U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
(X) Quarterly Report Under Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the Quarterly period ended September 30, 1996
( ) Transition Report Under Section 13 or 15(d) of the Exchange Act For the
Transition period from ________________to____________________
Commission File Number: 0-17600
Common Goal Health Care Participating Mortgage Fund L.P.
(Exact name of small business issuer as specified in its charter)
Delaware 52-1475268
(State or other Jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
215 Main Street
Penn Yan, New York, 14527
(Address of principal executive offices)
(303) 705-6000
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
YES _X_ NO____
PART 1 - Financial Information
Item 1. Financial Statements
COMMON GOAL HEALTH CARE PARTICIPATING MORTGAGE FUND L.P.
(A Limited Partnership)
Balance Sheets
September 30, December 31,
1996 1995
(Unaudited) (Audited)
-------------------------
Assets
Current Assets
Cash and cash equivalents ....................... $1,185,528 $1,010,659
Other assets .................................... 10,879 23,885
Mortgage interest receivable .................... 77,659 145,399
------ -------
Total current assets ....................... 1,274,065 1,179,943
Mortgage loans receivable ............................ 2,567,664 3,567,664
--------- ---------
$3,841,730 $4,747,607
========== ==========
Liabilities and Partners' Capital
Current Liabilities
Accounts payable, accrued expenses and other .... $ 8,455 $ 5,070
---------- ----------
Total current liabilities .................. 8,455 5,070
Partners' capital .................................... 3,833,275 4,742,537
--------- ---------
$3,841,730 $4,747,607
========== ==========
See accompanying notes
COMMON GOAL HEALTH CARE PARTICIPATING MORTGAGE FUND L.P.
(A Limited Partnership)
Statements of Earnings
(Unaudited)
THREE MONTHS ENDED NINE MONTHS ENDED
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
1996 1995 1996 1995
Income
Interest ........... $ 115,767 $ 160,377 $ 377,567 $ 572,972
Misc. income ....... -- -- 55,000 --
------
115,767 160,377 432,567 572,972
------- ------- ------- -------
Expenses
Professional fees .. (708) 14,814 31,356 117,208
Fees to affiliates:
Management ........ 10,572 18,992 35,895 72,601
Mortgage servicing 2,230 5,167 6,689 15,502
Other .............. 25,122 33,002 69,491 90,905
------ ------ ------ ------
37,216 71,975 143,431 296,216
------ ------ ------- -------
NET EARNINGS .. 78,551 88,402 289,136 276,756
====== ====== ======= =======
Net earnings per limited
partner unit ........... .04 .05 .15 .14
=== === === ===
Weighted average limited $ 1,911,411 $ 1,911,411 $ 1,911,411 $ 1,911,411
=========== =========== =========== ===========
partner units outstanding
See accompanying notes.
COMMON GOAL HEALTH CARE PARTICIPATING MORTGAGE FUND L.P.
(A Limited Partnership)
Statements of Partners' Capital
(Unaudited)
NINE MONTHS ENDED
SEPT. 30,
1996 1995
------------------------- -------------------------
TOTAL TOTAL
GENERAL LIMITED PARTNERS' GENERAL LIMITED PARTNERS'
PARTNERS PARTNERS CAPITAL PARTNERS PARTNERS CAPITAL
--------------------------------------- --------------------------------------------
Balance at beginning of period $ 43,185 $ 4,699,352 $ 4,742,537 $ 147,246 $ 10,580,160 $ 10,727,406
Net earnings ................. 5,783 283,353 289,136 5,535 271,221 276,756
Cash distributions to partners (--) (1,198,398) (1,198,398) (111,830) (5,932,147) (6,043,977)
- ---------- ---------- -------- ---------- ----------
Balance at end of period ..... $ 48,968 $ 3,784,307 $ 3,833,275 $ 40,951 $ 4,919,234 $ 4,960,185
============ ============ ============ ============ ============ ============
See accompanying notes.
COMMON GOAL HEALTH CARE PARTICIPATING MORTGAGE FUND L.P.
(A Limited Partnership)
Statements of Cash Flows
(Unaudited)
NINE MONTHS ENDED
SEPT. 30 SEPT. 30,
1996 1995
----------------------
Cash flows from operating activities:
Net earnings ..................................... $ 289,136 $ 276,756
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Decrease in other assets .................... 13,006 --
Decrease in interest receivable ............. 67,741 68,250
Increase in accounts payable, ............... 2,079 443
accrued expenses and other
Increase in due to affiliates ............... 1,305 1,835
----- -----
Net cash provided by operating activities 373,267 347,284
------- -------
Cash from investing activities:
Proceeds from mortgage loan principal repayments . 1,000,000 --
---------
Cash used in financing activities:
Distribution to general partner .................. -- (111,830)
Distribution to limited partners ................. (1,198,399 (5,932,150)
---------- ----------
Net cash used in financing activities ....... (1,198,399) (6,043,980)
---------- ----------
Net increase (decrease) in cash and cash equivalents: . 174,868 (5,696,696)
Cash and cash equivalents, beginning of period ........ 1,010,659 7,002,603
--------- ---------
Cash and cash equivalents, end of period .............. $ 1,185,527 $ 1,305,907
=========== ===========
See accompanying notes.
COMMON GOAL HEALTH CARE
PARTICIPATING MORTGAGE FUND L.P.
(A Limited Partnership)
Notes to Financial Statements
(Unaudited)
September 30, 1996
(1) Organization and Summary of Significant Accounting, Policies
Common Goal Health Care Participating Mortgage Fund L.P. (the
"Partnership") was formed on August 20, 1986 to invest in and make mortgage
loans to third-parties involved in health care. On February 20, 1987, the
Partnership commenced a public offering of limited partner units (the "Public
Offering"). On July 21, 1987, the Partnership commenced operations, having
previously sold more than the specified minimum of 116,000 units ($1,160,000).
The Partnership's offering terminated on February 20, 1989 with the Partnership
having sold the specified maximum of 1,912,911 units ($19,129,110).
The general partners are Common Goal Capital Group, Inc. as the managing
general partner and Common Goal Limited Partnership I as the minority general
partner. Under the terms of the Partnership's agreement of limited partnership
(the "Partnership Agreement"), the general partners are not required to make any
additional capital contributions except under certain limited circumstances upon
termination of the Partnership.
Under the terms of the Partnership Agreement, the Partnership is required
to pay a quarterly management fee to the managing general partner equal to .75%
per annum of adjusted contributions, as defined. Additionally, a mortgage
servicing fee equal to .25% per annum of the Partnership's outstanding mortgage
loan principal amount is to be paid to Common Goal Mortgage Company, an
affiliate of the general partners.
Additionally, under the terms of the Partnership Agreement, the Partnership
is required to reimburse the managing general partner for certain operating
expenses.
The Partnership classifies all short-term investments with maturities at
dates of purchase of three months or less as cash equivalents.
An allowance for loan losses is provided at a level which the Partnership's
management considers adequate based upon an evaluation of known and inherent
risks in the loan portfolio. Management believed no allowance was necessary as
of September 30, 1996.
No provision for income taxes has been recorded as the liability for such
taxes is that of the partners rather than the Partnership.
Earnings per limited partner unit are computed based on the weighted
average limited partner units outstanding for the period.
The accompanying unaudited financial statements as of and for the three and
nine months ended September 30, 1996 are the representation of management and
reflect all adjustments which are, in the opinion of management, necessary to a
fair presentation of the financial position and results of operations of the
Partnership. Such adjustments are normal and recurring.
(2) Mortgage Loans Receivable
Information concerning mortgage loans receivable as of September 30, 1996
is as follows:
Face and
Basic Carrying
Interest Maturity Prior Amount of
Description Rate Date Liens Mortgages
Westwood loan . 11.5% March 10, 1998 $ 3,200,000 $ 1,000,000
Honeybrook loan 13.7% January 1, 2000 8,810,000 1,567,664
---- -- ---- --------- ---------
$12,010,000 $ 2,567,664
=========== ===========
The loans are second mortgage loans secured by healthcare related real
properties. Interest is payable monthly with the principal balance generally due
at maturity. The loans generally provide for the payment of additional interest
based upon gross revenues of the properties and the payment of participation
interests ranging from 6-30% of the increase in the fair market value of the
properties at maturity or redemption, as defined.
The carrying value of the mortgage loans for tax purposes is the same as
that for financial reporting purposes. All properties are subject to a first
mortgage lien in each case held by unaffiliated third parties. As of September
30, 1996, neither of the loans was delinquent as to regular interest.
(3) Subsequent Event
On October 25, 1996 the Partnership received $1,222,720.56 as a payment on
the Westwood Hills loan. $1,000,000 was applied to principal, $4,792 to basic
interest, $40,000 to a Prepayment Penalty, $110,550 to Additional Equity
Interest, and $59,729 to Estimated Gross Revenue. The remaining $7,650 will be
applied to legal and appraisal fees incurred by the transaction.
Item 2. Management's Discussion and Analysis or Plan of 0perations
Liquidity and Capital Resources
Common Goal Health Care Participating Mortgage Fund L.P., a Delaware
limited partnership (the "Partnership"), was formed to make mortgage loans
secured by real property (the "Mortgage Loan") comprised of a mix of first and
junior Mortgage Loans, secured by health-care related properties. The Public
Offering commenced on February 20, 1987 and continued through February 20, 1989,
when the Public Offering terminated. Total gross offering proceeds raised were
$19,129,110.
Partnership assets decreased from $4,747,607 at December 31, 1995 to
$3,841,730 at September 30, 1996. The decrease ($905,877 or approximately 19.0%)
resulted primarily from cash distributions on January 5, April 5 and July 5 to
the Limited Partners that was offset by net earnings for the period. As of
September 30, 1996, the Partnership's loan portfolio consisted of two mortgage
loans, the aggregate outstanding principal balance of which was $2,567,664.
The Partnership has structured its Mortgage Loans to provide for payment of
quarterly distributions from investment income. The interest derived from the
Mortgage Loans, repayments of Mortgage Loans and interest earned on short-term
investments contribute to the Partnership's liquidity. These funds are used to
make cash distributions to Limited Partners, to pay normal operating expenses as
they arise and, in the case of repayment proceeds, may, subject to certain
exceptions, be used to make additional Mortgage Loans.
The Partnership's balance of cash and cash equivalents at September 30,
1996 and December 31, 1995 was $1,185,528 and $1,010,659, respectively, which
consisted of operating cash and working capital reserves. The increase in cash
and cash equivalents from December 31, 1995 resulted from net earnings of
$289,136, a decrease in interest and other receivables of $80,747, an increase
in reserve funds, and receipt of $1,000,000 as payoff of the Ifida loan; all of
which were offset by a payments of $1,198,398 ($.63 per Unit) in dividend
distributions (which included $917,963 [$.48 per Unit] return of capital), and a
$3,384 increase in accrued expenses and accounts payables. The net result was an
increase of cash and cash equivalents of $174,868. The Partnership is required
to maintain reserves not less than 1% of gross offering proceeds (not less than
$191,201), but currently maintains a reserve significantly in excess of that
amount. The amount of cash and cash equivalents currently maintained by the
Partnership is primarily the result of proceeds from the payment of mortgage
loans.
On February 12, 1996 the Partnership received $1,115,232 as a payoff on the
Winthrop Loan. $1,000,000 was applied to principal, $3,833 to basic interest,
$55,000 to a Prepayment Penalty, and $47,671 to Estimated Gross Revenue. The
remaining $8,728 will be applied to Legal Fees incurred by the transaction and
the Equity Participation owed in accordance with the loan documents.
The Managing General Partner continues to monitor the level of working
capital reserves and may adjust the reserves as necessary to meet the
Partnership's reserve requirements.
The Partnership's success and the resultant rate of return to Unitholders
is dependent upon, among other things, the continued ability of the borrowers to
pay the current interest, additional interest and principal of the Mortgage
Loans.
Since the Horizon Loan was charged off, the Riverview, SHALP, New Medico
and Winthrop Loans have been paid off, and the Joint Venture Loan and the
Westwood Loan have been paid down, the Partnership's rates of return have been
and will be adversely impacted. The additional funds representing repayment of
the above mentioned loans are being invested per Partnership guidelines.
Results of Operations
The Partnership was organized in August, 1986. The Partnership funded seven
Mortgage Loans between 1987 and 1990, including a loan made by a venture between
the Partnership and Common Goal II in August, 1990. As of September 30, 1996,
the Partnership had two Mortgage Loans. Since commencement of operations in July
of 1987, the Partnership invested all available funds (funds not invested in
Mortgage Loans) in short term, temporary investments. The interest earned on
these investments has been and is expected to continue to be less than the
interest rates achievable on Mortgage Loans made by the Partnership. Although
the Partnership's earnings were expected to increase slowly once its portfolio
of Mortgage Loans was substantially completed and borrowers commenced payments
of Additional Interest, the default on the Partnerships $1,400,000 Horizon Loan
(made in July 1988) which occurred in July of 1990 (as described above), has
adversely impacted such expectation.
During the quarters ended September 30, 1996 and 1995, the Partnership had
net earnings of $78,551 and $88,402 based on total revenues of $115,767 and
$160,377 and total expenses of $37,216 and $71,975, respectively. The decrease
in net earnings is due to decreases in interest income because of the Winthrop
Payoff, but is offset partially by a decrease of $15,522 in professional fees,
$8,420 in management fees and $2,937 in mortgage servicing fees, and a $7,880
decrease in other expenses. The two remaining Mortgage Loans were both current
as to regular interest as of September 30, 1996.
On October 25, 1996 the Partnership received $1,222,720.56 as payment on
the Westwood Hills loan. $1,000,000 was applied to principal, $4,792 to basic
interest, $40,000 to a Prepayment Penalty, $110,550 to Additional Equity
Interest, and $59,729 to Estimated Gross Revenue. The remaining $7,650 will be
applied to legal and appraisal fees incurred by the transaction.
On September 27, 1996, the Partnership settled the Horizon Loan Litigation
with all defendants for a total of $480,000, to be paid within 30 days, with all
parties to execute mutual releases. The net amount to the Partnership will be
less, after attorneys' fees and expenses are deducted. The General Partner
believes that this settlement is in the best interest of the Partnership, given
the expense and risk of trial and appeals, and the uncertainties and cost of
collection of any judgement that might have been obtained.
Although the Partnership made quarterly dividend distributions of $234,266,
$233,626, $236,840 and $224,567 in January, April, July and October of 1996
respectively the distributions may not remain at the present level (9.256%
financial capital) as a result of the Horizon Loan charge-off, the payoffs and
the pay downs mentioned above. The general partners are currently reviewing the
distribution policy. The Partnership receives a lesser rate of return from its
short-term investments than it would receive form the Mortgage Loans, (were they
not paid down) thereby reducing interest income available for distribution.
PART II - Other Information
Items I through 6 are omitted because of the absence of conditions under
which they are required.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Common Goal Health Care Participating Mortgage Fund L,P.
(Registrant)
By: Common Goal Capital Group, Inc.,
Managing General Partner
DATED: November 8, 1996
/s/Albert E. Jenkins, III
-------------------------
Albert E. Jenkins, III
President, Chief Executive Officer
and Acting Chief Financial Officer