-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, M/0dq5A5dJ399BJ/hBEes6bPYX4EDtiVr0jZEncNitVMMqWbQfAEXdmINt3XDsNm OuwmFE31IMwkbrhcGjp0uw== 0000804752-98-000001.txt : 19980518 0000804752-98-000001.hdr.sgml : 19980518 ACCESSION NUMBER: 0000804752-98-000001 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980515 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: FORUM RETIREMENT PARTNERS L P CENTRAL INDEX KEY: 0000804752 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-SOCIAL SERVICES [8300] IRS NUMBER: 351686799 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-09302 FILM NUMBER: 98623991 BUSINESS ADDRESS: STREET 1: 8900 KEYSTONE CROSSING STE 200 STREET 2: PO BOX 40498 CITY: INDIANAPOLIS STATE: IN ZIP: 46240-0498 BUSINESS PHONE: 3178460700 MAIL ADDRESS: STREET 1: 8900 KEYSTONE CROSSING STE 200 STREET 2: PO BOX 40498 CITY: INDIANAPOLIS STATE: IN ZIP: 46240-0498 10-Q 1 FORUM RETIREMENT PARTNERS, L.P. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q Quarterly Report Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934 For Quarter Ended March 31, 1998 Commission File Number: 1-9302 FORUM RETIREMENT PARTNERS, L.P. (Exact name of registrant as specified in its charter) Delaware 35-1686799 (State of Incorporation) (I.R.S. Employer Identification Number) Bethesda, MD 20817 Telephone: (301) 380-9000 Securities registered pursuant to Section 12(b) of the Act: Title of Each Class Name Of Each Exchange On Which Registered Preferred Depository Units American Stock Exchange Representing Preferred Limited Partners' Interests Securities registered pursuant to Section 12(g) of the Act: None 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 FORUM RETIREMENT PARTNERS, L.P. AND SUBSIDIARY PARTNERSHIP INDEX
PAGE NO. -------- PART I. FINANCIAL INFORMATION (unaudited): Condensed Consolidated Balance Sheets - 3 March 31, 1998 and December 31, 1997 Condensed Consolidated Statements of Operations - 4 Three months ended March 31, 1998 and 1997 Condensed Consolidated Statements of Cash Flows - 5 Three months ended March 31, 1998 and 1997 Notes to Condensed Consolidated Financial Statements 6 Management's Discussion and Analysis of 9 Operations and Financial Condition PART II. OTHER INFORMATION AND SIGNATURE 11-12
2 FORUM RETIREMENT PARTNERS, L.P. AND SUBSIDIARY PARTNERSHIP CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands)
March 31, December 31, 1998 1997 ---------- ------------ (unaudited) ASSETS Property and equipment, net.............................................. $ 98,774 $ 99,615 Deferred financing costs, net............................................ 1,058 1,144 Restricted cash.......................................................... 2,848 2,452 Cash and cash equivalents................................................ 3,220 6,459 ------------ ----------- Total assets.................................................... $ 105,900 $ 109,670 ============ =========== LIABILITIES AND PARTNERS' EQUITY Debt..................................................................... $ 46,554 $ 46,854 Deferred income taxes.................................................... 1,372 -- Due (from) to manager.................................................... (537) 3,909 Other liabilities........................................................ 961 678 General partner's equity in subsidiary partnership 273 262 Deferred management fees due to parent of general partner 15,780 15,780 ------------ ----------- Total liabilities............................................... 64,403 67,483 ------------ ----------- Partners' equity: General partner..................................................... 521 528 Limited partners (15,285 units issued and outstanding).............. 40,976 41,659 ------------ ----------- Total partners' equity.......................................... 41,497 42,187 ------------ ----------- Total liabilities and partners' equity.......................... $ 105,900 $ 109,670 ============ ===========
See Notes to Condensed Consolidated Financial Statements. 3 FORUM RETIREMENT PARTNERS, L.P. AND SUBSIDIARY PARTNERSHIP CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS Three Months Ended March 31, 1998 and 1997 (unaudited, in thousands, except per unit data)
1998 1997 --------- -------- REVENUES....................................................................................... $ 4,614 $ 4,426 --------- -------- OPERATING COST AND EXPENSES Depreciation and amortization............................................................. 965 944 Base management fees to MSLS.............................................................. 1,172 1,138 Property taxes............................................................................ 170 463 Insurance and other....................................................................... 46 17 --------- -------- Total operating costs and expenses.................................................... 2,353 2,562 --------- -------- OPERATING PROFIT BEFORE PARTNERSHIP EXPENSES AND INTEREST.............................................................................. 2,261 1,864 General and administrative................................................................ 78 101 Interest expense.......................................................................... 1,244 1,272 Interest income........................................................................... (106) (41) --------- -------- Income before general partner's interest in income of subsidiary partnership.................................................................... 1,045 532 General partners' interest in income of subsidiary partnership................................. 11 5 --------- -------- INCOME BEFORE INCOME TAXES..................................................................... 1,034 527 Provision for income taxes resulting from change in tax status (see Note 5)............... (1,271) -- Provision for income taxes for current operations ........................................ (453) -- --------- -------- Total provision for income taxes...................................................... (1,724) -- --------- -------- NET INCOME (LOSS).............................................................................. $ (690) $ 527 ========= ======== General partner's interest in net income (loss)................................................ $ (7) $ 5 ========= ======== Limited partners' interest in net income (loss)................................................ $ (683) $ 522 ========= ======== Average number of limited partner units........................................................ 15,285 15,285 ========= ======== Earnings (loss) per limited partner unit....................................................... $ (.04) $ .03 ========= ========
See Notes to Condensed Consolidated Financial Statements. 4 FORUM RETIREMENT PARTNERS, L.P. AND SUBSIDIARY PARTNERSHIP CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS Three Months Ended March 31, 1998 and 1997 (unaudited, in thousands)
1998 1997 -------- --------- OPERATING ACTIVITIES Net income (loss)................................................................... $ (690) $ 527 Adjustments to reconcile to cash from operations Depreciation................................................................... 965 944 Amortization of deferred financing costs....................................... 86 92 Increase in deferred income taxes.............................................. 1,372 -- Change in other operating accounts............................................. (4,272) (1,249) -------- --------- Cash (used in) provided by operations............................................... (2,539) 314 -------- --------- INVESTING ACTIVITIES Capital expenditures........................................................... (125) (825) Increase in capital improvement reserve........................................ (152) (133) -------- --------- Cash used in investing activities................................................... (277) (958) -------- --------- FINANCING ACTIVITIES Repayments of debt............................................................. (300) (272) Principal payments on note due to general partner (27) (12) Increase in financing reserve.................................................. (96) - -------- --------- Cash used in financing activities................................................... (423) (284) Decrease in cash and cash equivalents............................................... (3,239) (928) Cash and cash equivalents, beginning of period...................................... 6,459 6,199 -------- --------- Cash and cash equivalents, end of period............................................ $ 3,220 $ 5,271 ======== =========
See Notes to Condensed Consolidated Financial Statements. 5 FORUM RETIREMENT PARTNERS, L.P. AND SUBSIDIARY PARTNERSHIP NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) 1. The accompanying condensed consolidated financial statements of Forum Retirement Partners, L.P. (the "Partnership") and subsidiary partnership have been prepared by the Partnership without audit. Certain information and footnote disclosures normally included in financial statements presented in accordance with generally accepted accounting principles have been condensed or omitted. The Partnership believes the disclosures made are adequate to make the information presented not misleading. However, the condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Partnership's Annual Report on Form 10-K for the fiscal year ended December 31, 1997. In the opinion of the Partnership, the accompanying unaudited condensed consolidated financial statements reflect all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position of the Partnership as of March 31, 1998 and December 31, 1997, and the results of its operations and cash flows for the three months ended March 31, 1998 and 1997. Interim results are not necessarily indicative of fiscal year performance because of the impact of seasonal and short-term variations. The Partnership's balance sheet has been presented in a non-classified format. Accordingly, information as reported in prior filings has been restated. 2. Forum Retirement, Inc., a wholly-owned subsidiary of Forum Group, Inc. ("Forum Group"), is the general partner of the Partnership (the "General Partner") and owns a one percent interest in the Partnership and a one percent interest in a subsidiary operating partnership in which the Partnership owns a ninety-nine percent limited partnership interest. The General Partner's interest in the subsidiary operating partnership is reflected in the accompanying consolidated statements of operations as a reduction of the income of the Partnership. Forum Group beneficially owns approximately 86% of the outstanding Preferred Depository Units (the "Units") representing a preferred limited partner interest in the Partnership. On June 21, 1997, HMC Senior Communities, Inc. ("HMCSC"), a wholly-owned subsidiary of Host Marriott Corporation ("Host Marriott"), acquired all of the outstanding stock of Forum Group from Marriott Senior Living Services, Inc. ("MSLS"), a subsidiary of Marriott International, Inc. ("MI"). In connection with the acquisition, Forum Group assigned to MSLS its interest as manager under a long-term management agreement (the "Management Agreement") for the nine RCs owned by the Partnership. On April 16, 1998, the Board of Directors of Host Marriott approved a plan to reorganize Host Marriott's current business operations by spinning-off Host Marriott's senior living business into a separate corporation, the Senior Living Communities Company and contributing Host Marriott's hotels and certain other assets and liabilities to a newly formed Delaware limited partnership, Host Marriott, L.P., whose sole general partner will be Host Marriott Trust, a newly formed Maryland Real Estate Investment Trust ("REIT"). After the proposed reorganization, HMCSC will lease hotels from Host Marriott, L.P. The reorganization, if consummated, will not have a significant impact on the operations of the Partnership. Consummation of the reorganization is subject to significant contingencies, including final Board approval, consent of shareholders, partners, bondholders, lenders and ground lessors of Host Marriott, its affiliates and other third parties. Accordingly, there can be no assurance that the reorganization will be completed. 3. Revenues represent house profit from the Partnership's senior living communities. House profit reflects the net revenues flowing to the Partnership as property owner and represents gross community operating sales less property-level expenses excluding depreciation and amortization, real and personal property taxes, insurance, management fees and certain other costs which are classified as operating costs and expenses. 6 FORUM RETIREMENT PARTNERS, L.P. AND SUBSIDIARY PARTNERSHIP NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) House profit generated by the Partnership's senior living communities consists of (in thousands):
Three Months Ended March 31, ------------------------ 1998 1997 --------- --------- Community Sales Routine .............................................................. $ 12,502 $ 12,396 Ancillary............................................................. 2,153 1,874 --------- --------- Total Community Sales............................................. 14,655 14,270 --------- --------- Department Costs Routine .............................................................. 8,210 8,306 Ancillary............................................................. 1,831 1,538 --------- --------- Total Department Costs............................................ 10,041 9,844 --------- --------- Department Profit Routine .............................................................. 4,292 4,090 Ancillary............................................................. 322 336 --------- --------- Revenues.......................................................... $ 4,614 $ 4,426 ========= =========
4. Other assets include restricted cash as follows (in thousands):
March 31, December 31, 1998 1997 --------- ----------- Debt service reserve fund.................................................. $ 487 $ 391 Fixed asset reserve fund................................................... 421 268 Real estate tax reserve fund............................................... 453 627 Insurance reserve fund..................................................... 1,487 1,166 --------- --------- $ 2,848 $ 2,452 ========= =========
The debt service, fixed asset, real estate tax and insurance reserve funds consist of monies transferred into segregated escrow accounts out of revenues generated by the Partnership, pursuant to the Partnership's secured loan facility. These funds are periodically disbursed by the collateral agent to pay for debt service, capital expenditures, insurance premiums and real estate taxes relating to the secured property. In some cases, to ensure prompt payment, the Partnership utilizes its unrestricted cash to pay for capital expenditures, insurance premiums and real estate taxes and is thereafter reimbursed for such payments out of funds held in the appropriate escrow account. 5. The Omnibus Budget Reconciliation Act of 1987, as amended by the Taxpayer Relief Act of 1997 (the "Act"), provided that certain publicly traded partnerships should be treated as corporations for federal income tax purposes. A provision of the Act allows certain publicly traded partnerships which would otherwise become subject to tax as a corporation beginning in 1998 to elect to be subject to a special tax on gross income from its active conduct of a trade or business, and continue to avoid being treated as a corporation for federal income tax purposes. The tax generally applies to a partnership's gross income at the rate of three and one half percent, effective for taxable years beginning after December 31, 1997. 7 FORUM RETIREMENT PARTNERS, L.P. AND SUBSIDIARY PARTNERSHIP NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) The Partnership has elected not to pay the special tax on gross income and began being treated as a corporation for federal income tax purposes effective January 1, 1998. Included within the Partnership's tax provision for the first quarter of 1998 is a one time charge of approximately $1.3 million to record a net deferred tax liability related to the change in tax status. The net deferred tax liability represents the tax effect of the excess of the net assets reported in the accompanying financial statements over the Partnership's tax basis in the net assets. This difference is due primarily to the use, for income tax purposes, of accelerated depreciation methods and shorter depreciable lives for fixed assets and deferred management fees which have been expensed under generally accepted accounting principals but are generally not deductable for tax purposes until paid. 6. In connection with the formation of the Partnership, the Partnership entered into a long-term Management Agreement with Forum Group which requires fees of 8% of gross operating revenues. Through December 31, 1993, the agreement provided for the deferral of the payment of the fees if net cash flow was not adequate to make certain distributions to limited partners. Cash flow was not adequate to make the distributions, and the entire $15,780,000 of management fees earned from the formation of the Partnership through December 31, 1993 was deferred. The management fee payable to Forum Group of $15,780,000 for all periods from the formation of the Partnership in 1986 to December 31, 1993 was deferred. Management fees for periods after December 31, 1993 are being paid quarterly, in arrears. Deferred management fees are payable to Forum Group out of proceeds of sales and refinancings after making distributions of those proceeds in an amount sufficient to (i) meet limited partners' tax liabilities, (ii) repay limited partners' capital contributions, and (iii) pay a 12% cumulative, simple annual return on limited partners' unrecovered capital contributions. Deferred management fees become immediately due and payable in the event that the Management Agreement is terminated, which may occur under certain conditions including, but not limited to, if Forum Retirement, Inc. is removed as the General Partner and 80% of the limited partners' interest vote to terminate such agreement. The Partnership is unable to predict when or if management fees deferred prior to January 1, 1994 will become payable. On June 15, 1995, The Russell F. Knapp Revocable Trust (the "Plaintiff") filed a complaint in the United States District Court of the Southern District of Indiana (the "Indiana Court") against the General Partner and Forum Group alleging breach of the partnership agreement, breach of fiduciary duty, fraud, insider trading and civil conspiracy/aiding and abetting. On February 4, 1998, the Plaintiff, MSLS, the General Partner, Forum Group and Host Marriott entered into a Settlement and Release Agreement (the "Settlement Agreement"), pursuant to which Host Marriott agreed to pay each limited partner electing to join in the Settlement Agreement $4.50 per unit in exchange for (i) the transfer of all Partnership units owned by a settling limited partner; (ii) an agreement by each settling limited partner not to purchase additional Partnership units; (iii) a release of all claims asserted in the litigation; and (iv) a dismissal of the litigation. Initially, the period within which a limited partner could elect to participate in the Settlement Agreement was scheduled to expire on April 27, 1998. This period has now been extended to May 22, 1998. Host Marriott expects that additional limited partners will join in the Settlement Agreement but cannot predict with any certainty the extent of such additional participation. Host Marriott also agreed to pay as much as an additional $1.25 per unit to the settling Limited Partners, under certain conditions, in the event that Host Marriott within three years following the date of settlement initiates a tender offer for the purchase of units not presently held by Host Marriott or the settling Limited Partners. On February 5, 1998, the Indiana Court entered an order approving the dismissal of the Plaintiff's case. In connection with the Settlement Agreement on March 25, 1998, Host Marriott acquired 1,000,894 limited partner shares for $4,504,023. As a result of this purchase, Host Marriott's ownership interest in the Partnership, directly or through affiliates, increased to approximately 86%. 8 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATIONS AND FINANCIAL CONDITION FORWARD-LOOKING STATEMENTS Certain matters discussed in this Form 10-Q include forward-looking statements within the meaning of the Private Litigation Reform Act of 1995, including without limitation, statements related to Host Marriott Corporation ("Host Marriott") proposed REIT conversion, the terms, structure and timing thereof, and the expected effects of the proposed REIT conversion. All forward-looking statements involve known and unknown risks, uncertainties, and other factors, many of which are not within the control of the Partnership, that may cause actual transactions, results, performance or achievements to be materially different from any future transactions, results, performance or achievements expressed or implied by such forward-looking statements. While the Partnership believes that the expectations reflected in these forward-looking statements are based upon reasonable assumptions, it can give no assurance that its performance or other expectations will be attained, that the transactions described herein will be consummated or that the terms of the transactions or the timing or effects thereof will not differ materially from those described herein. The Partnership undertakes no obligation to publicly release the result of any revisions to these forward-looking statements that may be made to reflect any future events or circumstances. RESULTS OF OPERATIONS REVENUES. Revenues represent gross property routine and ancillary sales less property-level expenses. Routine service revenues are generated from monthly charges for independent living units and daily charges for assisted living suites and nursing beds which are recognized monthly based on the terms of the residents' agreements. Ancillary service revenues are generated on a "fee for service" basis for supplementary items requested by residents and are recognized as the services are provided. Revenues for the three months ended March 31, 1998 increased by $188,000, or 4%, to $4,614,000 compared to the same period in 1997. The revenue increase is primarily the result of increases in residency fees and charges in the independent living, assisted living and nursing components, the favorable impact of the expansion units and increases in therapy and other ancillary healthcare services. However, these increases in gross sales also resulted in increased department costs. Combined average occupancy (calculated based on the number of units occupied during the respective period) at the nine senior living communities was 94.6% for the three months ended March 31, 1998, an increase of approximately 1.3% compared to the same period in 1997. OPERATING COSTS AND EXPENSES. Operating costs and expenses consist of depreciation and amortization, base management fees, real and personal property taxes, insurance and certain other costs. The Partnership's operating costs and expenses decreased $209,000, or 8%, to $2,353,000 for the three months ended March 31, 1998 due primarily to a decrease in property taxes. OPERATING PROFIT. As a result of the changes in revenues and operating costs and expenses discussed above, the Partnership's operating profit increased by $397,000, or 21%, to $2,261,000 for the three months ended March 31, 1998. As a percentage of revenues, operating costs and expenses decreased from 58% for the three months ended March 31, 1997 to 51% for the same period in 1998. INTEREST EXPENSE. Interest expense decreased by $28,000, or 2%, to $1,244,000 for the three months ended March 31, 1998 from $1,272,000 during the same period in 1997 resulting from loan principal amortization. NET INCOME (LOSS) . The net loss was $690,000 for the three months ended March 31, 1998 compared to net income of $527,000 for the same period in 1997 due to the impact of an approximate $1.3 million one-time tax charge discussed below, partially offset by improved operations. The net loss per limited partner unit for the three months ended March 31, 1998 was $.04 per unit, compared to net income per unit of $.03 per share for the same period in 1997. INCOME TAXES. The Partnership began being taxed as a corporation effective January 1, 1998. This has resulted in a one-time charge of approximately $1.3 million included as the tax provision for the first quarter of 1998. Additionally, the Partnership's income tax provision for the first quarter of 1998 was $453,000. 9 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATIONS AND FINANCIAL CONDITION LIQUIDITY AND CAPITAL RESOURCES. At March 31, 1998, the Partnership had cash and cash equivalents of $3,220,000 and restricted cash of $2,848,000. The Partnership believes that it has sufficient capital resources to conduct its operations in the ordinary course of business. The Partnership's long-term financing needs have historically been funded through loan agreements with independent financial institutions. The General Partner believes that the Partnership will have sufficient capital resources and liquidity to continue to conduct its operations in the ordinary course of business, although there can be no assurance of the Partnership's ability to do so. The Partnership's principal source of cash is from operations. Its principal uses of cash are operating expenses, debt service, property replacement and renewals as well as to fund the expansions discussed below. The Partnership has an on-going expansion program related to all of its communities in an effort to further improve the Partnership's results of operations. The expansions are designed to add capacity to and/or modify the uses of existing facilities to increase earnings without incurring substantial land acquisition and common area build-out costs. Certain expansions will require additional regulatory approvals. The expansion program consists of eleven separate projects expected to increase the total number of units by 292, or 18% of total units, at an estimated cost of $20 million. Currently, six expansion projects have been completed, two expansion projects are under construction and another three expansion projects are in active development or design. The three remaining projects in development or design are expected to begin construction by the end of 1998 or early 1999. The six completed projects increased the total number of units by 113, at a cost of $7.9 million. The Partnership is financing and intends to continue to finance this expansion program with cash from operations. If cash flow from operations is insufficient to complete future expansions on a timely basis, the expansion may be delayed, reduced in scope or discontinued. The terms of the Partnership's current debt agreement restrict the Partnership from incurring additional third-party financing (other than $1 million of equipment financing) and prohibit the imposition of liens on the Partnership's assets. There can be no assurance that a waiver can be obtained from the lender to permit any third-party financing, or whether, when and on what terms, any such financing may be available. As a result of the capital required to fund the expansion program, the Partnership does not expect to make distributions to the limited partners in the foreseeable future. The implementation of the expansion program and its impact on the value of an investment in the Partnership is subject to a number of variables, including without limitation, the availability of cash flow from operations, the ability to obtain required zoning variances and permits from local government authorities and the timing thereof, whether development and construction costs are higher or lower than anticipated, whether construction is completed faster or slower than anticipated and whether operating costs are higher or lower than anticipated. Cash used in operating activities was $2,539,000 for the three months ended March 31, 1998, compared to cash provided by operations of $314,000 for the same period in 1997 due principally to changes in working capital and amounts due to Marriott International for reimbursement of operating costs and management fees. Cash used in investing activities was $277,000 for the three months ended March 31, 1998, compared to $958,000 for the same period in 1997 due to a decrease in capital expenditures. 10 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATIONS AND FINANCIAL CONDITION Cash used in financing activities was $423,000 for the three months ended March 31, 1998, compared to $284,000 for the same period in 1997 due to increases in repayments of debt, payments on note due to general partner and financing reserve. On April 16, 1998, the Board of Directors of Host Marriott approved a plan to reorganize Host Marriott's current business operations by spinning-off Host Marriott's senior living business into a separate corporation, the Senior Living Communities Company and contributing Host Marriott's hotels and certain other assets and liabilities to a newly formed Delaware limited partnership, Host Marriott, L.P., whose sole general partner will be Host Marriott Trust, a newly formed Maryland Real Estate Investment Trust ("REIT"). After the proposed reorganization, HMCSC will lease hotels from Host Marriott, L.P. The reorganization, if consummated, will not have a significant impact on the operations of the Partnership. Consummation of the reorganization is subject to significant contingencies, including final Board approval, consent of shareholders, partners, bondholders, lenders and ground lessors of Host Marriott, its affiliates and other third parties. Accordingly, there can be no assurance that the reorganization will be completed. Cash used in financing activities was $423,000 for the three months ended March 31, 1998, compared to $284,000 for the same period in 1996 due to increases in repayments of debt, payments on note due to general partner and financing reserve. On April 16, 1998, the Board of Directors of Host Marriott approved a plan to reorganize Host Marriott's current business operations by spinning-off Host Marriott's senior living business into a separate corporation, the Senior Living Communities Company and contributing Host Marriott's hotels and certain other assets and liabilities to a newly formed Delaware limited partnership, Host Marriott, L.P., whose sole general partner will be Host Marriott Trust, a newly formed Maryland Real Estate Investment Trust ("REIT"). After the proposed reorganization, HMCSC will lease hotels from Host Marriott, L.P. The reorganization, if consummated, will not have a significant impact on the operations of the Partnership. 11 PART II. OTHER INFORMATION FORUM RETIREMENT PARTNERS, L.P. AND SUBSIDIARY PARTNERSHIP ITEM 1. Legal Proceedings On June 15, 1995, The Russell F. Knapp Revocable Trust (the "Plaintiff") filed a complaint in the United States District Court of the Southern District of Indiana (the "Indiana Court") against the General Partner and Forum Group alleging breach of the partnership agreement, breach of fiduciary duty, fraud, insider trading and civil conspiracy/aiding and abetting. On February 4, 1998, the Plaintiff, MSLS, the General Partner, Forum Group and Host Marriott entered into a Settlement and Release Agreement (the "Settlement Agreement"), pursuant to which Host Marriott agreed to pay each limited partner electing to join in the Settlement Agreement $4.50 per unit in exchange for (i) the transfer of all Partnership units owned by a settling limited partner; (ii) an agreement by each settling limited partner not to purchase additional Partnership units; (iii) a release of all claims asserted in the litigation; and (iv) a dismissal of the litigation. Initially, the period within which a limited partner could elect to participate in the Settlement Agreement was scheduled to expire on April 27, 1998. This period has now been extended to May 22, 1998. Host Marriott expects that additional limited partners will join in the Settlement Agreement but cannot predict with any certainty the extent of such additional participation. Host Marriott also agreed to pay as much as an additional $1.25 per unit to the settling Limited Partners, under certain conditions, in the event that Host Marriott within three years following the date of settlement initiates a tender offer for the purchase of units not presently held by Host Marriott or the settling Limited Partners. On February 5, 1998, the Indiana Court entered an order approving the dismissal of the Plaintiff's case. In connection with the Settlement Agreement on March 25, 1998, Host Marriott acquired 1,000,894 limited partner shares for $4,504,023. As a result of this purchase, Host Marriott's ownership interest in the Partnership, directly or through affiliates, increased to approximately 86%. ITEM 4. Submission of Matters to a Vote of Security Holders None. ITEM 5. Other Information None. ITEM 6. Exhibits and Reports on Form 8-K None. 12 SIGNATURE FORUM RETIREMENT PARTNERS, L.P. AND SUBSIDIARY PARTNERSHIP 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 hereunto duly authorized. FORUM RETIREMENT PARTNERS, L.P., a Delaware Limited Partnership By: FORUM RETIREMENT, INC., GENERAL PARTNER May 15, 1998 By: /s/ Donald D. Olinger - ------------ --------------------------- Date Donald D. Olinger Vice President 13 EX-27 2 FDS --
5 This schedule contains summary financial information extracted from the Forum Retirement Partners, L.P. condensed consolidated balance sheets and condensed statement of operations as of the quarter ended March 31, 1998 and is qualified in its entirety by reference to such financial statements. 0000804752 FORUM RETIREMENT PARTNERS, L.P. 1,000 $ 3-mos Dec-31-1998 Jan-1-1998 Mar-31-1998 1 3,220 0 0 0 0 0 135,384 (36,610) 105,900 0 46,554 0 0 0 41,497 105,900 4,614 4,614 0 2,353 0 0 1,244 1,034 0 (690) 0 0 0 (690) (.04) (.04)
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