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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1996
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: 33-30084
AMERICAN RETIREMENT VILLAS PROPERTIES III, L.P.
- -----------------------------------------------------------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
CALIFORNIA 33-365417
------------------------------- -------------------
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
245 FISCHER AVENUE, D-1
COSTA MESA, CA 92626
------------------------------------- ------------------
ADDRESS OF PRINCIPAL EXECUTIVE OFFICE) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (714) 751-7400
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes No X
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PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
American Retirement Villas Properties III
(a California limited partnership)
Balance Sheets
(Unaudited)
MARCH 31, 1996 DECEMBER 31, 1995
-------------- -----------------
(UNAUDITED) (AUDITED)
ASSETS
Properties, at cost (notes 4, 5 and 6)
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,667,143 $ 4,667,143
Buildings and improvements, less accumulated depreciation of
$2,835,532 in 1996 and $2,657,624 in 1995 . . . . . . . . . . 18,099,891 18,237,426
Furniture, fixtures and equipment, less accumulated
depreciation of $991,200 in 1996 and $762,014 in 1995 . . . . 390,935 393,988
----------- -----------
Net Properties . . . . . . . . . . . . . . . . . . . 23,157,969 23,298,557
----------- -----------
Property under contract for sale (notes 4 and 5) . . . . . . . 8,428,557 8,500,359
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . 465,269 477,705
Restricted cash (note 5) . . . . . . . . . . . . . . . . . . . 132,393 130,178
Amounts receivable from affiliate (note 3) . . . . . . . . . . 26,775 0
Pre-opening costs, less accumulated amortization of $477,506 in
1996 and $286,934 in 1995 (note 3) . . . . . . . . . . . . . 154,814 154,814
Loan fees, less accumulated amortization of $114,344 in 1996
and $105,172 in 1995 . . . . . . . . . . . . . . . . . . . . 130,832 140,665
Other assets (note 3) . . . . . . . . . . . . . . . . . . . . . 56,649 92,092
----------- -----------
Total Assets . . . . . . . . . . . . . . . . . . . . $32,553,258 $32,794,370
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Notes Payable (notes 4 and 5) . . . . . . . . . . . . . . . . . $16,222,726 $16,272,463
Loan secured by property under contract for sale
(notes 4 and 5) . . . . . . . . . . . . . . . . . . . . . . 4,468,940 4,473,704
Deposit under contract for sale (note 4) . . . . . . . . . . . 2,968,562 2,968,562
Accounts payable and accrued expenses . . . . . . . . . . . . . 524,637 472,473
Amounts payable to affiliates (note 3) . . . . . . . . . . . . 125,416 113,338
Distributions payable to Partners (note 2) . . . . . . . . . . 517,085 186,691
----------- -----------
Total Liabilities . . . . . . . . . . . . . . . . . . 24,827,366 24,487,231
=========== ===========
Partners' capital (deficit) (notes 2 and 3)
General partners' capital (deficit) . . . . . . . . . . . . . (81,495) (75,682)
Limited partners' capital . . . . . . . . . . . . . . . . . 7,807,387 8,382,821
----------- -----------
Total liabilities and partners' capital . . . . . . . $32,553,258 $32,794,370
=========== ===========
See accompanying notes to financial statements (unaudited).
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American Retirement Villas Properties III
(a California limited partnership)
Statements of Operations
(Unaudited)
FOR THE THREE MONTHS ENDED
---------------------------------------
MARCH 31, 1996 MARCH 31, 1995
-------------- --------------
Revenues:
Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,304,643 $1,257,697
Assisted living . . . . . . . . . . . . . . . . . . . . . . . . 90,226 92,592
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . 105,079 125,943
Grants (note 6) . . . . . . . . . . . . . . . . . . . . . . . . 0 0
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28,922 52,779
---------- ----------
Total revenues . . . . . . . . . . . . . . . . . . . 1,528,870 1,529,011
---------- ----------
Costs and expenses:
Rental property operations (note 3) . . . . . . . . . . . . . . 640,865 611,264
Assisted living (note 3) . . . . . . . . . . . . . . . . . . . 44,397 41,683
Depreciation and amortization . . . . . . . . . . . . . . . . . 298,636 322,137
Interest (note 5) . . . . . . . . . . . . . . . . . . . . . . . 477,176 457,460
General and administrative (note 3) . . . . . . . . . . . . . . 94,299 94,030
Property taxes . . . . . . . . . . . . . . . . . . . . . . . . 75,877 81,771
Advertising . . . . . . . . . . . . . . . . . . . . . . . . . . 9,780 11,999
Minority interest in operations (note 4) . . . . . . . . . . . (2,285) 9,707
---------- ----------
Total costs and expenses . . . . . . . . . . . . . . 1,638,745 1,630,051
---------- ----------
Net income (loss) . . . . . . . . . . . . . . . . . . (109,875) (101,041)
========== ==========
Net income (loss) to General Partner . . . . . . . . (1,099) (1,010)
========== ==========
Net income (loss) to Limited Partner . . . . . . . . $ (108,776) $ (100,030)
========== ==========
Net income (loss) per Limited Partner unit . . . . . $ (5.83) $ (5.36)
========== ==========
See accompanying notes to financial statements (unaudited).
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American Retirement Villas Properties III
(a California limited partnership)
Statements of Cash Flow
(Unaudited)
FOR THE THREE MONTHS ENDED
--------------------------------------
MARCH 31, 1996 MARCH 31, 1995
-------------- --------------
Cash flows from operating activities:
Net income (loss) . . . . . . . . . . . . . . . . . . . . $(109,875) $ (101,041)
Adjustments to reconcile net loss to cash provided by
operating activities:
Depreciation and amortization . . . . . . . . . . . . 298,636 322,137
Change in assets and liabilities:
Decrease in other assets . . . . . . . . . . . . . 35,443 43,496
Increase in accounts payable and accrued expenses 52,165 167,557
Decrease (increase) in amounts receivable from
affiliates . . . . . . . . . . . . . . . . . . (26,775) (2,042)
Increase (decrease) in amounts payable to
affiliates . . . . . . . . . . . . . . . . . . 12,078 (33,714)
--------- -----------
Net cash provided by operating activities . . . . . . . . . . 261,672 396,393
--------- -----------
Cash flows used in investing activities:
(Increase) decrease in restricted cash . . . . . . . . . . (2,215) (640)
Capital expenditures . . . . . . . . . . . . . . . . . . . (36,038) (23,068)
Construction on land/building . . . . . . . . . . . . . . (40,372) 0
Increase in deposit on property under contract for sale. . 0 1,134,847
--------- -----------
Net cash used in investing activities . . . . . . . . . . . . (78,625) 1,111,139
--------- -----------
Cash flows from financing activities
Decrease (increase) in loan fees . . . . . . . . . . . . . 0 (91,784)
Principal payments of long term debt . . . . . . . . . . . (54,502) 4,432,061
Proceeds from construction loan . . . . . . . . . . . . . 0 (4,500,000)
Borrowings from revolving credit line . . . . . . . . . . 0 0
Repayments of revolving credit line . . . . . . . . . . . 0 (350,000)
Distributions paid . . . . . . . . . . . . . . . . . . . . (140,981) (2,106,712)
--------- -----------
Net cash used by financing activities . . . . . . . . . . . . (195,483) (2,616,436)
--------- -----------
Net increase (decrease) in cash and cash equivalents . . . . (12,436) (1,108,905)
Cash & cash equivalents at beginning of period . . . . . . . 477,705 1,485,516
--------- -----------
Cash & cash equivalents at end of period . . . . . . . . . . $ 465,269 $ 376,611
========= ===========
See accompanying notes to financial statements (unaudited).
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PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS (CONTINUED)
American Retirement Villas Properties III
(a California limited partnership)
Notes to Financial Statements (Unaudited) (Continued)
March 31, 1996
(1) SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
Pursuant to Regulation S-X Rule 10-1(5), the material stated in the December
31, 1995 Form 10K is incorporated by this reference.
BASIS OF ACCOUNTING
Pursuant to Regulation S-X Rule 10-1(5), the material stated in the December
31, 1995 Form 10-K is incorporated by this reference.
CARRYING VALUE OF REAL ESTATE
Pursuant to Regulation S-X Rule 10-1(5), the material stated in the December
31, 1995 Form 10-K is incorporated by this reference.
ORGANIZATION COSTS
Pursuant to Regulation S-X Rule 10-1(5), the material stated in the December
31, 1995 Form 10-K is incorporated by this reference.
PRE-OPENING COSTS
Pursuant to Regulation S-X Rule 10-1(5), the material stated in the December
31, 1995 Form 10-K is incorporated by this reference.
LOAN FEES
Pursuant to Regulation S-X Rule 10-1(5), the material stated in the December
31, 1995 Form 10-K is incorporated by this reference.
RENTAL INCOME
Pursuant to Regulation S-X Rule 10-1(5), the material stated in the December
31, 1995 Form 10-K is incorporated by this reference.
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PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS (CONTINUED)
American Retirement Villas Properties III
(a California limited partnership)
Notes to Financial Statements (Unaudited) (Continued)
March 31, 1996
INCOME TAXES
Pursuant to Regulation S-X Rule 10-1(5), the material stated in the December
31, 1995 Form 10-K is incorporated by this reference.
NET INCOME (LOSS) PER LIMITED PARTNER UNIT
Pursuant to Regulation S-X Rule 10-1(5), the material stated in the December
31, 1995 Form 10-K is incorporated by this reference.
CASH AND CASH EQUIVALENTS
Pursuant to Regulation S-X Rule 10-1(5), the material stated in the December
31, 1995 Form 10-K is incorporated by this reference.
RECLASSIFICATIONS
Pursuant to Regulation S-X Rule 10-1(5), the material stated in the December
31, 1995 Form 10-K is incorporated by this reference.
(2) ORGANIZATION AND PARTNERSHIP AGREEMENT
Pursuant to Regulation S-X Rule 10-1(5), the material stated in the December
31, 1995 Form 10-K is incorporated by this reference.
(3) TRANSACTIONS WITH AFFILIATES
Pursuant to Regulation S-X Rule 10-1(5), the material stated in the December
31, 1995 Form 10-K is incorporated by this reference, except for the following
additional comments. For the three months ended March 31, 1996, property
management fees and partnership administration fees of $70,855 and $22,573,
respectively, were paid or accrued to the Managing General Partner.
(4) PROPERTIES
Pursuant to Regulation S-X Rule 10-1(5), the material stated in the December
31, 1995 Form 10-K is incorporated by this reference.
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PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS (CONTINUED)
American Retirement Villas Properties III
(a California limited partnership)
Notes to Financial Statements (Unaudited) (Continued)
March 31, 1996
(5) NOTES PAYABLE
Pursuant to Regulation S-X Rule 10-1(5), the material stated in the December
31, 1995 Form 10-K is incorporated by this reference.
(6) GRANT INCOME
Pursuant to Regulation S-X Rule 10-1(5), the material stated in the December
31, 1995 Form 10-K is incorporated by this reference.
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ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
(1) LIQUIDITY
The General Partners expect that the cash to be generated from operations of
all the Registrant's properties will be adequate to pay operating expenses,
make necessary capital improvements, make required principal reductions, and
provide distributions to the Partners. On a long-term basis, the Registrant's
liquidity is sustained primarily from cash flow provided by operating
activities. During the three months ended March 31, 1996, cash provided by
operating activities was $261,672 compared to cash provided by operating
activities of $396,393 for the three months ended March 31, 1995.
During the three months ended March 31, 1996, the Registrant used net cash in
investing activities of $78,626 compared to net cash provided by investing
activities of $1,111,139 for the three months ended March 31, 1995. The
Registrant's investing activities consisted of capital improvements made on its
five operating properties and construction on its property in development.
During the three months ended March 31, 1996, the Registrant used net cash in
financing activities of $195,483 compared to $2,616,436 for the three months
ended March 31, 1995. The Registrant's financing activities consisted of
principal reduction on notes payable and distributions paid to the Partners.
The General Partners are not aware of any trends, other than national economic
conditions which have had, or which may be reasonably expected to have, a
material favorable or unfavorable impact on the revenues or income from the
operations or sale of properties. The General Partners believe that if the
inflation rate increases they will be able to pass the subsequent increase in
operating expenses onto the residents of the facilities by way of higher rental
and assisted living rates. The Registrant has long term debt of $16,222,726 as
of March 31, 1996. $4,875,327 is due January 1, 2007, $3,917,600 is due
February 1, 2019, $3,051,316 is due February 1, 2017, and $4,298,900 is due
November 1, 2017. The remaining balance of $79,583 are notes secured by
equipment.
(2) CAPITAL RESOURCES
The Registrant contemplates spending approximately $200,000 for capital
expenditures during 1996 for physical improvements at its five facilities and
$1,000,000 for construction costs for its development project. The funds for
these improvements should be available from operations and cash reserves.
There are no known material trends, favorable or unfavorable, in the
Registrant's capital resources, and there is no expected change in the mix of
such resources.
(3) RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1996 COMPARED WITH THE THREE MONTHS ENDED MARCH
31, 1995.
Revenue for the three month periods ended March 31, 1996 and the three months
ended March 31, 1995 includes rental income, assisted living income from all
five properties, interest earned on cash balances and other revenue. Total
revenues for the three months ended March 31, 1996 were $1,528,869, compared to
revenues of $1,529,011 for the three months ended March 31, 1995.
The largest component of revenue, rent, increased by approximately 4% from the
three months ended March 31, 1995 to the three months ended March 31, 1996.
The increase in rent was due to an increase in rental rates of approximately
2%. Occupancy remained the same.
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Revenue from assisted living decreased approximately 3% from the three months
ended March 31, 1995 to the three months ended March 31, 1996. The decrease in
assisted living revenue was due to lower occupancy at Bradford Square which is
the Registrant's main provider of assisted living services.
Interest and other revenue decreased approximately 25% from the three months
ended March 31, 1995 to the three months ended March 31, 1996. Interest income
results from interest earned on cash deposits. Other revenue generally
includes processing fees and beauty shop revenue.
Sources of revenue for the three months ended March 31, 1996 and March 31, 1995
are summarized as follows:
THREE MONTHS ENDED
-------------------------------------
MARCH 31, 1996 MARCH 31, 1995
------------- --------------
Rent $1,304,643 $1,257,697
Assisted Living 90,226 92,592
Interest 105,079 125,943
Other 28,922 52,779
---------- ----------
Total Revenue $1,528,869 $1,529,011
========== ==========
Total costs and expenses for the three months ended March 31, 1996 were
$1,638,744, an increase of less than 1% over costs and expenses of $1,630,051
for the three months ended March 31, 1995.
The largest component of expenses, rental property operations, consists
primarily of property managements costs, payroll related expenses, utilities,
food expenses and maintenance and supplies. Rental property operations
expenses increased over 5% from the three months ended March 31, 1995 to the
three months ended March 31, 1996.
Assisted living expenses consist primarily of related payroll expense.
Assisted living expenses increased by over 6% from the three months ended March
31, 1995 to the three months ended March 31, 1996. Assisted living expenses
increased due to the increases in size of the related staff providing assisted
living services.
General and administrative expenses are comprised of, but not limited to, costs
for accounting, partnership administration, bad debt, data processing, investor
relations, insurance and professional services. General and administrative
expenses remained the same from the three months ended March 31, 1995 to the
three months ended March 31, 1996.
Depreciation and amortization expense decreased by 7% from the three months
ended March 31, 1995 to the three months ended March 31, 1996. The decrease is
due to fixed assets becoming fully depreciated.
Interest expense increased approximately 4% from the three months ended March
31, 1995 to the three months ended March 31, 1996. This increase is due to
variable rate loans.
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Selected costs and expenses for the three months ended March 31, 1996 and March
31, 1995 are summarized as follows:
THREE MONTHS ENDED
----------------------------------
MARCH 31, 1996 MARCH 31, 1995
-------------- --------------
Rental Property Operations $640,865 $611,264
Assisted Living 44,397 41,683
General and Administrative 94,299 94,030
Depreciation and amortization 298,636 322,137
Property Taxes 75,877 81,771
Interest 477,176 457,460
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGE IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A. Exhibit 27 -- Financial Data Schedule
B. None
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Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AMERICAN RETIREMENT VILLAS PROPERTIES III
A CALIFORNIA LIMITED PARTNERSHIP
By: ARV Assisted Living, Inc.
(Managing General Partner)
By: /s/ GARY L. DAVIDSON
---------------------------
Gary L. Davidson
Chairman of the Board
Date: August 13, 1996
By: /s/ GRAHAM P. ESPLEY-JONES
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Graham P. Espley-Jones
Chief Financial Officer
Date: August 13, 1996
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