-----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, AgLl/fV6eOgpUvaW4h/r0E7cG1ayelkWNIfIu5iLrfhWFhhmECD41SPIXTICVxYi /SFJzqdLsDFQEcxcsYVNWQ== 0000892569-97-002288.txt : 19970815 0000892569-97-002288.hdr.sgml : 19970815 ACCESSION NUMBER: 0000892569-97-002288 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970814 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERICAN RETIREMENT VILLAS PROPERTIES III LTD PARTNERSHIP CENTRAL INDEX KEY: 0000853274 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE [6500] IRS NUMBER: 330365417 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 033-30084 FILM NUMBER: 97661897 BUSINESS ADDRESS: STREET 1: 245 FISCHER AVE STE D 1 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 FORMER COMPANY: FORMER CONFORMED NAME: AMERICAN RETIREMENT VILLAS PROPERTIES III L P DATE OF NAME CHANGE: 19920703 10-Q 1 QUARTERLY REPORT FOR THE PERIOD ENDED 06/30/1997 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, 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 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 III, L.P. (a California limited partnership) Balance Sheets
JUNE 30, DEC. 31, 1997 1996 ASSETS -------- -------- (Unaudited) (Audited) (IN THOUSANDS EXCEPT PER UNIT DATA) Properties, at cost Land $ 4,676 $ 4,674 Building and improvements, less accumulated depreciation of $3,700 in 1997 and $3,373 in 1996 21,356 18,921 Furniture, fixtures and equipment, less accumulated depreciation of $459 in 1997 and $498 in 1996 295 322 -------- -------- Net properties 26,327 23,917 Cash 1,007 893 Restricted cash 141 137 Loan fees, net 88 105 Other assets 353 248 -------- -------- $ 27,916 $ 25,300 ======== ======== LIABILITIES AND PARTNERS' CAPITAL Notes payable $ 18,287 $ 16,023 Accounts payable and accrued expenses 1,139 734 Amounts payable to affiliates 72 138 Distributions payable to Partners 54 46 -------- -------- Total liabilities 19,552 16,941 -------- -------- Minority interest 57 41 Partners' capital (deficit) : General partners (76) (76) Limited partners, 18,666 and 18,652 units outstanding at June 30, 1997 and December 31, 1996, respectively 8,383 8,394 -------- -------- Total partners' capital 8,307 8,318 $ 27,916 $ 25,300 ======== ========
3 American Retirement Villas Properties III, L.P. (a California limited partnership) Statements of Operations (Unaudited) (in thousands except per unit data)
FOR THE FOR THE THREE MONTHS ENDED SIX MONTHS ENDED --------------------- --------------------- JUNE 30, JUNE 30, JUNE 30, JUNE 30, 1997 1996 1997 1996 -------- -------- -------- -------- REVENUES: Rent ............................... $1,375 $1,308 $2,752 $ 2,581 Assisted living .................... 141 100 278 190 Interest ........................... 6 92 8 197 Other .............................. 19 44 44 105 ------ ------ ------ ------- Total revenues ............ 1,541 1,544 3,082 3,073 ------ ------ ------ ------- COSTS AND EXPENSES: Rental property operations ......... 685 630 1,376 1,271 Assisted living .................... 52 49 107 94 Depreciation and amortization ...... 228 299 455 598 Interest ........................... 358 477 719 953 General and administrative ......... 133 109 244 203 Property taxes ..................... 66 86 131 162 Advertising ........................ 14 5 23 15 Minority interest in operations .... 16 20 38 17 ------ ------ ------ ------- Total costs and expenses .. 1,552 1,675 3,093 3,313 ------ ------ ------ ------- Net income (loss) .................. (11) (131) (11) (240) ====== ====== ====== ======= Net income (loss) to General Partner -- (1) -- (2) Net income (loss) to Limited Partner (11) (130) (11) (238) ====== ====== ====== ======= Net income (loss) per Limited Partner unit ....................... ($0.58) ($6.94) ($0.58) ($12.77) ====== ====== ====== =======
See accompanying notes to financial statements (unaudited). 4 American Retirement Villas Properties III, L.P. (a California limited partnership) Statements of Cash Flow (Unaudited) (In thousands)
FOR THE SIX MONTHS ENDED JUNE 30, --------------------- 1997 1996 ------- ------- Cash flows from operating activities: Net income (loss) $ (11) $ (240) Adjustment to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 455 597 Minority interest in operations 16 -- CHANGE IN ASSETS AND LIABILITIES: Increase in other assets (100) (108) Increase in accounts payable and accrued expenses 405 57 Increase in amounts payable to affiliates (58) (58) ------- ------- Net cash provided by operating activities 707 248 ------- ------- Cash flows from investing activities: Increase in restricted cash (4) (64) Capital expenditures (50) (63) Construction of building (2,802) (579) Increase in deposit on property under contract for sale -- 1,576 ------- ------- Net cash used in investing activities (2,856) 870 ------- ------- Cash flows from financing activities: Proceeds from construction loan 2,403 -- Principal repayments on long-term debt (139) (125) Distributions paid -- (613) ------- ------- Net cash provided by (used in) financing activities 2,264 (738) ------- ------- Net increase in cash 115 380 Cash at beginning of period 892 478 ------- ------- Cash at end of period $ 1,007 $ 858 ======= =======
5 PART I - FINANCIAL INFORMATION ITEM 1 - FINANCIAL STATEMENTS (CONTINUED) American Retirement Villas Properties III, L.P. (a California limited partnership) Notes to Financial Statements (Unaudited) (Continued) June 30, 1997 (1) SIGNIFICANT ACCOUNTING POLICIES PRINCIPLES OF CONSOLIDATION Pursuant to Regulation S-X Rule 10-1(5), the material stated in the December 31, 1996 Form 10K is incorporated by this reference. BASIS OF ACCOUNTING Pursuant to Regulation S-X Rule 10-1(5), the material stated in the December 31, 1996 Form 10-K is incorporated by this reference. CARRYING VALUE OF REAL ESTATE Pursuant to Regulation S-X Rule 10-1(5), the material stated in the December 31, 1996 Form 10-K is incorporated by this reference. ORGANIZATION COSTS Pursuant to Regulation S-X Rule 10-1(5), the material stated in the December 31, 1996 Form 10-K is incorporated by this reference. PRE-OPENING COSTS Pursuant to Regulation S-X Rule 10-1(5), the material stated in the December 31, 1996 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, 1996 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, 1996 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, 1996 Form 10-K is incorporated by this reference. 6 NET INCOME (LOSS) PER LIMITED PARTNER UNIT Pursuant to Regulation S-X Rule 10-1(5), the material stated in the December 31, 1996 Form 10-K is incorporated by this reference. CASH AND CASH EQUIVALENTS Pursuant to Regulation S-X Rule 10-1(5), the material stated in the December 31, 1996 Form 10-K is incorporated by this reference. RECLASSIFICATIONS Pursuant to Regulation S-X Rule 10-1(5), the material stated in the December 31, 1996 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, 1996 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, 1996 Form 10-K is incorporated by this reference, except for the following additional comments. For the three months ended June 30, 1997, property management fees and partnership administration fees of $77,000 and $25,000, 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, 1996 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, 1996 Form 10-K is incorporated by this reference. (6) GRANT INCOME Pursuant to Regulation S-X Rule 10-1(5), the material stated in the December 31, 1996 Form 10-K is incorporated by this reference. 7 ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS THREE MONTHS ENDED JUNE 30, 1997 COMPARED WITH THE THREE MONTHS ENDED JUNE 30, 1996. Revenue for the three month periods ended June 30, 1997 and June 30, 1996 includes rental income, assisted living income, interest earned on cash balances and other revenue. Total revenues for the each of the three month periods ended June 30, 1997 and June 30, 1996 were $1.5 million. The largest component of revenue, rent, increased by over 5% to $1.4 million for the three months ended June 30, 1997 from $1.3 million for the three months ended June 30, 1996. The increase in rent was due to inflation as well as a change to include meals as part of the base rental package. Revenue from assisted living increased 41% from $100,000 for the three months ended June 30, 1996 to $141,000 for the three months ended June 30, 1997. The increase in assisted living revenue was due to the full implementation of an assisted living services program in the Partnership facilities. Interest and other revenue decreased approximately 82% from the three months ended June 30, 1996 to the three months ended June 30, 1997. Interest income currently results from interest earned on cash deposits. Other revenue generally includes banquet income, processing fees, and beauty shop revenue. During 1996, the Partnership met the requirements of statement of accounting standards No. 66 ("SFAS No. 66") and thus was able to record the sale of Heritage Pointe Claremont. In the three months ended June 30, 1996, the Partnership received interest income related to Heritage Pointe Claremont prior to recording the sale of the asset at the end of 1996. Under the requirements of SFAS No. 66, interest income was recorded to the extent that interest expense related to Heritage Point Claremont was incurred. Since the debt related to Heritage Point Claremont has been eliminated from the financial statements of the Partnership in conjunction with recognition of the sale of the property, interest income has declined significantly. In addition, other income was lower in 1997 compared to 1996 due to a change in the billing practices for meals. In 1996, meals were charged to residents on an a la carte plan and income derived from these meals were included in other income. In 1997, a change was made to include meals as part of the base rental package at the assisted living facilities. Sources of revenue for the three months ended June 30, 1997 and June 30, 1996 are summarized as follows:
THREE MONTHS ENDED -------------------- JUNE 30, JUNE 30, 1997 1996 -------- -------- (in thousands) Rent $1,375 $1,308 Assisted Living 141 100 Interest 6 92 Other 19 44 ------ ------ Total Revenue $1,541 $1,544 ====== ======
Total costs and expenses for the three months ended June 30, 1997 were $1.6 million, a decrease of over 7% compared to costs and expenses of $1.7 million for the three months ended June 30, 1996. 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 expenses for the three months ended June 30, 1997 increased approximately 9% to $685,000 for three months ended June 30, 1997 from $630,000 for the three months ended June 30, 1996. The increase in rental property operations is primarily due to increased payroll expenses. 8 Assisted living expenses consist primarily of payroll expense related to the provision of assisted living services. Assisted living expenses increased to $52,000 for the three months ended June 30, 1997 from $49,000 for the three months ended June 30, 1996. Assisted living expenses increased due to increased levels of staffing required to providing assisted living 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 22% to $133,000 for the three months ended June 30, 1997 from $109,000 for the three months ended June 30 1996. The general and administrative expenses increase is due to increased accounting and corporate overhead expenses. Depreciation and amortization expense incurred during the three months ended June 30, 1997 decreased by $71,000 (approximately 24%) to $228,000 compared to $299,000 for the three months ended June 30, 1996. The decrease is due to a portion of fixed assets becoming fully depreciated. Interest expense decreased approximately 25% to $358,000 for the three months ended June 30, 1997 from interest expense of $477,000 incurred during the three months ended June 30, 1996. Following recognition of the sale of Heritage Pointe Claremont, the property and related debt were eliminated from the financial statements of the Partnership. As a result, the decrease in debt led to the decrease in interest expense. Selected costs and expenses for the three months ended June 30, 1997 and June 30, 1996 are summarized as follows:
THREE MONTHS ENDED -------------------- JUNE 30, JUNE 30, 1997 1996 -------- -------- (in thousands) Rental Property Operations $685 $630 Assisted Living 52 49 General and Administrative 133 109 Depreciation and amortization 228 299 Property Taxes 66 86 Interest Expense 358 477
SIX MONTHS ENDED JUNE 30, 1997 COMPARED WITH THE SIX MONTHS ENDED JUNE 30, 1996. Revenue for the six months ended June 30, 1997 and 1996 includes rental income, assisted living revenue from all five facilities, interest income and other revenue. Total revenue for the six months ended June 30, 1997 and June 30, 1996 was $3.1 million for both periods. The largest component of revenue, rent, increased by $172,000 to $2.8 million during the six months ended June 30, 1997 reflecting an approximate 7% increase over rental income of $2.6 million earned during the six months ended June 30, 1996. During the six month period ended June 30, 1997, assisted living revenue increased 46% to $278,000 from assisted living revenues of $190,000 recorded during the six months ended June 30, 1996. The increase in assisted living revenue was due to the full implementation of a tiered assisted living services program in conjunction with an aggressive marketing campaign within the facilities. Interest income and other income for the six month period ended June 30, 1997 decreased 96% and 59%, respectively, when compared to the six month period ended June 30, 1996. The reduction of interest income reflects the elimination of Heritage Point Claremont from the financial statements and the related interest income. 9 Other revenue, which consists primarily of banquet income, processing fees and beauty shop revenue, was lower during the six month period ended June 30, 1996 in comparison to the six month period ended June 30, 1996. The primary reason for the decline in revenue is the change in billing practice which includes meals in the base rental fee. Sources of revenue for the six months ended June 30, 1997 and June 30, 1996 are summarized as follows:
SIX MONTHS SIX MONTHS ENDED ENDED JUNE 30, JUNE 30, 1997 1996 ---------- ---------- (in thousands) Rent $2,752 $2,581 Assisted Living 278 190 Interest 8 197 Other Income 44 105 ------ ------ TOTAL REVENUE $3,082 $3,073 ====== ======
Total costs and expenses for the six months ended June 30, 1997 were $3.1 million, a decrease of approximately 7% over costs and expenses of $3.3 million the six months ended June 30, 1996. 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 increased by 8% to $1.4 million for the six months ended June 30, 1997 compared to $1.3 million for the six month period ended June 30, 1996. The increase in rental property operating expenses is primarily due to an increase in both payroll-related and maintenance and supplies expenses. Assisted living expenses consist mainly of payroll expense related to the provision of assisted living services. Assisted living expenses incurred for the six months ended June 30, 1997 increased to $107,000, an increase of 14%, from $94,000 for 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 20% to $244,000 for the six months ended June 30, 1997 from $203,000 for the six months ended June 30, 1996. Depreciation and amortization expense decreased $143,000 to $455,000 for the six months ended June 30, 1997 from $598,000 for the six months ended June 30, 1996. Depreciation and amortization expense decreased due to the full depreciation of certain fixed assets. Interest expense decreased by 25% to $719,000 for the six months ended June 30, 1997 compared to $953,000 for the six months ended June 30, 1996. Following recognition of the sale of Heritage Pointe Claremont, the property and related debt were eliminated from the financial statements of the Partnership. As a result, the decrease in debt led to the decrease in interest expense. Selected costs and expenses for the six months ended June 30, 1997 and June 30, 1996 are as follows:
SIX MONTHS SIX MONTHS ENDED ENDED JUNE 30, JUNE 30, 1997 1996 ---------- ---------- (in thousands) Rental Property Operations $1,376 $1,271 Assisted Living 107 94 General & Administrative 244 203 Depreciation & Amortization 455 598 Property Taxes 131 162 Interest Expense 719 953
10 LIQUIDITY AND CAPITAL RESOURCES The General Partners expect that the cash to be generated from operations of all the Registrant'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 fall of 1997. On a long-term basis, the Registrant's liquidity is sustained primarily from cash flow provided by operating activities. During the three months ended June 30, 1997, cash provided by operating activities was $707,000 compared to cash provided by operating activities of $248,000 for the three months ended June 30, 1996. During the three months ended June 30, 1997, the Registrant used net cash in investing activities of $2.9 million compared to net cash provided by investing activities of $870,000 for the three months ended June 30, 1996. The Registrant's investing activities consisted of capital improvements made on its five operating properties and construction of its assisted living facility in development (Villa Las Posas). During the three months ended June 30, 1997, financing activities provided net cash of $2.3 million compared to using net cash in financing activities of $738,000 for the three months ended June 30, 1996. The Registrant's financing activities consisted of borrowings from its construction loan, principal reduction on 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. 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%. In addition, the Registrant has long term debt of $18.3 million as of June 30, 1997, comprised of $4.8 million due January 1, 2007, $3.0 million due February 1, 2017, $3.9 million due February 1, 2019 and $4.2 million due November 1, 2017. The remaining balance of $61,000 consists of notes secured by equipment. The Registrant 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 these 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 Registrant's capital resources, and there is no expected change in the mix of such resources. 11 PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS None ITEM 2. CHANGE 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 None ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K A. Exhibit 27 - Financial Data Schedule B. None 12 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/ GARY L. DAVIDSON ----------------------------- Gary L. Davidson Chairman of the Board Date: August 14, 1997 By: /s/ GRAHAM P. ESPLEY-JONES ----------------------------- Graham P. Espley-Jones Chief Financial Officer Date: August 14, 1997 EX-27 2 FINANCIAL DATA SCHEDULE
5 1,000 3-MOS DEC-31-1996 APR-01-1997 JUN-30-1997 1,007 0 0 0 0 1,007 25,810 (4,159) 27,916 1,265 18,287 0 0 0 8,307 27,916 0 1,541 0 1,194 0 0 358 0 0 0 0 0 0 (11) 0 0
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