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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ________ TO ___________
COMMISSION FILE NUMBER: 0-26470
AMERICAN RETIREMENT VILLAS
PROPERTIES III, L.P.
- --------------------------------------------------------------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
CALIFORNIA 33-365417
- ------------------------------- ------------------
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
245 FISCHER AVENUE, D-1
COSTA MESA, CA 92626
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(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (714) 751-7400
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
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PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
American Retirement Villas Properties III, L.P.
(a California limited partnership)
Balance Sheets
(In thousands except unit data)
<TABLE>
<CAPTION>
ASSETS September 30, December 31,
1997 1996
------------- ------------
(Unaudited)
<S> <C> <C>
Properties, at cost
Land $ 4,674 $ 4,674
Building and improvements, less accumulated depreciation
of $3,824 at September 30, 1997 and $3,373 in December 31, 1996 22,460 18,921
Furniture, fixtures and equipment, less accumulated depreciation
of $480 at September 30, 1997 and $498 at December 31, 1996 262 322
-------- --------
Net properties 27,396 23,917
-------- --------
Cash 1,201 893
Restricted cash 149 137
Loan fees, net 79 105
Other assets 431 248
-------- --------
$ 29,256 $ 25,300
======== ========
LIABILITIES AND PARTNERS' CAPITAL
Notes payable $ 19,386 $ 16,023
Accounts payable and accrued expenses 1,368 734
Amounts payable to affiliates 86 138
Distributions payable to Partners 61 46
-------- --------
Total liabilities 20,901 16,941
-------- --------
Minority interest 65 41
-------- --------
Partners' capital (deficit):
General partners (76) (76)
Limited partners, 18,666 and 18,652 units outstanding at
September 30, 1997 and December 31, 1996, respectively 8,366 8,394
-------- --------
Total partners' capital 8,290 8,318
-------- --------
$ 29,256 $ 25,300
======== ========
</TABLE>
See accompanying notes to the unaudited financial statements.
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American Retirement Villas Properties III, L.P.
(a California limited partnership)
Statements of Operations
(Unaudited)
(in thousands except per unit data)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------- -------------------------------
1997 1996 1997 1996
------- ------- ------ -------
<S> <C> <C> <C> <C>
REVENUES:
Rent.............................. $1,399 $1,395 $4,164 $ 4,029
Assisted living................... 155 110 429 300
Interest.......................... 3 84 11 282
Other............................. 16 24 50 76
------- ------ ------ -------
Total revenues........... 1,573 1,613 4,654 4,687
------- ------ ------ -------
COSTS AND EXPENSES:
Rental property operations ....... 731 669 2,105 1,953
Assisted living .................. 60 53 167 147
Depreciation and amortization..... 221 299 677 896
Interest ......................... 357 472 1,076 1,425
General and administrative ....... 102 105 346 296
Property taxes.................... 64 73 195 235
Advertising....................... 32 6 55 21
Minority interest in operations .. 23 21 61 39
------- ------ ------- -------
Total costs and expenses. 1,590 1,698 4,682 5,012
------- ------ ------- -------
Net loss.......................... $ (17) $ (85) $ (28) $ (325)
======= ====== ======= =======
Net loss to General Partner....... $ -- $ (1) $ -- $ (3)
======= ====== ======= =======
Net loss to Limited Partner ...... $ (17) $ (84) $ (28) $ (322)
======= ====== ======= =======
Net loss per Limited Partner unit. $ (.91) $(4.50) $ (1.50) $(17.26)
======= ====== ======= =======
</TABLE>
See accompanying notes to the unaudited financial statements.
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American Retirement Villas Properties III, L.P.
(a California limited partnership)
Statements of Cash Flow
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
For the nine months
ended September 30,
---------------------------------
1997 1996
---------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (28) $ (325)
Adjustment to reconcile net loss to net cash provided by
operating activities:
Depreciation and amortization 677 896
Minority interest in operations 61 39
CHANGE IN ASSETS AND LIABILITIES:
Increase in other assets (183) (58)
Increase in accounts payable and accrued expenses 633 376
Decrease in amounts payable to affiliates (52) (61)
-------- --------
Net cash provided by operating activities 1,108 867
-------- --------
Cash flows from investing activities:
Increase in restricted cash (12) (86)
Capital expenditures (55) (76)
Construction of building (4,074) (867)
Increase in deposit on property under contract for sale -- 1,474
-------- --------
Net cash provided by (used in) investing activities (4,141) 445
-------- --------
Cash flows from financing activities:
Proceeds from construction loan 3,573 --
Principal repayments on long-term debt (210) (198)
Distributions paid (22) (652)
-------- --------
Net cash provided by (used in) financing activities 3,341 (850)
-------- --------
Net increase in cash 308 462
Cash at beginning of period 893 478
-------- --------
Cash at end of period $ 1,201 $ 940
======== ========
Supplemental disclosure of cash flow information -
Cash paid during the period for interest $ 1,053 $ 1,425
======== ========
</TABLE>
See accompanying notes to the unaudited financial statements.
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American Retirement Villas Properties III, L.P.
(a California limited partnership)
Notes to Financial Statements
(Unaudited)
September 30, 1997
(1) SIGNIFICANT ACCOUNTING POLICIES
BASIS OF ACCOUNTING
All adjustments, including recurring accruals, have been made that are necessary
to present fairly the financial position and results of operations for the
periods covered by this report. The results of operations for the nine months
ended September 30, 1997, are not necessarily indicative of the operating
results for the full year.
Pursuant to Regulation S-X Rule 10-1(5), American Retirement Villas Properties
III, L.P.'s (the "Partnership") significant accounting policies are described in
the Partnership's December 31, 1996 Form 10-K filed with the Securities and
Exchange Commission. The Partnership follows the same accounting policies for
interim reporting purposes. This quarterly report should be read in conjunction
with such financial statements.
Certain prior period amounts have been reclassified to conform to the current
period financial statement presentation.
(2) TRANSACTIONS WITH AFFILIATES
The Partnership has an agreement with ARV Assisted Living, the Partnership's
Managing General Partner, providing for a property management fee of 5 percent
of gross revenues and a partnership management fee of 10 percent of cash flow
before distribution, as defined in the Partnership Agreement. Property
management fees and partnership administration fees were $77,000 and $32,000 for
the three months ended September 30, 1997, respectively, and $232,000 and
$81,000 for the nine month ended September 30, 1997, respectively.
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ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Revenue
Revenue includes rental income, assisted living income, interest earned
on cash balances and other revenue. Revenue decreased $40,000 and $33,000 for
the three month and nine month periods ended September 30, 1997, respectively,
compared with the corresponding periods of 1996. The decreases resulted
primarily from lower interest income as a result of lower average cash balances
over the periods, partially offset by additional residents using assisted living
services during 1997.
Costs and Expenses
Total costs and expenses includes rental property operations (consisting of, but
not limited to, property management costs, payroll related expenses, utilities,
food, and maintenance expenses), assisted living expenses, general and
administrative (comprised of, but not limited to, costs for accounting,
partnership administration, bad debt, data processing, investor relations,
insurance and professional services), facilities rent, depreciation and
amortization, property taxes, advertising and interest. Costs and expenses
deceased $108,000 and $330,000 for the three month and nine month periods ended
September 30, 1997, respectively, compared with the corresponding periods of
1996. The decreases resulted primarily from decreases in interest expense,
property taxes, depreciation and amortization. These decreases were partially
offset by increases in assisted living services.
Interest expense, property taxes and depreciation and amortization decreased as
a result of a reduction of property and related debt upon the sale of Heritage
Pointe Claremont in 1996. The increase in assisted living services is due to
additional residents using assisted living services during 1997.
Liquidity and Capital Resources
The General Partners expect that the cash to be generated from operations of all
the Partnership's properties will be adequate to pay operating expenses, make
necessary capital improvements and make required principal reductions of debt.
Cash currently generated by operations is being reserved by the Partnership to
fund start-up costs to be incurred by the Villa Las Posas facility which is
expected to commence operations in the late 1997. On a long-term basis, the
Partnership's liquidity is sustained primarily from cash flow provided by
operating activities. During the nine months ended September 30, 1997, cash
provided by operating activities increased to $1.2 million compared to $0.9
million for the corresponding period in 1996.
During the nine months ended September 30, 1997, the Partnership's net cash used
in investing activities increased to $4.2 million compared to net cash provided
by investing activities of $0.4 million for the corresponding period in 1996.
The Partnership's investing activities consisted of capital improvements made on
its five operating properties and continued construction of its assisted living
facility in development (Villa Las Posas).
During the nine months ended September 30, 1997, the Partnership's net cash
provided by financing activities was $3.3 million compared to net cash used in
financing activities of $0.9 million for the corresponding period in 1996. The
Partnership's financing activities consisted of borrowings from its construction
loan, principal reduction on its notes payable and distributions paid to the
Partners.
The General Partners are not aware of any trends, other than national economic
conditions which have had, or which may be reasonably expected to have, a
material favorable or unfavorable impact on the revenues or income from the
operations or sale of properties. The General Partners believe that if the
inflation rate increases they will be able to pass the subsequent increase in
operating expenses onto the residents of the facilities by way of higher rental
and assisted living rates.
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On March 12, 1997, ARVP III obtained a $7.7 construction loan from Bank United
of Texas for financing the construction of the assisted living facility known as
Villa Las Posas located in Camarillo, California. The terms of the construction
loan provide for the interest rate to be equal to 30 day LIBOR rate plus 2.75
percent. As of September 30, 1997, the Partnership had $3.6 million outstanding
under this construction loan. In addition, the Partnership has long-term notes
payable of $15.8 million as of September 30, 1997, comprised of $0.1 million due
in 2000, $4.8 million due in 2007, $7.1 million due in 2017 and $3.8 million due
in 2019.
The Partnership contemplates spending approximately $130,000 for capital
expenditures during 1997 for physical improvements at its five facilities and
$7.7 million for construction costs for its Villa Las Posas assisted living
facility. The funds for improvements should be available from operations and
cash reserves while the funds for construction of the Villa Las Posas facility
should be available from the construction loan with Bank United of Texas.
There are no known material trends, favorable or unfavorable, in the
Partnership's capital resources, and there is no expected change in the mix of
such resources.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A. Exhibit 27 - Financial Data Schedule
B. None
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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.
AMERICAN RETIREMENT VILLAS PROPERTIES III
A CALIFORNIA LIMITED PARTNERSHIP
By: ARV Assisted Living, Inc.
(Managing General Partner)
By: /s/ John A. Booty
----------------------------------
John A. Booty
President
Date: November 14, 1997
By: /s/ Graham P. Espley-Jones
----------------------------------
Graham P. Espley-Jones
Chief Financial Officer
Date: November 14, 1997
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EXHIBIT INDEX
Exhibit Description
- ------- -----------
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JUL-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 1,201
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,201
<PP&E> 27,026
<DEPRECIATION> (4,304)
<TOTAL-ASSETS> 29,256
<CURRENT-LIABILITIES> 1,515
<BONDS> 19,386
0
0
<COMMON> 0
<OTHER-SE> 8,290
<TOTAL-LIABILITY-AND-EQUITY> 29,256
<SALES> 0
<TOTAL-REVENUES> 1,573
<CGS> 0
<TOTAL-COSTS> 1,233
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 357
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (17)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
