<PAGE>
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UNITED STATES 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 QUARTERLY PERIOD ENDED MAY 31, 2000
------------
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from ____to____.
Commission File Number: 0-18249
ILM SENIOR LIVING, INC.
-----------------------
(Exact name of registrant as specified in its charter)
VIRGINIA 04-3042283
----------------------- --------------------
(State of organization) (I.R.S. Employer
Identification No.)
1750 TYSONS BOULEVARD, SUITE 1200, TYSONS CORNER, VA 22102
--------------------------------------------------------------------------------
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code: (888) 257-3550
-----------------------
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
------------------- -----------------------
None None
Securities registered pursuant to Section 12(g) of the Act:
Shares of Common Stock $.01 Par Value
-------------------------------------
(Title of Class)
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 / /
Shares of common stock outstanding as of May 31, 2000: 7,520,100.
Current Report on Form 8-K
of Registrant Dated June 2, 2000
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Page 1 of 21
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ILM SENIOR LIVING, INC.
INDEX
Part I. Financial Information PAGE
----
Item 1. Financial Statements
Consolidated Balance Sheets
May 31, 2000 (Unaudited) and August 31, 1999.................4
Consolidated Statements of Income
For the nine months and three months ended
May 31, 2000 and 1999 (Unaudited)..........................5
Consolidated Statements of Changes in Shareholders' Equity
For the nine months ended May 31, 2000
and 1999 (Unaudited).......................................6
Consolidated Statements of Cash Flows
For the nine months ended May 31, 2000
and 1999 (Unaudited).......................................7
Notes to Consolidated Financial Statements
(Unaudited).............................................8-12
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations............13-19
Part II. Other Information
Item 5. Other Information...........................................20
Item 6. Exhibits and Reports on Form 8-K............................20
Signatures....................................................................21
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<PAGE>
ILM SENIOR LIVING, INC
PART I. FINANCIAL INFORMATION
------------------------------
Item I. Financial Statements
(See next page)
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<PAGE>
ILM SENIOR LIVING, INC.
CONSOLIDATED BALANCE SHEETS
May 31, 2000 (Unaudited) and August 31, 1999
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
ASSETS
MAY 31, 2000 AUGUST 31, 1999
------------ ---------------
<S> <C> <C>
Operating investment properties, at cost:
Land $ 4,946 $ 4,921
Building and improvements 38,320 38,197
Furniture, fixtures and equipment 4,948 4,948
-------- --------
48,214 48,066
Less: accumulated depreciation (14,382) (13,417)
-------- --------
33,832 34,649
Mortgage placement fees 2,256 2,256
Less: accumulated amortization (2,256) (2,163)
-------- --------
-- 93
Loan origination fees 272 272
Less: accumulated amortization (155) (85)
-------- --------
117 187
Cash and cash equivalents 1,097 2,615
Accounts receivable - related party 314 306
Prepaid expenses and other assets 159 100
Deferred rent receivable -- 12
-------- --------
$ 35,519 $ 37,962
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable and accrued expenses $ 174 $ 365
Accounts payable - related party 112 343
Construction loan payable 2,093 2,093
Preferred shareholders' minority
interest in consolidated subsidiary 141 134
-------- --------
Total liabilities 2,520 2,935
Contingencies
Shareholders' equity:
Common stock, $0.01 par value,
10,000,000 shares authorized,
7,520,100 shares issued and outstanding 75 75
Additional paid-in capital 65,711 65,711
Accumulated deficit (32,787) (30,759)
-------- --------
Total shareholders' equity 32,999 35,027
-------- --------
$ 35,519 $ 37,962
======== ========
</TABLE>
See accompanying notes.
-4-
<PAGE>
ILM SENIOR LIVING, INC.
CONSOLIDATED STATEMENTS OF INCOME
For the nine months and three months ended May 31, 2000 and 1999 (Unaudited)
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
NINE MONTHS ENDED THREE MONTHS ENDED
MAY 31 MAY 31
------ ------
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
REVENUES
Rental and other income $5,693 $5,638 $1,905 $1,877
Interest income 52 48 12 9
------ ------ ------ ------
5,745 5,686 1,917 1,886
EXPENSES
Depreciation expense 965 965 321 322
Amortization expense 163 220 23 73
General and administrative 274 361 110 105
Professional fees 1,503 1,878 489 834
Directors' compensation 74 69 29 20
------ ------ ------ ------
2,979 3,493 972 1,354
------ ------ ------ ------
NET INCOME $2,766 $2,193 $ 945 $ 532
====== ====== ====== ======
Basic earnings per share of common stock $ 0.37 $ 0.29 $ 0.13 $ 0.07
====== ====== ====== ======
Cash dividends paid per share of common stock $ 0.64 $ 0.64 $ 0.22 $ 0.22
====== ====== ====== ======
</TABLE>
The above earnings and cash dividends paid per share of common stock are based
upon the 7,520,100 shares outstanding during each period.
See accompanying notes.
-5-
<PAGE>
ILM SENIOR LIVING, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
For the nine months ended May 31, 2000 and 1999 (Unaudited)
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
COMMON STOCK
$.01 PAR VALUE ADDITIONAL
--------------------- PAID-IN ACCUMULATED
SHARES AMOUNT CAPITAL DEFICIT TOTAL
------ ------ ------- ------- -----
<S> <C> <C> <C> <C> <C>
Shareholders' equity
at August 31, 1998 7,520,100 $ 75 $ 65,711 $ (27,327) $ 38,459
Cash dividends paid -- -- -- (4,795) (4,795)
Net income -- -- -- 2,193 2,193
--------- --------- --------- --------- ---------
Shareholders' equity
at May 31, 1999 7,520,100 $ 75 $ 65,711 $ (29,929) $ 35,857
========= ========= ========= ========= =========
Shareholders' equity
at August 31, 1999 7,520,100 $ 75 $ 65,711 $ (30,759) $ 35,027
Cash dividends paid -- -- -- (4,794) (4,794)
Net income -- -- -- 2,766 2,766
--------- --------- --------- --------- ---------
Shareholders' equity
at May 31, 2000 7,520,100 $ 75 $ 65,711 $ (32,787) $ 32,999
========= ========= ========= ========= =========
</TABLE>
See accompanying notes.
-6-
<PAGE>
ILM SENIOR LIVING, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the nine months ended May 31, 2000 and 1999 (Unaudited)
(Dollars in thousands)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
MAY 31
----------------------
2000 1999
------- -------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 2,766 $ 2,193
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization expense 1,128 1,185
Accrued dividends on subsidiary's preferred stock 7 7
Changes in assets and liabilities:
Accounts receivable - related party (8) 40
Prepaid expenses and other assets (59) (47)
Deferred rent receivable 12 27
Accounts payable and accrued expenses (191) --
Accounts payable - related party (231) 109
------- -------
Net cash provided by operating activities 3,424 3,514
------- -------
Cash flows used in investing activities:
Additions to operating investment properties (148) (97)
------- -------
Net cash used in investing activities (148) (97)
------- -------
Cash flows used in financing activities:
Loan origination fees paid -- (168)
Cash dividends paid to shareholders (4,794) (4,795)
------- -------
Net cash used in financing activities (4,794) (4,963)
------- -------
Net decrease in cash and cash equivalents (1,518) (1,546)
Cash and cash equivalents, beginning of period 2,615 2,264
------- -------
Cash and cash equivalents, end of period $ 1,097 $ 718
======= =======
Cash paid for interest $ 105 $ --
======= =======
</TABLE>
See accompanying notes.
-7-
<PAGE>
ILM SENIOR LIVING, INC.
Notes to Consolidated Financial Statements (Unaudited)
1. GENERAL
The accompanying consolidated financial statements, footnotes and
discussions should be read in conjunction with the consolidated financial
statements and footnotes contained in ILM Senior Living, Inc.'s (the
"Company") Annual Report on Form 10-K for the fiscal year ended August 31,
1999. In the opinion of management, the accompanying interim consolidated
financial statements, which have not been audited, reflect all adjustments
necessary to present fairly the results for the interim periods. All of the
accounting adjustments reflected in the accompanying interim consolidated
financial statements are of a normal recurring nature.
The accompanying consolidated financial statements have been prepared
on the accrual basis of accounting in accordance with U.S. generally
accepted accounting principles for interim financial information, which
requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosures of contingent
assets and liabilities as of May 31, 2000 and revenues and expenses for
each of the nine- and three-month periods ended May 31, 2000 and 1999.
Actual results may differ from the estimates and assumptions used. Certain
numbers in the prior period's financial statements have been reclassified
to conform to the current period's presentation. The results of operations
for the nine-month period ended May 31, 2000, are not necessarily
indicative of the results that may be expected for the year ending August
31, 2000.
The Company was incorporated on March 6, 1989 under the laws of the
State of Virginia as a Virginia finite-life corporation, formerly
PaineWebber Independent Mortgage Fund, Inc. On June 21, 1989, the Company
sold to the public in a registered initial offering 7,520,100 shares of
common stock, $.01 par value. The Company received capital contributions of
$75,201,000, of which $201,000 represented the sale of 20,100 shares to an
affiliate at that time, PaineWebber Group, Inc. ("PaineWebber"). For
discussion purposes, the term "PaineWebber" will refer to PaineWebber
Group, Inc. and all affiliates that provided services to the Company in the
past.
The Company elected to qualify and be taxed as a Real Estate
Investment Trust ("REIT") under the Internal Revenue Code of 1986, as
amended, for each taxable year of operations.
The Company originally invested the net proceeds of the initial public
offering in eight participating mortgage loans secured by senior housing
facilities located in seven states ("Senior Housing Facilities"). All of
the loans made by the Company were originally to Angeles Housing Concepts,
Inc. ("AHC"), as mortgagor, a company specializing in the development,
acquisition and operation of Senior Housing Facilities and guaranteed by
AHC's corporate parent, Angeles Corporation ("Angeles").
ILM Holding, Inc. ("ILM Holding"), a majority-owned subsidiary of the
Company, now holds title to the eight Senior Housing Facilities, which
comprise the balance of the operating investment properties on the
accompanying consolidated balance sheets, subject to certain mortgage loans
payable to the Company. Such mortgage loans and the related interest
expense are eliminated in the consolidation of the financial statements of
the Company.
The Company made charitable gifts of one share of the preferred stock
in ILM Holding to each of 111 charitable organizations so that ILM Holding
would meet the stock ownership requirements of a REIT as of January 30,
1997. The preferred stock has a liquidation preference of $1,000 per share
plus any accrued and unpaid dividends. Dividends on the preferred stock
accrue at a rate of 8% per annum on the original $1,000 liquidation
preference and are cumulative from the date of issuance. Since ILM Holding
is not expected to have sufficient cash flow in the foreseeable future to
make the required dividend payments, it is anticipated that dividends will
accrue and be paid at liquidation of ILM Holding. Cumulative dividends
accrued as of May 31, 2000 on the preferred stock in ILM Holding totaled
approximately $30,000.
-8-
<PAGE>
ILM SENIOR LIVING, INC.
Notes to Consolidated Financial Statements (Unaudited)
(continued)
1. GENERAL (CONTINUED)
As part of the fiscal 1994 settlement agreement with AHC, ILM Holding
retained AHC as the property manager for all of the Senior Housing
Facilities pursuant to the terms of a management agreement. The management
agreement with AHC was terminated in July 1996. Subsequent to the effective
date of the settlement agreement with AHC, in order to maximize the
potential returns to the Company's existing Shareholders while maintaining
its qualification as a REIT under the Internal Revenue Code, the Company
formed a new corporation, ILM I Lease Corporation ("Lease I"), for the
purpose of operating the Senior Housing Facilities under the terms of a
facilities lease agreement (the "Facilities Lease Agreement"). All of the
shares of capital stock in Lease I were distributed to the holders of
record of the Company's common stock and the Senior Housing Facilities were
leased to Lease I effective September 1, 1995 (see Note 2 for a description
of the Facilities Lease Agreement). Lease I is a public company subject to
the reporting obligations of the Securities and Exchange Commission. All
responsibility for the day-to-day management of the Senior Housing
Facilities, including administration of the property management agreement
with AHC, was transferred to Lease I. On July 29, 1996, the management
agreement with AHC was terminated and Lease I retained Capital Senior
Management 2, Inc. ("Capital") to be the new property manager of its Senior
Housing Facilities pursuant to a management agreement (the "Management
Agreement"). Lawrence A. Cohen, who, through July 28, 1998, served as
President, Chief Executive Officer and Director of the Company and a
Director of Lease I, has also served in various management capacities at
Capital Senior Living Corporation, an affiliate of Capital, since 1996. Mr.
Cohen currently serves as Chief Executive Officer of Capital Senior Living
Corporation. As a result, through July 28, 1998, Capital was considered a
related party.
AGREEMENT AND PLAN OF MERGER WITH CAPITAL SENIOR LIVING CORPORATION
On February 7, 1999, the Company entered into an agreement and plan of
merger, which was amended and restated on October 19, 1999, with Capital
Senior Living Corporation ("CSLC"), the corporate parent of Capital, and
certain affiliates of Capital. On April 18, 2000, the Company entered into
a First Amendment to the Amended and Restated Agreement and Plan of Merger
dated October 19, 1999. As stated in the April 18th amendment, if the
merger is consummated, the Shareholders of the Company will receive
all-cash merger consideration of approximately $11.63 per share compared to
the previous merger consideration of $12.90 per share. The Company was
advised by CSLC that, due to deteriorating conditions in the senior living
industry and consequent decline in the loan value of the Company's
properties, Capital was unable to raise sufficient financing to fund the
original purchase price. CSLC has reported to the Company that it has
obtained a signed financing commitment for substantially all of the merger
consideration. In addition, the amended agreement requires CSLC to agree to
pay the Company increased termination fees in certain circumstances.
Further, the Company required CSLC to agree to reduce the amount of fees
and expenses it would receive upon termination of the merger in certain
circumstances.
At a special meeting of Shareholders on June 22, 2000, holders of more
than two-thirds of the outstanding shares of the Company's common stock
voted in favor of approval of the proposed Amended and Restated Agreement
and Plan of Merger dated October 19, 1999, as amended on April 18, 2000.
Subject to the satisfaction of certain conditions, consummation of the
merger is expected to occur on or about July 31, 2000. The agreement
presently provides that it may be terminated if the merger is not
consummated by September 30, 2000. Holders of Company common stock will
have no dissenters' rights in the merger.
In connection with the merger, the Company has agreed to cause ILM
Holding to cancel and terminate the Facilities Lease Agreement with Lease I
on the date of consummation of the merger. The Facilities Lease Agreement
was extended on a month-to-month basis as of December 31, 1999, beyond its
original expiration date of December 31, 1999. If the merger is not
consummated, it is anticipated that the Facilities Lease Agreement will
remain in full force and effect pursuant to its terms. There can be no
assurance as to whether the merger will be consummated or, if consummated,
as to the timing thereof.
-9-
<PAGE>
ILM SENIOR LIVING, INC.
Notes to Consolidated Financial Statements (Unaudited)
(continued)
2. OPERATING INVESTMENT PROPERTIES SUBJECT TO FACILITIES LEASE AGREEMENT
At May 31, 2000, through its consolidated subsidiary, the Company
owned eight Senior Housing Facilities. The name, location and size of the
properties are as set forth below:
<TABLE>
<CAPTION>
YEAR FACILITY RENTABLE RESIDENT
NAME LOCATION BUILT UNITS (2) CAPACITIES (2)
---- -------- ----- --------- --------------
<S> <C> <C> <C> <C>
Independence Village of East Lansing East Lansing, MI 1989 161 162
Independence Village of Winston-Salem Winston-Salem, NC 1989 159 161
Independence Village of Raleigh Raleigh, NC 1991 164 205
Independence Village of Peoria Peoria, IL 1990 166 183
Crown Pointe Apartments Omaha, NE 1984 135 163
Sedgwick Plaza Apartments Wichita, KS 1984 150 170
West Shores Hot Springs, AR 1986 136 166
Villa Santa Barbara (1) Santa Barbara, CA 1979 125 125
</TABLE>
(1) The acquisition of Villa Santa Barbara was financed jointly by the Company
and an affiliated entity, ILM II Senior Living, Inc ("ILM II"). All amounts
generated from Villa Santa Barbara are equitably apportioned between the
Company, together with its consolidated subsidiary, and ILM II, together
with its consolidated subsidiary, generally 25% and 75%, respectively.
Villa Santa Barbara is owned 25% by ILM Holding and 75% by ILM II Holding
as tenants in common. Upon the sale of the Company or ILM II, arrangements
would be made to transfer the Santa Barbara facility to the selling joint
tenant (or one of its subsidiaries). The property was extensively renovated
in 1995.
(2) Rentable units represent the number of apartment units and is a measure
commonly used in the real estate industry. Resident capacity equals the
number of bedrooms contained within the apartment units and corresponds to
measures commonly used in the healthcare industry.
Subsequent to the effective date of the Settlement Agreement with AHC,
in order to maximize the potential returns to the existing Shareholders
while maintaining the Company's qualification as a REIT under the Internal
Revenue Code, the Company formed a new corporation, Lease I, for the
purpose of operating the Senior Housing Facilities under the terms of a
Facilities Lease Agreement dated September 1, 1995 between the Company's
consolidated affiliate, ILM Holding, as owner of the properties and lessor
(the "Lessor"), and Lease I as lessee (the "Lessee"). The facilities lease
is a "triple-net" lease whereby the Lessee pays all operating expenses,
governmental taxes and assessments, utility charges and insurance premiums,
as well as the costs of all required maintenance, personal property and
non-structural repairs in connection with the operation of the Senior
Housing Facilities. ILM Holding, as the Lessor, is responsible for all
major capital improvements and structural repairs to the Senior Housing
Facilities. During the term of the Facilities Lease Agreement, which was
extended on a month-to-month basis as of December 31, 1999, beyond its
original expiration date of December 31, 1999, Lease I pays annual base
rent for the use of all of the Senior Housing Facilities in the aggregate
amount of $6,364,800 per year. Lease I also pays variable rent, on a
quarterly basis, for each facility in an amount equal to 40% of the excess
of aggregate total revenues for the Senior Housing Facilities, on an
annualized basis, over $16,996,000. Variable rent was $929,000 and $313,000
for the nine- and three-month periods ended May 31, 2000, respectively,
compared to $859,000 and $295,000 for the nine- and three-month periods
ended May 31, 1999, respectively.
-10-
<PAGE>
ILM SENIOR LIVING, INC.
Notes to Consolidated Financial Statements (Unaudited)
(continued)
3. RELATED PARTY TRANSACTIONS
Lease I has retained Capital to be the property manager of the Senior
Housing Facilities and the Company has guaranteed the payment of all fees
due to Capital pursuant to the Management Agreement which commenced on July
29, 1996. Lawrence A. Cohen, who, through July 28, 1998, served as
President, Chief Executive Officer and Director of the Company and a
Director of Lease I, has also served in various management capacities at
Capital Senior Living Corporation, an affiliate of Capital, since 1996. Mr.
Cohen currently serves as Chief Executive Officer of Capital Senior Living
Corporation. As a result, through July 28, 1998, Capital was considered a
related party. For the nine-month periods ended May 31, 2000 and 1999,
Capital earned property management fees from Lease I of $776,000, and
$778,000, respectively. For the three-month periods ended May 31, 2000 and
1999, Capital earned property management fees from Lease I of $230,000 and
$241,000, respectively. In connection with the Agreement and Plan of Merger
discussed in Note 1, the Management Agreement with Capital will be
terminated upon consummation of the merger.
On September 18, 1997, Lease I entered into an agreement with Capital
Senior Development, Inc., an affiliate of Capital, to manage the
development process for the potential expansion of several of the Senior
Housing Facilities. Capital Senior Development, Inc. will receive a fee
equal to 7% of the total development costs of these expansions if they are
pursued. The Company will reimburse Lease I for all costs related to these
potential expansions, including fees to Capital Senior Development, Inc.
During fiscal 2000 and 1999, Capital Senior Development, Inc. earned no
fees from Lease I for managing pre-construction development activities for
potential expansions of the Senior Housing Facilities.
Jeffry R. Dwyer, Secretary and Director of the Company, is a
shareholder of Greenberg Traurig, Counsel to the Company and its affiliates
since 1997. For the nine-month periods ended May 31, 2000 and 1999,
Greenberg Traurig earned fees from the Company of $902,000 and $1,027,000,
respectively. For the three-month periods ended May 31, 2000 and 1999,
Greenberg Traurig earned fees from the Company of $309,000 and $651,000,
respectively.
Accounts receivable - related party at May 31, 2000 and August 31,
1999, represent amounts due from an affiliated company, Lease I,
principally for variable rent. Accounts payable - related party at May 31,
2000 and August 31, 1999, represent accrued legal fees due to Greenberg
Traurig, Counsel to the Company and its affiliates and a related party, as
described above.
-11-
<PAGE>
ILM SENIOR LIVING, INC.
Notes to Consolidated Financial Statements (Unaudited)
(continued)
4. LEGAL PROCEEDINGS AND CONTINGENCIES
FELDMAN LITIGATION
On May 8, 1998 Andrew A. Feldman and Jeri Feldman, as Trustees for the
Andrew A. & Jeri Feldman Revocable Trust dated September 18, 1990,
commenced a purported class action on behalf of that trust and all other
shareholders of the Company and ILM II in the Supreme Court of the State of
New York, County of New York naming the Company, ILM II and their Directors
as defendants. The class action complaint alleged that the Directors
engaged in wasteful and oppressive conduct and breached fiduciary duties in
preventing the sale or liquidation of the assets of the Company and ILM II,
diverting certain of their assets. The complaint sought compensatory
damages in an unspecified amount, punitive damages, the judicial
dissolution of the Company and ILM II, an order requiring the Directors to
take all steps to maximize Shareholder value, including either an auction
or liquidation, and rescinding certain agreements, and attorney's fees.
On October 15, 1999, the parties entered into a Stipulation of
Settlement and filed it with the Court, which approved the settlement, by
order dated October 21, 1999. In issuing that order the Court entered a
final judgment dismissing the action and all non-derivative claims of the
settlement class against the defendants with prejudice. This litigation was
settled at no cost to the Company and ILM II. As part of the settlement,
Capital Senior Living Corporation increased its proposed merger
consideration payable to the Company and ILM II shareholders and is also
responsible for a total of approximately $1.1 million in plaintiffs'
attorneys fees and expenses if the proposed merger is consummated. If the
proposed merger is not consummated and if the Company and ILM II were to
consummate an extraordinary transaction with a third party, then the
Company and ILM II would be responsible for the plaintiffs' attorneys fees
and expenses.
5. CONSTRUCTION LOAN FINANCING
During 1999, the Company secured a construction loan facility with a
major bank that provides the Company with up to $24.5 million to fund the
capital costs of potential expansion programs. The construction loan
facility is secured by a first mortgage of the Senior Housing Facilities
and collateral assignment of the Company's leases of such properties. The
loan expires on December 31, 2000, with possible extensions through
September 29, 2003. Principal is due at expiration. Interest is payable
monthly at a rate equal to LIBOR plus 1.10% or Prime plus 0.5%. Amounts
outstanding under the loan at May 31, 2000, were approximately $2.1
million. Loan origination fees of $272,000 were paid in connection with
this loan facility and are being amortized over the term of the loan.
Capitalized interest at May 31, 2000, and August 31, 1999, was $123,093 and
$31,233.
6. SUBSEQUENT EVENTS
On June 2, 2000, the Company's Board of Directors unanimously agreed
not to declare any dividends on shares of the Company's common stock for
the remainder of Fiscal Year 2000. The Board cited transaction costs
previously incurred and to be incurred through closing of the pending
merger with Capital and the establishment of a reserve to fund the
short-term operations of the Company's senior living communities if the
proposed merger with Capital is not consummated. The Company also announced
that, should the merger not be consummated, its Board of Directors would
reevaluate its dividend policy.
On June 2, 2000, the Company caused Holding I to notify Lease I that
the Facilities Lease Agreement would terminate on the date of consummation
of the pending merger of the Company with CSLC. Subject to the satisfaction
of certain conditions and the receipt of requisite approvals, consummation
of the merger is expected to occur on or about July 31, 2000. If the merger
is not consummated, it is anticipated that the Facilities Lease Agreement
will remain in full force and effect pursuant to its terms.
On June 22, 2000, at a special meeting of Shareholders, holders of
more than two-thirds of the outstanding shares of the Company's common
stock voted in favor of approval of the proposed Amended and Restated
Agreement and Plan of Merger dated October 19, 1999, as amended on April
18, 2000.
-12-
<PAGE>
ILM SENIOR LIVING, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The Company offered shares of its common stock to the public from June 21,
1989 to July 21, 1989 pursuant to a Registration Statement filed under the
Securities Act of 1933. Capital contributions of $75,201,000 were received by
the Company (including $201,000 contributed by PaineWebber) and, after deducting
selling expenses and offering costs and allowing for adequate cash reserves,
approximately $62.8 million was available to be invested in participating first
mortgage loans secured by Senior Housing Facilities. The Company originally
invested the net proceeds of the initial public offering in eight participation
mortgage loans secured by Senior Housing Facilities located in seven different
states. All of the loans made by the Company were originally with AHC. As
previously reported, AHC defaulted on the scheduled mortgage loan payments due
to the Company on March 1, 1993. Its parent company, Angeles, subsequently filed
for bankruptcy. In fiscal 1994, a Settlement Agreement was executed whereby
ownership of the properties was transferred from AHC to certain designated
affiliates of the Company which were majority owned by the Company.
Subsequently, these affiliates were merged into ILM Holding, which is majority
owned by the Company. ILM Holding holds title to the eight Senior Housing
Facilities which comprise the balance of operating investment properties in the
accompanying consolidated balance sheets, subject to certain mortgage loans
payable to the Company. As part of the fiscal 1994 Settlement Agreement with
AHC, ILM Holding retained AHC as the property manager for all of the Senior
Housing Facilities pursuant to the terms of the Agreement. As discussed further
below, the Agreement with AHC was terminated in July 1996.
Subsequent to the effective date of the Settlement Agreement with AHC, in
order to maximize the potential returns to the Company's existing Shareholders
while maintaining its qualification as a REIT under the Internal Revenue Code,
the Company formed a new corporation, Lease I, for the purpose of operating the
Senior Housing Facilities under the terms of a Facilities Lease Agreement. As of
August 31, 1995, Lease I, which is taxable as a so-called "C" corporation and
not as a REIT, was a wholly-owned subsidiary of the Company. On September 1,
1995 the Company, after receiving the required regulatory approval, distributed
all of the shares of capital stock of Lease I to the holders of record of the
Company's common stock. One share of common stock of Lease I was issued for each
full share of the Company's common stock held. Prior to the distribution, the
Company capitalized Lease I with $700,000 from existing cash reserves, which was
an amount estimated to provide Lease I with necessary working capital.
The Facilities Lease Agreement is between the Company's consolidated
affiliate, ILM Holding, as owner of the Senior Housing Facilities and Lessor,
and Lease I as Lessee. The facilities lease is a "triple-net" lease whereby the
Lessee pays all operating expenses, governmental taxes and assessments, utility
charges and insurance premiums, as well as the costs of all required
maintenance, personal property and non-structural repairs in connection with the
operation of the Senior Housing Facilities. ILM Holding, as the Lessor, is
responsible for all major capital improvements and structural repairs to the
Senior Housing Facilities. Pursuant to the Facilities Lease Agreement, which
expired on December 31, 1999, but has been extended on a month-to-month basis,
Lease I pays annual base rent for the use of all of the Senior Housing
Facilities in the aggregate amount of $6,364,800. Lease I also pays variable
rent, on a quarterly basis, for each Senior Housing Facility in an amount equal
to 40% of the excess, if any, of the aggregate total revenues for the Senior
Housing Facilities, on an annualized basis, over $16,996,000. Variable rental
income for the nine- and three-month periods ended May 31, 2000 was $929,000 and
$313,000, respectively, compared to variable rental income of $859,000 and
$295,000 for the nine- and three-month periods ended May 31, 1999, respectively.
The Company completed its restructuring plans by qualifying ILM Holding as
a REIT for Federal tax purposes. In connection with these plans, on November 21,
1996, the Company requested that PaineWebber sell all of its stock in ILM
Holding to the Company for a price equal to the fair market value of the 1%
economic interest in ILM Holding represented by the common stock. On January 10,
1997, this transfer of the common stock of ILM Holding was completed at an
agreed upon fair value of $46,000, representing a $39,000 increase in fair
value. This increase in fair value is based on the increase in values of the
Senior Housing Facilities which occurred between April 1994 and January 1996, as
supported by independent appraisals. With this transfer completed, effective
January 23, 1997, ILM
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ILM SENIOR LIVING, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL (CONTINUED)
Holding recapitalized its common stock and preferred stock by replacing the
outstanding shares with 50,000 shares of new common stock and 275 shares of
non-voting, 8% cumulative preferred stock issued to the Company (the "Preferred
Stock"). The number of authorized shares of preferred stock and common stock in
ILM Holding were also increased as part of the recapitalization. Following the
recapitalization, the Company made charitable gifts of one share of the
Preferred Stock in ILM Holding to each of 111 charitable organizations so that
ILM Holding would meet the stock ownership requirements of a REIT as of January
30, 1997. The Preferred Stock has a liquidation preference of $1,000 per share
plus any accrued and unpaid dividends. Dividends on the Preferred Stock accrue
at a rate of 8% per annum on the original $1,000 liquidation preference and are
cumulative from the date of issuance. It is anticipated that dividends will
accrue and be paid at liquidation. Cumulative dividends accrued as of May 31,
2000 on the Preferred Stock in ILM Holding totaled approximately $30,000.
The assumption of ownership of the Senior Housing Facilities through ILM
Holding, which was organized as a so-called "C" corporation for tax purposes at
the time of assumption, has resulted in a possible future tax liability which
would be payable upon the ultimate sale of the Senior Housing Facilities (the
"built-in gain tax"). The amount of such tax would be calculated based on the
lesser of the total net gain realized from the sale transaction or the portion
of the net gain realized upon a final sale which is attributable to the period
during which the properties were held in a "C" corporation.
Any future appreciation in the value of the Senior Housing Facilities
subsequent to the conversion of ILM Holding to a REIT would not be subject to
the built-in gain tax. The built-in gain tax would most likely not be incurred
if the properties were to be held for a period of at least ten years from the
date of the conversion of ILM Holding to a REIT. Although the Company originally
anticipated holding the properties through December 31, 1999, pursuant to the
Articles of Incorporation, the Board of Directors may defer the Company's
scheduled liquidation date if in the opinion of a majority of the Directors the
disposition of the Company's assets at such time would result in a material
under-realization of the value of such assets; provided, however, that no such
deferral may extend beyond December 31, 2014 absent amendment of the Company's
Articles of Incorporation. The Company's Board of Directors voted to extend the
term of the Company and the Facilities Lease Agreement with Lease I on a
month-to-month basis commencing December 31, 1999. Based on management's
estimate of the increase in values of the Senior Housing Facilities which
occurred between April 1994 and January 1996, as supported by independent
appraisals, ILM Holding would incur a sizeable tax if the Senior Housing
Facilities were sold. Based on this increase of values during the time that ILM
Holding was operated as a regular "C" corporation, a sale within ten years of
the date of the conversion of ILM Holding to a REIT could result in a built-in
gain tax of as much as $2.9 million, which could be reduced by $2.45 million
using available net operating loss carryforwards of ILM Holding of approximately
$7.2 million.
Because the ownership of the assets of ILM Holding was expected to be
transferred to the Company or its wholly-owned subsidiary, ILM Holding was
capitalized with funds to provide it with working capital only for a limited
period of time. At the present time, ILM Holding is not expected to have
sufficient cash flow during fiscal year 2000 to (i) meet its obligations to make
the debt service payments due under the loans and (ii) pay for capital
improvements and structural repairs in accordance with the terms of the
Facilities Lease Agreement. Although ILM Holding is not expected to fully fund
its scheduled debt service payments to the Company, the current values of the
Senior Housing Facilities are well in excess of the mortgage principal amounts
plus accrued interest at May 31, 2000. As a result, the Company is expected to
receive the full amount that would be due under the loans upon sale of the
Senior Housing Facilities.
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<PAGE>
ILM SENIOR LIVING, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL (CONTINUED)
AGREEMENT AND PLAN OF MERGER WITH CAPITAL SENIOR LIVING CORPORATION
On February 7, 1999, the Company entered into an agreement and plan of
merger, which was amended and restated on October 19, 1999, with Capital Senior
Living Corporation ("CSLC"), the corporate parent of Capital, and certain
affiliates of Capital. On April 18, 2000, the Company entered into a First
Amendment to the Amended and Restated Agreement and Plan of Merger dated October
19, 1999. As stated in the April 18th amendment, if the merger is consummated,
the Shareholders of the Company will receive all-cash merger consideration of
approximately $11.63 per share compared to the previous merger consideration of
$12.90 per share. The Company was advised by CSLC that, due to deteriorating
conditions in the senior living industry and consequent decline in the loan
value of the Company's properties, Capital was unable to raise sufficient
financing to fund the original purchase price. CSLC has reported to the Company
that it has obtained a signed financing commitment for substantially all of the
merger consideration. In addition, the amended agreement requires CSLC to agree
to pay the Company increased termination fees in certain circumstances. Further,
the Company required CSLC to agree to reduce the amount of fees and expenses it
would receive upon termination of the merger in certain circumstances.
At a special meeting of Shareholders on June 22, 2000, holders of more than
two-thirds of the outstanding shares of the Company's common stock voted in
favor of approval of the proposed Amended and Restated Agreement and Plan of
Merger dated October 19, 1999, as amended on April 18, 2000. Subject to the
satisfaction of certain conditions, consummation of the merger is expected to
occur on or about July 31, 2000. The agreement presently provides that it may be
terminated if the merger is not consummated by September 30, 2000. Holders of
Company common stock will have no dissenters' rights in the merger.
In connection with the merger, the Company has agreed to cause ILM Holding
to cancel and terminate the Facilities Lease Agreement with Lease I on the date
of consummation of the merger. The Facilities Lease Agreement was extended on a
month-to-month basis as of December 31, 1999, beyond its original expiration
date of December 31, 1999. If the merger is not consummated, it is anticipated
that the Facilities Lease Agreement will remain in full force and effect
pursuant to its terms. There can be no assurance as to whether the merger will
be consummated or, if consummated, as to the timing thereof.
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<PAGE>
ILM SENIOR LIVING, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
Occupancy levels for the eight properties in which the Company has invested
averaged 90% for the three-month period ended May 31, 2000, compared to 95% for
the three-month period ended May 31, 1999. The Company's net operating cash flow
is expected to be relatively stable and predictable due to the structure of the
Facilities Lease Agreement. The annual base rental payments owed to ILM Holding
are $6,364,800 and will remain at that level for the remainder of the lease
term. In addition, the Senior Housing Facilities are currently generating gross
revenues which are in excess of the specified threshold in the variable rent
calculation, as discussed further above, which became effective in January 1997.
The Company and Lease I have been pursuing the potential for future
expansion of several of the Senior Housing Facilities which are located in areas
that have particularly strong markets for senior housing to increase cash flow
and shareholder value. Potential expansion candidates include the facilities
located in Raleigh, North Carolina, East Lansing, Michigan, Omaha, Nebraska,
Peoria, Illinois and Hot Springs, Arkansas. Approximately two acres of land
located adjacent to the East Lansing facility and approximately two-and-one-half
acres of land located adjacent to the Omaha facility were acquired by ILM
Holding during the quarter ended November 30, 1997. In addition, an agreement
has been obtained by ILM Holding to purchase approximately five acres of land
located adjacent to the Peoria facility. The Hot Springs facility already
includes a vacant land parcel of approximately two acres which could accommodate
an expansion of the existing facility or the construction of a new free-standing
facility. Preliminary feasibility evaluations have been completed for all of
these potential expansions and pre-construction design and construction-cost
evaluations are underway for expansions of the facilities located in Raleigh and
Omaha.
The Company secured a construction loan facility with a major bank that
provides the Company with up to $24.5 million to fund the capital costs of the
potential expansion programs. The construction loan facility is secured by a
first mortgage of the Senior Housing Facilities and collateral assignment of the
Company's leases of such Senior Housing Facilities. The loan expires December
31, 2000, with possible extensions through September 29, 2003. Principal is due
at expiration. Interest is payable monthly at a rate equal to LIBOR plus 1.10%
or Prime plus 0.5%. Loan origination costs in connection with this loan facility
are being amortized over the life of the loan.
On June 7, 1999, the Company borrowed approximately $2.1 million under the
construction loan facility to fund the pre-construction capital costs, incurred
through April 1999, of the potential expansions of the Senior Housing
Facilities. As of May 31, 2000, approximately $22.4 million of the construction
loan facility is unused and available.
At May 31, 2000, the Company had cash and cash equivalents of $1,097,000
compared to $2,615,000 at August 31, 1999. Remaining cash will be used for the
working capital requirements of the Company, along with the investment in the
properties owned by ILM Holding for certain capital improvements and transaction
costs associated with the merger. If the merger is not consummated, future
capital improvements could be financed from operations or through borrowings,
depending on the magnitude of the improvements, the availability of financing
and the Company's incremental borrowing rate. The source of future liquidity and
dividends to the Shareholders is expected to be through facilities lease
payments from Lease I, interest income earned on invested cash reserves and
proceeds from the future sales of the underlying operating investment
properties. Such sources of liquidity are expected to be adequate to meet the
Company's operating requirements on both a short-term and long-term basis. The
Company generally will be obligated to distribute annually at least 95% of its
taxable income to its shareholders in order to continue to qualify as a REIT
under the Internal Revenue Code.
While the Company has potential liabilities pending due to ongoing
litigation against the Company, the eventual outcome of this litigation cannot
presently be determined. The Company will vigorously defend against all claims
made against it and, at this time, it is not certain that the Company will have
ultimate responsibility for any such claims.
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<PAGE>
ILM SENIOR LIVING, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
MARKET RISK
The Company believes its market risk is immaterial.
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<PAGE>
ILM SENIOR LIVING, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
NINE MONTHS ENDED MAY 31, 2000 VERSUS NINE MONTHS ENDED MAY 31, 1999
Net income increased $573,000 or 26.1% to $2,766,000 for the nine-month
period ended May 31, 2000 compared to $2,193,000 for the nine-month period ended
May 31, 1999. Total revenue was $5,745,000 representing an increase of $59,000
or 1.0%, compared to $5,686,000 for the same period of the prior year. Rental
and other income increased $55,000, or 1.0%, to $5,693,000 from $5,638,000, due
to increased rental income earned pursuant to the terms of the Facilities Lease
Agreement. Total expenses decreased $514,000 or 14.7%, to $2,979,000 for the
nine-month period ended May 31, 2000, compared to $3,493,000 for the nine-month
period ended May 31, 1999. This overall decrease in expenses is primarily
attributable to a $375,000 or 20.0% decrease in professional fees as the result
of decreased use of legal, financial and advisory professionals who were engaged
to assist the Company with the agreement and plan of merger with Capital Senior
Living Corporation (as discussed in Note 1 to the financial statements). In
addition, legal fees associated with the construction loan facility, also an
expense of the prior year, were not repeated this year contributing to the
overall decrease in professional fees when compared to 1999. Other decreases
include an $87,000 or 24.1% decrease in general and administrative costs due to
decreased insurance costs of $61,000 or 33.2%; an $11,000 or 43.1% decrease in
investor servicing costs; and decreased state tax expense of $14,000 or 35.3%.
Amortization expense decreased $57,000 or 25.9% as the amortization of mortgage
placement fees was completed as of January 2000.
THREE MONTHS ENDED MAY 31, 2000 VERSUS THREE MONTHS ENDED MAY 31, 1999
Net income increased $413,000 or 77.6%, to $945,000 for the third quarter
ended May 31, 2000 compared to $532,000 for the third quarter ended May 31,
1999. Total revenue was $1,917,000 representing an increase of $31,000 or 1.6%,
compared to $1,886,000 for the same period of the prior year. Rental and other
income increased $28,000 or 1.5%, to $1,905,000 from $1,877,000, due to
increased rental income earned pursuant to the terms of the Facilities Lease
Agreement. Total expenses decreased $382,000, or 28.2%, to $972,000 for the
quarter ended May 31, 2000 compared to $1,354,000 for the quarter ended May 31,
1999. This decrease in expenses is primarily attributable to a decrease of
$345,000 or 41.4% in professional fees due to decreased use of legal, financial
and advisory professionals who were engaged to assist the Company with the
agreement and plan of merger with Capital Senior Living Corporation (as
discussed in Note 1 to the financial statements). In addition, legal fees
associated with the construction loan facility, an expense of the prior year,
were not repeated this year, contributing to the overall decrease in
professional fees when compared to 1999. A $50,000 or 68.5% decrease in
amortization expense is the result of mortgage placement fees becoming fully
amortized as of January 2000.
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<PAGE>
ILM SENIOR LIVING, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FORWARD-LOOKING INFORMATION
CERTAIN STATEMENTS INCLUDED IN THIS QUARTERLY REPORT ON FORM 10-Q
("QUARTERLY REPORT") CONSTITUTE "FORWARD-LOOKING STATEMENTS" INTENDED TO QUALIFY
FOR THE SAFE HARBORS FROM LIABILITY ESTABLISHED BY SECTION 27A OF THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND SECTION 21E OF THE
SECURITIES ACT OF 1934, AS AMENDED (THE "EXCHANGE ACT"). THESE FORWARD-LOOKING
STATEMENTS GENERALLY CAN BE IDENTIFIED AS SUCH BECAUSE THE CONTEXT OF THE
STATEMENT WILL INCLUDE WORDS SUCH AS "BELIEVES," "COULD," "MAY," "SHOULD,"
"ENABLE," "LIKELY," "PROSPECTS," "SEEK," "PREDICTS," "POSSIBLE," "FORECASTS,"
"PROJECTS," "ANTICIPATES," "EXPECTS" AND WORDS OF ANALOGOUS IMPORT AND
CORRELATIVE EXPRESSIONS THEREOF, AS WELL AS STATEMENTS PRECEDED OR OTHERWISE
QUALIFIED BY: "THERE CAN BE NO ASSURANCE" OR "NO ASSURANCE CAN BE GIVEN."
SIMILARLY, STATEMENTS THAT DESCRIBE THE COMPANY'S FUTURE PLANS, OBJECTIVES,
STRATEGIES OR GOALS ALSO ARE FORWARD-LOOKING STATEMENTS. SUCH STATEMENTS MAY
ADDRESS FUTURE EVENTS AND CONDITIONS CONCERNING, AMONG OTHER THINGS, THE
COMPANY'S CASH FLOWS, RESULTS OF OPERATIONS AND FINANCIAL CONDITION; THE
CONSUMMATION OF ACQUISITION AND FINANCING TRANSACTIONS AND THE EFFECT THEREOF ON
THE COMPANY'S BUSINESS, ANTICIPATED CAPITAL EXPENDITURES, PROPOSED OPERATING
BUDGETS AND ACCOUNTING RESERVES; LITIGATION; PROPERTY EXPANSION AND DEVELOPMENT
PROGRAMS OR PLANS; REGULATORY MATTERS; AND THE COMPANY'S PLANS, GOALS,
STRATEGIES AND OBJECTIVES FOR FUTURE OPERATIONS AND PERFORMANCE. ANY SUCH
FORWARD-LOOKING STATEMENTS ARE SUBJECT TO VARIOUS RISKS AND UNCERTAINTIES THAT
COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE EXPRESSED OR IMPLIED
IN SUCH FORWARD-LOOKING STATEMENTS. SUCH FORWARD-LOOKING STATEMENTS ARE SUBJECT
TO A NUMBER OF ASSUMPTIONS REGARDING, AMONG OTHER THINGS, GENERAL ECONOMIC,
COMPETITIVE AND MARKET CONDITIONS. SUCH ASSUMPTIONS NECESSARILY ARE BASED ON
FACTS AND CONDITIONS AS THEY EXIST AT THE TIME SUCH STATEMENTS ARE MADE, THE
PREDICTION OR ASSESSMENT OF WHICH MAY BE DIFFICULT OR IMPOSSIBLE AND, IN ANY
CASE, BEYOND THE COMPANY'S CONTROL. FURTHER, THE COMPANY'S BUSINESS IS SUBJECT
TO A NUMBER OF RISKS THAT MAY AFFECT ANY SUCH FORWARD-LOOKING STATEMENTS AND
ALSO COULD CAUSE ACTUAL RESULTS OF THE COMPANY TO DIFFER MATERIALLY FROM THOSE
PROJECTED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. ALL FORWARD-LOOKING
STATEMENTS CONTAINED IN THIS QUARTERLY REPORT ARE EXPRESSLY QUALIFIED IN THEIR
ENTIRETY BY THE CAUTIONARY STATEMENTS IN THIS PARAGRAPH. MOREOVER, THE COMPANY
DOES NOT INTEND TO UPDATE OR REVISE ANY FORWARD-LOOKING STATEMENTS TO REFLECT
ANY CHANGES IN GENERAL ECONOMIC, COMPETITIVE OR MARKET CONDITIONS AND
DEVELOPMENTS BEYOND ITS CONTROL.
READERS OF THIS QUARTERLY REPORT ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE
ON ANY OF THE FORWARD-LOOKING STATEMENTS SET FORTH HEREIN AND THAT ACTUAL FUTURE
RESULTS MAY DIFFER.
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ILM SENIOR LIVING, INC.
PART II-OTHER INFORMATION
ITEM 1 THROUGH 5. NONE
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits: 27. Financial Data Schedule
(b) Reports on Form 8-K:
The Company filed a Current Report on Form 8-K dated June 2, 2000, reporting (1)
the impending termination of the Facilities Lease Agreement between the Company
and ILM I Lease Corporation; and (2) the Board of Director's decision regarding
the declaration of dividends for the remainder of fiscal year 2000.
The Company filed a Current Report on Form 8-K dated April 18, 2000, reporting
that the Company had entered into the First Amendment to the Amended and
Restated Agreement and Plan of Merger dated October 19, 1999, with Capital
Senior Living Corporation.
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<PAGE>
ILM SENIOR LIVING, INC.
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.
BY: ILM SENIOR LIVING, INC.
By: /s/ J. WILLIAM SHARMAN, JR.
----------------------------------
J. William Sharman, Jr.
President and Director
Dated: July 14, 2000
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