-----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, VoV9f8bBEVbr7hfrf0sXmlpTt3GGgF/PBR1H6Evn7yfw1fNdZh8ZnWgxMBxrCDmf GcpkmKg/vprYn+KXz8uUmQ== /in/edgar/work/0001095811-00-004801/0001095811-00-004801.txt : 20001116 0001095811-00-004801.hdr.sgml : 20001116 ACCESSION NUMBER: 0001095811-00-004801 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000930 FILED AS OF DATE: 20001114 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERICAN RETIREMENT VILLAS PROPERTIES III LTD PARTNERSHIP CENTRAL INDEX KEY: 0000853274 STANDARD INDUSTRIAL CLASSIFICATION: [6500 ] IRS NUMBER: 330365417 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 033-30084 FILM NUMBER: 769079 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 a67346e10-q.txt FORM 10-Q QUARTER ENDED SEPTEMBER 30, 2000 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 SEPTEMBER 30, 2000 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.) FISCHER AVENUE, D-1 COSTA MESA, CA 92626 - --------------------------------------- ------------------- (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 [ ] ================================================================================ 2 PART I - FINANCIAL INFORMATION ITEM 1 - FINANCIAL STATEMENTS American Retirement Villas Properties III, L.P. (a California limited partnership) Condensed Consolidated Balance Sheets (Unaudited) (In thousands) ASSETS
SEPTEMBER 30, DECEMBER 31, 2000 1999 ------------- ------------ Properties, at cost: Land $ 2,224 $ 2,224 Buildings and improvements, less accumulated depreciation of $3,400 and $2,976 at September 30, 2000 and December 31, 1999, respectively 12,363 12,768 Furniture, fixtures and equipment, less accumulated depreciation of $655 and $527 at September 30, 2000 and December 31, 1999, respectively 637 746 -------- -------- Net properties 15,224 15,738 Cash 2,706 2,190 Restricted cash 174 168 Loan fees, less accumulated amortization of $448 and $240 220 401 at September 30, 2000 and December 31, 1999, respectively Other assets 393 289 -------- -------- $ 18,717 $ 18,786 ======== ======== LIABILITIES AND PARTNERS' CAPITAL Notes payable to banks $ 13,211 $ 13,323 Notes payable to others 2,315 2,342 Accounts payable 105 116 Accrued expenses 566 486 Amounts payable to affiliate 104 118 Distributions payable to partners 109 286 -------- -------- Total liabilities 16,410 16,671 -------- -------- Minority interest 136 115 -------- -------- Partners' capital (deficit): General partners' deficit (137) (139) Limited partners' capital, 18,666 units outstanding 2,308 2,139 -------- -------- Total partners' capital 2,171 2,000 -------- -------- Commitments and contingencies $ 18,717 $ 18,786 ======== ========
See accompanying notes to the unaudited condensed consolidated financial statements. 2 3 American Retirement Villas Properties III, L.P. (a California limited partnership) Consolidated Statements of Operations (unaudited) (In thousands, except unit data)
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ------------------ ------------------ 2000 1999 2000 1999 ------ ------- ------ ------- REVENUES: Rent $1,902 $ 1,704 $5,662 $ 5,313 Assisted living 278 234 829 753 Interest and other 66 89 223 399 ------ ------- ------ ------- Total operating revenues 2,246 2,027 6,714 6,465 ------ ------- ------ ------- COSTS AND EXPENSES: Rental property operations 1,112 1,085 3,297 3,210 Assisted living 171 172 500 485 Depreciation and amortization 280 279 822 798 Interest 380 383 1,033 1,119 General and administrative 106 67 278 254 Property taxes 58 57 172 195 Advertising 20 21 78 69 ------ ------- ------ ------- Total operating costs and expenses 2,127 2,064 6,180 6,130 ------ ------- ------ ------- Operating income 119 (37) 534 335 Income tax expense 3 -- 8 -- ------ ------- ------ ------- Income (loss) from continuing operations before minority interest in income of majority owned entities, gain on sale of properties and change in accounting principle 116 (37) 526 335 Minority interest in income of majority owned entities 65 43 183 130 ------ ------- ------ ------- Net income (loss) before gain on sale of properties and change in accounting principle 51 (80) 343 205 Gain on sale of properties -- -- -- 4,562 ------ ------- ------ ------- Net income (loss) before cumulative effect of change in accounting principle 51 (80) 343 4,767 Cumulative effect of change in accounting principle -- -- -- (96) ------ ------- ------ ------- Net income (loss) $ 51 $ (80) $ 343 $ 4,671 ====== ======= ====== ======= Net income (loss) per limited partner unit before cumulative effect of change in accounting principle 2.71 (4.29) 18.19 255.33 Cumulative effect of change in accounting principle -- -- -- (5.09) ------ ------- ------ ------- Net income (loss) per limited partner unit $ 2.71 $.(4.29) $18.19 $250.24 ====== ======= ====== =======
See accompanying notes to the unaudited condensed consolidated financial statements. 3 4 American Retirement Villas Properties III, L.P. (a California limited partnership) Consolidated Statements of Cash Flows (unaudited) (In thousands)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, ---------------------- 2000 1999 ------- -------- Cash flows from operating activities: Net income $ 343 $ 4,671 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 822 798 Gain on sale of properties -- (4,562) Cumulative effect of change in accounting principle -- 96 Increase in minority interest 184 13 Change in assets and liabilities: Increase in restricted cash (6) (4) Increase in other assets (103) (660) Increase (decrease) in accounts payable and accrued expenses 69 (436) Increase (decrease) in amounts payable to affiliates, net (14) 95 ------- -------- Net cash provided by operating activities 1,295 11 ------- -------- Cash flows used in investing activities: Proceeds from sale of properties -- 3,962 Additions to furniture, fixtures and equipment, net (127) (47) ------- -------- Net cash provided by (used in) investing activities (127) 3,915 ------- -------- Cash flows from financing activities: Proceeds from notes payable -- 13,361 Principal repayments on notes payable to banks and others (139) (10,144) Proceeds from note receivable -- 2,765 Distributions paid (513) (9,447) ------- -------- Net cash used in financing activities (652) (3,465) ------- -------- Net increase in cash 516 461 Cash at beginning of period 2,190 1,900 ------- -------- Cash at end of period $ 2,706 $ 2,361 ======= ======== Supplemental disclosure of cash flow information- Cash paid during the period for interest $ 1,145 $ 1,090 ======= ======== Supplemental schedule of non-cash investing and financing activities: Notes payable assumed by the buyer of the senior apartments -- $ 10,605 ======= ========
See accompanying notes to the unaudited condensed consolidated financial statements. 4 5 American Retirement Villas Properties III, L.P. (a California limited partnership) Notes to Financial Statements (Unaudited) September 30, 2000 (1) SIGNIFICANT ACCOUNTING POLICIES BASIS OF ACCOUNTING We prepared the accompanying condensed consolidated financial statements of American Retirement Villas Properties III, L.P. following the requirements of the Securities and Exchange Commission ("SEC") for interim reporting. As permitted under those rules, certain footnotes or other financial information that are normally required by generally accepted accounting principles ("GAAP") can be condensed or omitted. The financial statements include all normal and recurring adjustments that we consider necessary for the fair presentation of our financial position and operating results. These are condensed financial statements. To obtain a more detailed understanding of our results, one should also read the financial statements and notes in our Form 10-K for 1999, which is on file with the SEC. The results of operations can vary during each quarter of the year. Therefore, the results and trends in these interim financial statements may not be the same as those for the full year. USE OF ESTIMATES In preparing the financial statements conforming to GAAP, we have made estimates and assumptions that affect the following: o Reported amount of assets and liabilities at the date of the financial statements; o Disclosure of contingent assets and liabilities at the date of the financial statements; and o Reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. (2) TRANSACTIONS WITH AFFILIATES We have an agreement with ARV Assisted Living, Inc. ("ARV"), our Managing General Partner, providing for a property management fee of five percent of gross revenues amounting to $ 110,346 and $ 104,941 for the three-month period and $330,340 and $315,368 for the nine-month period ended September 30, 2000 and 1999 respectively. Additionally, a partnership management fee of 10 percent of cash flow before distributions, as defined in the Partnership Agreement, amounted to $ 53,206 and $ 23,798 for the three-month period and $ 141,680 and $ 115,737 for the nine-month period ended September 30, 2000 and 1999 respectively. (3) SALE OF SENIOR APARTMENT PROJECTS On February 19, 1999 we sold the three senior apartment projects for approximately $17.4 million, net of costs. In connection with the sale, we received cash of approximately $4.0 million, $2.8 million in notes receivable paid in June 1999, and assumption of mortgage balances of approximately $10.6 million by the buyer. (4) NOTES PAYABLE On June 28, 1999, we obtained financing of $13.2 million on two owned communities. As part of the loan requirements, we created a wholly owned subsidiary Retirement Inns III, LLC. The loan is for 24 months and is secured by the various properties; in addition, ARV Assisted Living Inc., our managing general partner, is a guarantor on the loan for fraud, material misrepresentation and certain covenants. The mortgage loans are due June 2001 and are in the process of being refinanced with 35-year loans. We have received a commitment letter on one of the loans and anticipate closing in the fourth quarter of 2000. However, the partnership can not guaranty that the long-term loan will be obtained. ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FACTORS AFFECTING FUTURE RESULTS AND FORWARD-LOOKING STATEMENTS This 10-Q report contains forward-looking statements, including statements regarding, among other items: o our business strategy; o our liquidity requirements and ability to obtain financing; o the level of future capital expenditures; o the impact of inflation and changing prices; and 5 6 These forward-looking statements are based on our expectations and are subject to a number of risks and uncertainties, some of which are beyond our control. These risks and uncertainties include, but are not limited to: o access to capital necessary for acquisitions and development; o our ability to manage growth; o governmental regulations; o competition; and o other risks associated with the assisted living industry. Although we believe we have the resources required to achieve our objectives, actual results could differ materially from those anticipated by these forward-looking statements. There can be no assurances that events anticipated by these forward-looking statements will in fact transpire as expected. CONDENSED RESULTS OF OPERATIONS
For the Nine Months Ended September 30, ------------------ Increase/ 2000 1999 (decrease) ----- ----- ---------- (DOLLARS IN MILLIONS) Revenue: Rent $5.66 $5.31 6.6% Assisted living 0.83 0.76 10.2% Interest and other revenue 0.22 0.40 (44.2)% ----- ----- ------ Total revenue 6.71 6.47 3.86% ----- ----- ------ Costs and expenses: Rental property operations 3.30 3.21 2.7% Assisted living 0.50 0.49 3.0% General and administrative 0.36 0.32 10.3% Depreciation and amortization 0.82 0.80 3.1% Property taxes 0.17 0.19 (11.7)% Interest 1.03 1.12 (7.7)% ----- ----- ------ Total costs and expenses 6.18 6.13 0.9% ----- ----- ------ Operating income 0.52 0.34 59.3% Minority interest in operations 0.18 0.13 41.6% ----- ----- ------ Net income before gain (loss) on sale of properties and change in accounting principle 0.34 0.21 66.7% ----- ----- ------ Net profit on sale of property -- 4.56 (100.0)% ----- ----- ------ Net income before cumulative effect of change in accounting principle 0.34 4.77 (92.8)% Cumulative effect of change in accounting principle -- (0.10) (100.0)% ----- ----- ------ Net income $0.34 $4.67 (96.8)% ===== ===== ======
The increase in rental revenue is attributable to: o average occupancy for our assisted living communities increased to 96.5% for the nine-month period ended September 30, 2000 compared to 93.3% for the nine-month period ended September 30, 1999; and o an increase in average rental rate per occupied unit to $1,719 per month for the nine-month period ended September 30, 2000 compared to $1,566 per month for the nine-month period ended September 30, 1999; offset by o only one and a half month of rent from senior apartments in 1999 due to the sale of the three apartment projects on February 19, 1999. The increase in the assisted living revenue is attributable to an increase in assisted living rate from $683 per month for the nine-month period ended September 30, 1999 compared to $707 per month for the nine-month period ended September 30, 2000. The decrease in interest and other revenue is attributable to: o a decrease in processing and other resident fees for the nine-month period ended September 30, 2000 due to competitor's waiving such fees to increase occupancy; and o a lack of interest income from notes receivable in connection with the sale of three apartment projects in February 1999; and o a lack of other income from Claremont Senior Partner note; offset by o an increase in interest earned from bank accounts which utilize commercial paper investments. 6 7 The increase in rental property operations and assisted living operating expenses is attributable to: o increased occupancy in assisted living communities; and o staffing requirements related to increased assisted living services provided; and o increased salaries of staff and fringe benefits; offset by o a decrease in expenses from senior apartments which were sold in 1999. The increase in general and administrative expenses is attributable to: o increased administration fees paid to our managing general partner; and o increased marketing and advertising expenses; and o increased legal expenses related to the recovery of the interest rate lock and commitment fees incurred in connection with the failed refinancing of certain notes payable in 1998; offset by o a reduction of expenses, that were previously allocated to G&A due to cost-cutting efforts. Property taxes decreased due to the sale of the senior apartments in February 1999. The decrease in interest expense is related to the following: o a recovery of $112,000 of the interest rate lock and commitment fees incurred in connection with the failed refinancing of certain notes payable in 1998; and o buyer's assumption of the notes payable for the three senior apartments sold on February 19, 1999; offset by o an increase in expense from refinancing in June 1999 of two communities. Minority interest in income of majority owned entities increased due to an increased in net income of an affiliated partnership.
For the Three Months Ended September 30, -------------------- Increase/ 2000 1999 (decrease) ----- ----- ---------- (DOLLARS IN MILLIONS) Revenue: Rent $1.90 $ 1.70 11.7% Assisted living 0.28 0.23 18.5% Interest and other revenue 0.07 0.09 (26.1)% ----- ------ ------ Total revenue 2.25 2.02 10.8% ----- ------ ------ Costs and expenses: Rental property operations 1.11 1.08 2.5% Assisted living 0.17 0.17 (0.5)% General and administrative 0.14 0.09 44.1% Depreciation and amortization 0.28 0.28 0.2% Property taxes 0.06 0.06 0.7% Interest 0.38 0.38 (0.8)% ----- ------ ------ Total costs and expenses 2.14 2.06 3.2% ----- ------ ------ Operating income (loss) 0.11 (0.04) 415.7% Minority interest in operations 0.06 0.04 51.0% ----- ------ ------ Net income (loss) $0.05 $(0.08) 163.8% ===== ====== ======
The increase in rental revenue is attributable to: o average occupancy for our assisted living communities increased to 95% for the three-month period ended September 30, 2000 compared to 93% for the three-month period ended September 30, 1999; and o an increase in average rental rate per occupied unit to $1,762 per month for the three-month period ended September 30, 2000 compared to $1,612 per month for three-month period ended September 30, 1999. The increase in assisted living revenue is attributable to an increase, noted earlier, in the assisted living rate from $651 per month for the three-month period ended September 30, 1999 compared to $711 per month for the three-month period ended September 30, 2000. 7 8 The decrease in interest and other revenue is attributable to: o a decrease in processing and other resident fees for the three-month period ended September 30, 2000 due to a competitor's waiving such fees to increase occupancy; while o interest income remained relatively constant between periods. The increase in rental property operations and assisted living operating expenses is attributable to: o increased occupancy in assisted living communities; and o staffing requirements related to increased assisted living services provided; and o increased salaries of staff and fringe benefits; offset by o a reduction of expenses due to cost-cutting efforts. General and administrative expenses increased due to: o increased administration fees paid to our managing general partner; and o increased legal expenses related to the recovery of the interest rate lock and commitment fees incurred in connection with the failed refinancing of certain notes payable in 1998. Property taxes and interest expense remained relatively constant between periods. Minority interest in operation increased due to an increase in net income of an affiliate partner. LIQUIDITY AND CAPITAL RESOURCES We expect that the cash to be generated from operations of all our properties and an ability to refinance certain assisted living communities will be adequate to pay operating expenses, fund necessary capital improvements, meet required principal payments of one of the debt and pay quarterly distributions. On a long-term basis, our liquidity is sustained primarily from cash flow provided by operating activities. During the nine-month period ended September 30, 2000, cash provided by operating activities increased to $1.3 million compared to $0.01 million cash provided by operating activities for the corresponding period in 1999. During the nine-month period ended September 30, 2000, our net cash used in investing activities was $0.1 million compared to cash provided by investing activities of $3.9 million for the corresponding period in 1999. The decrease was primarily a result of the sale of the three senior apartment projects in 1999. During the nine-month period ended September 30, 2000, our net cash used in financing activities was $0.6 million compared to $3.5 million for the corresponding period in 1999. The components of which are as follows: o Cash provided by proceeds from refinancing of two properties in June 1999; offset by o repayments of bridge loan in 1999; o Collection of $2.8 million receivable from the sale of apartments in the first quarter of 1999; offset by o Distribution of the sale proceeds from the senior apartment sale and refinancing proceeds, as noted above, to the partners. The $13.2 million mortgage loans are due June 2001 and, are in the process of being refinanced with 35-year loans. We have received a commitment letter on one of the loans and anticipate closing in the fourth quarter of 2000. However, the partnership can not guaranty completion of this long term financing. Our debt agreements contain restrictive covenants requiring us to maintain a certain level of debt service coverage. At September 30, 2000, we were not in compliance with the debt service coverage ratio. We have obtained waivers for those covenants with which we were not in compliance. Had we not obtained waivers we would have been in default on certain debt agreements. We have accepted an offer to sell one of the assisted living communities we own in partnership with Bradford Square, LP. We anticipate closing this transaction in the fourth quarter of 2000. 8 9 We anticipate spending approximately $200,000 for capital expenditures during 2000 for physical improvements at our communities. Funds for these improvements are expected to be available from operations. We 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. We believe that if the inflation rate increases they will be able to pass the subsequent increase in operating expenses onto the residents of the communities by way of higher rental and assisted living rates. The implementation of price increases is intended to lead to an increase in revenue, however, those increases may result in an initial decline in occupancy and/or a delay in increasing occupancy. If this occurs, revenues may remain constant or even decline. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK We are exposed to market risks related to fluctuations in interest rates on our fixed rate notes payable. Currently, we do not utilize interest rate swaps. You should be aware that many of the statements contained in this section are forward looking and should be read in conjunction with our disclosures under the heading "Forward-Looking Statements." For fixed rate debt, changes in interest rates generally affect the fair market value of the debt instrument, but not our earnings or cash flows. Conversely, for variable rate debt, changes in interest rates generally do not impact fair market value of the debt instrument, but do affect our future earnings and cash flows. We do not have an obligation to prepay fixed rate debt prior to maturity, and as a result, interest rate risk and changes in fair market value should not have a significant impact on the fixed rate debt until we would be required to refinance such debt. PART II - OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K A. Exhibit 27 - Financial Data Schedule B. None 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., a Delaware Corporation (Managing General Partner) By: /s/ Douglas M. Pasquale -------------------------------------- Douglas M. Pasquale President, Chief Executive Officer and Chairman of the Board of ARV Assisted Living, Inc., General Partner Date: November 14, 2000 By: /s/ Abdo H. Khoury ------------------------------------- Abdo H. Khoury Senior Vice President and Chief Financial Officer of ARV Assisted Living, Inc., General Partner Date: November 14, 2000 9 EX-27 2 a67346ex27.txt FINANCIAL DATA SCHEDULE
5 1,000 9-MOS DEC-31-2000 JAN-01-2000 SEP-30-2000 2,706 0 0 0 0 0 19,279 4,055 18,717 0 15,526 0 0 0 2,171 18,717 0 6,714 0 5,147 183 0 1,033 351 8 343 0 0 0 343 18.19 18.19 Net income per limited partner unit.
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