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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): April 16, 1998
Commission file number 0-26980
ARV ASSISTED LIVING, INC.
(Exact name of Registrant as specified in its charter)
CALIFORNIA 33-0160968
(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)
REGISTRANTS TELEPHONE NUMBER, INCLUDING AREA CODE: (714) 751-7400
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
PURCHASE AND SALE AGREEMENTS
As of February 12, 1998, ARV Assisted Living, Inc. ("ARV") entered into Purchase
and Sale Agreements with The Hillsdale Group, L.P., a California limited
partnership; 270 Center Associates, Limited Partnership, a California limited
partnership; and TH Group, Inc., a California corporation, to purchase interests
in thirteen (13) senior housing communities located in California, containing
approximately 1,900 units, for approximately $88 million. The transaction is
expected to occur in phases beginning April 16, 1998 through July 1998.
On April 16, 1998, the purchases of two communities, a general partnership
interest and four management agreements were completed.
The following is a description of the closed transactions.
THE ACQUIRED COMMUNITIES
Golden Creek Inn
The Company acquired Golden Creek Inn from TH Group Inc., an unrelated third
party, pursuant to a Purchase and Sale Agreement dated February 12, 1998, as
amended. Golden Creek Inn is a 167-unit assisted living community located in
Irvine, California.
Hillcrest Inn
The Company acquired Hillcrest Inn from 270 Center Associates, Limited
Partnership, an unrelated third party, pursuant to a Purchase and Sale Agreement
dated February 12, 1998, as amended. Hillcrest Inn is a 138-unit assisted living
community located in Thousand Oaks, California.
THE ACQUIRED GENERAL PARTNERSHIP INTEREST
The Company acquired a 20 percent (20%) general partnership interest in WHW
Associates, a California general partnership, pursuant to a Purchase and Sale
Agreement dated February 12, 1998. WHW Associates is a general partner of Fifty
Peninsula Partners, a California limited partnership, which owns Sterling Court,
a 149-unit assisted living community located in San Mateo, California..
THE ACQUIRED MANAGEMENT CONTRACTS
The Company acquired the rights, title and interest as manager in four
management agreements, from The Hillsdale Group, L.P. The management agreements
acquired are for senior housing communities identified as follows: Sterling
Court, a 149-unit assisted living community located in San Mateo, California;
Palo Alto Commons, a 140-unit assisted living community located in Palo Alto,
California; San Carlos Retirement Center, an 85-unit assisted living community
located in San Carlos, California; and The Altenheim, a 210-unit assisted living
community located in Oakland, California.
TERMS OF PURCHASE
The purchase prices of the assets acquired were as follows: Golden Creek Inn -
$14.5 million; Hillcrest Inn - $27.5 million; general partnership interest -
$1.2 million; and the management contracts - $1.325 million. A portion of the
purchase price was paid from cash on hand with the balance consisting of
mortgage financing assumed by the Company.
The Company believes that the purchase price negotiated with the Seller reflects
the location, occupancy rates and the condition of the communities.
Additionally, the Company believes that the location of the acquired and managed
communities in relation to the Company's existing communities will provide
opportunities to achieve management efficiencies and operational economies of
scale.
The Company is confident that its experience in assisted living communities and
its knowledge of the senior housing market, including the operation of fifty
other assisted living communities, will enable it to achieve operating
efficiencies while maintaining the occupancy rates at full market rent.
Management believes that the acquisition of these communities will allow the
Company to increase its competive advantages in California, where 30 of the 50
assisted living communities currently operated or managed are located.
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MORTGAGE FINANCING
Concurrent with the purchase, the Company assumed existing mortgage financing
with an outstanding balance of $15.25 million secured by Golden Creek Inn and
Hillcrest Inn (balances of $2.25 million and $13.0 million, respectively). The
loans bear interest at LIBOR plus 2.5% require monthly payments of interest only
until August 1998 (Golden Creek Inn) and October 1998 (Hillcrest Inn).
Thereafter, the loans require monthly payments of principal and interest based
upon a 25-year amortization schedule. The outstanding balance of the loans plus
all accrued and unpaid interest is due and payable in 2002.
SPECIAL RISKS
The success of the communities depends to a large extent on increasing gross
revenues, holding or decreasing costs, and on the abilities of the on-site
management teams which the Company assembles. Additionally, the success of this
acquisition will depend in large part on the Company's ability to integrate the
existing management and staff into the Company's operations. To achieve
increased revenue and stable operating cost goals, policies used by the former
owners may need to be altered. This could result in short term resident
dissatisfaction and/or relocation. Moreover, given that the communities are not
newly constructed, unforeseen circumstances could necessitate major renovation
or more refurbishing than originally planned. The relatively low vacancy rates
enjoyed throughout the primary market may induce other operators to create new,
competitive facilities.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements
All financial statements and pro forma financial statements required
pursuant to Rule 3-14 of Regulation S-X with respect to the Registrants
acquisitions will be filed within 60 days of this report.
(b) Exhibits
Number Exhibit
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10.1 Purchase and Sale Agreement by and between 270
Center Associates, Limited Partnership and ARV
Assisted Living, Inc. dated as of February 12,
1998.
10.2 Amendment to Purchase and Sale Agreement by and
between 270 Center Associated, Limited Partnership
and ARV Assisted Living, Inc. dated as of March 2,
1998
10.3 Second Amendment to Purchase and Sale Agreement by
and between 270 Center Associated, Limited
Partnership and ARV Assisted Living, Inc. dated as
of April 10, 1998
10.4 Purchase and Sale Agreement by and between TH
Group, Inc. and ARV Assisted Living, Inc. dated as
of February 12, 1998.
10.5 Amendment to Purchase and Sale Agreement by and
between TH Group, Inc. and ARV Assisted Living,
Inc. dated as of March 2, 1998
10.6 Second Amendment to Purchase and Sale Agreement by
and between TH Group, Inc. and ARV Assisted Living,
Inc. dated as of April 10, 1998
10.7 Purchase and Sale Agreement by and between The
Hillsdale Group, LP and ARV Assisted Living, Inc.
dated as of February 12, 1998.
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10.8 Amendment to Purchase and Sale Agreement by and
between The Hillsdale Group, LP and ARV Assisted
Living, Inc. dated as of March 2, 1998
10.9 Second Amendment to Purchase and Sale Agreement by
and between The Hillsdale Group, LP and ARV
Assisted Living, Inc. dated as of April 6, 1998
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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.
ARV Assisted Living, Inc.
By: /s/ Sheila M. Muldoon
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Sheila M. Muldoon
Senior Vice President and General Counsel
(Duly authorized officer)
Date: May 8, 1998
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