-----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, UuBy/POFJRS2qvSa4HMzy1xf25UCDwFOVaRIMqhYQzAIu82sgk344m8VHLCyYMGw OldQdPI07ktwK5g48BnzVQ== 0000892569-96-001545.txt : 19960814 0000892569-96-001545.hdr.sgml : 19960814 ACCESSION NUMBER: 0000892569-96-001545 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960813 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERICAN RETIREMENT VILLAS PROPERTIES II CENTRAL INDEX KEY: 0000830156 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE [6500] IRS NUMBER: 330278155 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 033-20413 FILM NUMBER: 96610207 BUSINESS ADDRESS: STREET 1: 245 FISCHER AVE STE D1 CITY: COSTA MESA STATE: CA ZIP: 92626 BUSINESS PHONE: 7147517400 MAIL ADDRESS: STREET 2: 245 FISCHER AVE STE D1 CITY: COSTA MESA STATE: CA ZIP: 92626 10-Q 1 FORM 10-Q FOR PERIOD ENDING JUNE 30, 1996 1 ================================================================================ 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 JUNE 30, 1996 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ________ TO ___________ COMMISSION FILE NUMBER: 0-26468 AMERICAN RETIREMENT VILLAS PROPERTIES II (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) --------------- CALIFORNIA 33-0278155 (STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.) 245 FISCHER AVENUE, D-1 92626 COSTA MESA, CA (ZIP CODE) (ADDRESS OF PRINCIPAL EXECUTIVE OFFICE) 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 --- --- ================================================================================ 2 PART I - FINANCIAL INFORMATION ITEM 1 - FINANCIAL STATEMENTS American Retirement Villas Properties II (a California limited partnership) Balance Sheets (Unaudited)
June 30, 1996 December 31, 1995 ASSETS (Unaudited) (Audited) ------------- ----------------- Properties, at cost (notes 3,4 and 5) Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,902,684 $2,902,684 Buildings and improvements, less accumulated depreciation of $5,779,193 in 1996 and $5,361,962 in 1995 . . . . . . . . . . 14,865,698 15,179,456 Leasehold property and improvements, less accumulated amortization of $6,095,796 in 1996 and $5,807,795 in 1995 . . 488,289 825,432 Furniture, fixtures and equipment, less accumulated depreciation of $5,242,180 in 1996 and $1,108,392 in 1995 . . 897,187 937,861 ----------- ----------- Net Properties . . . . . . . . . . . . . . . . . . 19,153,858 19,845,433 Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . 295,629 488,582 Loan fees, less accumulated amortization of $9,929 in 1996 and $9,119 in 1995 . . . . . . . . . . . . . . . . . . . . . . . 675 1,486 Other assets . . . . . . . . . . . . . . . . . . . . . . . . 1,198,280 1,188,373 ----------- ----------- Total Assets . . . . . . . . . . . . . . . . . . . $20,648,442 $21,523,874 =========== =========== LIABILITIES AND PARTNERS' CAPITAL Notes Payable (note 5) . . . . . . . . . . . . . . . . . . . $6,892,178 $7,211,460 Accounts payable and accrued expenses . . . . . . . . . . . . 834,989 758,240 Amounts payable to affiliates (note 3) . . . . . . . . . . . 144,370 155,155 Distributions payable to partners . . . . . . . . . . . . . . 39,175 580,163 ----------- ----------- Total Liabilities . . . . . . . . . . . . . . . . . 7,910,712 8,705,018 ----------- ----------- Partners' capital General partners' capital . . . . . . . . . . . . . . . . . 275,287 276,099 Limited partners' capital, 34,995 units outstanding . . . . 12,462,443 12,542,757 ----------- ----------- Total liabilities and partners' capital . . . . . . $20,648,442 $21,523,874 =========== ===========
See accompanying notes to financial statements (unaudited). 1 3 American Retirement Villas Properties II (a California limited partnership) Statements of Operations (Unaudited)
FOR THE THREE MONTHS ENDED FOR THE SIX MONTHS ENDED ---------------------------------- -------------------------------- JUNE 30, 1996 JUNE 30, 1995 JUNE 30, 1996 JUNE 30, 1995 --------------- ------------- --------------- ------------- Revenue: Rent . . . . . . . . . . . . . . . $3,733,358 $3,647,896 $7,428,867 $7,344,722 Assisted living . . . . . . . . . . 616,615 494,447 1,171,634 990,126 Interest . . . . . . . . . . . . . 3,108 3,923 7,338 7,921 Other . . . . . . . . . . . . . . . 52,434 33,728 100,702 92,442 ---------- ---------- ---------- ---------- Total revenue 4,405,516 4,179,994 8,708,541 8,435,212 ---------- ---------- ---------- ---------- Costs and expenses (note 3): Rental property operations . . . . 2,371,880 2,431,262 4,769,268 4,885,305 Assisted living . . . . . . . . . . 240,102 215,636 480,503 419,845 General and administrative . . . . 635,283 225,901 885,931 482,855 Facilities rent (note 4) . . . . . 293,981 286,683 586,786 573,382 Depreciation and amortization . . . 412,301 534,809 890,692 1,061,711 Property taxes . . . . . . . . . . 138,673 129,413 237,594 257,755 Advertising . . . . . . . . . . . . 15,087 35,985 45,635 67,418 Interest . . . . . . . . . . . . . 145,174 147,682 293,558 295,232 ---------- ---------- ---------- ---------- Total costs and expenses 4,252,481 4,007,371 8,189,968 8,043,502 ---------- ---------- ---------- ---------- Net income . . . . . . . $153,035 $172,623 $518,573 $391,709 ========== ========== ========== ========== Net income to General Partner . . $1,530 $1,726 $5,186 $3,917 ========== ========== ========== ========== Net income to Limited Partners . . $151,504 $170,897 $513,387 $387,792 ========== ========== ========== ========== Net income per Limited Partner unit . . . . . . . . . . . . . . . $4.33 $4.88 $14.67 $11.08 ========== ========== ========== ==========
See accompanying notes to financial statements (unaudited). 2 4 American Retirement Villas Properties II (a California limited partnership) Statements of Cash Flow (Unaudited)
FOR THE SIX MONTHS ENDED ------------------------------------- June 30, 1996 June 30, 1995 ------------- ------------- Cash flows from operating activities: Net income . . . . . . . . . . . . . . . . . . . . . . . . $518,573 $391,709 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization . . . . . . . . . . . . 890,692 1,061,711 Change in assets and liabilities: Decrease in loan fees . . . . . . . . . . . . . . 0 0 (Increase) in other assets . . . . . . . . . . . . (9,906) (106,112) Increase in accounts payable and accrued expenses 76,749 164,709 Increase (decrease) in amounts payable to affiliates . . . . . . . . . . . . . . . . . . . (10,785) 34,978 ---------- ---------- Net cash provided by operating activities . . 1,465,323 1,546,995 ---------- ---------- Cash flows used in investing activities Capital expenditures . . . . . . . . . . . . . . . . . . (198,307) (288,199) Acquisition of autos . . . . . . . . . . . . . . . . . . 0 (166,196) ---------- ---------- Net cash used in investing activities. . . . . . (198,307) (454,395) ---------- ---------- Cash flows from financing activities: Borrowings on line of credit . . . . . . . . . . . . . . . 660,000 375,000 Principal repayments on line of credit . . . . . . . . . . (900,000) (690,000) Principal repayments on notes payable . . . . . . . . . . (79,282) (57,351) Borrowings on capital leases . . . . . . . . . . . . . . . 0 0 Distributions paid . . . . . . . . . . . . . . . . . . . . (1,140,687) (1,118,157) ---------- ---------- Net cash used by financing activities . . . . (1,459,969) (1,490,508) ---------- ---------- Net decrease in cash . . . . . . . . . . . . . . . . . . . . (192,953) (397,908) Cash at beginning of period . . . . . . . . . . . . . . . . . 488,582 1,329,594 ---------- ---------- Cash at end of period . . . . . . . . . . . . . . . . . . . . $295,629 $931,686 ========== ==========
See accompanying notes to financial statements (unaudited). 3 5 (1) SIGNIFICANT ACCOUNTING POLICIES BASIS OF ACCOUNTING Pursuant to Regulation S-X Rule 10-1(5), the material stated in the December 31, 1995 Form 10-K is incorporated by this reference. The financial statements reflect all adjustments and disclosures which are, in the opinion of management, necessary for a fair presentation. All such adjustments are of a normal recurring nature. CARRYING VALUE OF REAL ESTATE Pursuant to Regulation S-X Rule 10-1(5), the material stated in the December 31, 1995 Form 10-K is incorporated by this reference. LOAN FEES Pursuant to Regulation S-X Rule 10-1(5), the material stated in the December 31, 1995 Form 10-K is incorporated by this reference. RENTAL INCOME Pursuant to Regulation S-X Rule 10-1(5), the material stated in the December 31, 1995 Form 10-K is incorporated by this reference. INCOME TAXES Pursuant to Regulation S-X Rule 10-1(5), the material stated in the December 31, 1995 Form 10-K is incorporated by this reference. NET INCOME PER LIMITED PARTNER UNIT Pursuant to Regulation S-X Rule 10-1(5), the material stated in the December 31, 1995 Form 10-K is incorporated by this reference. CASH Pursuant to Regulation S-X Rule 10-1(5), the material stated in the December 31, 1995 Form 10-K is incorporated by this reference. 4 6 RECLASSIFICATIONS Pursuant to Regulation S-X Rule 10-1(5), the material stated in the December 31, 1995 Form 10-K is incorporated by this reference. (2) ORGANIZATION AND PARTNERSHIP AGREEMENT Pursuant to Regulation S-X Rule 10-1(5), the material stated in the December 31, 1995 Form 10-K is incorporated by this reference. (3) TRANSACTIONS WITH AFFILIATES Pursuant to Regulation S-X Rule 10-1(5), the material stated in the December 31, 1995 Form 10-K is incorporated by this reference, and is supplemented as follows. For the quarter ended June 30, 1996, property management fees and partnership administration fees of $220,304 and $101,606 respectively, were paid or accrued to the Managing General Partner. (4) PROPERTIES Pursuant to Regulation S-X Rule 10-1(5), the material stated in the December 31, 1995 Form 10-K is incorporated by this reference. (5) NOTES PAYABLE Pursuant to Regulation S-X Rule 10-1(5), the material stated in the December 31, 1995 Form 10-K is incorporated by this reference. 5 7 ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (1) LIQUIDITY Currently, the Partnership has approximately $569,000 of debt maturing within the next six months. It is the Managing General Partner's intention to refinance this debt. To the extent such a refinancing effort is successful, 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, make required principal reductions, and provide distributions to the Partners. In the event the Managing General Partner is unsuccessful in refinancing these obligations, the Partnership's ability to provide distributions to the Partners over the near term could be temporarily impaired as operating funds would be required for the retirement of debt. On a long-term basis, the Partnership's liquidity is sustained primarily from cash flow provided by operating activities. During the six months ended June 30, 1996, cash provided by operating activities was $1,465,323 compared to cash provided by operating activities of $1,546,995 for the six months ended June 30, 1995. During the six months ended June 30, 1996, the Partnership used net cash in investing activities of $198,307 compared to $454,395 for the six months ended June 30, 1995. The Partnership's investing activities consisted of capital improvements made on its ten facilities. During the six months ended June 30, 1996, the Partnership used net cash in financing activities of $1,459,969 compared to $1,490,508 for the six months ended June 30, 1995. The Partnership's financing activities consisted of net repayments under its line of credit, principal reduction on notes payable and distributions paid to the Partners. The Managing General Partner is 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 revenue or income from the operations or sale of properties. Six of the facilities in the Partnership's portfolio are leased to the Partnership. On June 27, 1996, the Partnership filed actions seeking declaratory judgements against the landlords of the Retirement Inn of Campbell ("Campbell") and the Retirement Inn of Sunnyvale ("Sunnyvale"). The Partnership leases the Campbell and Sunnyvale assisted living facilities under long-term leases. A dispute has arisen as to the amount of rent due during the 10-year lease renewal periods which commenced in August 1995 for Campbell and March 1996 for Sunnyvale. The Partnership seeks a determination that the Partnership is not required to pay any higher rent during the 10-year renewal periods than during the original 20-year lease terms. In the event that the court finds against the Partnership, rent for the Campbell and Sunnyvale facilities could increase significantly, which will reduce distributions to Unitholders in the future. These rent increases would be retroactive to the commencement of the lease renewal periods. Two other facilities leased by the Partnership, the Retirement Inn of Fremont ("Fremont") and the Retirement Inn at Burlingame ("Burlingame"), are owned by entities which are related to the entities that own the Campbell and Sunnyvale facilities. It is not known whether the landlords of those facilities will dispute the amount of rent due during the renewal periods beginning January 1997 for Fremont and August 1997 for Burlingame. If so, the Partnership may be required to file litigation to determine the rights under those leases as well. Increases in rent for the facilities may not be offset by an increase in rental and assisted living rates and may result in a decrease in revenue or income from the operations of the facilities. The Managing General Partner believes that if expenses increase as a result of inflation, the subsequent increases in operating expenses will most likely be able to be passed on to the residents of the facilities by way of higher rental and assisted living rates. The Partnership has long term debt of $6,892,178 as of June 30, 1996. Of this amount, $240,000 is due October 15, 1996 (pursuant to the terms of the Partnership's revolving line of credit agreement), $329,333 is due December 1, 1996, and the balance is due through regularly scheduled payments of principal and interest payments (primarily on mortgage debt) through August 2018. 6 8 (2) CAPITAL RESOURCES The Managing General Partner contemplates incurring approximately $500,000 for physical improvements and normal recurring preventative maintenance at its ten facilities during 1996. Of this amount, approximately $200,000 has been expended as of June 30, 1996. Funds for these improvements should be available from operations. There are no known material trends, favorable or unfavorable, other than those disclosed above, in the Partnership's capital resources. There is no expected change in the mix of such resources. (3) RESULTS OF OPERATIONS THREE MONTHS ENDED JUNE 30, 1996 COMPARED WITH THE THREE MONTHS ENDED JUNE 30, 1995. Revenue for the three month periods ended June 30, 1996 and 1995 includes rental income, assisted living income, interest earned on cash balances and other revenue. Total revenue for the three months ended June 30, 1996 was $4,405,515 representing an increase of approximately 5.4% over revenues of $4,179,994 for the three months ended June 30, 1995. The largest component of revenue, rental income, increased approximately 2.3% for the three months ended June 30, 1996 from the comparable period in the prior year. Meanwhile, assisted living revenue increased approximately 24.7% to $616,615 for the three months ended June 30, 1996 from $494,447 for the three months ended June 30, 1995. The increase in assisted living revenue was primarily the result of an aggressive marketing campaign for assisted living services and more residents using the services. Interest income decreased approximately 20.8% to $3,108 for the three months ended June 30, 1996 from $3,923 for the three months ended June 30, 1995. Other revenue increased approximately 55.5% from $33,728 for the three months ended June 30, 1995 to $52,434 for the three months ended June 30, 1996, primarily due to a increase in processing fees and beauty shop revenue. Sources of revenue for the three months ended June 30, 1996 and June 30, 1995 are summarized as follows:
THREE MONTHS ENDED ------------------------------------- JUNE 30, 1996 JUNE 30, 1995 ------------- ------------- Rent $3,733,358 $3,647,896 Assisted Living 616,615 494,447 Interest 3,108 3,923 Other 52,434 33,728 ---------- ---------- Total Revenue $4,405,515 $4,179,994 ========== ==========
Total costs and expenses for the three months ended June 30, 1996 were $4,252,481, an increase of 6.1% compared to costs and expenses of $4,007,370 for the three months ended June 30, 1995. The largest component of expenses, rental property operations, consists primarily of property managements costs, payroll related expenses, utilities, food expenses and maintenance and supplies. Rental property operations expenses decreased approximately 2.4% to $2,371,880 for the three months ended June 30, 1996 from $2,431,262 for the three months ended June 30, 1995. 7 9 Assisted living expenses consist primarily of the related payroll expense. This expense increased approximately 11.4% to $240,102 for the three months ended June 30, 1996 from $215,636 for the three months ended June 30, 1995. The increase corresponds directly to the increase in assisted living services revenue in the current year and the staffing required to provide these services. General and administrative expenses are comprised of, but not limited to, costs for accounting, partnership administration, bad debt, data processing, investor relations, insurance and professional services. General and administrative expenses increased by 181% to $635,283 for the three months ended June 30, 1996 from $225,901 for the three months ended June 30, 1995. The increase was due primarily to a one time charge of $347,510 for costs related to preparing to solicit the consent of the Partnership's Unitholders with respect to an anticipated sale of the Partnership's four fee properties to a health care real estate investment trust. A preliminary consent solicitation statement had been filed with the Securities and Exchange Commission (the "SEC"). The normal course of review of the consent solicitation by the SEC was not completed before the time in which the solicitation statement was required to be updated with audited year-end financial statements for the Partnership. While the year-end financial statements were being prepared and audited, that Managing General Partner requested the appraisal firm which had previously prepared appraisals of the four fee properties to update those appraisals. Upon receiving and reviewing the updated appraisals, which indicated an increase in market value for each of the fee properties, the Managing General Partner contacted the potential buyer of the properties to determine if it was willing to increase its purchase price accordingly. As the purchase price was not increased, the Partnership's General Partners decided not to solicit the consent of the Partners for the sale of the fee properties. Although the sale of the fee properties did not occur, the General Partner provided those Unitholders seeking liquidity an opportunity to sell their interests in the Partnership at an amount which reflected the values contained in the updated appraisals. (See Item 5. Other Information). Depreciation and amortization expense decreased by 22.9% from $534,809 for the three months ended June 30, 1995 to $412,301 for the three months ended June 30, 1996. The primary reason for this decrease is the full amortization of assets associated with the expiration of the initial lease term of two of the facility operating leases. Interest expense remained relatively constant for the three months ended June 30, 1996 compared with the three months ended June 30, 1995. Selected costs and expenses for the three months ended June 30, 1996 and June 30, 1995 are summarized as follows:
THREE MONTHS ENDED ------------------------------------- JUNE 30, 1996 JUNE 30, 1995 ------------- ------------- Rental Property Operations $2,371,880 $2,431,262 Assisted Living 240,102 215,636 General and Administrative 635,283 225,901 Depreciation and amortization 412,301 534,809 Property Taxes 138,673 129,413 Interest 145,174 147,682
SIX MONTHS ENDED JUNE 30, 1996 COMPARED WITH THE SIX MONTHS ENDED JUNE 30, 1995. Revenue for the six months ended June 30, 1996 and 1995 includes rental income, assisted living revenue from all ten facilities, interest income and other revenue. Total revenue for the six months ended June 30, 1996 was $8,708,541 an increase of 3.2% over revenue of $8,435,211 for the six months ended June 30, 1995. The largest component of revenue, rent, increased a little over 1% from the six months ended June 30, 1995 to the six months ended June 30, 1996. Revenue from assisted living increased over 18% from the six months ended June 30, 1995 to the six month period ended June 30, 1996. The increase in assisted living revenue was due to an aggressive marketing campaign of the assisted living services and the resulting increase in the number of residents using the services. Interest income decreased by approximately 7.4% and other income increased approximately 9% over the six month period 8 10 ended June 30, 1995 to the six month period ended June 30, 1996. Interest income results from interest earned on cash deposits. Other revenue consists primarily of processing fees and beauty shop revenue. Sources of revenue for the six months ended June 30, 1996 and June 30, 1995 are summarized as follows:
SIX MONTHS ENDED SIX MONTHS ENDED JUNE 30, 1996 JUNE 30, 1995 ---------------- ---------------- Rent $7,428,867 $7,344,722 Assisted Living 1,171,634 990,126 Interest and Other Income 108,040 100,363 ---------- ---------- TOTAL REVENUE $8,708,541 $8,435,211 ========== ==========
Total costs and expenses for the six months ended June 30, 1996 were $8,189,967, an increase of 1.8% over costs and expenses of $8,043,503 for the six months ended June 30, 1995. The largest component of expenses, rental property operations, consists primarily of property management costs, payroll related expenses, utilities, food expenses and maintenance and supplies. Rental property operations expense decreased by 2.4% from the six months ended June 30, 1995 to the six months ended June 30, 1996. The decrease in rental property operating expenses is due to reductions in payroll-related expenses, food, utilities and maintenance and supplies expenses. Assisted living expenses consist mainly of the related payroll expense. Assisted living expenses increased by over 14% from the six months ended June 30, 1995 to the six months ended June 30, 1996. The increase corresponds directly to the increase in assisted living services revenue in the current year and the staffing required to provide these services. General and administrative expenses are comprised of, but not limited to, costs for accounting, partnership administration, bad debt, data processing, investor relations, insurance, and professional services. General and administrative expenses increased approximately 83% from the six months ended June 30, 1995 to the six months ended June 30, 1996. The increase was due primarily to a one time charge of $347,510 for costs related to preparing to solicit the consent of the Partnership's Unitholders with respect to an anticipated sale of the Partnership's four fee properties to a health care real estate investment trust. A preliminary consent solicitation statement had been filed with the Securities and Exchange Commission (the "SEC"). The normal course of review of the consent solicitation by the SEC was not completed before the time in which the solicitation statement was required to be updated with audited year-end financial statements for the Partnership. While the year-end financial statements were being prepared and audited, that Managing General Partner requested the appraisal firm which had previously prepared appraisals of the four fee properties to update those appraisals. Upon receiving and reviewing the updated appraisals, which indicated an increase in market value for each of the fee properties, the Managing General Partner contacted the potential buyer of the properties to determine if it was willing to increase its purchase price accordingly. As the purchase price was not increased, the Partnership's General Partners decided not to solicit the consent of the Partners for the sale of the fee properties. Although the sale of the fee properties did not occur, the General Partner provided those Unitholders seeking liquidity an opportunity to sell their interests in the Partnership at an amount which reflected the values contained in the updated appraisals. (See Item 5. Other Information). Depreciation and amortization expense decreased over 16% from the six months ended June 30, 1995 to the six months ended June 30, 1996. Depreciation and amortization expense decreased due to a reduction in amortization expense for those assets associated with the Campbell and Sunnyvale leases whose terms have expired and the assets have been fully amortized. 9 11 Interest expense decreased by less than 1% for the six months ended June 30, 1995 compared to the six months ended June 30, 1996, as a result of reduced outstanding principal on loans. Selected costs and expenses for the six months ended June 30, 1996 and June 30, 1995 are as follows:
SIX MONTHS ENDED SIX MONTHS ENDED JUNE 30, 1996 JUNE 30, 1995 ---------------- ---------------- Rental Property Operations $4,769,268 $4,885,305 Assisted Living 480,503 419,845 General & Administrative 885,931 482,855 Depreciation & Amortization 890,692 1,061,711 Property Taxes 237,594 257,755 Interest 293,558 295,232
10 12 PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS On June 27, 1996, the Partnership filed actions seeking declaratory judgements against the landlords of the Retirement Inn of Campbell ("Campbell") and the Retirement Inn of Sunnyvale ("Sunnyvale"). The Partnership leases the Campbell and Sunnyvale assisted living facilities under long-term leases. A dispute has arisen as to the amount of rent due during the 10-year lease renewal periods which commenced in August 1995 for Campbell and March 1996 for Sunnyvale. The Partnership seeks a determination that the Partnership is not required to pay any higher rent during the 10-year renewal periods than during the original 20-year lease terms. In the event that the court finds against the Partnership, rent for the Campbell and Sunnyvale facilities could increase significantly, which will reduce distributions to Unitholders in the future. These rent increases would be retroactive to the commencement of the lease renewal periods. Two other facilities leased by the Partnership, the Retirement Inn of Fremont ("Fremont") and the Retirement Inn at Burlingame ("Burlingame"), are owned by entities which are related to the entities that own the Campbell and Sunnyvale facilities. It is not known whether the landlords of those facilities will dispute the amount of rent due during the renewal periods beginning January 1997 for Fremont and August 1997 for Burlingame. If so, the Partnership may be required to file litigation to determine the rights under those leases as well. ITEM 2. CHANGES IN SECURITIES None ITEM 3. DEFAULTS UPON SENIOR SECURITIES None ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None ITEM 5. OTHER INFORMATION On May 16, 1996, the General Partner, ARV Assisted Living, Inc. ("ARV"), initiated a tender offer for all limited partnership units in American Retirement Villas Properties II which it did not own at a net cash price of $720 per unit. At the close of the offer period on June 21, 1996, 1,426 unitholders validly tendered approximately 15,488 units representing approximately 44.6% of all outstanding units. On July 26, 1996 ARV initiated a second tender offer (the "Offer") to purchase up to 3,715 additional limited partnership units at a net cash price of $720 per unit less second quarter distributions. If more than 3,715 units are validly tendered and not withdrawn, ARV will accept only 3,715 units, with such units purchased on a pro rata basis. The offer, withdrawal rights and prorations period will expire at 5:00 p.m. Pacific Daylight Time on Friday August 23, 1996, unless extended. If ARV acquires all 3,715 units sought in the Offer, ARV will own approximately 55% of the outstanding units. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K A. Exhibit 27 - Financial Data Schedule B. None 11 13 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 II A CALIFORNIA LIMITED PARTNERSHIP By: ARV Assisted Living, Inc. a California Corporation (General Partner) By: /s/ Gary L. Davidson -------------------------- Gary L. Davidson Chairman of the Board Date: August 14, 1996 By: /s/ Graham P. Espley-Jones -------------------------- Graham P. Espley-Jones Chief Financial Officer Date: August 14, 1996 12 EX-27 2 FINANCIAL DATA SCHEDULE
5 1 U.S. DOLLARS 3-MOS DEC-31-1995 APR-01-1996 JUN-30-1996 1 259,629 0 0 0 0 0 19,153,858 17,117,169 20,648,441 0 6,892,178 0 0 0 12,737,730 20,648,442 0 4,405,515 0 4,107,307 0 0 145,174 153,034 0 153,034 0 0 0 153,034 4.33 4.33
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