-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, NJ3ZCo/7Ck6haKcPSUZgErBf2MHfxfgpCumQiHqfqX8M0pbTSX7LwgnQQmME3b92 DLTIDuYxI6gw+ZL5oWCsoQ== 0000899078-96-000055.txt : 19960401 0000899078-96-000055.hdr.sgml : 19960401 ACCESSION NUMBER: 0000899078-96-000055 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960329 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: NHP RETIREMENT HOUSING PARTNERS I LTD PARTNERSHIP CENTRAL INDEX KEY: 0000793730 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE [6500] IRS NUMBER: 521453513 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-16815 FILM NUMBER: 96541941 BUSINESS ADDRESS: STREET 1: 14160 DALLAS PARKWAY STREET 2: STE 300 CITY: DALLAS STATE: TX ZIP: 20005 BUSINESS PHONE: 2147703600 MAIL ADDRESS: STREET 1: 14160 DALLAS PKWY STE 300 CITY: DALLAS STATE: TX ZIP: 75240 10-K 1 NHP RETIREMENT 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, 1995, 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 incorporation or organization) Identification No.) 14160 Dallas Parkway, Suite 300, Dallas, Texas75240 (Address of principal executive offices)(Zip Code) Registrant's telephone number, including area code:(214) 770-5600 Securities registered pursuant to Section 12(g) of the Act: Title of Class 42,711 Limited Partnership Assignee Interests 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 (S 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. X 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 NHP RETIREMENT HOUSING PARTNERS I LIMITED PARTNERSHIP (A Delaware Limited Partnership) 1995 Form 10-K Annual Report TABLE OF CONTENTS PART I Page Item 1. Business 1 Item 2. Properties 2 Item 3. Legal Proceedings 3 Item 4. Submission of Matters to a Vote of Security Holders3 PART II Item 5. Market for the Registrant's Pension Notes and Limited Partnership Assignee Interests and Related Partnership Matters 3 Item 6. Selected Financial Data 4 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 4 Item 8. Financial Statements and Supplementary Data 6 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 21 PART III Item 10. Directors and Executive Officers of the Registrant21 Item 11. Executive Compensation 24 Item 12. Security Ownership of Certain Beneficial Owners and Management 24 Item 13. Certain Relationships and Related Transactions 24 PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K 25 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 nonrecourse 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, the assets of NBW were purchased by Riggs National Bank, Washington, D.C. which became the successor trustee. At December 31, 1994, the 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% interest as general partner in the Partnership. The sole general partner of NHP/RHGP-I is The National Housing Partnership (NHP), a District of Columbia limited partnership. NHP's sole general partner is National Corporation for Housing Partnerships (NCHP), a District of Columbia corporation. All of the outstanding shares of NCHP, and 99% of NHP's limited partnership interests are owned by NHP Incorporated, a Delaware corporation. NHP Incorporated's controlling shareholders are Demeter Holdings Corporation (a Massachusetts nonprofit corporation, which is wholly- owned/controlled by the President and Fellows of Harvard College, a Massachusetts educational corporation created by the constitution of Massachusetts), and Capricorn Investors, L.P. (a Delaware investment limited partnership, whose general partner is Capricorn Holdings, G.P., a Delaware general partnership). -1- As of December 31, 1994, the limited partners of NHP/RHGP-I are 1225 Eye Street RHP-I Associates, a Maryland limited partnership whose general partner is NHP and whose limited partner is a key employee of NCHP, and NHP. 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. The substitution of CRGSH as sole general partner of the Partnership required the consent of 50% 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 nonrecourse Pension Notes are not entitled to vote. Pursuant to a Consent Solicitation dated October 25, 1994, Assignee Holders holding more than 64% 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 is a wholly owned subsidiary of Capital Realty Group Corporation, a Texas corporation (Capital). Capital is owned 50% by James A. Stroud (through a trust) and 50% by Jeffrey L. Beck. The address of the principal executive offices of CRGSH is the same as the Partnership: 14160 Dallas Parkway, Suite 300, Dallas, Texas 75240, and their telephone number at such address is the same as the Partnership (214)770-5600. The Partnership's business is to acquire existing and to develop new residential rental properties for retirement age occupants (the Properties) to the extent possible on an all cash basis (without third party mortgage indebtedness) and to operate such Properties. The Partnership presently owns four properties in fee and has a 99.99% interest in a fifth property. See Item 2. Properties for a description of these Properties and the business plan for these Properties. 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. CRGSH became the General Partner effective January 23, 1995 and assigned its contract rights to manage the Partnership properties to Capital Senior Living, Inc. ("CSL") effective February 1, 1996. The Partnership did not have any employees as of December 31, 1995. -2- 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. Risks of inadequate cost reimbursement from various government programs such as Medicaid and Medicare may also impact lessees' ability to fulfill their lease obligations to the Partnership. Any impact from proposed health care legislation is not known at this time; however, such impact could adversely affect cost reimbursements from various government programs. Item 2. Properties The following is a schedule of the Properties owned by the Partnership. All of the Properties are owned in fee directly by the Partnership except The Amberleigh, which is owned by a limited partnership in which the Partnership is a 99.99% partner. The Properties are encumbered by mortgages in favor of the trustee 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, 1995 December 31, 1994 The Heatherwood, 160 89% 91% Southfield, Michigan Veranda Club 189 93% 92% Boca Raton, Florida The Amberleigh 271 95% 93% At Woodstream Farms Williamsville, New York The Atrium at Carmichael 153 93%97% Sacramento, California Crosswood Oaks 122 83% 87% Sacramento, California
The cornerstones of the General Partner's business plan for continuing to improve the Properties' performance are expanding the services offered to residents to include special services or home health care programs, continued effective use of creative marketing techniques such as outreach to local hospitals and physicians, and sound, cost effective site operations. The introduction of special services and home health care is intended -3- to end the premature loss of tenants which some of the Partnership's properties have experienced in the past. Special services and home health care also tends to attract the well elderly to a community because they see the possibility of receiving assistance in their day-to-day living (e.g., bathing, dressing, eating and taking medication) without having to move to another home at a difficult time. Thus, offering special services and home health care tends to attract more people who know they can stay for a longer period, with obvious benefits to the community's occupancy and resident turnover. The General Partner believes this philosophy provides an opportunity for improved operations at the Properties. Due to aging of the Properties and the Partnership's goal to remain competitive in the real estate markets, the General Partner developed a capital improvement program that was implemented in 1994 and scheduled to be completed in 1996. The program varies by property, but generally includes painting of the building, replacement of carpet and curtains, purchase of new furniture and furniture refurbishment, and purchase of new equipment. In 1994 and 1995, $430,197 and $712,919, respectively, was spent for capital expenditures. Budgeted capital expenditures for 1996 are approximately $388,412. Item 3. Legal Proceedings The Partnership is not involved in any material legal proceedings as of March 27, 1996. 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. (b) As of March 15, 1996, there were 2,449 registered holders of Assignee Interests and 3,945 registered holders of Pension Notes. -4- As of March 15, 1996, an affiliate of the general partner of the Partnership purchased approximately 1,430 Pension Notes, or approximately 3.35% of the Partnership's outstanding Pension Notes at an average price of $423 per Pension Note. (c) 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 for limited periods, 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, 1995, 1994 and 1993, interest paid to the Pension Note Holders as a group totalled $2,987,040 per year. With respect to the fourth quarter of 1995, interest payments paid to Pension Note Holders on February 29, 1996 amounted to $752,734. No cash distributions were paid to the Assignee Interest Holders during 1995, 1994, or 1993. As presented in the Statement of Cash Flows (pages 12 and 13), cash and cash equivalents decreased $114,543 and $155,963 for the years ended December 31, 1995 and 1994, respectively. This cash need has caused the General Partner to determine that it is not financially appropriate to make distributions to Assignee Interest Holders. The General Partner anticipates that distributions will be suspended until operating results significantly improve. See Item 7 below. Item 6. Selected Financial Data
Years Ended December 31, 1995 1994 1993 1992 1991 Revenue $14,020,626 $13,445,022 $12,247,313 $10,947,444$10,089,174 Loss due to reduction in carrying value of rental property $ 0 $ 0 $ 3,300,000 $ 0$ 0 Net loss $ 3,690,549 $ 3,773,975 $ 7,580,517 $ 4,670,855$ 5,043,413 Net Loss per Assignee Interest$ 85$ 87$ 174$ 107$ 116 -5- Total assets $57,749,496 $58,967,958 $60,399,012$65,821,271$68,504,078 Long-term obligations - Pension Notes, and related interest payable $60,573,461 $58,039,450 $55,729,421$53,604,651$51,693,480 Cash distributions per Assignee Interest$ 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 increased to $2,377,625 from $2,177,663 and $1,380,087 for the years ended December 31, 1995, 1994, and 1993, respectively. Rental revenue increased in 1995 to $13,754,959 from $13,187,354 in 1994, or an increase of 4.3%, primarily as a result of rental rate increases. Rental expenses also increased to $11,643,001 in 1995 from $11,267,359 in 1994, or an increase of 3.3%, reflecting increased costs primarily in salaries, administration, depreciation, taxes and insurance costs and food services. The Partnership's net loss is $3,690,549, $3,773,975 and $7,580,517 for the years ended December 31, 1995, 1994 and 1993, respectively. A $3,300,000 charge to reduce the carrying value of rental property was recorded in 1993. Rental revenue increased in 1994 to $13,187,354 from $11,999,118 in 1993, or an increase of 9.9%, primarily as a result of increased rental rates. Rental expenses also increased to $11,267,359 in 1994 from $10,867,226 in 1993, or an increase of 3.7%, reflecting increased costs in salaries, utilities, maintenance, resident services and food services. Liquidity and Capital Resources Net cash provided by operating activities during 1995 was $659,336, representing a significant improvement over 1994's net cash provided by operating activities of $334,887 and 1993's net cash used in operations of $58,971. Rent collections increased in 1995 to $13,747,228 from $13,180,197 in 1994, an increase of 4.3%, primarily from rental rate increases. Rental collections likewise increased from $11,998,352 in 1993 to $13,180,197 in 1994, or an increase of 9.9%, primarily from rental rate increases. Operating expenses paid increased from $10,116,279 in 1994 to $10,366,496 in 1995, or an increase of 2.5%, reflecting increased salary costs, food, administration, depreciation, taxes and insurance costs. Operating expenses paid increased from $9,320,154 in 1993 to $10,116,279 in 1994, or an increase of 8.5%, reflecting increased costs in salaries, utilities, maintenance, resident and food service. Interest paid was $2,987,040 in 1995, 1994 and 1993. For the year ended December 31, 1993, cash generated from rental operations prior to the payment of interest expense was not sufficient to pay all of the interest on the $42,672,000 of -6- outstanding Pension Notes. For the years ended 1995 and 1994, cash generated from rental operations was sufficient to pay the base interest amount of $2,987,040. The 1993 shortfall in cash flow from operations to meet the interest payments was funded from available cash on hand during 1993. Interest payments on the Pension Notes are accrued at a 13% rate, but were paid based on a 7% pay rate in 1995, 1994, and 1993. The remaining 6% 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 is due at maturity, December 31, 2001. Accrued and unpaid interest at December 31, 1995, amounted to $17,901,461. At the time of the maturity of the Pension Notes, total principal and accrued interest due will approximate $81 million. Cash and cash equivalents at December 31, 1995, amounted to $3,478,604 as compared to $3,593,147 at December 31, 1994. Cash required by operations, including interest on Pension Notes, has been funded by maturing short-term investments or available cash on hand. Though operations improved in the current year, if operations do not improve significantly in the long-term, future funds may not be available to meet operating requirements or for payment of the Pension Notes and accrued interest as described below. This cash need has caused the General Partner to determine that it is not financially appropriate to make distributions to Assignee Interest Holders. The General Partner anticipates that distributions to the Assignee Interest Holders will be suspended until operating results significantly improve. The Trust Indenture Agreement (the Indenture) governing the terms of the Pension Notes provides for certain events of default. The Partnership would be in default under the Notes for any of the following reasons: (i) the failure of the Partnership to pay interest on a quarterly basis for any quarter at the stated pay rate of 7%; (ii) the default in payment of principal of the Pension Notes at maturity or upon call or redemption of the Notes; (iii) default by the Partnership in the performance or breach of any covenant; and (iv) institution or decree of bankruptcy of the Partnership. All covenants included in the Indenture are non-financial in nature. Additionally, the Indenture provides for call or redemption of the Notes either at the election of the Partnership or upon sale or refinancing of the underlying properties of the Partnership. The Partnership Agreement limited the number of Pension Notes to 50,000, or $50 million during the Offering. Of the available 50,000, 42,697 Pension Notes were subscribed. The Partnership Agreement does not specifically prohibit the Partnership from incurring additional mortgage indebtedness related to the Properties by borrowing from banks and other institutional lenders in order to finance the acquisition and development of Properties. Although it is the present intent of the Partnership to hold the Properties free and clear of third party mortgage indebtedness (other than the mortgages in favor of the Pension Notes), to the extent that financing is available at favorable rates and would be in the best interest of investors, the -7- Partnership may obtain future financings for Properties, subject to applicable limitations. Although cash flow from operations significantly improved in 1995, cash generated from operations over the past several years prior to 1994 has not been adequate to meet the Partnership's minimum interest payment requirements. The annual shortfall was approximately $59,000 during 1993, and averaged approximately $1.5 million annually in the five-year period prior to 1993. The shortfall has been funded by Partnership's cash reserves, which principally resulted from funds remaining from the initial offering of Partnership Assignee Interest and Pension Notes, after the acquisition of the Partnership's Properties. Given the level of the Partnership's cash reserves at December 31, 1995, if the Partnership is unable to increase cash generated from operations over time, cash reserves may be exhausted and the Partnership may be unable to meet its obligations. If interest payments continue to be deferred at the current rate (see Note 6), the total accrual for unpaid interest and principal will approximate $81 million at December 31, 2001, the maturity date of the Pension Notes which is far in excess of projected cash reserves. Accordingly, there will need to be very significant improvements in cash flows from operations and/or increases in the disposition and refinancing values of the Properties to fund both the accrued interest and the face value of the Pension Notes upon their maturity. Properties owned by the Partnership may still exceed current market values as of December 31, 1995. Should the Partnership be forced to dispose of one or more of its Properties, it could incur a loss. The Partnership, however, does not intend to sell any Properties in the near future, but rather intends to continue to hold and operate them as rental Properties. As a result, the Partnership has not obtained appraisals of the current market value of its Properties. Management's plans are to continue to manage the Properties prudently to achieve positive cash flows from operations after interest payments. Item 8. Financial Statements and Supplementary Data The financial statements and supplementary data of the Partnership are included on pages 9 through 22 of this report. -8- NHP RETIREMENT HOUSING PARTNERS I LIMITED PARTNERSHIP A LIMITED PARTNERSHIP STATEMENTS OF FINANCIAL POSITION
December 31, 1995 1994 ASSETS (Note 6) Cash and cash equivalents (Note 2) $ 3,478,604 $ 3,593,147 Interest receivable 1,265 1,242 Other receivables (Note 4) 858,722 850,991 Pension notes issuance costs 1,519,426 1,774,218 Organization and offering costs 314,878 364,654 Prepaid expenses 279,152 273,393 Rental property (Notes 4 and 10): Land 6,318,028 6,318,028 Buildings and improvements, net of accumulated depreciation of $12,137,832 in 1995 and $10,612,319 in 1994 44,942,735 45,755,329 Other assets 36,686 36,956 Total assets $ 57,749,496 $ 58,967,958 LIABILITIES AND PARTNERS' EQUITY (DEFICIT) Liabilities: Accounts payable $ 591,228 $ 502,854 Interest payable (Note 6) 17,901,461 15,367,450 Pension notes (Note 6) 42,672,000 42,672,000 Purchase installments (Note 4) 552,000 552,000 Other liabilities (Note 4) 833,116 922,454 62,549,805 60,016,758 Partners' equity (deficit): General Partner (1,332,625) (1,197,854) Assignor Limited Partner - 42,691 investment units outstanding (3,467,684) 149,054 Total partners' equity (deficit) ( 4,800,309) (1,048,800) Total liabilities and partners' equity (deficit)$ 57,749,496$ 58,967,958
See notes to financial statements. -9- NHP RETIREMENT HOUSING PARTNERS I LIMITED PARTNERSHIP A LIMITED PARTNERSHIP STATEMENTS OF OPERATIONS
Year Ended December 31, 1995 1994 1993 REVENUES: Rental income $13,754,959 $13,187,354 $11,999,118 Interest income 83,348 71,462 68,333 Other income 182,319 186,206 179,862 14,020,626 13,445,022 12,247,313 COSTS AND EXPENSES:Salaries, related benefits and overhead reimbursements (Note 3) 3,919,906 3,857,590 3,494,729 Management fees, dietary fees and other services (Note 3)1,326,2721,312,079 1,297,070 Insurance advisory fees and reinsurance premiums (Note 3)091,922 93,739 Administrative and marketing 700,594 608,230 708,751 Utilities 852,805 889,124 783,163Maintenance444,394421,579385,301 Resident services, other than salaries 292,097 263,484 216,168 Food services, other than salaries 1,513,898 1,432,153 1,327,502 Depreciation 1,525,513 1,439,377 1,583,935 Taxes and insurance 1,067,522 951,821 976,868 11,643,001 11,267,359 10,867,226 INCOME FROM RENTAL OPERATIONS 2,377,625 2,177,663 1,380,087 COSTS AND EXPENSES: Interest expense - pension notes (Note 6)5,521,051 5,297,069 5,111,810 Loss due to reduction in carrying value of rental property (Note 10) 003,300,000 Amortization of pension notes issuance costs 254,792 254,792 254,792 Amortization of organizationand offering costs 49,776 49,776 49,776 Other expenses 242,555 350,001 244,226 6,068,174 5,951,638 8,960,604 NET LOSS $(3,690,549)$(3,773,975) $(7,580,517) ALLOCATION OF NET LOSS:General Partner $ (73,811) $ (75,480)$ (151,610) Assignor Limited Partner (3,616,738) (3,698,495) (7,428,907) $(3,690,549)$(3,773,975)$ (7,580,517) NET LOSS PER ASSIGNEE INTEREST $ (85)$ (87)$ (174)
See notes to financial statements. -10- NHP RETIREMENT HOUSING PARTNERS I LIMITED PARTNERSHIP A LIMITED PARTNERSHIP STATEMENTS OF PARTNERS' EQUITY (DEFICIT)
General Partner- Capital Realty Assignor Group Senior Limited Housing, Inc. Partners Total Partners' equity (deficit) at January 1, 1993 $ (849,455)$ 11,276,456 $ 10,427,001 Distributions (60,656) - (60,656) Net Loss (151,610) (7,428,907) (7,580,517) Partners' equity (deficit) at December 31, 1993 (1,061,721) 3,847,549 2,785,828 Distributions (60,653) - (60,653) Net Loss (75,480) (3,698,495) (3,773,975) Partners' equity (deficit) at December 31, 1994 (1,197,854) 149,054 (1,048,800) Distributions (60,960) 0 (60,960) Net Loss (73,811) (3,616,738) (3,690,549) Partners' equity (deficit) at December 31, 1995 $(1,332,625) $(3,467,684) $(4,800,309) See notes to financial statements.
-11-
NHP RETIREMENT HOUSING PARTNERS I LIMITED PARTNERSHIP A LIMITED PARTNERSHIP STATEMENTS OF CASH FLOWS Years Ended December 31, 1995 1994 1993 Cash flows from operating activities: Rent collections $13,747,228$13,180,197$11,998,352 Interest received 83,325 71,803 70,009 Other income 182,319 186,206 179,862 Management fees, dietary fees and other services (1,326,188)(1,312,855)(1,297,071) Salary, related benefits and overhead reimbursements (3,925,369)(3,858,879)(3,339,988) Insurance advisory services and reinsurance premiums 0 (91,922) (93,739) Other operating expenses paid (5,114,939)(4,852,623)(4,589,356) Interest paid (2,987,040) (2,987,040) (2,987,040) Net cash provided by (used in) operating activities 659,336 334,887 (58,971) Cash flows from investing activity: Capital expenditures (712,919) (430,197) (203,447) Net cash used in investing activity (712,919) (430,197) (203,447) Cash flows from financing activity: Distributions (60,960) (60,653) (60,656) Net cash used in financing activity (60,960) (60,653) (60,656) Net decrease in cash and cash equivalents (114,543) (155,963) (323,074) Cash and cash equivalents at beginning of year 3,593,147 3,749,110 4,072,184 Cash and cash equivalents at end of year $3,478,604 $3,593,147$ 3,749,110
See notes to financial statements. -12-
NHP RETIREMENT HOUSING PARTNERS I LIMITED PARTNERSHIP A LIMITED PARTNERSHIP STATEMENTS OF CASH FLOWS (continued) Years Ended December 31, 1995 1994 1993 RECONCILIATION OF NET LOSS TO NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES: Net loss $(3,690,549)$(3,773,975) $(7,580,517) Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Loss due to reduction in carrying value of rental property 0 0 3,300,000 Depreciation 1,525,513 1,439,377 1,583,935 Amortization of organization costs 49,776 49,776 49,776 Amortization of pension notes issuance costs 254,792 254,792 254,792 Changes in operating assets and liabilities: Interest receivable (23) 341 1,676 Other assets and receivables (7,461) (5,569) 92,906 Prepaid expenses (5,759) (33,429) 19,547 Accounts payable 88,374 (51,631) 159,100 Interest payable 2,534,011 2,310,029 2,124,770 Other liabilities (89,338) 145,176 (64,956) Net cash provided by (used in) operating activities$ 659,336$ 334,887$ (58,971)
See notes to financial statements. -13- NHP RETIREMENT HOUSING PARTNERS I LIMITED PARTNERSHIP A LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS December 31, 1995 and 1994 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. A description of the Projects now owned directly or indirectly and operated by the Partnership is as follows: The Amberleigh. This project is a 271 unit retirement living center located in Williamsville, New York. The facility was approximately 95% and 93% occupied at December 31, 1995 and 1994, respectively. The Atrium of Carmichael. This project is a 153 unit retirement living center located in Sacramento, California. This facility was approximately 93% and 97% occupied at December 31, 1995 and 1994, respectively. Crosswood Oaks. This project is an 122 unit retirement living center located in Sacramento, California. This facility was approximately 83% and 87% occupied at December 31, 1995 and 1994, respectively. The Heatherwood. This project is an 160 unit retirement living center located in Southfield, Michigan. This facility was approximately 89% and 91% occupied at December 31, 1995 and 1994, respectively. Veranda Club. This project is an 189 unit retirement living center located in Boca Raton, Florida. This -14- facility was approximately 93% and 92% occupied at December 31, 1995 and 1994, respectively. Significant Accounting Policies Offering costs 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, 1995 was $2,038,336. Selling commissions related to the sale of Interests were recorded as a direct reduction to the capital account of the holders of Interests. Organization costs, certain pre-occupancy marketing costs and offering costs related to the sale of Interests are being amortized over a period of sixty months. Accumulated amortization at December 31, 1995 was $398,208. Direct costs of acquisition, including acquisition fees NHP RETIREMENT HOUSING PARTNERS I LIMITED PARTNERSHIP A LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS (Continued) and expenses paid to the General Partner, have been capitalized as a 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 an effective interest method (see Note 6). Operating deficit and cash flow guarantee payments received from the sellers of The Heatherwood, The Atrium and Crosswood Oaks are recognized as a reduction of the basis of the respective properties. 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% salvage value. The cost of rental property and their useful lives are summarized as follows:
Useful Life 1995 1994 Land $ 6,318,028 $ 6,318,028 Land improvements 30 years $ 52,043 $ 39,910 Building and building improvements 30 years 55,067,422 54,783,283 Furniture and equipment 5 years 1,961,102 1,544,455 -15- 57,080,567 56,367,648 Less-accumulated depreciation ( 12,137,832) ( 10,612,319) $44,942,735 $45,755,329
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 assumption that effect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. 2 CASH AND CASH EQUIVALENTS As of December 31, 1995 and 1994, 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 $493,425 and $437,601 of tenant security deposits at December 31, 1995 and 1994, respectively, which are designated for the purpose of providing refunds to tenants upon move-out. 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). The sole limited partner of the Partnership is NHP RHP-I Assignor Corporation, a Delaware corporation which is an affiliate of NHP/RHGP-I. -16- NHP RETIREMENT HOUSING PARTNERS I LIMITED PARTNERSHIP A LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS (continued) NHP RETIREMENT HOUSING PARTNERS I LIMITED PARTNERSHIP A LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS (Continued) On December 19, 1991, the General Partner executed an amended and restated purchase agreement with Capital Realty Group Properties, Inc. (CRGP) for the transfer of the General Partner's interest in the Partnership, subject to the approval of Assignee Holders. CRGP's rights and obligations under the purchase agreement were subsequently assigned to an affiliate, Capital Realty Group Senior Housing, Inc. (CRGSH). CRGSH is the management agent under a five year contract with an option to renew for an additional five years under certain conditions. Pursuant to a Consent Solicitation dated October 25, 1994, Assignee Holders holding more than 64% 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 has become the new 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"). CRGSH and CSL received $1,326,188, $1,312,855, and $1,297,071 in 1995, 1994 and 1993, respectively, for management fees, dietary services fees and other operating expense reimbursements related to services provided to the Properties and the Partnership. Personnel working at the Property sites and certain home office personnel who perform services for the Partnership are employees as of February 1, 1995 of CSL, an affiliate of CRGSH, and prior to February 1, 1995 were employees of CRGSH. The Partnership reimburses CRGSH or CSL for the salaries and related benefits of such personnel as reflected in the accompanying financial statements. During 1995, 1994 and 1993, such reimbursements for salaries, related benefits and overhead reimbursements amounted to $3,925,369, $3,858,879 and $3,339,988, respectively. In addition, the Partnership paid $91,922 and $93,739 to an affiliate of NHP/RHGP-I for insurance advisory -17- NHP RETIREMENT HOUSING PARTNERS I LIMITED PARTNERSHIP A LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS (continued) services and reinsurance premiums during 1994 and 1993, respectively. During 1995, an affiliate of the General Partner purchased approximately 1,388 Pension Notes, or approximately 3.25% of the Partnership's outstanding Pension Notes at an average price of $423 per Note. 4. ACQUISITION OF RENTAL PROPERTY In connection with the purchase of the Heatherwood in 1988, the Partnership has recorded receivables of $826,877 from the seller and purchase installments and other liabilities due to the seller totalling $816,583. The Partnership is attempting to negotiate a settlement of these amounts. Amounts due to the Seller at December 31, 1995 include $264,583 in property management fees and the remaining $525,000 plus accrued interest of $27,000 purchase installment payment due to the seller. 5. CASH DISTRIBUTION POLICIES The Partnership Agreement allows for quarterly payments of substantially all Cash Available For Distribution Before Interest Payments (as defined in the Partnership Agreement), subject to the following: (i) 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 (ii) all Assignee Holder distributions are subject to the payment of Partnership expenses and maintenance of working capital reserves. Cash Available For Distribution Before Interest Payments generally consists of cash received from the ordinary operations of the Partnership less operating expenses, without reduction for interest payments to Pension Note Holders, and working capital reserves. Distributions of Cash Available For Distribution Before Interest Payments are made in the following order of priority, to the extent available: First, 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 (payable only if the Note Holders receive the distribution as described below). -18- NHP RETIREMENT HOUSING PARTNERS I LIMITED PARTNERSHIP A LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS (continued) Second, to the Note Holders in an amount equal to an annual return of 7 percent on the adjusted principal amount of their Pension Notes for each quarterly cash distribution period. Third, to the Assignee Holders in an amount equal to an annual return of 7 percent on their adjusted capital contributions for each quarterly cash distribution period. Fourth, to the Note Holders and Assignee Holders pro rata based on the relationship between the adjusted principal amount of the Pension Notes to the adjusted capital contributions of the Assignee Holders until the Note Holders have received an amount equal to an aggregate annual return of 10 percent on the adjusted principal amount of their Pension Notes for each quarterly cash distribution period and the Assignee Holders have received an amount equal to an aggregate annual return of 10 percent on their adjusted capital contributions for each quarterly cash distribution period. Fifth, to the General Partner as a Partnership Incentive Fee in an amount equal to 8 percent of Cash Available For Distribution Before Interest Payments for the fiscal year. If the amount of Cash Available for Distribution Before Interest Payments for any fiscal year is insufficient to pay the General Partner its Partnership Incentive Fee, the fee shall not accrue and shall not be paid from Cash Available For Distribution Before Interest Payments payable in subsequent fiscal years. Sixth, the balance to the Note Holders and Assignee Holders pro rata based on the relationship between the adjusted principal amount of the Pension Notes to the adjusted capital contributions of the Assignee Holders. However, the amount of interest payable to the Note Holders shall not exceed a cumulative noncompounded return of 13 percent per annum on the adjusted principal amount of their Pension Notes. No payments of Cash Available For Distribution Before Interest Payments shall reduce the principal balance of the Pension Notes. -19- NHP RETIREMENT HOUSING PARTNERS I LIMITED PARTNERSHIP A LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS (continued) No distributions were paid to the Assignee Interest Holders during 1995, 1994 or 1993 (also see Note 12). The General Partner anticipates that distributions to Assignee Interest Holders will be suspended until operating results significantly improve. Cash received from sales or refinancings 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 noncompounded rate of 13% per annum less any prior payments (see Note 6), is to be distributed in the following manner: -20- NHP RETIREMENT HOUSING PARTNERS I LIMITED PARTNERSHIP A LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS (continued) First, to the Interest Holders until their adjusted capital accounts are reduced to zero; Second, to the Interest Holders until cumulative cash distributions received equal a 13% non-compounded return on their adjusted capital accounts, reduced by prior distributions; Third, to the General Partner in the form of a disposition fee; and Fourth, 85% to the Interest Holders and 15% to the General Partner. 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% to the Assignee Holders as a class and 10% to the General Partner. Other provisions exist if there is net income or loss other than from operations. As discussed in Note 7, 2% for 1995, 1994 and 1993 of the Cash Available For Distribution Before Interest Payments was paid to the General Partner. During 1994 and 1993, the General Partner assigned $60,653 and $30,263, respectively, of such distributions to CRGSH. Accordingly, net loss for each of the three years ended December 31, 1995 was allocated in the same manner. 6. PENSION NOTES The Notes bear stated simple interest at a rate equal to 13% per annum. Payment of up to 9% of stated interest was subject to deferral through December 31, 1988 and payment of up to 6% of stated interest is subject to deferral thereafter. Deferred interest does not bear interest. Interest not deferred is payable quarterly. Using an effective interest method, interest on principal and accrued interest of the Notes has been accrued at the rate of approximately 9% per annum compounded quarterly. The approximate 9% 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 and will provide a liability for the full amount of deferred interest upon the maturity of the Notes. If interest had been provided based on 13% versus the -21- NHP RETIREMENT HOUSING PARTNERS I LIMITED PARTNERSHIP A LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS (continued) effective rate of approximately 9%, an additional liability of approximately $4,821,379 would be recorded at December 31, 1995 and future interest expense would be reduced by this amount. The Partnership made payments of $2,987,040 per year in 1995, 1994 and 1993 to Note holders. 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 Notes is limited to the assets of the Partnership. The Notes are subject to redemption in whole or in part upon not less than 30 nor more than 60 days prior notice, at the election of the Partnership. 7. DISTRIBUTIONS TO PARTNERS During 1995, 1994 and 1993, the General Partner received distributions, representing 2% of the Cash Available For Distribution Before Interest Payments to the Note Holders. During 1994 and 1993, the General Partner assigned such distributions to CRGSH as part of the management arrangement. The Partnership did not make a distribution to the holders of Assignee Interests during 1995, 1994 or 1993. -22- NHP RETIREMENT HOUSING PARTNERS I LIMITED PARTNERSHIP A LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS (continued) 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 off- setting 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. 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, assuming a 30-year life and a 30% salvage value. Interest on 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 Notes is computed using an effective interest method. Start-up and marketing costs incurred prior to initial occupancy are capitalized and amortized over sixty months for Federal income tax purposes, while for financial statement purposes, only those start-up and marketing costs that are expected to benefit future operations have been capitalized and amortized over sixty months. A reconciliation between financial statement net loss and net loss for tax purposes follows:
Years Ended December 31, 1995 1994 1993 Net loss per financial statements $3,690,549 $3,773,975 $7,580,517 Temporary differences in determining losses for Federal income tax purposes -23- NHP RETIREMENT HOUSING PARTNERS I LIMITED PARTNERSHIP A LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS (continued) Depreciation 671,332 923,302 782,341 Amortization of start-up and marketing costs (48,116) (19,366) (48,116) Interest expense - pension notes (2,673,201) (2,471,909) (2,282,284) Loss due to reduction in carrying value of rental property $ -$ -$(3,300,000) Miscellaneous (18,001) (11,175) 140,622 Loss per tax return $ 1,622,563 $ 2,194,827 $ 2,873,080
The basis of building and improvements, net of accumulated depreciation, for Federal income tax purposes was $38,724,490 and $40,208,416 at December 31, 1995 and 1994, respectively. -24- NHP RETIREMENT HOUSING PARTNERS I LIMITED PARTNERSHIP A LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS (continued) 9. FUTURE OPERATIONS AND CASH FLOWS Although cash flow from operations improved in 1995, cash generated from operations over the past several years prior to 1994 has not been adequate to meet the Partnership's minimum interest payment requirements. The shortfall has been funded by Partnership's cash reserves, which principally resulted from funds remaining from the initial offering of Partnership Assignee Interest and Pension Notes, after the acquisition of the Partnership's Properties. Given the level of the Partnership's cash reserves at December 31, 1995, if the Partnership is unable to increase cash generated from operations over time, cash reserves may be exhausted and the Partnership may be unable to meet its obligations. If interest payments continue to be deferred at the current rate (see Note 6), the total accrual for unpaid interest and principal will approximate $81 million at December 31, 2001, the maturity date of the Pension Notes which is far in excess of projected cash reserves. Accordingly, there will need to be very significant improvements in cash flows from operations and/or increases in the disposition and refinancing values of the Properties to fund both the accrued interest and the face value of the Pension Notes upon their maturity. Management plans to continue to manage the Properties prudently to achieve positive cash flows from operations after interest payments. 10. VALUATION OF RENTAL PROPERTY In accordance with FASB Statement No 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of", 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 each 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 -25- NHP RETIREMENT HOUSING PARTNERS I LIMITED PARTNERSHIP A LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS (continued) sale of the properties on December 31, 2001. Sales proceeds, net of an estimated 3% cost of disposal, are estimated using a 10% capitalization rate of the net operating income projected for each property for the year 2001. As a result of operating budget revisions during 1993 which reduced projected undiscounted cash flows, evaluations prepared at September 30, 1993 indicated that write-downs at that date were necessary. Therefore, as of September 30, 1993, write-downs in the amounts of $2,000,000 and $800,000 were recorded on the Crosswood Oaks and Atrium properties, respectively. As of December 31, 1993, an evaluation of projected future undiscounted cash flows disclosed that, as of December 31, 1993, additional write-downs of $400,000 and $100,000 were required on the Crosswood Oaks and Atrium properties, respectively. After recording these additional amounts, the total write-down recorded for 1993 was $3,300,000 and is reflected as loss due to reduction in carrying value of rental property in the accompanying statements of operations for the year ended December 31, 1993. The primary factors that resulted in the reduced projected undiscounted cash flows as compared in the previous year were increased projected future capital expenditures for these two properties as well as reductions in the projected occupancy rates and higher operating costs as a percentage of revenue than that originally projected. The Partnership will continue to evaluate the operations of all of its Properties, and should actual cash flows fall short of projected cash flows on any of its properties, further reductions in carrying value may be necessary. Based on the Partnership's evaluation of each respective property during December 31, 1995 and 1994, no additional write-downs were taken. Even after the write-downs discussed above, the carrying value of Crosswood Oaks and The Atrium as well as the other Properties owned by the Partnership may still exceed current market values as of December 31, 1995. Should the Partnership be forced to dispose of one or more of its Properties, it could incur a loss. The Partnership, however, does not intend to sell any Properties in the near future, but rather intends to continue to hold and operate them as rental properties. As a result, the Partnership has not obtained appraisals of the current market value of its Properties. 11. FAIR VALUE OF FINANCIAL INSTRUMENTS: -26- NHP RETIREMENT HOUSING PARTNERS I LIMITED PARTNERSHIP A LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS (continued) The carrying amounts and fair values of financial instruments at December 31, 1995 and 1994 are as follows:
1995 1994 Carrying Fair Carrying Fair Amount Value Amount Value Cash and cash equivalents $ 3,478,604 $ 3,478,604 $3,593,147 $3,593,147 Pension Notes 42,672,000 17,932,740 42,672,000 17,078,800
The following methods and assumptions were 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. Pension Notes: The fair values of Pension Notes are based on quoted market price. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure The Partnership's former independent accountant, Deloitte & Touche LLP, was dismissed by the Partnership on July 17, 1995. Deloitte & Touche's report on the financial statements for either of the past two years did not contain an adverse opinion or disclaimer of opinion, or was modified as to uncertainty, audit scope, or accounting principles. The Partnership engaged Ernst & Young as its independent accountant on July 17, 1995. Part III Item 10. Directors and Executive Officers of the Registrant (a). The Partnership has no directors, executive officers or significant employees of its own. (b). 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 -27- property for its own account and for the account of various limited partnerships of which it is the general partner. CRGSH is a wholly owned subsidiary of Capital Realty Group Corporation, a Texas corporation ("Capital"), with its corporate headquarters in Dallas, Texas. Capital is owned 50% by James A. Stroud (through a trust) and 50% by Jeffrey L. Beck. 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 properties to Capital Senior Living. CSL is owned in the same manner as Capital. The following are the directors and executive officers of CSL, and previously CRGSH: Name Position James A. Stroud Chief Operating Officer, Secretary and Director Jeffrey L. Beck Chief Executive Officer and Director Keith N. Johannessen President Fred Tanner Executive Vice President Rob L. Goodpaster National Director of Marketing Marilyn J. Teel Vice President David Brickman Vice President Robert F. Hollister Controller James A. Stroud, age 45. Mr. Stroud has served as an officer and a director of CRGSH since December 1988, most recently serving as Chief Operating Officer and Secretary since May 1991. He owns 50% (through a trust) of Capital Realty Group Corporation. From 1984 until 1985, he was Executive Vice-President of Equity Management Corporation, Dallas, Texas, a full service real estate company. From 1980 to 1983, he was director in charge of the Tax Department of the law firm of Baker, Glast & Middleton, Dallas, Texas. From 1978 until 1980, he was an associate with Brice & Mankoff (formerly Durant and Mankoff), a law firm in Dallas, Texas. Mr. Stroud is a Certified Public Accountant and a licensed attorney. He received his B.B.A. from Texas Tech University with highest honors, his J.D. from the University of Texas with honors, and his L.L.M. in taxation from New York University with honors. While at New York University, he was a graduate editor of the New York University Tax Law Review and a Wallace Scholar. Mr. Stroud is a founder and director of the Assisted Living Facilities Association of America, a member of the Health Industry Council, President-elect of National Investment Conference ("NASLI"), and has delivered speeches on health care topics to the National Association for Senior Living Industries, NASLI, and the Urban Land Institute. -28- Jeffrey L. Beck, age 51. Mr. Beck has served as an officer and a director of CRGSH since December 1988, most recently serving as Chief Executive Officer since November 1990. He owns 50% of Capital Realty Group Corporation. From 1975 to 1985, he was President of Beck Properties, Inc., which was the predecessor of Capital. From 1973 to 1974, he was Regional Controller with Trammell Crow & Company, a real estate company based in Dallas, Texas. Mr. Beck is Chairman of the Board of Directors of Park Central Bank of Dallas. Mr. Beck serves as Chairman of the American Senior Housing Association. Keith N. Johannessen, age 39. Mr. Johannessen became Executive Vice President of CRGSH in May 1993 with responsibility for supervising the day-to-day operations of CRGSH's retirement communities. In March 1994, Mr. Johannessen became President of CRGSH. From September 1992 through May 1993, Mr. Johannessen was a Senior Manager in the North Central Region for the health care practice of Ernst & Young, responsible for assisting in the development and direction of the firm's long term care center consulting projects in the region as well as on a national basis. From August 1987 through September 1992, Mr. Johannessen was Executive Vice President with Oxford Retirement Services, Inc. responsible for the sales, marketing and operations of retirement communities and nursing homes. From August 1978 to August 1987, Mr. Johannessen was employed by Life Care Services Corporation in a variety of operations management positions, from single retirement projects to multi- facility responsibilities. He is a licensed nursing home administrator and holds a Bachelor of Arts Degree from Nyack College, New York. Mr Johannessen is active in the American Senior Housing Association, National Association for Senior Living Industries and the American Association of Homes for the Aging. Fred Tanner, age 40. Mr. Tanner became Executive Vice President of CRGSH in 1994, providing operational support to congregate, assisted living and nursing facilities. Additionally, he is responsible for the development and oversight of home health programs. Prior to joining CRGSH, Mr. Tanner served in similar operational roles with Greystone Communities from May 1993 to November 1994 and Central Park Lodges from December 1988 to May 1993. His experience includes the multiple supervision of both endowment and rental, including independent, assisted living and nursing care facilities. Mr. Tanner's involvement in the industry began in 1979 at the Methodist Home for the Aged in Charlotte, North Carolina. In 1983 he served as an Executive Director of retirement communities in Kansas and Tennessee before becoming a Regional Director of Operations for the Forum Group in Indianapolis, Indiana. Mr. Tanner is a member of the -29- American Senior Housing Association, where he heads the committee formulating the association's assisted living regulatory policy. Mr. Tanner is a graduate of the University of North Texas Center for Studies in Aging with a M.A. in Gerontology/Retirement Community Administration. Rob L. Goodpaster, age 43. Mr. Goodpaster became National Director of Marketing of CRGSH in December 1992, with overall responsibility for marketing and lease-up functions of CRGSH's managed properties. With 19 years of experience in the industry, Mr. Goodpaster has an extensive background in retirement housing marketing. His experience includes analyzing demographics, developing and implementing marketing plans, creating outreach and advertising programs, hiring and training sales personnel and implementing lead management and tracking systems. Prior to joining Capital, Mr. Goodpaster was National Director of Marketing for Autumn America from January 1990 to November 1992. From 1985 until December 1989, he was President of Retirement Living Concepts, Inc. where he marketed retirement properties throughout the United States. Mr. Goodpaster was formerly Vice President, Marketing for U.S. Retirement Corp. from 1984 to 1985 and Vice President, Development for American Retirement Corp. from 1980 to 1984. Mr. Goodpaster is a graduate of Ball State University with a B.S. in Business Management and Marketing. Mr. Goodpaster is a member of the National Association for Senior Living Industry and the Texas Association of Retirement Communities. Marilyn J. Teel, age 42. Ms. Teel has served as Vice President of CRGSH since 1992. Ms. Teel has over 15 years experience in the senior housing industry. She has had extensive experience in marketing, leasing and management operations for retirement communities and assisted living facilities. She joined CRGSH in 1991 and is currently responsible for overseeing day-to-day property operations as well as marketing and leasing operations for multiple retirement communities, assisted living facilities and nursing home facilities. From 1987 through 1988, Ms. Teel was marketing director with OverCash Goodman Company, a company located in Fort Worth, Texas, providing nursing home and congregate care. From 1988 until 1991, Ms. Teel was the on-site administrator for various retirement communities. She is a member of the Texas Association of Retirement Communities and the NASLI. David Brickman, age 37. Mr. Brickman has served as Vice President and Counsel of CRGSH since 1992. Mr. Brickman received his bachelor of Arts degree from Brandeis University. He holds a J.D. from the University of South Carolina Law School, an M.B.A. from the University of -30- South Carolina School of Business Administration and a Masters of Health Administration from Duke University. Prior to joining Capital in 1992, he served as in-house counsel from 1986 through 1987 with Cigna Health Plan Inc., from 1987 through 1989 with American General Group Insurance Company and from 1989 until joining Capital, with LifeCo Travel Management Company located in Houston, Texas. Mr. Brickman is also responsible for asset management activities, operational activities and investor relations for Capital's portfolio. Robert F. Hollister, age 40. Mr. Hollister has served as Controller of CRGSH since 1992. Mr. Hollister received his Bachelor of Science in Accounting from the University of Maryland. His experience includes public accounting experience as well as private experience in fields such as securities, construction, and nursing homes. Prior to joining Capital in 1992, Mr. Hollister was the chief financial officer and controller for Kavanaugh Securities, Inc. from December 1985 until 1992. Mr. Hollister is the property controller and supervises the day-to-day accounting and financial aspects of Capital. Mr. Hollister is a Certified Financial Planner and a member of both local and national professional accounting organizations. The executive officers of CSL are required to spend only such time on the Partnership's affairs as is deemed necessary in the sole judgment of CSL. A significant amount of these officers' time is expected to be spent on matters unrelated to the Partnership. 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 1995. 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. The following is a summary of such fees paid or accrued during the year ended December 31, 1995: Paid or payable from operating cash flow: Cash distributions of $60,960 to the General Partner, which represents 2% of Cash Available for Distribution Before Interest Payments to the Note Holders. -31- Management fees, dietary service fees, and other operating expense reimbursements of $1,326,188 and salaries, related benefits and overhead reimbursements of $3,925,369, were paid to the General Partner and CSL, an affiliate of the General Partner Item 12. Security Ownership of Certain Beneficial Owners and Management No person is known by the Partnership to own more than 5% of Assignee Interests. As of March 15, 1996, an affiliate of the General Partner, purchased approximately 1,430 Pension Notes, or approximately 3.35% of the Partnership's outstanding Pension Notes of an average price of $423 per Pension Note. Item 13. Certain Relationships and Related Transactions. An outside member of NCHP's Board of Directors, Lloyd N. Cutler, is of counsel to the law firm of Wilmer, Cutler & Pickering, which firm was retained by NCHP and certain of its affiliates for legal services during the last fiscal year. The Partnership had no transactions or business relationships with NHP, CRGSH, or its affiliates except as described in Items 8 (Note 3 in the Financial Statements), 10, and 11. -32- PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K (a) Documents filed as part of this report: 1.Financial Statements The financial statements, notes and reports listed below are included herein: Page Report of Ernst & Young LLP, Independent Auditors7 Report of Independent Public Accountants 8 Statements of Financial Position, December 31, 1995 and 1994 9 Statements of Operations for the Years Ended December 31, 1995, 1994 and 1993 10 Statements of Partners' Equity (Deficit) for the Years Ended December 31, 1995, 1994 and 1993 11 Statements of Cash Flows for the Years Ended December 31, 1995, 1994 and 1993 12 Notes to Financial Statements 14 2. Financial Statement Schedules All schedules have been omitted as the r e q u i r e d information is inapplicable or the information is presented in the financial statements or related notes. 3. Exhibits None. (b) Reports on Form 8-K -33- No reports on Form 8-K were filed during the last quarter of fiscal 1995. -34- 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\ James A. Stroud James A. Stroud Chief Operating Officer and Director Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant and in capacities and on the dates indicated. By: \s\ James A. Stroud James A. Stroud Chief Operating Officer and Director (Chief financial, and accounting officer) By: \s\ Jeffrey L. Beck Jeffrey L. Beck Chief Executive Officer and Director Date: March 29, 1996 -35- EX-99 2 CONSENT OF AUDITORS REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS The Partners NHP Retirement Housing Partners I Limited Partnership We have audited the accompanying statement of financial position of NHP Retirement Housing Partners I Limited Partnership as of December 31, 1995, and the related statements of operations, partners' equity (deficit), and cash flows for the year then ended. 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 audit. We conduced 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 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, 1995 and the results of its operations and its cash flows for the year then ended, in conformity with generally accepted accounting principles. Ernst & Young LLP Dallas, Texas February 16, 1996 EX-27 3 NHP FDS
5 This schedule contains summary financial information extracted from the consolidated balance sheet at December 31, 1995 and the consolidated statements of operations and cash flows for the nine months ended December 31, 1995 and is qualified in its entirety by reference to such financial statements. 0000793730 NATIONAL 12-MOS DEC-31-1995 DEC-31-1995 3,478,604 0 859,987 0 0 0 63,398,595 (12,137,832) 57,749,496 0 42,672,000 0 0 0 (4,800,309) 57,749,496 0 14,020,626 0 11,643,001 547,123 0 5,521,051 (3,690,549) 0 0 0 0 0 (3,690,549) 0 0
EX-99 4 CONSENT OF ACCOUNTANTS Report of Independent Public Accountants To The Partners NHP Retirement Housing Partners I Limited Partnership We have audited the accompanying statement of financial position of NHP Retirement Housing Partners I Limited Partnership (the Partnership) as of December 31, 1994, and the related statements of operations, partners' equity (deficit) and cash flows for the periods ended December 31, 1994 and 1993. 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 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 audits provide a reasonable basis for our opinion. In our opinion, such financial statements present fairly, in all material respects, the financial position of NHP Retirement Housing Partners I Limited Partnership as of December 31, 1994, and the results of its operations and its cash flows for the periods ended December 31, 1994 and 1993, in conformity with generally accepted accounting principles presents fairly, in all material respects, when read in conjunction with the related financial statements, the information therein set forth. As discussed in Note 9 to the financial statements, the Partnership generated cash losses from operations over the past several years prior to 1995. This shortfall from operations was funded by the Partnership's existing cash and maturing short-term investments remaining from its initial public offering. Should the cash generated from operations not continue to improve over the next several years, the Partnership's cash reserves may not be adequate to fund interest payments or other Partnership obligations. Management's plans regarding these matters are described in Note 9. As discussed in Note 10 to the financial statements, the carrying values of the Partnership's rental properties may exceed the current market values of the properties at December 31, 1994. Should the Partnership be forced to dispose of one or more of its Properties, it could incur a loss. Management's plans in regard to operations and the carrying value of the Partnership's properties are described in Notes 9 and 10. During 1993, a $3,300,000 write-down was taken on the Partnership's rental properties; there can be no assurance that further write-downs will not be needed in the future. As discussed in Notes 6 and 9, the Partnership defers a significant portion of the interest on its Pension Notes. Accordingly, there would need to be very significant improvements in the cash flows from operations and/or increases in the values of the Properties to fund both the accrued interest and the face value of the Pension Notes upon their maturity. Deloitte & Touche Washington, D.C. February 17, 1995 EX-99 5 COVER LETTER March 29, 1996 Securities and Exchange Commission 450 5th Street N.W. Judiciary Plaza Washington, D.C. 20549 Re: NHP Retirement Housing Partners I Limited Partnership SEC File Number: 0-16815 Madam or Sir: Enclosed please find Form 10-K for the year ended December 31, 1995 for the above referenced partnership. Please acknowledge receipt of this filing by stamping and returning the enclosed copy of this letter in the self-addressed, stamped envelope provided. If there are any questions regarding this filing, please contact the undersigned. Very truly yours, NHP RETIREMENT HOUSING PARTNERS I LIMITED PARTNERSHIP Pamela Crace Investor Relations Director PJC/pb Enclosure -----END PRIVACY-ENHANCED MESSAGE-----