Back to GetFilings.com
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the fiscal year ended December 31, 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 0-16815
-------
NHP RETIREMENT HOUSING PARTNERS I LIMITED PARTNERSHIP
-------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 52-1453513
- ------------------------------ ---------------------------
(State or other Jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
14160 Dallas Parkway, Suite 300, Dallas, Texas 75240
- ---------------------------------------------- -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (972) 770-5600
-------------
Securities registered pursuant to Section 12(g) of the Act:
Limited Partnership Assignee Interests
--------------------------------------
(Title of Class)
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 twelve 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 [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (Section 229.405 of this Chapter) is not contained herein, and
will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [ ]
The Registrant's outstanding securities consist of assignee interests in limited
partnership interests which have no readily ascertainable market value since
there is no public trading market for these securities on which to base a
calculation of aggregate market value.
Documents incorporated by reference: None
----
Page 1 of 32
Exhibit Index: Page 31
1
NHP RETIREMENT HOUSING PARTNERS I LIMITED PARTNERSHIP
2000 FORM 10-K
TABLE OF CONTENTS
PART I Page
Item 1. Business 3
Item 2. Properties 5
Item 3. Legal Proceedings 6
Item 4. Submission of Matters to a Vote of Security Holders 7
PART II
Item 5. Market for the Registrant's Pension Notes and Limited
Partnership Assignee Interests and Related Partnership Matters 7
Item 6. Selected Financial Data 8
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations 8
Item 7A. Qualitative and Quantitative Disclosure About Market Risk 10
Item 8. Financial Statements and Supplementary Data 10
PART III
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 29
Item 10. Directors and Executive Officers of the Registrant 29
Item 11. Executive Compensation 30
Item 12. Security Ownership of Certain Beneficial Owners and
Management 30
Item 13. Certain Relationships and Related Transactions 31
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K 31
2
PART I
ITEM 1. BUSINESS
NHP Retirement Housing Partners I Limited Partnership (the Partnership), a
Delaware limited partnership, was formed under the Delaware Revised Uniform
Limited Partnership Act as of March 10, 1986. On September 23, 1986, the
Partnership commenced offering 25,000 Assignee Interests and 50,000 Pension
Notes, both at a price of $1,000 per unit (the Offering). The Partnership
subsequently exercised its right to increase the offering to 75,000 Assignee
Interests and 100,000 Pension Notes. The offering was managed by NHP Real Estate
Securities, Inc. and was terminated on September 22, 1987, with subscriptions
for 42,711 Assignee Interests and 42,697 Pension Notes.
The Assignee Interests were sold to taxable individuals or entities and
represent assignments of limited partnership interests in the Partnership issued
to NHP RHP-I Assignor Corporation (Assignor Corporation), a Delaware
corporation, the assignor and sole limited partner. Pension Notes were sold to
qualified profit-sharing, pension and other retirement trusts, bank commingled
trust funds for such trusts, Keogh Plans and IRAs, government pension and
retirement trusts, and other entities intended to be exempt from Federal
taxation. The Pension Notes are obligations of the Partnership issued under a
Trust Indenture between the Partnership and The National Bank of Washington
(NBW), Washington, D.C., as Trustee, and have a preference over the Assignee
Interests with respect to payment. In August 1990, Riggs National Bank,
Washington, D.C., which became the successor trustee, purchased the assets of
NBW. In November 1996, Riggs National Bank transferred its trust operations to
the Bank of New York, New York City, which claims to be the successor trustee.
The original General Partner of the Partnership was NHP/RHGP-I Limited
Partnership (NHP/RHGP-I), a Delaware limited partnership, and NHP/RHGP-I held a
2 percent interest as General Partner in the Partnership. On December 19, 1991,
NHP/RHGP-I executed an amended and restated purchase agreement with Capital
Realty Group Properties, Inc. (CRG), a Texas corporation, for the transfer of
its General Partner interests in the Partnership. CRG assigned its rights under
this purchase agreement to an affiliate, Capital Realty Group Senior Housing,
Inc. (CRGSH), a Texas corporation. Effective January 1, 1992, CRGSH was selected
by NHP/RHGP-I to manage the five properties of the Partnership. Effective June
1, 1993, the Partnership entered into a Partnership Management Agreement with
CRGSH to provide administrative services on behalf of the Partnership. This
Partnership management agreement was terminated effective upon CRGSH becoming
the substitute General Partner.
The substitution of CRGSH as sole General Partner of the Partnership required
the consent of 50 percent or more of the outstanding Assignee Interests, which
had been issued by the Partnership and assigned by Assignor Corporation to the
Assignee Holders. Under the Partnership Agreement, holders of the Pension Notes
were not entitled to vote. Pursuant to a Consent Solicitation dated October 25,
1994, Assignee Holders holding more than 64 percent of the equity interests in
the Partnership approved the election of CRGSH, as the replacement General
Partner of the Partnership. Effective January 23, 1995, CRGSH became the new
sole General Partner of the Partnership. CRGSH was a wholly owned subsidiary of
Capital Realty Group Corporation, a Texas corporation (Capital). Capital is
3
owned by James A. Stroud (50 percent through a trust) and Jeffrey L. Beck (50
percent). CRGSH assigned its contract rights to manage the Partnership
properties to Capital Senior Living, Inc. (CSL), a subsidiary of Capital Senior
Living Corporation (CSLC), effective February 1, 1996.
On June 10, 1998, Capital sold all of its shares of CRGSH common stock to
Retirement Associates, Inc. (Associates) for $855,000. The source of the funds
is a Promissory Note for $855,000 with a five-year term and bearing an interest
rate of 8 percent per annum since December 1, 1999. Prior to December 1, 1999,
the Promissory Note had an interest rate of 10 percent per annum; the interest
rate was decreased to adjust to a market rate and in consideration of an early,
unscheduled payment of interest due. The remaining interest will accrue on the
Promissory Note and be payable at the maturity of the Promissory Note.
Associates is the maker of the Note and Capital is the payee. Mr. Robert
Lankford is the President of Associates and has had prior business relationships
with Messrs. Beck and Stroud, the former principals of CRGSH. From 1988 to 1997,
Mr. Lankford was an independent broker with Capital Realty Group Brokerage,
Inc., an affiliate of Capital. From 1997 to the present, however, Mr. Lankford
has been a principal with Kamco Property Company Commercial Real Estate
Brokerage. In this capacity, Mr. Lankford provides independent commercial real
estate brokerage services for various clients including CSLC, which accounts for
less than 20 percent of his compensation. The address of the principal executive
offices of CRGSH is 3516 Merrell Road, Dallas, Texas 75229. The phone number is
(972) 679-7477.
The Partnership's business is to operate residential rental properties for
retirement age occupants (the Properties). The Partnership presently owns a
99.99 percent partnership interest in one property. See Item 2, Properties, for
a description of this Property and the business plan for the Property.
The Partnership did not have any employees as of December 31, 2000.
Dissolution of Partnership
On December 31, 2001, the Pension Notes and deferred interest of approximately
$38,668,000 will mature and become due. Given the level of the Partnership's
cash reserves at December 31, 2000 and estimated value of Partnership assets,
the Partnership is not expected to have sufficient funds to fully repay the
maturing Pension Notes and deferred interest on December 31, 2001. Accordingly,
the Partnership does not expect to have any funds available for distribution to
the Assignee Holders.
If the Pension Notes are not fully paid at their maturity, a default will occur
under the Pension Notes and Trust Indenture under which the Pension Notes are
administered. In such event, the Trustee may choose to liquidate the
Partnership's assets in an effort to satisfy the Pension Notes. A concern arises
that such a sale may be a "fire" or "distressed" sale and, as a result, may not
yield the maximum value for the Partnership's assets. Further concern arises
from the apparent weakening in the sales market for senior living communities.
Because of these factors and the savings that may be obtained from earlier
payment on the Pension Notes, the General Partner has deemed it prudent to
dissolve the Partnership and sell its remaining asset to obtain the best terms
for a sale and accordingly, maximize value realization of the Partnership's
remaining asset.
4
Accordingly, on February 12, 2001, the General Partner notified the Note Holders
and Assignee Holders of its intent to dissolve the Partnership effective May 21,
2001. The dissolution is subject to the rights of the Limited Partners to elect
to continue the business of the Partnership. Following dissolution, the
Partnership will take all actions necessary to wind-up the Partnership's
business including the sale of all of its remaining assets in an orderly fashion
and, to the extent of the proceeds thereof, pay its creditors and claims.
Regulatory Matters
Federal, state and local government regulations govern fitness and adequacy,
equipment, personnel and standards of medical care at a health care facility, as
well as health and fire codes. Changes in the applicable regulations could
adversely affect the operations of a property, which could also affect the
financial results of the Partnership. Any impact from proposed health care
legislation is not known at this time; however, such impact could adversely
affect the Partnership operations.
ITEM 2. PROPERTIES
On September 30, 1998, the Partnership sold four properties to Capital Senior
Living Properties 2 - NHPCT, Inc., a wholly owned subsidiary of CSLC, for
$40,650,000. The four properties sold were the Atrium at Carmichael, Crosswood
Oaks, The Heatherwood and the Veranda Club. After the sale, The Amberleigh
(Property) is the only remaining property in which the Partnership has any
interest. After payment of closing costs, the Partnership netted $322,652 in
cash proceeds from the sale after $22,514,174 was allocated for partial
redemption of Pension Notes, $15,703,636 allocated for partial payment of
deferred interest on redeemed Pension Notes, and $413,188 for payment of current
interest due on redeemed Pension Notes. The Partnership recognized a $9,249,174
gain on sale of those properties at September 30, 1998. In October 1998, the
Partnership recognized approximately $1,856,485 of additional interest expense
paid on redeemed Pension Notes resulting from the difference between the stated
interest rate of 13 percent on the Pension Notes and the accrued interest rate
of approximately 9 percent recorded by the Partnership under the effective
interest rate method. Due to the partial redemption of Pension Notes, the
Partnership recognized $525,891 of losses on early extinguishment of debt
relating to the write off of issuance and organization costs on Pension Notes
that were redeemed. The partial redemption of Pension Notes will reduce the
amount of deferred interest, which continues to accrue on the remaining Pension
Notes.
5
The following is a schedule of the Property owned by the Partnership at December
31, 2000. The Amberleigh is owned by a limited partnership in which the
Partnership is a 99.99 percent partner. The Amberleigh is encumbered by a
mortgage for the benefit of the Pension Note holders.
Units Occupied Units Occupied
Number as a Percentage of as a Percentage of
Property of Total Units, as of Total Units, as of
Name/Location Units December 31, 2000 December 31, 1999
------------- ----- ----------------- -----------------
The Amberleigh 271 86% 87%
At Woodstream Farms
Williamsville, New York
On November 5, 1997, the Partnership purchased approximately 3.10 acres of land
adjacent to The Amberleigh for $500,000 plus closing costs for the potential
expansion of the Amberleigh, as well as to prevent another purchaser from buying
the tract and blocking the facility from view from the main intersection. Due to
licensure and financing requirements, the land currently will not be used for
development.
The business plan for the Amberleigh will be to continue to aggressively lease
up the property in order to maximize re-sale value prior to sale. To achieve
this plan, an additional marketing executive has been hired, the regional
marketing director has been relocated to office on-site at the facility, and a
community outreach program has been implemented. The General Partner believes
this business plan will provide an opportunity for improved occupancy at the
property, and increase its potential resale value.
Due to the Partnership's goal to remain competitive in its real estate markets,
the General Partner developed an ongoing capital improvement program that was
implemented in 1994. The program generally includes painting of the building,
replacement of carpet and curtains, purchase of new furniture and furniture
refurbishment, and purchase of new equipment. Budgeted operational capital
expenditures for 2001 are approximately $123,725.
ITEM 3. LEGAL PROCEEDINGS
On or about October 23, 1998, Robert Lewis filed a putative class action
complaint on behalf of certain holders of assignee interests (Assignee
Interests) in the Partnership in the Delaware Court of Chancery against the
Partnership, CSLC, Capital Senior Living Properties 2-NHPCT, Inc. and CRGSH,
Inc. (collectively the Defendants). Mr. Lewis purchased 90 Assignee Interests in
NHP in February 1993 for $180. The complaint alleges, among other things, that
the Defendant breached, or aided and abetted a breach of, the express and
implied terms of the NHP Partnership Agreement in connection with the sale of
four properties by NHP to Capital Senior Living Properties 2-NHPCT, Inc. The
complaint seeks, among other relief, rescission of the sale of these properties
and unspecified damages. The Partnership believes the complaint is without merit
and is vigorously defending itself this action. The Partnership has filed a
Motion to Dismiss in this case, which currently is pending. The Partnership is
unable to estimate any liability related to this claim, if any.
6
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S PENSION NOTES AND LIMITED PARTNERSHIP
ASSIGNEE INTERESTS AND RELATED PARTNERSHIP MATTERS
a. Assignee Interests and Pension Notes were sold through a public
offering managed by NHP Real Estate Securities, Inc. There is not
currently, and it is not anticipated that there will be, any
established public trading market for resale of Assignee Interests or
Pension Notes. Accordingly, an investor may be unable to sell or
otherwise dispose of his interest in the Partnership.
As of March 1, 2001, there were 2,271 registered holders of Assignee
Interests and 3,109 registered holders of Pension Notes.
As of March 1, 2001, Capital Senior Living Properties, Inc. owned
approximately 14,131 Pension Notes, or approximately 33 percent of the
Partnership's outstanding Pension Notes.
Each Pension Note bears stated interest in an amount equal to 13
percent per annum, 9 percent of which was subject to deferral through
December 31, 1988 and 6 percent of which is subject to deferral
thereafter. Interest is payable quarterly. Quarterly distributions of
Cash Available for Distribution (as defined in the Partnership
Agreement) are payable to Assignee Interest Holders within 60 days
after the end of each three-month period, subject to the General
Partner's right to restrict or suspend such distributions, if the
General Partner, in its absolute discretion, determines that such
restriction or suspension is in the best interests of the Partnership.
For each of the years ended December 31, 2000, 1999 and 1998, interest
paid to the Pension Note Holders as a group totaled $1,416,337,
$1,421,799, and $2,589,891, respectively, per year. With respect to the
fourth quarter of 2000, interest payments paid to Pension Note Holders
on March 1, 2001 amounted to $355,661. In addition to the fourth
quarter 2000 interest payment made on March 1, 2001, an additional
$1,000,000 deferred interest payment was disbursed on March 1, 2001.
No cash distributions were paid to the Assignee Interest Holders during
2000, 1999, or 1998. As presented in the Statement of Cash Flows (as
stated below), cash and cash equivalents (decreased) increased
$(60,769), $(267,943), and $1,325,567 for the years ended December 31,
2000, 1999 and 1998, respectively. Future cash requirements have caused
the General Partner to determine that it is not financially appropriate
to make distributions to Assignee Interest Holders.
7
b. Not applicable.
ITEM 6. SELECTED FINANCIAL DATA
Years Ended December 31,
2000 1999 1998 1997 1996
---- ---- ---- ---- ----
Revenue $ 5,274,800 $ 5,322,600 $ 13,746,088 $ 15,548,138 $ 14,488,099
============= ============= ============ ============= =============
Net Income (Loss) $ (2,473,796) $ (2,474,347) $ 3,409,569 $ (3,522,917) $ (3,574,668)
============= ============= ============ ============= ==============
Net Income (Loss) per Assignee
Interest $ (58) $ (57) $ 61 $ (81) $ (82)
============= ============== ============ ============== ==============
Total assets $ 23,753,479 $ 24,333,572 $ 25,262,800 $ 55,585,840 $ 56,071,884
============= ============= ============ ============= =============
Long-term obligations,
Pension Notes, and related
interest payable $ 36,938,253 $ 35,036,889 $ 33,300,689 $ 66,402,407 $ 63,353,172
============= ============= ============ ============= =============
Cash distributions per
Assignee Interest $ 0 $ 0 $ 0 $ 0 $ 0
============= ============= ============ ============= =============
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Results of Operations
Income from rental operations decreased to $1,350,158 from $1,456,968 and
$3,402,021 for the years ended December 31, 2000, 1999, and 1998, respectively.
Rental revenue decreased in 2000 to $5,274,800 from $5,322,600 in 1999 due to
lower occupancies at the Property. Rental expenses slightly increased to
$3,924,642 in 2000 from $3,865,632 in 1999 due to increased costs attributable
to inflation.
Rental revenue decreased in 1999 to $5,322,600 from $13,746,088 in 1998. Rental
expenses also decreased to $3,865,632 in 1999 from $10,344,067 in 1998. Both
decreases in rental revenues and expenses from 1998 to 1999 were due to the sale
of four properties on September 30, 1998. Due to the sale of four properties on
September 30, 1998, the Partnership recognized in 1998 a gain on sale of
$9,249,174, a loss on early extinguishment of debt of $525,891, and additional
interest expense on Pension Notes of $1,856,485 on the redeemed Pension Notes.
The Partnership's net income (loss) is $(2,473,796), $(2,474,347) and $3,409,569
for the years ended December 31, 2000, 1999, and 1998, respectively.
8
Liquidity and Capital Resources.
Net cash provided by operating activities during 2000 was $126,945, representing
an increase over 1999 net cash used by operating activities of $125,391. Net
cash provided in 2000 operations primarily was due to decreased other operating
expenses paid. Rent collections decreased to $4,985,113 in 2000 from $5,056,293
in 1999, primarily due to lower occupancy at the Property. Likewise, rental
collections decreased from $13,401,008 in 1998 to $5,056,293 in 1999 due to the
sale of the properties in 1998. Operating expenses paid decreased from
$4,012,953 in 1999 to $3,721,034 in 2000 primarily due to decreased other
operating expenses paid. Operating expenses decreased from $9,448,442 in 1998 to
$4,012,953 in 1999 due to the sale of the properties in 1998. Interest paid was
$1,416,337 in 2000, $1,421,799 in 1999, and $2,589,891 in 1998.
For the years ended 2000 and 1998, cash generated from rental operations was
sufficient to pay the base interest amount on the outstanding Pension Notes of
$1,416,337 and $2,589,891, respectively. However, cash generated from rental
operations during 1999 was insufficient to pay the base interest amount of
$1,421,799. Interest payments on the Pension Notes are accrued at a 13 percent
rate, but were paid based on a 7 percent pay rate in 2000, 1999, and 1998. The
remaining 6 percent unpaid portion for these years as well as amounts deferred
in prior years in accordance with the terms of the Pension Notes continues to be
accrued and are due at maturity, December 31, 2001. Accrued and unpaid interest
at December 31, 2000 amounted to $16,780,427.
Cash and cash equivalents at December 31, 2000 amounted to $5,492,588 as
compared to $5,553,357 at December 31, 1999.
Dissolution of Partnership
On December 31, 2001, the Pension Notes and deferred interest of approximately
$38,668,000 will mature and become due. Given the level of the Partnership's
cash reserves at December 31, 2000 and estimated value of Partnership assets,
the Partnership is not expected to have sufficient funds to fully repay the
maturing Pension notes and deferred interest on December 31, 2001. Accordingly,
the Partnership does not expect to have any funds available for distribution to
the Assignee Holders.
If the Pension Notes are not fully paid at their maturity, a default will occur
under the Pension Notes and Trust Indenture under which the Pension Notes are
administered. In such event, the Trustee may choose to liquidate the
Partnership's assets in an effort to satisfy the Pension Notes. A concern arises
that such a sale may be a "fire" or "distressed" sale and, as a result, may not
yield the maximum value for the Partnership's assets. Further concern arises
from the apparent weakening in the sales market for senior living communities.
Because of these factors and the savings that may be obtained from earlier
payment on the Pension Notes, the General Partner has deemed it prudent to
dissolve the Partnership and sell its remaining asset to obtain the best terms
for a sale and accordingly, maximize value realization of the Partnership's
remaining asset.
9
Accordingly, on February 12, 2001, the General Partner notified the Note Holders
and Assignee Holders of its intent to dissolve the Partnership effective May 21,
2001. The dissolution is subject to the rights of the Limited Partners to elect
to continue the business of the Partnership. Following dissolution, the
Partnership will take all actions necessary to wind-up the Partnership's
business including the sale of all of its remaining assets in an orderly fashion
and, to the extent of the proceeds thereof, pay its creditors and claims.
Management's plans are to continue to manage the Property prudently in order to
maximize the resale value of the Property during the dissolution of the
Partnership.
ITEM 7A. QUALITATIVE AND QUANTITATIVE DISCLOSURE ABOUT MARKET RISK
The Partnership believes any impact of market risk to the Partnership's
operations is immaterial.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and supplementary data of the Partnership are included
on pages 11 through 28 of this report.
10
REPORT OF ERNST & YOUNG LLP,
INDEPENDENT AUDITORS
The Partners
NHP Retirement Housing Partners I Limited Partnership
We have audited the accompanying statements of financial position of NHP
Retirement Housing Partners I Limited Partnership as of December 31, 2000 and
1999, and the related statements of operations, partners' equity (deficit), and
cash flows for each of the three years in the period ended December 31, 2000.
These financial statements are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of NHP Retirement Housing Partners
I Limited Partnership at December 31, 2000 and 1999 and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 2000, in conformity with accounting principles generally accepted
in the United States.
The accompanying financial statements have been prepared assuming that NHP
Retirement Housing Partners I Limited Partnership (the Partnership) will
continue as a going concern. As more fully described in Note 9, the Partnership
has Pension Notes and accrued interest of $38,668,000 due at December 31, 2001,
that are expected to be in excess of the net book value of the Partnership's
assets available to meet this liability, which is $23,753,479 at December 31,
2000. Additionally, without proceeds from the sale of the Partnership's
principal operating property during 2001, the Partnership will not have
sufficient liquidity to repay substantially all the Pension Notes and accrued
interest when due. On February 12, 2001, the General Partner of the Partnership
notified the Note Holders and Assignee Holders of its intent to dissolve the
Partnership effective May 21, 2001. These conditions raise substantial doubt
about the Partnership's ability to continue as a going concern. The financial
statements do not include any adjustments to reflect the possible future effects
on the recoverability and classification of assets or the amounts and
classification of liabilities that may result from the outcome of this
uncertainty.
Ernst & Young LLP
Dallas, Texas
January 26, 2001
except for notes 1 and 9, as to which the date is
February 12, 2001
11
NHP RETIREMENT HOUSING PARTNERS I LIMITED PARTNERSHIP
STATEMENTS OF FINANCIAL POSITION
December 31,
2000 1999
---- ----
ASSETS (Notes 1 and 6)
Cash and cash equivalents (Note 2) $ 5,492,588 $ 5,553,357
Receivables 36,174 25,690
Pension Notes issuance costs (Note 1) 119,009 238,013
Prepaid expenses 132,989 119,097
Rental property (Notes 1 and 10):
Land 2,497,725 2,391,705
Buildings and improvements, net of
accumulated depreciation of $6,936,874
in 2000 and $6,354,013 in 1999 15,470,554 16,001,167
Other assets 4,440 4,543
----------------- -----------------
Total assets $ 23,753,479 $ 24,333,572
================= =================
LIABILITIES AND PARTNERS' DEFICIT
Liabilities:
Accounts payable $ 203,373 $ 175,495
Interest payable (Notes 1 and 6) 16,780,427 14,879,063
Pension Notes (Notes 1 and 6) 20,157,826 20,157,826
Other liabilities (Note 2) 289,944 296,037
----------------- -----------------
37,431,570 35,508,421
----------------- -----------------
Contingencies (Note 12)
Partners' deficit (Notes 5 and 7):
General Partner (1,006,466) (928,115)
Assignee Limited Partner - 42,120 and 42,691
investment units outstanding in 2000 and 1999, (12,671,625) (10,246,734)
respectively ------------------ ------------------
Total partners' deficit (13,678,091) (11,174,849)
----------------- -----------------
Total liabilities and partners' deficit $ 23,753,479 $ 24,333,572
================= =================
See Notes to Financial Statements
12
NHP RETIREMENT HOUSING PARTNERS I LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS
Year Ended December 31,
2000 1999 1998
---- ---- ----
REVENUES
Rental income $ 4,995,597 $ 5,069,532 $ 13,381,567
Interest income 216,442 181,994 149,883
Other income 62,761 71,074 214,638
-------------- -------------- --------------
5,274,800 5,322,600 13,746,088
-------------- -------------- --------------
COSTS AND EXPENSES
Salaries, related benefits and overhead reimbursements (Note 3) 1,080,206 1,074,947 3,318,570
Management fees, dietary fees and other services (Note 3) 460,444 457,581 1,235,020
Administrative and marketing 235,967 228,217 552,944
Utilities 286,361 267,087 729,706
Maintenance 181,526 174,640 421,542
Resident services, other than salaries 38,661 45,182 230,693
Food services, other than salaries 533,939 529,369 1,350,723
Depreciation 582,861 570,238 1,462,362
Taxes and insurance 524,677 518,371 1,042,507
-------------- -------------- --------------
3,924,642 3,865,632 10,344,067
-------------- -------------- --------------
INCOME FROM RENTAL OPERATIONS 1,350,158 1,456,968 3,402,021
-------------- -------------- --------------
OTHER (INCOME) EXPENSES
Gain on sale (Note 4) - - (9,249,174)
Loss on early extinguishment of debt (Note 4) - - 525,891
Interest expense - Pension Notes (Note 6) 3,317,701 3,157,999 8,119,171
Amortization of Pension Notes issuance costs 119,004 119,004 220,845
Amortization of Pension Notes organization costs - 77,615 43,800
Other expenses 387,249 576,697 331,919
-------------- -------------- --------------
3,823,954 3,931,315 (7,548)
-------------- -------------- --------------
NET INCOME (LOSS) $ (2,473,796) $ (2,474,347) $ 3,409,569
=============== =============== ==============
ALLOCATION OF NET INCOME (LOSS)
General Partner $ (49,476) $ (49,487) $ 808,125
Assignor Limited Partner (2,424,320) (2,424,860) 2,601,444
--------------- --------------- --------------
$ (2,473,976) $ (2,474,347) $ 3,409,569
============== ============== ==============
NET INCOME (LOSS) PER ASSIGNEE INTEREST $ (58) $ (57) $ 61
============== ============== ==============
See Notes to Financial Statements
13
NHP RETIREMENT HOUSING PARTNERS I LIMITED PARTNERSHIP
STATEMENTS OF PARTNERS' EQUITY (DEFICIT)
Assignee
General Limited
Partner Partners Total
Partners' deficit at December 31, 1997 $ (1,596,670) $ (10,423,318) $ (12,019,988)
Distributions (61,287) - (61,287)
Net Income 808,125 2,601,444 3,409,569
---------------- --------------- ---------------
Partners' deficit at December 31, 1998 (849,832) (7,821,874) (8,671,706)
Distributions (28,796) - (28,796)
Net Loss (49,487) (2,424,860) (2,474,347)
---------------- ---------------- ----------------
Partners' deficit at December 31, 1999 (928,115) (10,246,734) (11,174,849)
Distributions (28,875) - (28,875)
Repurchase of 571 assignee units
subsequently cancelled - (571) (571)
Net Loss (49,476) (2,424,320) (2,473,796)
---------------- --------------- ---------------
Partner's deficit at December 31, 2000 $ (1,006,466) $ (12,671,625) $ (13,678,091)
================ =============== ===============
See Notes to Financial Statements
14
NHP RETIREMENT HOUSING PARTNERS I LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
Year Ended December 31,
2000 1999 1998
---- ---- ----
CASH FLOWS FROM OPERATING ACTIVITIES
Rent collections $ 4,985,113 $ 5,056,293 $ 13,401,008
Interest received 216,442 181,994 149,883
Other income 62,761 71,074 214,638
Management fees, dietary fees and other services (422,871) (457,390) (1,239,970)
Salary, related benefits and overhead reimbursements (1,080,869) (1,078,502) (3,440,465)
Other operating expenses paid (2,217,294) (2,477,061) (4,768,007)
Interest paid (1,416,337) (1,421,799) (2,589,891)
--------------- --------------- ---------------
Net cash provided by (used in) operating activities 126,945 (125,391) 1,727,196
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of properties - - 38,540,462
Capital expenditures (158,268) (113,756) (662,994)
--------------- --------------- ---------------
Net cash (used in) provided by investing activities (158,268) (113,756) 37,877,468
CASH FLOWS FROM FINANCING ACTIVITIES
Repurchase of assignee units (571) - -
Payments on Pension Notes and deferred interest
payable - - (38,217,810)
Distributions (28,875) (28,796) (61,287)
---------------- ---------------- ---------------
Net cash used in financing activities (29,446) (28,796) (38,279,097)
---------------- ---------------- ---------------
Net (decrease) increase in cash and cash equivalents (60,769) (267,943) 1,325,567
Cash and cash equivalents at beginning of year 5,553,357 5,821,300 4,495,733
--------------- --------------- ---------------
Cash and cash equivalents at end of year $ 5,492,588 $ 5,553,357 $ 5,821,300
=============== =============== ===============
See Notes to Financial Statements
15
NHP RETIREMENT HOUSING PARTNERS I LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
Year Ended December 31,
2000 1999 1998
---- ---- ----
RECONCILIATION OF NET INCOME (LOSS)
TO NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES
Net Income (loss) $ (2,473,796) $ (2,474,347) $ 3,409,569
---------------- ---------------- ---------------
ADJUSTMENTS TO RECONCILE NET
INCOME (LOSS) TO NET CASH PROVIDED
BY (USED IN) OPERATING ACTIVITIES
Gain on sale of properties - - (9,249,174)
Loss on early extinguishment of debt - - 525,891
Depreciation 582,861 570,238 1,462,362
Amortization of Pension Notes organization costs - 77,615 43,800
Amortization of Pension Notes issuance costs 119,004 119,004 220,845
Interest deferred 1,901,364 1,736,200 5,529,280
CHANGES IN OPERATING ASSETS AND
LIABILITIES
Other assets and receivables (10,381) (13,309) 56,888
Prepaid expenses (13,892) 21,493 138,755
Accounts payable 27,878 (126,178) (19,123)
Other liabilities (6,093) (36,107) (391,897)
--------------- --------------- ----------------
Net cash provided by (used in) operating activities $ 126,945 $ (125,391) $ 1,727,196
=============== ================ ===============
See Notes to Financial Statements
16
NHP RETIREMENT HOUSING PARTNERS I LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2000 AND 1999
NOTE 1. SUMMARY OF PARTNERSHIP ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Organization
NHP Retirement Housing Partners I Limited Partnership (the Partnership) is a
limited partnership organized under the laws of the State of Delaware on March
10, 1986. The Partnership was formed for the purpose of raising capital by
issuing both Pension Notes (Notes) to tax-exempt investors and selling
additional Partnership interests in the form of Assignee Interests (Interests)
to taxable individuals. Interests represent assignments of the limited
partnership interests of the Partnership issued to the Assignor Limited Partner,
NHP RHP-I Assignor Corporation. The proceeds from the sale of the Notes and
Interests have been invested in residential rental properties for retirement age
occupants.
On December 31, 2001, the Notes and deferred interest of approximately
$38,668,000 are scheduled to mature. The Partnership is not expected to have
sufficient funds to fully repay this amount. Due to the pending maturity of the
Notes and to obtain maximum value through an organized disposition of
Partnership assets, the General Partner on February 12, 2001 has notified the
Note Holders and Assignee Holders of its intent to dissolve the Partnership
effective May 21, 2001 (see Note 9).
Following is a description of the Project owned indirectly and operated by the
Partnership at December 31, 2000.
The Amberleigh
This project is a 271-unit retirement living center located in Williamsville,
New York. The facility was approximately 86 percent and 87 percent occupied at
December 31, 2000 and 1999, respectively. On November 5, 1997, the Partnership
purchased approximately 3.10 acres of land adjacent to The Amberleigh for
$500,000 plus closing costs for the potential expansion of The Amberleigh, as
well as to prevent another purchaser from buying the tract and blocking the
facility from view from the main intersection. Due to licensure and financing
issues, there are no current plans to develop this land. During 2000,
construction in process of $106,020 associated to this land were reclassified
from construction in process to land.
Following are descriptions of the Projects owned directly and operated by the
Partnership at December 31, 1997 and subsequently sold on September 30, 1998
(see Note 4).
17
NHP RETIREMENT HOUSING PARTNERS I LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2000 AND 1999 CONTINUED
The Atrium of Carmichael
This project is a 153-unit retirement living center located in Sacramento,
California.
Crosswood Oaks
This project is a 122-unit retirement living center located in Sacramento,
California.
The Heatherwood
This project is a 160 -unit retirement living center located in Southfield,
Michigan.
Veranda Club
This project is a 189-unit retirement living center located in Boca Raton,
Florida.
Significant Accounting Policies
Organization costs related to the sale of Notes were being amortized using the
straight-line method through February 1999. The remaining balance of
organization costs of $68,599 was written off in 1999 as required under the
American Institute of Certified Public Accountants Statement of Position 98-5,
Reporting Costs of Start-Up Activities. Offering and issuance costs related to
the sale of Notes are being amortized using the straight-line method over the
term of the Notes. Accumulated amortization at December 31, 2000 and 1999 was
$3,438,753 and $3,319,749, respectively. Selling commissions related to the sale
of Interests were recorded as a direct reduction to the capital account of the
holders of Interests. Direct costs of acquisition, including acquisition fees
and expenses paid to the General Partner, have been capitalized as part of
buildings and improvements. Other fees and expenses of the Partnership are
recognized as expenses in the period the related services are performed.
Interest expense on Notes is calculated using the effective interest method (see
Note 6).
18
NHP RETIREMENT HOUSING PARTNERS I LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2000 AND 1999 CONTINUED
Buildings and improvements are recorded at the lower of cost or net recoverable
value (Note 10) and depreciated using the straight-line method, assuming a
30-year life and a 30 percent salvage value. Furniture and equipment are
recorded at cost and depreciated using the straight-line method over 5 years.
The cost of rental property and their useful lives are summarized as follows:
Useful Life 2000 1999
----------- ---- ----
Land $ 2,497,725 $ 2,391,705
================= =================
Land improvements 30 years $ 50,317 $ 40,815
Building and building improvements 30 years 21,501,103 21,456,303
Furniture and equipment 5 years 856,008 752,042
Construction in process - - 106,020
----------------- ------------------
22,407,428 22,355,180
Less-accumulated depreciation (6,936,874) (6,354,013)
----------------- -----------------
$ 15,470,554 $ 16,001,167
================= =================
Rental income is recognized when earned based on residents' signed rental
agreements. Rental payments received in advance are deferred and recognized when
earned.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
effect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
NOTE 2. CASH AND CASH EQUIVALENTS
As of December 31, 2000 and 1999, cash and cash equivalents consisted of demand
deposits and repurchase agreements. All repurchase agreements have an original
maturity of three months or less and, therefore, are considered to be cash
equivalents.
Cash and cash equivalents also includes $161,500 and $135,504 of tenant security
deposits at December 31, 2000 and 1999, respectively, which are designated for
the purpose of providing refunds to tenants upon move-out.
19
NHP RETIREMENT HOUSING PARTNERS I LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2000 AND 1999 CONTINUED
NOTE 3. TRANSACTIONS WITH THE GENERAL PARTNER AND ITS AFFILIATES
Through January 22, 1995, the sole General Partner of the Partnership was
NHP/RHGP-I Limited Partnership (NHP/RHGP-I) and the sole limited partner of the
Partnership was NHP RHP-I Assignor Corporation, a Delaware corporation.
Effective January 23, 1995, Capital Realty Group Senior Housing, Inc. (CRGSH)
became the sole General Partner of the Partnership. Effective February 1, 1995,
CRGSH assigned its contract rights to manage the Partnership's properties to
Capital Senior Living, Inc. (CSL), which, in 1997, became a subsidiary of
Capital Senior Living Corporation. CSL received $422,871, $457,390, and
$1,239,970, in 2000, 1999, and 1998, respectively, for management fees, dietary
services fees and other operating expense reimbursements related to services
provided to the Partnership.
Personnel working at the property sites and certain home office personnel who
perform services for the Partnership were employees of CSL, an affiliate of
CRGSH until June 30, 1998. The Partnership reimbursed CSL for the salaries and
related benefits of such personnel as reflected in the accompanying financial
statements. During 2000, 1999, and 1998, such reimbursements for salaries,
related benefits and overhead reimbursements amounted to $1,080,869, $1,078,502,
and $3,440,465, respectively.
During 1997, a former affiliate of the General Partner, Capital Senior Living
Communities, L.P., purchased approximately 11,318 of Pension Notes, or
approximately 30.74 percent of the Partnership's outstanding Pension Notes at an
average price of $822 per Note. On November 3, 1997, Capital Senior Living
Communities, L.P. sold its Pension Notes to Capital Senior Living Properties,
Inc., at that time an affiliate of the General Partner and a subsidiary of
Capital Senior Living Corporation, at a price of $1,422 per Note. At December
31, 2000, Capital Senior Living Properties, Inc. holds 14,131 Pension Notes.
Capital Senior Living Corporation is subject to the periodic reporting
obligations of the Securities and Exchange Commission.
20
NHP RETIREMENT HOUSING PARTNERS I LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2000 AND 1999 CONTINUED
On June 10, 1998, Capital Realty Group Corporation sold all of its shares of
CRGSH common stock to Retirement Associates, Inc. (Associates) for $855,000. The
source of the funds is a Promissory Note for $855,000 with a five-year term and
bearing an interest rate of 8 percent per annum as of December 1, 1999. Prior to
December 1, 1999, the Promissory Note had an interest rate of 10 percent per
annum; the interest rate was decreased to adjust to a market rate and in
consideration of an early, unscheduled payment of interest due. The remaining
interest will accrue on the Promissory Note and be payable at the maturity of
the Promissory Note. Associates is the maker of the Note and Capital Realty
Group Corporation is the payee. Mr. Robert Lankford is the President of
Associates and has had prior business relationships with Messrs. Beck and
Stroud, the former principals of CRGSH. From 1988 to 1997, Mr. Lankford was an
independent broker with Capital Realty Group Brokerage, Inc., an affiliate of
Capital Realty Group Corporation. From 1997 to the present, however, Mr.
Lankford has been a principal with Kamco Property Company Commercial Real Estate
Brokerage. In this capacity, Mr. Lankford provides independent commercial real
estate brokerage services for various clients including Capital Senior Living
Corporation, which accounts for less than 20 percent of his compensation. The
address of the principal executive offices of CRGSH is 3516 Merrell Road,
Dallas, Texas 75229.
In connection with the sale of four properties in 1998 (see Note 4), Capital
Realty Group Brokerage, Inc. received $1,219,500 in brokerage fees.
NOTE 4. DISPOSITION OF PROPERTY AND REDEMPTION OF PENSION NOTES
On September 30, 1998, the Partnership sold four properties to Capital Senior
Living Properties 2 - NHPCT, Inc., a wholly owned subsidiary of Capital Senior
Living Corporation, for $40,650,000. The four properties sold were the Atrium at
Carmichael, Crosswood Oaks, The Heatherwood and the Veranda Club. After the
sale, The Amberleigh is the only remaining property in which the Partnership has
any interest. After payment of closing costs, the Partnership netted $322,652 in
cash proceeds from the sale after $22,514,174 was allocated for partial
redemption of Pension Notes, $15,703,636 allocated for partial payment of
deferred interest, and $413,188 for payment of current interest due on redeemed
Pension Notes. The Partnership recognized a $9,249,174 gain on sale of those
properties at September 30, 1998.
21
NHP RETIREMENT HOUSING PARTNERS I LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2000 AND 1999 CONTINUED
In October 1998, the Partnership recognized approximately $1,856,485 of
additional interest expense paid on redeemed Pension Notes resulting from the
difference between the stated interest rate of 13 percent on the Pension Notes
and the accrued interest rate of approximately 9 percent recorded by the
Partnership under the effective interest rate method. Due to the partial
redemption of Pension Notes, the Partnership recognized $525,891 of losses on
early extinguishment of debt relating to the write off of issuance and
organization costs on Pension Notes that were redeemed.
NOTE 5. CASH DISTRIBUTION POLICIES
The Partnership Agreement allows for quarterly payments of substantially all
Cash Available For Distribution (as defined in the Partnership Agreement),
subject to the following: (a) distributions to Assignee Holders may be
restricted or suspended for limited periods when the General Partner determines
in its absolute discretion that it is in the best interests of the Partnership;
and (b) all Assignee Holder distributions are subject to the payment of
Partnership expenses, payments to Note Holders and maintenance of working
capital reserves.
Distributions of cash available for distribution are made in the following order
of priority, to the extent available:
1. To the General Partner in an amount equal to 2 percent of cash
available for distribution before interest payments for each quarterly
cash distribution period;
2. To the Interest Holders until the Interest Holders have received an
amount equal to an aggregate annual non-compounded return of 10 percent
on their adjusted capital contributions for each quarterly cash
distribution period;
3. To the General Partner, a Partnership Management Incentive Fee in an
amount equal to 8 percent of Cash Available For Distribution Before
Interest Payments for the fiscal year; and
4. To the Interest Holders, the balance.
22
NHP RETIREMENT HOUSING PARTNERS I LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2000 AND 1999 CONTINUED
No distributions were paid to the Assignee Interest Holders during 2000, 1999 or
1998. Future cash requirements have caused the General Partner to determine it
is not financially appropriate to make distributions to Assignee Interest
holders.
Cash received from sales or re-financings of any Partnership Property, after
retirement of applicable mortgage debt and the payment of all expenses related
to the transaction and any payments of debt service on the Pension Notes
including interest at a non-compounded rate of 13 percent per annum less any
prior payments (see Note 6) and establishment of reserves, is to be distributed
in the following order of priority:
1. To the Assignee Interest Holders until their adjusted capital accounts
are reduced to zero;
2. To the Assignee Interest Holders until cumulative cash distributions
received equal a 13 percent non-compounded return on their adjusted
capital accounts, reduced by prior distributions;
3. To the General Partner in the amount of a disposition fee of not more
than 3 percent of sales price; and
4. To the Assignee Interest Holders, 85 percent, and to the General
Partner, 15 percent.
Taxable net income or loss from operations is allocated to the Interest Holders
as a class and to the General Partner in proportion to available cash
distributed during the fiscal year. If no cash is distributed during the year,
net income or loss is allocated 90 percent to the Assignee Holders as a class
and 10 percent to the General Partner. For book purposes in 1998, the gain on
sale of $9,249,174 was allocated 90 percent to the Assignee Holders as a class
and 10 percent to the General Partner. Other provisions exist if there is net
income or loss other than from operations. As discussed in Note 7, 2 percent for
2000, 1999 and 1998 of the Cash Available For Distribution Before Interest
Payments was paid to the General Partner. Accordingly, net income or loss for
each of the three years in the period ended December 31, 2000 was allocated in
the same manner.
The deficit balance in the Assignee Limited Partner account reflects their
percentage interest in the Partnership's cumulative net losses, although there
are no restoration requirements for the Assignee Limited Partner interest upon
termination of the Partnership.
23
NHP RETIREMENT HOUSING PARTNERS I LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2000 AND 1999 CONTINUED
NOTE 6. PENSION NOTES
The Notes bear stated simple interest at a rate equal to 13 percent per annum.
Payment of up to 9 percent of stated interest was subject to deferral through
December 31, 1988 and payment of up to 6 percent of stated interest is subject
to deferral thereafter. Deferred interest does not bear interest. Interest not
deferred is payable quarterly. Using the effective interest method, interest on
principal and accrued interest of the Pension Notes has been accrued at the rate
of approximately 9 percent per annum compounded quarterly. The approximate 9
percent effective interest rate was calculated using estimates of the amounts of
interest that will be deferred and the time period in which such deferred
amounts will be paid. If interest had been provided based on 13 percent versus
the effective rate of approximately 9 percent, an additional liability of
approximately $356,624 would be recorded at December 31, 2000 and future
interest expense would be reduced by this amount. The Partnership made minimum
interest payments of $1,416,337, $1,421,799, and $2,589,891 in 2000, 1999 and
1998, respectively, to Pension Note Holders. Relating to the sale of properties
on September 30, 1998, the Partnership paid $22,514,174 for a partial redemption
of Pension Notes, and paid $15,703,636 for a partial redemption of deferred
interest. The Partnership's obligation to repay the principal amount of the
Notes, which mature on December 31, 2001, and stated interest thereon, is
secured by a lien on the Partnership's assets (see Note 9). The liability of the
Partnership under the Pension Notes is limited to the assets of the Partnership.
The Pension Notes are subject to redemption in whole or in part upon not less
than 30 or more than 60 days prior notice, at the election of the Partnership.
NOTE 7. DISTRIBUTIONS TO PARTNERS
During 2000, 1999 and 1998, the General Partner received distributions,
representing 2 percent of the Cash Available For Distribution Before Interest
Payments to the Pension Note Holders. The Partnership did not make a
distribution to the holders of Assignee Interests during 2000, 1999 or 1998.
24
NHP RETIREMENT HOUSING PARTNERS I LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2000 AND 1999 CONTINUED
NOTE 8. INCOME TAXES
The Partnership is not taxed on its income. The partners are taxed in their
individual capacities upon their distributive share of the Partnership's taxable
income and are allowed the benefits to be derived from possibly offsetting their
distributive share of the tax loss against taxable income from other sources
subject to application of passive loss rules and subject to At Risk basis
limitation. The taxable income or loss differs from amounts included in the
statement of operations primarily because of different methods used in computing
depreciation and interest on the Notes and determining start-up and marketing
expenses for financial reporting and federal income tax purposes.
In the event funds are not sufficient to pay outstanding Pension Notes and
deferred interest at maturity, income may be recognized to the Assignee Holders
for any forgiven debt.
For federal income tax purposes, the Partnership computes depreciation of
buildings and improvements using the Modified Accelerated Cost Recovery System
(MACRS) and the Accelerated Cost Recovery System (ACRS), while for financial
statement purposes, depreciation is computed using the straight-line method.
Interest on Pension Notes is computed in accordance with Internal Revenue
Service regulations for original issue discount for federal income tax purposes,
while for financial statement purposes, interest on Pension Notes is computed
using the effective interest method. Start-up and marketing costs incurred prior
to initial occupancy were capitalized and amortized over sixty months for
federal income tax purposes, only those start-up and marketing costs that are
expected to benefit future operations have been capitalized and amortized over
sixty months for financial statement purposes.
25
NHP RETIREMENT HOUSING PARTNERS I LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2000 AND 1999 CONTINUED
Reconciliation between financial statement net (income) loss and net (income)
loss for tax purposes follows:
Years Ended December 31,
2000 1999 1998
---- ---- ----
Net (income) loss per financial statements $ 2,473,796 $ 2,474,347 $ (3,409,569)
Temporary differences in determining (income)
losses for federal income tax purposes:
Gain on sale of properties - - (4,168,952)
Depreciation 218,987 217,692 289,778
Amortization of start-up and marketing costs 2,141 (45,064) (65,660)
Interest expense - Pension Notes (1,933,772) 2,282,306 (2,932,081)
Miscellaneous 5,540 13,354 76,426
------------- ------------- -------------
Net (income) loss per tax return $ 766,692 $ 4,942,635 $ (4,345,896)
============= ============= =============
For federal income tax purposes, the basis of building and improvements, net of
accumulated depreciation, was $15,153,644 and $15,352,637 at December 31, 2000
and 1999, respectively.
NOTE 9. DISSOLUTION OF PARTNERSHIP
On December 31, 2001, the Pension Notes and deferred interest of approximately
$38,688,000 will mature and become due. Given the level of the Partnership's
cash reserves at December 31, 2000 and estimated value of Partnership assets,
the Partnership is not expected to have sufficient funds to fully repay the
maturing Pension notes and deferred interest on December 31, 2001. Accordingly,
the Partnership does not expect to have any funds available for distribution to
the Assignee Holders.
If the Pension Notes are not fully paid at their maturity, a default will occur
under the Pension Notes and Trust Indenture under which the Pension Notes are
administered. In such event, the Trustee may choose to liquidate the
Partnership's assets in an effort to satisfy the Pension Notes. A concern arises
that such a sale may be a "fire" or "distressed" sale and, as a result, may not
yield the maximum value for the Partnership's assets. Further concern arises
from the apparent weakening in the sales market for senior living communities.
Because of these factors and the savings that may be obtained from earlier
payment on the Pension Notes, the General Partner has deemed it prudent to
dissolve the Partnership and sell its remaining asset to obtain the best terms
for a sale and accordingly, maximize value realization of the Partnership's
remaining asset.
26
NHP RETIREMENT HOUSING PARTNERS I LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2000 AND 1999 CONTINUED
Accordingly, on February 12, 2001, the General Partner notified the Note Holders
and Assignee Holders of it intent to dissolve the Partnership effective May 21,
2001. The dissolution is subject to the rights of the Limited Partners to elect
to continue the business of the Partnership. Following dissolution, the
Partnership will take all actions necessary to wind-up the Partnership's
business including the sale of all of its remaining assets in an orderly fashion
and, to the extent of the proceeds thereof, pay its creditors and claims.
NOTE 10. VALUATION OF RENTAL PROPERTY
The Partnership records impairment losses on long-lived assets used in
operations when events and circumstances indicate that the assets might be
impaired and the undiscounted cash flows estimated to be generated by those
assets are less than the carrying amounts of those assets. If such a shortfall
exists, a write-down would be warranted based on the estimated shortfall of
discounted cash flows. The Partnership performs such evaluations on an ongoing
basis by comparing the property's net book value to the total estimated future
operating cash flow for years through 2001 (the year the Pension Notes mature)
plus cash projected to be received upon an assumed sale of the property on
December 31, 2001. Sales proceeds, net of an estimated 3 percent cost of
disposal, are estimated using a 10 percent capitalization rate of the net
operating income projected for the property for the year 2001. The Partnership
does not believe there are any indicators that would require an adjustment to
the carrying value of its property or the remaining useful lives as of December
31, 2000.
NOTE 11. FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts and fair values of financial instruments at December 31,
2000 and 1999 are as follows:
2000 1999
---- ----
Carrying Fair Carrying Fair
Amount Value Amount Value
------ ----- ------ -----
Cash and cash equivalents $ 5,492,588 $ 5,492,588 $ 5,553,357 $ 5,553,357
Pension Notes and accrued interest 36,938,253 25,103,925 35,036,889 23,515,417
Following are methods and assumptions used by the General Partner in estimating
its fair value disclosures for financial instruments.
Cash and Cash Equivalents
The carrying amounts reported in the balance sheet for cash and cash equivalents
approximate fair value.
27
NHP RETIREMENT HOUSING PARTNERS I LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2000 AND 1999 CONTINUED
Pension Notes and Accrued Interest
The fair values of Pension Notes are based on discounted cash flows at December
31, 2000 and 1999.
NOTE 12. CONTINGENCIES
On or about October 23, 1998, Robert Lewis filed a putative class action
complaint on behalf of certain holders of assignee interests (Assignee
Interests) in the Partnership in the Delaware Court of Chancery against the
Partnership, Capital Senior Living Corporation, Capital Senior Living Properties
2-NHPCT, Inc. and Capital Realty Group Senior Housing, Inc. (collectively the
Defendants). Mr. Lewis purchased 90 Assignee Interests in NHP in February 1993
for $180. The complaint alleges, among other things, that the Defendant
breached, or aided and abetted a breach of, the express and implied terms of the
NHP Partnership Agreement in connection with the sale of four properties by the
Partnership to Capital Senior Living Properties 2-NHPCT, Inc. The complaint
seeks, among other relief, rescission of the sale of these properties and
unspecified damages. The Partnership has filed a Motion to Dismiss in this case,
which currently is pending. The Partnership is unable to estimate the liability
related to this claim, if any.
28
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There have been no changes in or disagreements with accountants that are
required to be reported herein.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The Partnership has no directors, executive officers or significant employees of
its own.
On January 23, 1995, CRGSH became the sole General Partner of the Partnership.
CRGSH is a privately owned corporation initially organized on December 1, 1988.
Its principal business activity has been the ownership and management of real
property for its own account and for the account of various limited Partnerships
of which it is the General Partner. Prior to June 10, 1998, CRGSH was wholly
owned subsidiary of Capital Realty Group Corporation, a Texas corporation
(Capital), with its corporate headquarters in Dallas, Texas. Capital is owned by
James A. Stroud (50 percent through a trust) and by Jeffrey L. Beck (50
percent).
On June 10, 1998, Capital sold all of its shares of CRGSH common stock to
Retirement Associates, Inc. (Associates) for $855,000. The source of the funds
is a Promissory Note for $855,000 with a five-year term and bearing an interest
rate of 8 percent per annum since December 1, 1999. Prior to December 1, 1999,
the Promissory Note had an interest rate of 10 percent per annum; the interest
rate was decreased to adjust to a market rate and in consideration of an early,
unscheduled payment of interest due. The remaining interest will accrue on the
Promissory Note and be payable at the maturity of the Promissory Note.
Associates is the maker of the Note and Capital is the payee. Mr. Robert
Lankford is the President of Associates and has had prior business relationships
with Messrs. Beck and Stroud, the former principals of CRGSH. From 1988 to 1997,
Mr. Lankford was an independent broker with Capital Realty Group Brokerage,
Inc., an affiliate of Capital. From 1997 to the present, however, Mr. Lankford
has been a principal with Kamco Property Company Commercial Real Estate
Brokerage. In this capacity, Mr. Lankford provides independent commercial real
estate brokerage services for various clients including Capital Senior Living
Corporation, which accounts for less than 20 percent of his compensation. The
address of the principal executive offices of CRGSH is 3516 Merrell Road,
Dallas, Texas 75229.
The Partnership properties during 1994 and through February 1, 1995, were
managed by CRGSH. On February 1, 1995, CRGSH assigned its contract rights to
manage the Partnership's properties to Capital Senior Living (CSL), a subsidiary
of Capital Senior Living Corporation.
29
Following are directors and executive officers of CRGSH, the General Partner of
the Partnership.
Name Position
Robert L. Lankford President, Retirement Associates, Inc., sole
stockholder of CRGSH, the General Partner
Wayne R. Miller Secretary, Retirement Associates, Inc.
Robert L. Lankford
Robert L. Lankford, age 46, has served as President of Retirement Associates,
Inc. since June 1997. From 1988 to 1997, Mr. Lankford was an independent broker
with Capital Realty Group Brokerage, Inc., an affiliate of Capital. From 1997 to
the present, however, Mr. Lankford has been a principal with Kamco Property
Company Commercial Real Estate Brokerage. In this capacity, Mr. Lankford
provides independent commercial real estate brokerage services for various
clients including Capital Senior Living Corporation, which accounts for less
than 20 percent of his compensation.
Wayne R. Miller
Wayne R. Miller, age 51, has served as Secretary of Retirement Associates, Inc.
since June 1997. From 1980 to 1994, Mr. Miller was an officer, director and
shareholder of Miller, Hiersche, Martens and Hayward, Inc. From 1994 to the
present, Mr. Miller has been President, Sole Director and Sole Shareholder of
Wayne R. Miller P.C.
Section 16(a) Beneficial Ownership Reporting Compliance
Based solely upon a review of Forms 3, 4 and 5 and any amendments thereto
furnished to the Partnership pursuant to Rule 16a-3(c) of the Securities and
Exchange Commission (SEC) rules, the Partnership is not aware of any failure of
any officer or director of CRGSH or beneficial owner of more than ten percent of
the Assignee Interests to file timely with the SEC any Forms 3, 4 or 5 relating
to the Partnership for 2000.
ITEM 11. EXECUTIVE COMPENSATION
NHP Retirement Housing Partners I Limited Partnership has no officers or
directors. However, various fees and reimbursements are paid to the General
Partner or its affiliates. Such fees paid or accrued during the year ended
December 31, 2000 included cash distributions of $28,875 to the General Partner,
which represents 2 percent of cash available for distribution before interest
payments to the Note Holders. See Item 8, Financial Statements and Supplementary
Data.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
No person is known by the Partnership to own more than 5 percent of Assignee
Interests.
30
As of March 1, 2001, a former affiliate of the General Partner, owns
approximately 14,131 Pension Notes, or approximately 33 percent of the
Partnership's outstanding Pension Notes.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Except as described in Items 8 (Note 3 in the Financial Statements), 10, 11 and
12, the Partnership had no other transactions or business relationships with
CRGSH or its affiliates.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
Financial Statements
Following are the financial statements, notes and reports listed included in
this report.
Page
----
Report of Ernst & Young LLP, Independent Auditors 11
Statements of Financial Position,
December 31, 2000 and 1999 12
Statements of Operations for the Years
Ended December 31, 2000, 1999 and 1998 13
Statements of Partners' Equity (Deficit)
for the Years Ended December 31, 2000, 1999
and 1998 14
Statements of Cash Flows for the
Years Ended December 31, 2000, 1999 and 1998 15
Notes to Financial Statements 17
Financial Statement Schedules
All schedules have been omitted as the required information is inapplicable or
the information is presented in the financial statements or related notes.
31
Exhibits
27.1 Financial Data Schedule
Reports on Form 8-K
None.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
NHP RETIREMENT HOUSING PARTNERS I LIMITED PARTNERSHIP
By: CAPITAL REALTY GROUP SENIOR HOUSING, INC.
General Partner
By: /s/ Robert L. Lankford
----------------------
ROBERT L. LANKFORD, President
March 28, 2001
32