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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, 2001, 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: 0-17695.
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HEALTHCARE PROPERTIES, L.P.
(Exact name of Registrant as specified in its charter)
DELAWARE 62-1317327
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
14160 Dallas Parkway, Suite 300, Dallas, Texas 75254
(Address of principal executive officers) (Zip Code)
The Registrant's telephone number, including area code: (972) 770-5600
------------------
Securities registered pursuant to Section 12(g) of the Act:
Limited Partnership 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 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 [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the 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 units of 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
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HEALTHCARE PROPERTIES, L.P.
2001 FORM 10-K
TABLE OF CONTENTS
Page
----
PART I
Item 1 Business 3
Item 2 Properties 4
Item 3 Legal Proceedings 6
Item 4 Submission of Matters to a Vote of Security Holders 6
PART II
Item 5 Market for the Registrant's Common Equity
and Related Security Holder Matters 6
Item 6 Selected Financial Data 8
Item 7 Management's Discussion and Analysis of Financial Condition 9
and Results of Operations
Item 7A Quantitative and Qualitative Disclosures About Market Risk 13
Item 8 Financial Statements and Supplementary Data 13
Item 9 Changes in and Disagreements with Accountants on Accounting 13
and Financial Disclosure
PART III
Item 10 Directors and Executive Officers of the Registrant 14
Item 11 Executive Compensation 15
Item 12 Security Ownership of Certain Beneficial Owners and Management 15
Item 13 Certain Relationships and Related Transactions 16
PART IV
Item 14 Exhibits, Financial Statement Schedules, and Reports on Form 8-K 17
PART I
ITEM 1. BUSINESS
HealthCare Properties, L.P. (Registrant), is a Delaware limited partnership
formed in March 1987 for the purpose of acquiring, leasing and operating
existing or newly constructed health care properties. The General Partner of the
Registrant is Capital Realty Group Senior Housing, Inc. (Capital).
The offering of the Registrant's limited partnership interests (the Units)
terminated on August 31, 1989, although some Units were sold to existing
investors pursuant to the Registrant's distribution reinvestment plan (the Plan)
until July of 1991 when the Plan was suspended. The Registrant received gross
proceeds from the offering of $43,373,269 and net proceeds of $38,748,791.
All of the net proceeds of the offering were originally invested in 12
properties or used for working capital reserves. The Registrant partially
financed the acquisition of eight of its original properties with non-recourse
debt. Four properties were initially unleveraged. As of December 31, 2001, nine
of the original 12 properties had either been sold or deeded back to the lender,
leaving the Registrant with three properties -- one property secured by debt and
two properties unleveraged (the Properties). See Item 2, Properties, and Item 7,
Management's Discussion and Analysis of Financial Condition and Results of
Operations, for a description of the Registrant's properties and their history.
As of December 31, 2001, the Registrant had two properties leased to
unaffiliated operators under triple net leases, whereby the lessee is
responsible for all operating expenses, insurance and real estate taxes. These
two properties have subsequently been sold.
Both the income and expenses of operating the Properties owned by the Registrant
are subject to factors outside the control of both the Registrant and the
operators of the facilities, such as oversupply of similar properties resulting
from overbuilding, increases in unemployment or population shifts, reduced
availability of permanent mortgage funds, changes in taxes and regulations,
including healthcare regulations and zoning laws, or changes in patterns or
needs of users.
For the year ended December 31, 2001, the Registrant's Properties accounted for
100 percent of the Registrant's gross revenues.
The Registrant's original objective was to maintain and hold its properties for
long-term appreciation. During 1999, management of the Registrant approved and
established a plan to sell certain properties because the properties were no
longer competitive in current markets and no longer met the Registrant's
strategic objectives. The Registrant has since actively marketed and sold
various properties, including the sale of the Hearthstone property on January 1,
2002 and the Trinity Hills property on February 28, 2002. Following the sale of
the Trinity Hills property on February 28, 2002, the Registrant will continue to
seek opportunities to sell its remaining asset on favorable terms. Following the
sale of its last remaining asset, the Partnership will take all actions
necessary to wind-up the Partnership's business in an orderly fashion and to the
extent of the proceeds thereof, pay its creditors and claims.
Capital Senior Living Properties, Inc., a wholly owned subsidiary of Capital
Senior Living Corporation, an SEC registrant, and until June 10, 1998, an
affiliate of Capital, owns 56.8 percent of the outstanding Units of the
Registrant as of March 1, 2002.
2
Employees
Capital Senior Living, Inc. (CSL), a subsidiary of Capital Senior Living
Corporation, manages the Registrant. Until June 10, 1998, CSL was an affiliate
of Capital. There were no employees of the Registrant at December 31, 2001.
Competition
The real estate business is highly competitive. The Registrant's Properties are
subject to competition from similar properties within their service area. In
addition, the health care industry markets in which the Registrant's Properties
operate are also subject to intense competitive pressures, which may impact such
lessees' ability to generate sufficient revenues to fulfill their obligations to
the Registrant under their leases.
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 also could affect the
financial results of the Registrant. Risks of inadequate cost reimbursements
from various government programs such as Medicaid and Medicare also may impact
lessees' ability to fulfill their lease obligations to the Registrant. Any
impact from future health care legislation is not known at this time; however,
such impact could adversely affect cost reimbursements from various government
programs.
Impact of Inflation
To offset potential adverse effects of inflation, the Registrant required each
of its unaffiliated lessees to execute triple-net leases with the lessees being
responsible for all operating expenses, insurance and real estate taxes. Such
leases required additional participating rent payments based on certain
increases in the lessee's collected revenues
ITEM 2. PROPERTIES
The Registrant owned three properties at December 31, 2001, consisting of two
nursing homes and one rehabilitation center. One facility is secured by a
mortgage loan. This loan is non-recourse to the Registrant. See Item 7,
Management's Discussion and Analysis of Financial Condition and Results of
Operations.
3
The following table summarizes key information about each of the Registrant's
properties at December 31, 2001.
HEARTHSTONE CRENSHAW CREEK TRINITY HILLS
----------- --------------- -------------
Location Lancaster, SC Ft. Worth, TX Austin, TX
Type Rehab Nursing Nursing
Date Purchased 6/88 2/88 11/88
Purchase Price $3,900,000 $2,700,000 $3,625,000
Original Mortgage Amount $0 $0 $1,500,000
12/31/01 Mortgage Balance $0 $0 $1,123,389
Mortgage Maturity N/A N/A July 1, 2002
End of Lease Term November 2001 December 2006 April 2006
During 1999, 2000 and 2001, the Partnership disposed of several of its
Properties. On September 20, 1999, the Registrant sold the main facility on the
Cedarbrook campus for $2,825,000, resulting in a $772,286 gain on the sale and
$2,308,734 in net cash proceeds after payment of settlement costs and mortgage
related to this facility. On July 12, 2000, one of the two small Cedarbrook
facilities was sold for $390,546, resulting in a gain on sale of $115,717 and
net cash proceeds of approximately $360,380 after payment of settlement costs.
The remaining facility on the Cedarbrook campus was sold on September 25, 2001
for $325,000, resulting in a gain on sale of $1,418 and net cash proceeds of
$286,046 after payment of settlement costs.
On January 11, 2000, the Cane Creek facility was sold to its lessee for
$2,350,000, resulting in a $302,787 gain on sale and $2,143,400 in net cash
proceeds after payment of closing costs and the mortgage related to this
facility.
On August 4, 2000, the Sandybrook facility was sold for $2,025,000 resulting in
a loss on sale of approximately $766,400, and net cash proceeds of approximately
$1,829,130 after payment of settlement costs.
At December 31, 2000, the Cedarbrook facility and the McCurdy facility were
classified as assets held for sale on the Registrant's consolidated financial
statements as the management of the Registrant had approved and established a
plan to sell these facilities.
On August 15, 2001, the Cambridge facility was sold for $3,600,000 resulting in
a gain on sale of $2,443,030 and net cash proceeds of $3,457,205 after payment
of settlement costs.
The lessee of the McCurdy facility defaulted on its minimum lease payments as of
January 2001. The Registrant attempted to work with the lessee to stabilize its
census, but the lessee was unable to do so. The Registrant discontinued mortgage
payments to the lender after the lessee defaulted on payment of its lease
obligations. The facility was foreclosed by the lender on September 11, 2001,
resulting in an extraordinary loss of $434,199.
4
At December 31, 2001, the Crenshaw facility was classified as assets held for
sale on the Registrant's consolidated financial statements as the management of
the Registrant had approved and established a plan to sell this facility.
Subsequent to December 31, 2001, the Hearthstone facility was sold on January 1,
2002 for $4,000,000, resulting in a gain on sale of $1,777,113 and net cash
proceeds of $2,641,003 after payment of settlement costs. On February 28, 2002,
the Trinity Hills facility was sold for $1,800,000, resulting in a gain of
approximately $506,000 and net cash proceeds of $1,747,323 after payment of
settlement costs.
ITEM 3. LEGAL PROCEEDINGS
The Registrant was a defendant in a lawsuit brought by AmHealth (Evansville),
Inc. in the Circuit Court of Vanderburgh County, Indiana, Cause Number
82C01-9811-CP-0373 (Lawsuit), which concerned the McCurdy facility being leased
by AmHealth (Evansville), Inc. On December 10, 1999, the Registrant and AmHealth
(Evansville), Inc. entered into an Amendment of Lease whereby the parties agreed
to dismiss the lawsuit with prejudice. The Stipulation and Order of Dismissal
with Prejudice was filed with the Court on January 21, 2000. The Registrant paid
no settlement funds to AmHealth (Evansville), Inc. and, in fact, received a
letter of credit from the lessee.
On September 11, 2001 Old Nations Bank in Evansville obtained a judgment of
foreclosure against Registrant on the McCurdy property. The Registrant
additionally withdrew its opposition (and was dismissed from the lawsuit) to a
complaint by certain property owners relating to an interest it had claimed in a
ground lease on the McCurdy property.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED SECURITY HOLDER
MATTERS
At March 1, 2002, there were 1,678 Unit Holders of record in the Registrant
owning an aggregate of 4,148,325 Units. There is no public market for these
Units and there is no plan to list the Units on a national exchange or automated
quotation system. The Registrant formerly had a liquidity reserve feature that,
under certain circumstances, permitted Unit Holders to sell their Units at a
predetermined formula. In March 1991, due to inadequate liquidity of the
Registrant and the adverse impact on Unit values caused by prior-year defaults
of certain of the Registrant's lessees, the prior General Partners suspended all
redemptions pursuant to the liquidity reserve.
Pursuant to the terms of the Partnership Agreement, there are restrictions on
the ability of the Unit Holders to transfer their Units. In all cases, the
General Partner must consent in writing to any substitution of a Unit Holder.
The Internal Revenue Code contains provisions that have an adverse impact on
investors in publicly traded partnerships. Accordingly, the General Partner has
established a policy of imposing restrictions on the transferability of the
Units in private transactions. This policy is intended to prevent a public
trading market from developing and may impact the ability of a Unit Holder to
liquidate his investment quickly.
5
Subsequent to December 31, 2001, the Registrant distributed $3,111,816 to its
partners, of which $2,521,003 resulted from net cash proceeds from the
Hearthstone sale and $590,813 resulted from excess operating cash.
In 2001, the Registrant collectively distributed $17,596,912 to its partners, of
which $3,450,000 resulted from net cash proceeds from the Cambridge sale,
$1,801,358 resulted from the Cedarbrook house and prior years sales, and
$12,345,554 resulted from excess operating cash.
In 2000, the Registrant collectively distributed $9,132,500 to its partners, of
which $2,143,000 resulted from net cash proceeds from the Cane Creek sale,
$2,189,500 resulted from net cash proceeds from the Cedarbrook and Sandybrook
sales, and $4,800,000 resulted from excess operating cash.
In 1999, the Registrant collectively distributed $499,976 to its partners to
cover tax liabilities of the partners, and $2,263,593 in net cash proceeds from
the Cedarbrook sale (see Item 6, Selected Financial Data).
6
ITEM 6. SELECTED FINANCIAL DATA
HEALTHCARE PROPERTIES, L.P.
(Unaudited - Not Covered By Independent Auditors' Reports)
Year Ended December 31
- ------------------------------------------------------------------------------------------------------------------------------------
2001 2000 1999 1998 1997
----------------- ------------------ ----------------- ----------------- ------------------
Total Assets $ 6,919,587 $ 25,294,360 $ 32,055,252 $ 32,758,958 $ 32,801,853
- ---------------------------------------- ----------------- ------------------ ----------------- ----------------- ------------------
Mortgage Debt $ 1,123,389 $ 4,772,795 $ 5,173,281 $ 6,128,656 $ 6,677,432
- ---------------------------------------- ----------------- ------------------ ----------------- ----------------- ------------------
Total Revenue From
Operations $ 6,638,177 $ 9,746,951 $ 9,499,819 $ 8,787,575 $ 8,977,628
- ---------------------------------------- ----------------- ------------------ ----------------- ----------------- ------------------
- ---------------------------------------- ----------------- ------------------ ----------------- ----------------- ------------------
Income Before
Extraordinary Item $ 3,738,913 $ 2,651,881 $ 3,131,398 $ 874,425 $ 1,452,334
- ---------------------------------------- ----------------- ------------------ ----------------- ----------------- ------------------
Extraordinary Loss $ (434,199) $ - $ - $ - $ -
- ---------------------------------------- ----------------- ------------------ ----------------- ----------------- ------------------
Net Income $ 3,304,714 $ 2,651,881 $ 3,131,398 $ 874,425 $ 1,452,334
- ---------------------------------------- ----------------- ------------------ ----------------- ----------------- ------------------
- ---------------------------------------- ----------------- ------------------ ----------------- ----------------- ------------------
Net Income (Loss) Per Unit:
- ---------------------------------------- ----------------- ------------------ ----------------- ----------------- ------------------
Income Before
Extraordinary Item $ 0.86 $ 0.63 $ 0.74 $ 0.21 $ 0.34
- ---------------------------------------- ----------------- ------------------ ----------------- ----------------- ------------------
Extraordinary Loss $ (0.10) $ - $ - $ - $ -
- ---------------------------------------- ----------------- ------------------ ----------------- ----------------- ------------------
Net Income $ 0.76 $ 0.63 $ 0.74 $ 0.21 $ 0.34
- ---------------------------------------- ----------------- ------------------ ----------------- ----------------- ------------------
- ---------------------------------------- ----------------- ------------------ ----------------- ----------------- ------------------
Weighted Average Number of Units
4,148,325 4,148,325 4,148,325 4,153,835 4,172,457
- ---------------------------------------- ----------------- ------------------ ----------------- ----------------- ------------------
- ---------------------------------------- ----------------- ------------------ ----------------- ----------------- ------------------
Taxable Net (Loss) Income
- ---------------------------------------- ----------------- ------------------ ----------------- ----------------- ------------------
Taxable Net (Loss) Income $ (613,181) $ 1,707,451 $ 3,315,817 $ 1,822,007 $ 1,832,184
- ---------------------------------------- ----------------- ------------------ ----------------- ----------------- ------------------
Per Unit $ (0.15) $ 0.41 $ 0.80 $ 0.44 $ 0.44
- ---------------------------------------- ----------------- ------------------ ----------------- ----------------- ------------------
- ---------------------------------------- ----------------- ------------------ ----------------- ----------------- ------------------
Cash Distributions $ 17,596,912 $ 9,132,500 $ 2,763,569 $ - $ 325,000
- ---------------------------------------- ----------------- ------------------ ----------------- ----------------- ------------------
Per Limited Partnership Unit $ 4.18 $ 2.18 $ 0.67 $ $ 0.08
- ---------------------------------------- ----------------- ------------------ ----------------- ----------------- ------------------
The above selected financial data should be read in conjunction with the
consolidated financial statements and the related notes appearing elsewhere in
this annual report. See Footnote 3, Property and Improvements, to the
Consolidated Financial Statements, for discussion of property dispositions.
7
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Liquidity and Capital Resources
During 1999, management of the Registrant approved and established a plan to
sell certain properties because the properties were no longer competitive in
current markets and no longer met the Registrant's strategic objectives. The
Registrant has since actively marketed and sold various properties, including
the sale of the Hearthstone property on January 1, 2002 and the Trinity Hills
property on February 28, 2002. Following the sale of the Trinity Hills property
on February 28, 2002, the Registrant will continue to seek opportunities to sell
its remaining asset, the Crenshaw Creek property, on favorable terms. Following
the sale of its last remaining asset, the Partnership will take all actions
necessary to wind-up the Partnership's business in an orderly fashion and to the
extent of the proceeds thereof, pay its creditors and claims. The Registrant
anticipates sufficient cash flow to satisfy all operational expenses.
The Registrant ended 2001 with cash and cash equivalents of $1,694,546, compared
to $13,514,255 at December 31, 2000. Cash and cash equivalents decreased in 2001
due to distributions of net cash proceeds from sales of property and excess
operating cash flow.
Accounts receivable at December 31, 2001 decreased to approximately $89,000,
compared to $754,000 at December 31, 2000 primarily due to rent collections from
the Trinity Hills lessee and due to improved account receivable collections at
the Cambridge Nursing Home. The allowance for doubtful accounts decreased to
approximately $652,000 at December 31, 2001 from approximately $799,000 at
December 31, 2000. This decrease was the result of account receivable write-offs
at the Cambridge facility.
Assets held for sale were approximately $1,864,000 at December 31, 2001,
compared to $4,463,000 at December 31, 2000. This decrease resulted from the
sale of one of the small Cedarbrook facilities and the foreclosure of the
McCurdy facility. At December 31, 2001, the Crenshaw Creek facility was
reclassified as an asset held for sale.
Property and improvements, net, were approximately $3,272,000 at December 31,
2001, compared to $6,451,000 at December 31, 2000. This decrease resulted from
the sale of the Cambridge facility and the Crenshaw Creek facility being
reclassified as an asset held for sale.
Accounts payable and accrued expenses were approximately $175,000 at December
31, 2001, compared to $564,000 at December 31, 2000. This decrease resulted from
payment of accrued real estate taxes by the Registrant and the lessee on the
Hearthstone facility, payment of accrued expenses upon sale of the Cambridge
facility, and write off of prior management lessee obligations on the Trinity
Hills facility.
Operating facility accounts payable were approximately $3,000 at December 31,
2001, and $148,000 at December 31, 2000. The decrease is due to the sale of the
Cambridge facility.
Decreases from December 31, 2000 to 2001 in deferred charges and mortgage loans
payable primarily relate to amortization and payments on mortgage loans payable,
respectively. In addition to the scheduled note payments, approximately
$3,600,000 of mortgage debt was written off upon foreclosure on the McCurdy
facility in 2001.
8
Results of Operations
Rental revenues were approximately $3,619,000 in 2001 compared to approximately
$4,084,000 in 2000 and approximately $4,304,000 in 1999. The decrease in rental
revenue from 2000 to 2001 resulted from the November 30, 2001 lease termination
on the properties leased to HealthSouth Corporation and due to the termination
of the lease upon foreclosure of the McCurdy facility. The decrease in rental
revenues from 1999 to 2000 resulted from decreased participation payments.
Patient revenues of approximately $3,019,000 for the year ended December 31,
2001, approximately $5,663,000 for the year ended December 31, 2000 and
approximately $5,196,000 for the year ended December 31, 1999, related to the
operations at the Cambridge facility. The decrease in patient revenues from 2000
to 2001 is due to the sale of the Cambridge facility in 2001. The increase in
patient revenues from 1999 to 2000 resulted from increased occupancies and
reimbursement rates at the Cambridge facility.
Facility operating expenses were approximately $3,461,000 in 2001 compared to
approximately $4,862,000 in 2000 and approximately $4,701,000 in 1999. The
decrease in facility operating expenses is due to the sale of the Cambridge
facility in 2001. The increase in facility operation expenses from 1999 to 2000
resulted primarily from increased nursing costs.
Depreciation was approximately $443,000 for 2001, $533,000 for 2000, and
$1,145,000 for 1999. Depreciation decreased in 2001 and 2000 from 1999 due to
the sale of the Cambridge, Cane Creek, Sandybrook and small Cedarbrook
facilities.
Fees to related parties were approximately $419,000, $838,000, and $1,104,000
for the years ended 2001, 2000, and 1999, respectively. The decrease in fees
from 2000 to 2001 resulted from decreased asset management fees, property
management fees, administrative expenses, and general partner management fees.
The decrease in fees from 1999 to 2000 resulted from decreased asset management
fees.
Bad debt expense (net of recoveries) was approximately $798,000, $0, and
$(248,000), for the years ended 2001, 2000, and 1999, respectively. Bad debt
expense provision increase in 2001 is due non-payment of rent on the McCurdy
lease and additional allowance reserves at the Cambridge facility. There was no
bad debt expense provision in 2000. Bad debt expense (net of recoveries) in 1999
was a credit balance primarily due to a $700,000 bad debt recovery on the
Registrant's administrative claim with the United States Bankruptcy Court with
respect to NCA Cambridge Nursing Home, the lessee of the Cambridge Facility.
The Registrant recorded an approximately $232,000 write-down on an asset held
for sale in 2000 for its remaining small Cedarbrook facility.
Administrative and other expenses were approximately $207,000, $446,000, and
$387,000 for the years ended December 31, 2001, 2000, and 1999, respectively.
Administrative and other expenses decreased from 2000 to 2001 due to decreased
overhead costs on properties held for sale or released. Administrative and other
expenses increased from 1999 to 2000 due to increased overhead costs on
properties held for sale.
Interest income was approximately $248,000, $768,000, and $595,000 for the years
ended December 31, 2001, 2000, and 1999, respectively. Interest income decreased
in 2001 from 2000 due to less available cash for investment resulting from
increased distributions in 2001. Interest income increased in 2000 from 1999 due
to additional cash available as a result of sales proceeds, lower debt service
requirements and continued positive operating cash flows.
9
Interest expense was approximately $364,000, $499,000, and $584,000 for the
years ended December 31, 2001, 2000, and 1999, respectively. Interest expense
decreased in 2001 and 2000 from 1999 due to continuing pay-down of loan
principal and the repayment of mortgages upon the sale or foreclosure of
facilities.
Amortization was approximately $56,000, $107,000, and $105,000 for the years
ended December 31, 2001, 2000 and 1999, respectively. Amortization decrease in
2001 from 2000 due to fully amortized lease costs and was relatively unchanged
from 1999 to 2000.
During 2001, the net gain on sale of properties of approximately $2,444,000
resulted from a $2,443,000 gain on the Cambridge facility and a $1,000 gain on
the Cedarbrook facility. During 2000, the net loss on sale of properties of
approximately $348,000 resulted from a $303,000 gain on the sale of the Cane
Creek facility, a $115,000 gain on the sale of a small Cedarbrook facility, and
a $766,000 loss on the sale of the Sandybrook facility. During 1999, the gain on
disposition of operating property of approximately $772,000 resulted from the
sale of the Cedarbrook facility.
During 2001, other income of approximately $156,000 was due to the write off of
prior management lessee obligations on the Trinity Hills facility. During 1999,
other income of approximately $42,000 resulted from a distribution from Rebound,
Inc. (a subsidiary of HealthSouth Corporation).
During 2001, an extraordinary loss of approximately $434,000 resulted upon
foreclosure of the McCurdy facility.
This item should be read in conjunction with the consolidated financial
statements and other items contained elsewhere in this report.
Operations of the Registrant's Properties
Cedarbrook, Cane Creek, Crenshaw Creek and Sandybrook Facilities
Rebound, Inc., a subsidiary of HealthSouth Corporation (HealthSouth), formerly
leased the Cedarbrook, Cane Creek, Crenshaw Creek and Sandybrook properties
pursuant to a master lease with the Registrant through the end of the lease
term, November 30, 2001.
Due to low occupancy, HealthSouth closed the Sandybrook facility in 1994, the
Cedarbrook facility in 1997, and the Crenshaw Creek facility in May 2000.
HealthSouth continued to make full lease payments under the terms of the master
lease on a timely basis through the end of the lease term.
Effective August 5, 1999, HealthSouth agreed to transfer control of the
Cedarbrook and Sandybrook facilities to the Registrant and to continue making
its full lease payments under the terms of the master lease to the Registrant.
On September 30, 1999, the Registrant sold the main facility of the Cedarbrook
campus for $2,825,000, resulting in a $772,286 gain on the sale and $2,308,734
in net cash proceeds after payment of settlement costs and mortgage payable. On
July 12, 2000, one of the two small Cedarbrook facilities was sold for $390,546,
resulting in a gain on sale of $115,717 and net cash proceeds of approximately
$360,380 after payment of settlement costs. On September 25, 2001, the remaining
Cedarbrook facility was sold for $325,000, resulting in a gain on sale of $1,418
and net cash proceeds of $286,046 after payment of settlement costs. On January
11, 2000, the Cane Creek facility was sold to a subsidiary of HealthSouth for
$2,350,000, resulting in a $302,787 gain on sale and $2,143,400 in net cash
proceeds after payment of settlement costs and mortgage payable. On August 4,
2000, the Sandybrook facility was sold for $2,025,000 resulting in a loss of
10
approximately $766,400, and net cash proceeds of approximately $1,829,130 after
payment of settlement costs. HealthSouth transferred the Crenshaw Creek facility
to the Registrant by the end of its lease term. The Crenshaw Creek facility was
closed in May 2000 and held for sale at December 31, 2001.
Cambridge Facility
The lessee of the Cambridge facility, Nursing Centers of America-Cambridge
(NCAC), filed a voluntary petition under Chapter 11 of the Federal Bankruptcy
Code in February of 1992. The Registrant commenced litigation against NCAC
seeking full payment of future rentals under the lease of NCAC.
On August 1, 1996, the United States Bankruptcy Court approved the transfer of
the operations of NCA Cambridge Nursing Home to Cambridge LLC, a subsidiary of
the Registrant, thereby releasing the operations of the Cambridge facility from
the jurisdiction of the United States Bankruptcy Court. The Registrant's
subsidiary operated this property through August 2001. On August 15, 2001, the
Cambridge facility was sold for $3,600,000 resulting in a gain on sale of
$2,443,030 and net cash proceeds of $3,457,205 after payment of settlement
costs.
The Registrant had filed an administrative claim with the trustee of the United
States Bankruptcy Court for unpaid lease payments. At December 31, 1999, the
Registrant recorded a receivable for $700,000 related to this administrative
claim, which was approved by the United States Bankruptcy Court. The $700,000
account receivable was subsequently collected on March 1, 2000. In January 2002,
an additional $63,498 was received related to the administrative claim.
It is unlikely that material future disbursements will be made to the Registrant
from NCAC's bankruptcy.
Hearthstone, Trinity Hills and McCurdy Facilities
The Hearthstone lease expired on November 7, 2000. The lessee and the Registrant
attempted to negotiate an extension of the lease, but were unsuccessful in doing
so. On January 18, 2000, the parent company of the lessee filed for Chapter 11
bankruptcy in the United States Bankruptcy Court for the District of Delaware.
The Hearthstone lessee did not pay its April 2001 rent to the Registrant. The
Registrant negotiated with an unaffiliated operator to take over the lease,
effective May 1, 2001 for a five-year term through April 30, 2006. Subsequent to
December 31, 2001, the Hearthstone facility was sold on January 1, 2002 for
$4,000,000, resulting in a gain on sale of $1,777,113 and net cash proceeds of
$2,641,003 after payment of settlement costs. The Trinity Hills lease expired on
June 30, 2000, however, the lessee continued to lease the facility on a
month-to-month basis. On February 2, 2000, the parent company of the lessee
filed for Chapter 11 bankruptcy in the United States Bankruptcy Court for the
District of Delaware. The lessee was current on its rent and lease participation
payments through December 31, 2001. The Registrant negotiated with an
unaffiliated operator to take over the lease effective January 1, 2002 for a
five-year term through December 2006, with an option to purchase. Subsequent to
December 31, 2001, the Trinity Hills facility was sold to the lessee on February
28, 2002 for $1,800,000, resulting in a gain of approximately $506,000 and net
cash of $1,747,323 after payment of settlement costs. The lessee of the McCurdy
facility defaulted on its minimum lease payments as of January 2001. The
Registrant attempted to work with the current lessee to stabilize its census,
but was unable to do so. The Registrant discontinued mortgage payments to the
lender after the lessee's default on payment of lease obligations. The facility
was foreclosed by the lender on September 11, 2001, resulting in an
extraordinary loss of $434,199.
11
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Registrant's primary market risk exposure is from fluctuations in interest
rates and the effects of those fluctuations on the market values of its cash
equivalent short-term investments. The cash equivalent short-term investments
consist primarily of overnight investments that are not significantly exposed to
interest rate risk, except to the extent that changes in interest rates will
ultimately affect the amount of interest income earned on these investments.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See the attached Consolidated Financial Statements with Independent Auditors'
Reports thereon located at F-1.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The Registrant is a Limited Partnership and has no directors, officers, or
significant employees.
The General Partner of the Registrant is Capital, which was formed under the
laws of the State of Texas in 1988. Capital was a wholly owned subsidiary of
Capital Realty Group Corporation, a Texas corporation (CRG). CRG is owned by
James A. Stroud (50 percent through a trust) and by Jeffrey L. Beck (50
percent).
On June 10, 1998, the sole owner of stock of the General Partner, CRG, sold all
of its shares of Capital common stock to Retirement Associates, Inc.
(Associates) for $855,000. The source of the financing 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 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 CRG
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 Capital. From 1988 to 1997, Mr. Lankford was an independent broker with
Capital Realty Group Brokerage, Inc., an affiliate of CRG. 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 (CSLC), which accounts for less than
20 percent of his compensation. The address of the principal executive offices
of Capital is 3516 Merrell Road, Dallas, Texas 75229.
CSL, a subsidiary of CSLC, manages the Registrant.
12
As of December 31, 2001 the officers and directors of Capital, the General
Partner, were:
Name Position
Robert L. Lankford President, Retirement Associates, Inc.,
sole stockholder of Capital, the
General Partner
Wayne R. Miller, Esq. Secretary, Retirement Associates, Inc.
Robert L. Lankford
Robert L. Lankford, age 47, 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 CRG. From 1997 to the
present, 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 currently accounts for less than 20 percent of his
compensation.
Wayne R. Miller
Wayne R. Miller, age 52, has served as Secretary of Retirement Associates, Inc.
since June 1997. From 1980 to 1994, Mr. Miller was an officer, director and
shareholder of the law firm of Miller, Hiersche, Martens and Hayward, Inc. From
1994 to the present, Mr. Miller has been President, Sole Director and Sole
Shareholder of the law firm 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 Registrant pursuant to Rule 16a-3(e) of the SEC rules, the
Registrant is not aware of any failure of any officer or director of CSL or
beneficial owner of more than 10 percent of the Units to timely file with the
SEC any Form 3, 4 or 5 relating to the Registrant for 2001.
ITEM 11. EXECUTIVE COMPENSATION
The Registrant has no officers or directors. The officers and directors of the
General Partner receive no direct current remuneration from the Registrant nor
is it proposed that they receive remuneration in such capacities. The Registrant
is required to pay certain fees to the General Partner or its affiliates, make
distributions, and allocate a share of the profits and losses of the Registrant
to the General Partner. The relationship of the General Partner (and its
directors and officer) to its affiliates is set forth above in Item 10.
Reference is also made to Note 6 of the Notes to the Consolidated Financial
Statements included herein, for a description of such distributions, allocations
and the compensation and reimbursements paid to the General Partner and former
affiliates. Also see Item 13, Certain Relationships and Related Transactions,
for additional information.
There are no compensatory plans or arrangements resulting from resignation or
retirement of the partners, directors or executive officers of the General
Partner that require payments to be received from the Registrant.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Capital Senior Living Properties, Inc., owned by CSLC, an SEC registrant and an
affiliate of CSL, and until June 10, 1998, an affiliate of Capital, owns 56.8
percent of outstanding Units of the Registrant as of March 1, 2002. Otherwise,
no other person or group owns more than 5 percent of the Registrant as of March
1, 2002.
No partners, officers or directors of the General Partner directly own any Units
at March 1, 2002. However, Messrs. Beck and Stroud and their affiliates own a
substantial interest (approximately 50 percent) in CSLC.
13
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Under the terms of the Partnership Agreement, the Registrant is entitled to
engage in various transactions involving affiliates of the General Partner.
Pursuant to the Partnership Agreement, the General Partner receives a share of
the Registrant's profits and losses.
The General Partner and its affiliates are entitled to receive an Acquisition
Fee, as defined in the Registrant's Partnership Agreement, for their services
rendered to the Registrant in connection with the selection and purchase of any
property by the Registrant whether designated as real estate commissions or
other fees, however designated and however treated for tax or accounting
purposes. Aggregate Acquisition Fees (as defined n the Registrant's Partnership
Agreement) payable to all persons in connection with the purchase of the
Registrant's properties may not exceed the lesser of: (a) 2 percent of the gross
proceeds of the Registrant's offering; or (b) such compensation as is
customarily charged in similar arm's-length transactions. If there are
insufficient proceeds to pay such fee to the General Partner and their
affiliates, such amount will not be deferred. No amounts were earned in 2001,
2000 and 1999 in connection with such services. In connection with any
reinvestment of sale or refinancing proceeds as provided in the Partnership
Agreement, the Registrant will pay a reinvestment acquisition fee of 2 percent
of the price of additional properties payable from Net Sale or Refinancing
Proceeds (each as defined in the Registrant's Partnership agreement) utilized
solely for the acquisition. No such fees were paid in 2001, 2000, or 1999.
The Registrant may pay the General Partner or its affiliates a Regulatory
Approval Fee, as defined in the Partnership Agreement, of up to 6 percent of the
costs of any newly constructed property that is acquired by the Registrant. The
services rendered in connection with such fee will include: obtaining the
appropriate certificates of need, licenses, Medicare and Medicaid clearances,
regulatory approvals of transfer as is necessary, and such other federal, state,
local and other regulatory agency approvals as are necessary, and completion of
various other items which pertain to the commencement of the operation of a
newly constructed health care facility. Said services are expected to continue
over the term for which such the Registrant properties are subject to compliance
with regulatory agencies, so as to ensure that the newly constructed property
can be placed into service on a timely basis and remain operational. This fee
will not exceed $1,150,000. The General Partner or its affiliates did not earn
any compensation in 2001, 2000 or 1999 in connection with such services
The Registrant may pay to the General Partner or its affiliates, for services
rendered in connection with the refinancing, financing or lease restructuring of
a the Registrant property, a service fee equal to the lesser of: (a) 2 percent
of the refinancing proceeds of the Registrant property; or (b) fees which are
competitive for similar services in the geographical area where the Registrant
property is located. In 2001, the General Partner received a $39,856 fee for the
lease restructure of the Hearthstone facility. No such fees were paid in 2000 or
1999.
The Registrant may pay to the General Partner or its affiliates, for services
rendered in connection with the sale of a the Registrant property, and shall be
entitled to receive the lessor of: (a) 3 percent of the sale price of the
Registrant's property, or (b) an amount not to exceed 50 percent of the standard
real estate commission. Amounts earned by the General Partner in 2001 for its
efforts in the sale of the Cambridge facility were $108,000. Amounts earned by
the General Partner in 2000 for its efforts in the sale of Cane Creek,
Sandybrook and the small Cedarbrook facility were $142,967. Amounts earned by
the General Partner in 1999 for the sale of Cedarbrook were $84,750.
14
Since most of the Registrant's properties have long-term, triple-net leases and
others have independent fee management engagements for most services, the
General Partner or its former affiliates received 1 percent of the monthly gross
rental or operating revenues, totaling approximately $60,000, $97,000, and
$96,000 in 2001, 2000, and 1999, respectively. Property management fees paid to
the General Partner or to its managing agent, CSL, were approximately $209,000,
$396,000, and $370,000 in 2001, 2000,and 1999, respectively. Asset management
fees paid to the General Partner or to its managing agent, CSL, were
approximately $0, $80,000, and $468,000 in 2001, 2000, and 1999, respectively.
The General Partner may be reimbursed for its direct expenses relating to
administration of the Registrant. The General Partner, its affiliates or its
managing agent, CSL, received approximately $111,000, $265,000, and $170,000 of
reimbursements for such out-of-pocket expenses in 2001, 2000, and 1999,
respectively. In addition, the General Partner, its affiliates or its managing
agent, CSL, received approximately $2,487,000, $3,130,000, and $3,126,000 for
salary and benefit reimbursements during 2001, 2000 and 1999 respectively.
In addition, a significant stockholder of Capital Senior Living Corporation is
chairman of the board and principal stockholder of a bank, United Texas Bank of
Dallas, where the Registrant holds the majority of its operating cash accounts.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K
Financial Statements
The following documents were filed as part of this report beginning at page F-1:
o Report of Independent Auditors of Ernst & Young LLP;
o Independent Auditors' Report of KPMG LLP;
o Consolidated Balance Sheets -December 31, 2001 and 2000;
o Consolidated Statements of Income - Three years ended December 31, 2001;
o Consolidated Statements of Partnership Equity - Three years ended December
31, 2001;
o Consolidated Statements of Cash Flows - Three years ended December 31,
2001; and
o Notes to Consolidated Financial Statements.
Financial Statement Schedules
All schedules have been omitted because they are inapplicable, not required, or
the information is included in the consolidated financial statements or notes
thereto.
Exhibits
The list of exhibits is incorporated herein by reference to the exhibit index on
page E-1 of this report.
Reports on Form 8-K
No reports on Form 8-K were filed during the last quarter of fiscal 2001.
15
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 of the undersigned, thereunto duly authorized.
HEALTHCARE PROPERTIES, L.P.
By: Capital Realty Group Senior Housing, Inc.,
General Partner
By: /s/ Robert L. Lankford
--------------------------------------------
Robert L. Lankford, President
March 28, 2002
16
HealthCare Properties, L.P. and Subsidiaries
Consolidated Financial Statements
Years ended December 31, 2001, 2000, and 1999
Contents
Report of Ernst & Young LLP, Independent Auditors......................................................F-1
Independent Auditors' Report of KPMG LLP...............................................................F-2
Audited Consolidated Financial Statements
Consolidated Balance Sheets............................................................................F-3
Consolidated Statements of Income......................................................................F-4
Consolidated Statements of Partnership Equity (Deficit)................................................F-5
Consolidated Statements of Cash Flows..................................................................F-6
Notes to Consolidated Financial Statements.............................................................F-7
i
Report of Independent Auditors
The Partners
HealthCare Properties, L.P.:
We have audited the accompanying consolidated balance sheets of HealthCare
Properties, L.P. and subsidiaries as of December 31, 2001 and 2000, and the
related consolidated statements of income, partnership equity, and cash flows
for the years then ended. These consolidated financial statements are the
responsibility of the Partnership's management. Our responsibility is to express
an opinion on these consolidated 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 HealthCare Properties, L.P. and
subsidiaries at December 31, 2001 and 2000, and the results of their operations
and their cash flows for the years then ended December 31, 2001 in conformity
with accounting principles generally accepted in the United States.
ERNST & YOUNG LLP
/s/ ERNST & YOUNG LLP
Dallas, Texas
February 8, 2002,
except for Notes 3 and 5, as to which the date is
February 28, 2002
F-1
Independent Auditors' Report
The Partners
HealthCare Properties, L.P.:
We have audited the consolidated statements of income, partnership equity and
cash flows of HealthCare Properties, L.P. and subsidiaries (a Delaware limited
partnership) for the year ended December 31, 1999. These consolidated financial
statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
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 audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the results of operations and cash flows of
HealthCare Properties L.P. and subsidiaries for the year ended December 31,
1999, in conformity with generally accepted accounting principles.
KPMG LLP
/s/ KPMG LLP
Dallas, Texas
February 4, 2000,
except as to the third paragraph of
Note 13 which is as of
March 1, 2000
F-2
HealthCare Properties, L.P. and Subsidiaries
Consolidated Balance Sheets
December 31
2001 2000
---------------------------------------
Assets (Note 2)
Cash and cash equivalents $ 1,694,546 $13,514,255
Accounts receivable, less allowance for doubtful accounts of
$652,212 in 2001 and $798,737 in 2000 89,185 753,814
Prepaid expenses - 15,200
Assets held for sale 1,863,652 4,462,527
Property and improvements, net (Notes 3, 4, and 5) 3,272,204 6,451,238
Deferred charges, less accumulated amortization of $955,607 in
2001 and $858,281 in 2000 - 97,326
---------------------------------------
Total assets $ 6,919,587 $ 25,294,360
=======================================
Liabilities and Partnership Equity
Accounts payable and accrued expenses $ 175,001 $ 564,449
Operating facility accounts payable 3,345 148,313
Security deposits 101,247 -
Mortgage loans payable (Note 4) 1,123,389 4,772,795
---------------------------------------
Total liabilities 1,402,982 5,485,557
Partnership equity (deficit):
Limited partners (4,148,325 units at December 31, 2001 and 2000) 5,550,910 19,748,775
General partner (34,305) 60,028
---------------------------------------
Total partnership equity 5,516,605 19,808,803
---------------------------------------
Total liabilities and partnership equity $ 6,919,587 $ 25,294,360
=======================================
See accompanying notes.
F-3
HealthCare Properties, L.P. and Subsidiaries
Consolidated Statements of Income
Years ended December 31
2001 2000 1999
------------------------------------------------------
Revenues:
Resident and health care revenue $ 3,019,174 $ 5,663,026 $ 5,196,080
Rental and lease income (Note 5) 3,619,003 4,083,925 4,303,739
------------------------------------------------------
6,638,177 9,746,951 9,499,819
------------------------------------------------------
Expenses:
Facility operating expenses 3,461,459 4,862,317 4,700,597
Depreciation 442,619 532,949 1,144,939
Fees to related parties (Note 6) 419,203 837,912 1,104,000
Bad debt expense, net of recoveries of
$0 in 2001, $0 in 2000 and
$700,000 in 1999 797,619 - (248,484)
Write-down of asset held for sale to estimated
net realizable value - 232,490 -
Administrative and other 207,116 446,463 386,943
------------------------------------------------------
5,328,016 6,912,131 7,087,995
------------------------------------------------------
Income from operations 1,310,161 2,834,820 2,411,824
Other income (expense):
Interest income 248,413 767,806 594,715
Interest expense (363,614) (498,416) (584,204)
Amortization (56,291) (107,041) (105,132)
Gain (loss) on sale of properties, net (Note 3) 2,444,448 (347,896) 772,286
Other 155,796 2,608 41,909
------------------------------------------------------
2,428,752 (182,939) 719,574
------------------------------------------------------
Income before extraordinary loss 3,738,913 2,651,881 3,131,398
Extraordinary loss (434,199) - -
------------------------------------------------------
Net income $ 3,304,714 $ 2,651,881 $ 3,131,398
------------------------------------------------------
Allocation of net income:
Limited partners $ 3,152,135 $ 2,595,512 $ 3,084,216
General partner 152,579 56,369 47,182
------------------------------------------------------
$ 3,304,714 $ 2,651,881 $ 3,131,398
======================================================
Basic per limited partnership unit calculations:
Net income before extraordinary loss $ .86 $ .63 $ .74
Extraordinary loss (.10) - -
------------------------------------------------------
Net income $ .76 $ .63 $ .74
======================================================
Distributions $ (4.18) $ (2.18) $ (.67)
======================================================
Weighted average number of units 4,148,325 4,148,325 4,148,325
======================================================
See accompanying notes.
F-4
HealthCare Properties, L.P. and Subsidiaries
Consolidated Statements of Partnership Equity (Deficit)
Limited General
Partners Partner Total
-------------------------------------------------------------
Equity at January 1, 1999 $ 25,869,116 $ 52,477 $ 25,921,593
Net income 3,084,216 47,182 3,131,398
Distributions (2,763,569) - (2,763,569)
-------------------------------------------------------------
Equity at December 31, 1999 26,189,763 99,659 26,289,422
Net income 2,595,512 56,369 2,651,881
Distributions (9,036,500) (96,000) (9,132,500)
-------------------------------------------------------------
Equity at December 31, 2000 19,748,775 60,028 19,808,803
Net income 3,152,135 152,579 3,304,714
Distributions (17,350,000) (246,912) (17,596,912)
-------------------------------------------------------------
Equity (Deficit) at December 31, 2001 $ 5,550,910 $ (34,305) $ 5,516,605
=============================================================
See accompanying notes.
F-5
HealthCare Properties, L.P. and Subsidiaries
Consolidated Statements of Cash Flows
Year ended December 31
2001 2000 1999
--------------------------------------------------------
Operating Activities
Net income $ 3,304,714 $ 2,651,881 $ 3,131,398
Adjustments to reconcile net income to net cash provided
by operating activities:
Write-down of asset held for sale to estimated net
realizable value - 232,490 -
Depreciation and amortization 498,910 639,990 1,250,071
Bad debt expense, net of recoveries 797,619 - (248,484)
(Gain) loss on sale of properties (2,444,448) 347,896 (772,286)
Extraordinary loss 434,199 - -
Changes in operating assets and liabilities:
Accounts receivable (132,990) 867,129 (529,127)
Prepaid expenses 15,200 (14,895) 36,300
Accounts payable and accrued expenses (341,185) 120,213 (116,160)
Security deposits 101,247 - -
--------------------------------------------------------
Net cash provided by operating activities 2,233,266 4,844,704 2,751,712
Investing Activities
Purchase of property and improvements (20,500) (27,572) (20,191)
Proceeds from sales of properties 3,644,457 4,506,173 2,739,954
--------------------------------------------------------
Net cash provided by investing activities 3,623,957 4,478,601 2,719,763
Financing Activities
Payments on mortgage loans payable (80,020) (400,486) (955,375)
Distributions to partners (17,596,912) (9,132,500) (2,763,569)
--------------------------------------------------------
Net cash used in financing activities (17,676,932) (9,532,986) (3,718,944)
--------------------------------------------------------
Net (decrease) increase in cash and cash equivalents
(11,819,709) (209,681) 1,752,531
Cash and cash equivalents at beginning of year 13,514,255 13,723,936 11,971,405
--------------------------------------------------------
Cash and cash equivalents at end of year $ 1,694,546 $ 13,514,255 $ 13,723,936
========================================================
Supplemental Disclosures
Cash paid for interest $ 365,022 $ 495,876 $ 579,261
========================================================
See accompanying notes.
F-6
HealthCare Properties, L.P. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2001
1. General
HealthCare Properties, L.P. (HCP or the Partnership) is a Delaware limited
partnership established for the purpose of acquiring, leasing, and operating
existing or newly constructed long-term health care properties. These properties
are operated by the Partnership or are leased to qualified operators who provide
specialized health care services. Capital Realty Group Senior Housing, Inc.
(CRG) is the sole general partner of the Partnership. Capital Senior Living,
Inc. (CSL), a wholly owned subsidiary of Capital Senior Living Corporation
(CSLC), and an affiliate of CRG until June 1998, is the managing agent for the
Partnership, replacing CRG.
Capital Senior Living Properties, Inc. (CSLP), a wholly owned subsidiary of
CSLC, owned approximately 57% of the Partnership's limited partner units at
December 31, 2001, 2000, and 1999. As a result, HCP is consolidated into the
financial statements of CSLC. CSLC is subject to the reporting obligations of
the Securities and Exchange Commission.
The consolidated financial statements for the years ended December 31, 2001,
2000 and 1999, include the accounts of the Partnership's wholly owned
subsidiary, Cambridge Nursing Home Limited Liability Company (Cambridge LLC),
which operated the Partnership's Cambridge Nursing Home, located in Cambridge,
Massachusetts, until it was sold on August 15, 2001. All significant
intercompany accounts and transactions have been eliminated in consolidation.
At December 31, 2001, the Partnership leased two of its three properties to
unaffiliated operators on a triple net basis. At December 31, 2000, the
Partnership leased four of its five properties to unaffiliated operators on a
triple net basis. At December 31, 1999, the Partnership leased six of its seven
properties to unaffiliated operators on a triple net basis.
2. Summary of Significant Accounting Policies
The Partnership classifies all highly liquid investments with original
maturities of three months or less as cash equivalents.
The Partnership records accounts receivable for contingent rentals and past due
rents only when circumstances indicate a substantial probability of collection.
Existing receivables are reserved to the extent collection is deemed doubtful by
the Partnership's management.
F-7
2. Summary of Significant Accounting Policies (continued)
Property and improvements are stated at cost. Depreciation is calculated over
the estimated useful service lives of the assets using declining-balance and
straight-line methods. The estimated useful lives are as follows: buildings and
improvements, 25 to 31 years; and furniture, fixtures and equipment, 5 to 10
years.
Long-lived assets are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to future net cash flows expected
to be generated by the asset. If such assets are considered to be impaired, the
impairment to be recognized is measured by the amount by which the carrying
amount of the assets exceeds the fair value of the assets. The fair value is
based on either the expected future cash flows discounted at a rate which varies
based on associated risk or an independent third-party appraisal. Assets to be
disposed of are reported at the lower of the carrying amount or fair value less
costs to sell.
During 1999, the Partnership reclassified four of its properties to assets held
for sale. Three of the properties had been leased to Rebound Inc., a subsidiary
of HealthSouth Corporation (HealthSouth), under a master lease agreement. These
properties were closed by the lessee. Effective August 5, 1999, HealthSouth
agreed to transfer control of the closed communities to the Partnership. The
assets of one of the four communities classified as held for sale, with the
exception of two houses, were sold during 1999. The assets of two of the
remaining communities and one of the houses were sold during 2000. During 2000,
the Partnership recorded a write-down on the remaining house of $232,490 due to
a reduction in estimated net realizable value. During 2001, the Partnership
reclassified an additional property to assets held for sale, and sold the
remaining house. In addition, during 2001, a lender foreclosed on a property
that had been classified as an asset held for sale, resulting in an
extraordinary loss of $434,199. The Partnership estimates the one remaining
property classified as held for sale has an aggregate fair value, net of costs
of disposal, of $1,863,652 at December 31, 2001. The amount the Partnership will
ultimately realize could differ materially from this estimate.
Deferred charges primarily represent initial fees and other costs incurred in
negotiating leases and mortgage loans payable. These costs are being amortized
using the straight-line method over the lives of the related leases or mortgage
loans.
F-8
2. Summary of Significant Accounting Policies (continued)
The consolidated financial statements and federal income tax returns are
prepared on the accrual method of accounting and include only those assets and
liabilities and results of operations which relate to the business of the
Partnership and its wholly owned subsidiaries. No provision has been made for
federal and state income taxes since such taxes are the responsibility of the
individual partners. Although the Partnership's subsidiaries file federal
corporate income tax returns, none of the subsidiaries had significant net
income for financial reporting or income tax purposes in 2001, 2000, or 1999.
Accordingly, no provision has been made for federal and state income taxes for
these subsidiaries in 2001, 2000, or 1999.
Resident and health care revenue is reported at the estimated net realizable
amounts due from residents, third-party payors (including the Medicare and
Medicaid programs), and others in the period for which services are provided.
Revenue under third-party payor agreements is subject to audit and, in certain
cases, retroactive adjustment. Provisions for estimated third-party payor
settlements are provided in the period the related services are rendered.
Differences between the estimated amounts accrued and interim and final
settlements are reported in operations in the year of settlement. Final
settlement has been made by the Medicare fiscal intermediary with respect to the
Cambridge property for all years through December 31, 1998. Laws and regulations
governing the Medicare and Medicaid programs are complex and subject to
interpretation. The Partnership believes that it is in compliance with all
applicable laws and regulations and is not aware of any pending or threatened
investigations involving allegations of potential wrongdoing. While no such
regulatory inquiries have been made, compliance with such laws and regulations
can be subject to future government review and interpretation as well as
significant regulatory action, including fines, penalties, and exclusion from
the Medicare and Medicaid programs.
Net income (loss) of the Partnership and taxable income (loss) are generally
allocated 98% to the limited partners and 2% to the general partner. The net
income of the Partnership from the disposition of a property is allocated (i) to
partners with deficit capital accounts on a pro rata basis, (ii) to limited
partners until they have been paid an amount equal to the amount of their
Adjusted Investment, (iii) to the limited partners until they have been
allocated income equal to their 12% Liquidation Preference, and (iv) thereafter,
80% to the limited partners and 20% to the general partner. The net loss of the
Partnership from the disposition of a property is allocated (i) to partners with
positive capital accounts on a pro rata basis and (ii) thereafter, 98% to the
limited partners and 2% to the general partner. Distributions of available cash
flow are generally distributed 98% to the limited partners and 2% to the general
partner, until the limited
F-9
2. Summary of Significant Accounting Policies (continued)
partners have received an annual preferential distribution as defined.
Thereafter, available cash flow is distributed 90% to the limited partners and
10% to the general partner.
For the year ended December 31, 2001, the gain on the sale of Cambridge (Note 3)
was allocated first to the deficit of the general partner account and the
remaining amount was allocated to the limited partners. The loss on the
Cedarbrook sale was allocated to the balance on the partners' capital accounts
on the date of the event, resulting in 99.99% of the loss being allocated to the
limited partners' and 0.01% to the general partner. The extraordinary loss on
the McCurdy foreclosure was allocated to the balance on the partners' capital
accounts on the date of the event, resulting in 99.99% of the loss being
allocated to the limited partners and 0.01% to the general partner. The
remaining net income was allocated 98% to the limited partners and 2% to the
general partner. The Partnership made distributions of $17,350,000 and $246,912
to the limited partners and general partner, respectively.
For the year ended December 31, 2000, the gain on sale of the Cane Creek
property and the Cedarbrook house (see Note 3) was allocated 100% to the limited
partners. The loss on the sale of the Sandybrook property was allocated
according to the balance on the partners' capital accounts at the date of sale,
resulting in 99.5% of the loss being allocated to the limited partners and 0.5%
to the general partner. The remaining 2000 net income was allocated 98% to the
limited partners and 2% to the general partner. The Partnership made a
$9,036,500 and $96,000 distribution to the limited partners and general partner,
respectively, in 2000.
For the year ended December 31, 1999, the gain on sale of the Cedarbrook main
campus facility (see Note 3) was allocated 100% to the limited partners. The
remaining 1999 net income was allocated 98% to the limited partners and 2% to
the general partner. The Partnership made a $2,763,569 distribution to the
limited partners in 1999 and no distribution to the general partner.
The Partnership evaluates the performance and allocates resources of its
properties based on current operations and market assessments on a
property-by-property basis. The Partnership does not have a concentration of
operations geographically or by product or service as its management functions
are integrated at the property level.
F-10
2. Summary of Significant Accounting Policies (continued)
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
3. Property and Improvements
Property and improvements consist of:
December 31
2001 2000
-------------------- --------------------
Land $ 1,056,039 $ 1,677,310
Buildings and improvements 4,932,962 13,270,191
Furniture, fixtures, and equipment 487,423 942,365
-------------------- --------------------
6,476,424 15,889,866
Less allowance for reduction in carrying value of operating
property - 2,185,381
-------------------- --------------------
6,476,424 13,704,485
Less accumulated depreciation 3,204,220 7,253,247
-------------------- --------------------
$ 3,272,204 $ 6,451,238
==================== ====================
During 2001, the Partnership sold its Cambridge facility and final Cedarbrook
house for net proceeds of $3,644,457, and the gain on the sale was $2,444,448.
Also during 2001, the Crenshaw Creek property was reclassified to assets held
for sale at a net book value of $1,863,652, which is the lower of net book value
or fair value. The lessee of the McCurdy facility defaulted on its minimum lease
payment. The Partnership attempted to work with the current lessee to stabilize
it census, but was unable to do so. The facility was foreclosed by the lender on
September 11, 2001, resulting in an extraordinary loss of $434,199.
On January 1, 2002, the Hearthstone property was sold for net proceeds of
$2,641,003, which resulted in a gain of $1,777,113.
On February 28, 2002, the Trinity Hills facility was sold for $1,800,000,
resulting in a gain of approximately $506,000 and net cash proceeds of
$1,747,323 after payment of settlement costs.
F-11
3. Property and Improvements (continued)
During 2000, the Partnership sold the Cane Creek, Sandybrook, and one of the
Cedarbrook houses for total proceeds of $4,506,173, net of sales commissions,
which resulted in a net loss on sales of $347,896. These facilities had been
classified as assets held for sale as of December 31, 1999. Rental revenue
associated with these properties was $1,794,000 in 2000. Rental revenue and net
income associated with these properties were $2,749,392 and $1,079,406,
respectively, in 1999.
On September 20, 1999, the Partnership sold the Cedarbrook main campus facility
for $2,739,954, net of sales commissions and settlement costs, which resulted in
a $772,286 gain on the sale.
The following information is a summary of Partnership additions to and
deductions from property and improvements and accumulated depreciation for the
years ended December 31, 2001 and 2000. The information presented includes
furniture, fixtures, and equipment, which are immaterial to the Partnership.
Property and Improvements 2001 2000
- -------------------------------------------------------------------------------------------------------------
Balance at beginning of year $ 13,704,485 $ 13,676,913
Additions during the year 20,500 27,572
-------------------- ---------------------
13,724,985 13,704,485
Deductions during year:
Cost of property sold 3,245,829 -
Reclass to assets held for sale 4,002,732 -
-------------------- ---------------------
Balance at end of year $ 6,476,424 $ 13,704,485
==================== =====================
Accumulated depreciation:
Balance at beginning of year $ 7,253,247 $ 6,720,298
Additions 442,619 532,949
Deductions during year:
Property sold 2,352,566 -
Reclass to assets held for sale 2,139,080 -
-------------------- ---------------------
Balance at end of year $ 3,204,220 $ 7,253,247
==================== =====================
F-12
3. Property and Improvements (continued)
The following is a summary of information for the individual Partnership
properties from inception of the Partnership through December 31, 2001. The
information presented includes furniture, fixtures, and equipment, which are
immaterial to the Partnership.
Costs
Capitalized
Subsequent to
Initial Cost to Partnership Acquisition
---------------------------- --------------
Buildings Buildings
and and
Description Land Improvements Improvements Land Improvements Total Encumbrances
-------------------------- ------------- ------------- ---------------- ---------- --------------- ---------- ----------------
Trinity Hills nursing
home
Ft. Worth, TX 300,000 2,400,000 26,152 300,000 2,426,152 2,726,152 -
Hearthstone nursing home
Austin, TX 756,039 2,868,961 116,365 756,039 2,985,326 3,741,365 1,123,389
Partnership assets
Dallas, TX
- - 8,907 - 8,907 8,907 -
------------- ------------- ---------------- ------------- ------------ ------------ -------------
Total properties and $ 1,056,039 $ 5,268,961 $151,424 $ 1,056,034 $5,420,385 $6,476,424 $ 1,123,389
improvements
------------- ------------- ---------------- ------------- ------------ ------------ -------------
Crenshaw Creek rehab
facility Lancaster, SC $ 123,801 $ 3,776,199 $102,732 $ 123,801 $3,878,931 $4,002,732 $ -
------------- ------------- ---------------- ------------- ------------ ------------ -------------
Total assets held for
sale $ 123,801 $ 3,776,199 $102,732 $ 123,801 $3,878,931 $4,002,732 $ -
============= ============= ================ ============= ============ ============ =============
Table continued:
Accumulated Date of Date Useful
Description Depreciation Construction Acquired Life
-------------------------- --------------- -------------- ----------- --------
Trinity Hills nursing
home 25-31
Ft. Worth, TX 1,525,548 1971 1988 years
Hearthstone nursing home 25-31
Austin, TX 1,670,660 1988 1988 years
Partnership assets
Dallas, TX 1991- 5-10
8,012 n/a 1993 years
--------------
Total properties and $3,204,220
improvements
--------------
Crenshaw Creek rehab 25-31
facility Lancaster, SC $2,139,080 1988 1988 years
--------------
Total assets held for
sale $2,139,080
===============
F-13
4. Mortgage Loans Payable
Mortgage loans payable consist of the following at December 31:
2001 2000
------------------ -------------------
Hearthstone property - note payable to life insurance company $1,123,389 $1,173,285
McCurdy property - note payable to bank - 3,599,510
------------------ -------------------
Total mortgage loans payable $1,123,389 $4,772,795
================== ===================
Mortgage loans payable bear interest of 10.75% at December 31, 2001, and ranged
from 10.5% to 10.75% at December 31, 2000. These notes are payable in monthly
installments of $14,847 at December 31, 2001, and $59,100 at December 31, 2000,
including interest. The notes are secured by properties with net book values
aggregating $2,070,705 and $6,344,347 at December 31, 2001 and 2000,
respectively. The note on the Hearthstone property matures in 2002.
During 2001, the lessee of the McCurdy facility defaulted on its minimum lease
payment. The Partnership attempted to work with the current lessee to stabilize
its census, but was unable to do so. The facility was foreclosed by the lender
on September 11, 2001. In connection with the foreclosure, net fixed assets of
$4,196,816, mortgage loans of $3,569,386 and accrued interest of $193,231 were
written off resulting in an extraordinary loss of $434,199.
5. Leases
The Partnership leases its property and equipment to tenants under noncancelable
operating leases. The lease terms expire in 2006, with options to renew for
additional five-year terms and options to purchase the leased property at the
current fair market value at the end of the initial lease term. The leases
generally provide for contingent rentals based on the performance of the
property. Contingent rentals aggregated $151,089, $112,597, and $332,411 in
2001, 2000, and 1999, respectively.
Minimum rentals are $260,640 for the year 2002, subject to change based on
changes in interest rates. The minimum rentals thereafter are $1,149,120:
2002 $ 260,640
2003 287,280
2004 287,280
2005 287,280
2006 287,280
-------------------
Total $1,409,760
===================
Property and improvements, less accumulated depreciation attributable to such
properties with minimum rentals, amounted to $1,200,604 and $6,463,743 at
December 31, 2001 and 2000, respectively.
F-14
The Hearthstone lease expired on November 7, 2000. The parent company of the
lessee filed for Chapter 11 bankruptcy in the United States Bankruptcy Court for
the District of Delaware. The lessee and the Partnership attempted to negotiate
an extension of the lease, but were unsuccessful in doing so. The Hearthstone
lessee did not pay its April 2001 rent to the Partnership. The Partnership
negotiated a new lease with an affiliated operator, effective May 1, 2001. All
rental payments to date to the Partnership have been timely. The Hearthstone
property was sold on January 1, 2002.
The Trinity Hills lease expired on June 30, 2000, however, the lessee continued
to lease the facility on a month-to-month basis. On February 2, 2000, the parent
company of the lessee of the Trinity Hills facility filed for Chapter 11
bankruptcy in the United States Bankruptcy Court for the District of Delaware.
As of January 1, 2002, a new lessee has entered into a lease with the
Partnership through December 31, 2006. On February 28, 2002, the lessee
purchased The Trinity Hills facility.
6. Related Party Transactions
Personnel working at the property sites and certain home office personnel who
perform services on behalf of the Partnership are employees of CSL. The
Partnership reimburses CSL for the salaries, related benefits, and overhead
reimbursements of such personnel. In addition, the Partnership pays fees to the
general partner and to CSL. The approximate costs of these arrangements are
reflected below:
Year ended December 31
2001 2000 1999
------------------- ------------------ -------------------
Salary and benefit reimbursements $2,487,415 $3,130,000 $3,126,000
================== ================== ===================
Asset management fees $ - $ 80,000 $ 468,000
Property management fees 208,708 396,000 370,000
Administrative and other expenses 111,089 265,000 170,000
General partner management fees 59,550 97,000 96,000
GP release fee 39,856 - -
------------------ ------------------ -------------------
$ 419,203 $ 838,000 $1,104,000
================== ================== ===================
In connection with the sale of the properties during 2001, the general partner
was paid fees of $108,000.
In connection with the sale of properties during 2000, the general partner was
paid fees of $142,967.
In connection with the sale of the main Cedarbrook property on September 20,
1999, the general partner was paid fees aggregating $84,750.
A former officer and significant shareholder of CSLC is chairman of the board of
a bank where the Partnership holds the majority of its operating cash accounts.
F-15
7. Income Taxes
The reconciliation of financial statement basis partnership equity to federal
income tax basis partnership equity is as follows:
Year ended December 31
2001 2000 1999
----------------- ---------------- -----------------
Total partnership equity - financial statement basis $ 5,516,605 $19,808,803 $26,289,422
Current year tax basis net (losses) earnings over (4,797,732) (1,155,714) 197,634
financial statement basis
Cumulative tax basis net earnings over financial 4,775,575 5,931,289 5,733,655
statement basis
----------------- ---------------- -----------------
Total partnership equity - federal income tax basis $ 5,494,448 $24,584,378 $32,220,711
================= ================ =================
Differences between financial statement basis and tax basis amounts primarily
relate to different methods for depreciation and bad debt expense.
Because many types of transactions are susceptible to varying interpretations
under federal and state income tax laws and regulations, the amounts reported
above may be subject to change at a later date upon final determination by the
taxing authorities.
The federal income tax basis of the Partnership's property and improvements at
December 31, 2001 and 2000, is $8,340,076 and $15,938,155, respectively.
8. Business and Credit Concentrations
As of December 31, 2001, the Partnership's three remaining facilities are
located in Texas and South Carolina. The facilities operated by HealthSouth
through November 2001 (Note 2) are located in the southeastern United States and
accounted for approximately $2,169,750 (32%), $2,367,000 (24%), and $2,367,000
(25%) of Partnership revenues in 2001, 2000, and 1999, respectively. One
property leased to an unaffiliated operator accounted for approximately $612,328
(9%), $918,000 (9%), and $955,000 (10%) of Partnership revenues in 2001, 2000,
and 1999, respectively.
F-16
8. Business and Credit Concentrations (continued)
The Partnership also derived revenue from the Medicaid program funded by the
State of Massachusetts until the sale of the Cambridge property. The Partnership
derived 36% of its revenues in 2001, 40% of its revenues in 2000, and 33% of its
revenues in 1999 from the state program in Massachusetts. The Partnership also
derived 3%, 6% and 11% of its revenues from the Medicare program in 2001, 2000
and 1999, respectively.
Receivables due from the Massachusetts state Medicaid program aggregated
$258,221 and $608,133 at December 31, 2001 and 2000, respectively.
The Partnership does not require collateral or other security to support
financial instruments subject to credit risk.
9. Fair Value of Financial Instruments
The following methods and assumptions were used to estimate the fair value of
each class of financial instruments presented below:
Cash and Cash Equivalents, Receivables, Payables and Mortgage Loans Payable -
The carrying amount approximates fair value because of the short maturity of
these instruments.
10. Condensed Operating Results for Subsidiary
Operating results for the Partnership's subsidiary, Cambridge LLC, follow:
2001 2000 1999
-------------------- -------------------- ---------------------
Net patient service revenue $ 3,019,174 $ 5,663,026 $ 5,154,045
Facility operating expenses 3,309,389 4,862,317 4,700,597
Depreciation 13,253 19,546 218,029
Fees to affiliates 270,903 453,014 427,293
Bad debt expense, net of recoveries of $0
in 2001, $0 in 2000, and $700,000 in 1999
152,077 - (248,484)
-------------------- -------------------- ---------------------
3,745,622 5,334,877 5,097,435
-------------------- -------------------- ---------------------
(Loss) income from operations $ (726,448) $ 328,149 $ 56,610
==================== ==================== =====================
F-17
11. Selected Quarterly Financial Data (Unaudited)
Fiscal 2001 Quarters
-------------------------------------------------------------------
First Second Third Fourth
---------------- ---------------- ---------------- ----------------
Revenues $2,484,141 $2,501,468 $1,062,987 $ 589,581
================ ================ ================ ================
Net income before extraordinary loss $ 536,726 $ 435,067 $2,479,154 $ 287,966
Extraordinary loss - - (434,199) -
---------------- ---------------- ---------------- ----------------
Net income $ 536,726 $ 435,067 $2,044,955 $ 287,966
================ ================ ================ ================
Basic earnings per limited partnership unit:
Net income before extraordinary
loss $ .13 $ .10 $ .56 $ .07
Extraordinary loss - - (.10) -
---------------- ---------------- ---------------- ----------------
Net income $ .13 $ .10 $ .46 $ .07
================ ================ ================ ================
Fiscal 2000 Quarters
-------------------------------------------------------------------
First Second Third Fourth (a)
---------------- ---------------- ---------------- ----------------
Revenues $2,428,494 $2,445,155 $2,425,045 $2,448,257
Net income 1,051,539 897,130 229,220 473,992
Basic earnings per limited partnership
unit .25 .21 .05 .12
(a) During the fourth quarter of 2000, the Partnership recorded a write-down on
an asset held for sale of $232,490 due to a reduction in estimated net
realizable value.
Quarterly operating results are not necessarily representative of operations for
a full year.
F-18
EXHIBIT INDEX
Page Nos. in
Exhibit Number This Filing
3 Restated Limited Partnership Agreement is incorporated N/A
by reference to Exhibit A to the Prospectus of the Registrant
dated August 31, 1987, as filed with the Commission
pursuant to Rule 424(b).
10 Restructuring Agreement dated November 30, 1992, N/A
between the Registrant and Rebound, Inc. with exhibits.
28 Partnership Management Agreement, dated July 29, 1992, N/A
with Capital Realty Group Properties, Inc. as filed with
the Commission in the Third Quarter 10-Q,
dated September 30, 1992.
E-1