UNITED VANGUARD HOMES INC /DE - 10KSB - 20010531 - PART_I
Item 1. Description of Business
THIS REPORT CONTAINS CERTAIN FORWARD-LOOKING STATEMENTS WITHIN THE
MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933, AS AMENDED, AND SECTION
21E OF THE SECURITIES EACT OF 1934, AS AMENDED, WHICH ARE INTENDED TO BE COVERED
BY THE SAFE HARBORS CREATED HEREBY. ALL FORWARD-LOOKING STATEMENTS INVOLVE RISKS
AND UNCERTAINTY. ALTHOUGH UNITED VANGUARD HOMES, INC. BELIEVES THAT THE
ASSUMPTIONS UNDERLYING THE FORWARD-LOOKING STATEMENTS CONTAINED HEREIN ARE
REASONABLE, ANY OF THE ASSUMPTIONS COULD BE INACCURATE, AND THEREFORE, THERE CAN
BE NO ASSURANCE THAT THE FORWARD-LOOKING STATEMENTS INCLUDED IN THIS REPORT WILL
PROVE TO BE ACCURATE. IN LIGHT OF THE SIGNIFICANT UNCERTAINTIES INHERENT IN THE
FORWARD-LOOKING STATEMENTS INCLUDED HEREIN, THE INCLUSION OF SUCH INFORMATION
SHOULD NOT BE REGARDED AS A REPRESENTATION BY UVH OR ANY OTHER PERSON THAT THE
OBJECTIVES AND PLANS OF UVH WILL BE ACHIEVED.
United Vanguard Homes, Inc. ("UVH"), a Delaware corporation, was
originally organized on September 26, 1988 ("Old UVH") in order to combine
various activities relating to the development, ownership and management of
senior living facilities organized and operated by Vanguard Ventures, Inc.
("Vanguard") and its principals beginning in 1980. On March 30, 1993, Old UVH
merged into Coap Systems Inc. ("Coap"), a relatively inactive, publicly-owned
subsidiary of Vanguard, and simultaneously Coap changed its name to United
Vanguard Homes, I Although UVH is subject to the information requirements of the
Securities Exchange Act of 1934, there are only a few shares of UVH's common
stock, $.01 par value per share ("Common Stock") in the public float and there
is no public market for the Common Stock. UVH is currently a major subsidiary of
UVH is an owner, manager and developer of senior living facilities
which provide housing and various levels of care and services for the elderly.
Fiscal Year Ended March 31,
Statement of Operations Data:
Resident services $4,843,000 $4,943,000
Healthcare services 2,849,000 2,766,000
Management Fees 111,000 152,000
Development fees 1,119,000 1,035,000
Total revenues $8,922,000 $8,896,000
Senior living facilities provide a combination of housing, personalized
support and healthcare services generally identified as INDEPENDENT LIVING,
ASSISTED LIVING and SKILLED NURSING. INDEPENDENT LIVING facilities are designed
to enable residents to live independently yet remain free from the chores of
home ownership and concerns of daily life, such as transportation, meal
preparation, personal security and housekeeping. ASSISTED LIVING facilities
offer a combination of housing and personal care and healthcare services
designed to respond to the individual needs of those who require help with the
activities of daily living but are not sick or bedridden. SKILLED NURSING
facilities are for those residents who require extensive care. A continuing care
retirement community (" provides all three levels of services (independent
living, assisted living and skilled nursing) in the same facility, whereas other
facilities, known as congregate care facilities, provide only independent living
and assisted living services.
As residents of senior living facilities "age-in-place," they generally
require more assistance. In each of UVH's currently owned and/or managed senior
living facilities, a significant shift in the needs of residents from
independent living services to assisted living services has taken place, and to
accommodate residents, UVH is in the initial stages, subject to regulatory
approval, of converting a number of its independent living apartments in certain
of its properties to assisted living units.
UVH's growth objective is to capitalize on the experience of its
management team in the senior living industry and on the growing demand for
senior living facilities as an increasingly preferred lifestyle for the elderly
by (i) providing a full range of high-quality personalized resident care and
services; (ii) pursuing development opportunities for itself or on behalf of
others; and (iii) acquiring properties in the open market or through the
exercise of purchase options obtained in the development process.
UVH believes that its business will benefit in the foreseeable future
from significant trends affecting the long-term care industry, including an
increase in the demand for senior care resulting from the aging of the U.S.
population, efforts to contain healthcare costs by both the public and private
sector and the increasing financial net worth of the senior population which
makes the senior living facility an available option to a broader market. UVH
believes that these trends will result in increasing demand for senior living
facilities that generally offer a more secure, trou environment and improved
quality of life.
GENERAL. UVH's business strategy is based upon the experience of its
management team in the senior living industry and on the growing demand for
senior living facilities as an increasingly preferred life style for the
elderly. UVH intends to capitalize on these two factors by (i) providing a full
range of high-quality personalized resident care and services; (ii) pursuing
development opportunities for itself or on behalf of others; and (iii) acquiring
properties in the open market or through the exercise of purchase options
obtained in the development process.
PERSONALIZED RESIDENT CARE AND SERVICES. UVH believes that income
qualified elderly would choose residential CCRCs and assisted living facilities
over skilled nursing facilities when given the choice. UVH believes that the
elderly would choose the residential assisted living facility alternative
because of the significant quality of life advantages which they offer.
Consequently, providing a high quality of life for its residents in a safe,
healthy and secure environment is the foundation of UVH's business strategy.
In furtherance of this strategy, UVH has structured its senior living
facilities to offer residents a supportive, "home-like" setting and availability
of assistance with activities of daily living ("ADLs"). Its facilities are, in
many respects, similar to conventional apartment living with enhanced services
allowing residents a more independent and social lifestyle than they would
receive in a skilled nursing facility or, in most cases, at home. At the same
time, support is provided in a manner sufficient to meet residents'
requirements. General services in UVH's residences include the provision of
three meals per day, laundry, housekeeping and maintenance. Available support
services include personal and routine nursing care, social and recreational
services and transportation. Personal care includes assistance with activities
such as bathing, dressing, personal hygiene, grooming, and eating and
ambulating. UVH also provides or makes available routine nursing services (in
addition to its skilled nursing facility services), entertainment, banking and
shopping. Generally, however, UVH is able to tailor the changing needs of its
residents through the use of individual service contracts and flexible staffing
DEVELOPMENT OPPORTUNITIES. Operating revenues and management fees are
generally stable once a facility is fully occupied. At that point, growth in
revenue of UVH becomes dependent upon development and management fees received
through the development and management of additional senior living facilities on
behalf of others. Consequently, the second part of UVH's business strategy is to
increase the number of senior living facilities it develops and manages for
itself or on behalf of others, in part through a strategy whereby UVH may enter
into an agreement with an unaffiliated third-party entity, which may be a
not-for-profit organization exempt from federal itaxes under ss. 501(c)(3) of
the Internal Revenue Code of 1986, as amended (the "Code") (a "501(c)(3)
organization"), to develop a senior living facility for such entity. UVH would
generally attempt to obtain a management agreement to operate the facility upon
its completion as well as afair market value option to purchase the facility at
a future time. Through this type of transaction, if the unaffiliated entity is
adequately financed, UVH would not incur the start-up dcosts and operating
losses typically associated with the development and initial operation of a
senior living facility because UVH would not be the owner. However, prior to
entering into such agreement, UVH may incur certain initial expenses associated
with its site selection process. UVH would earn a development fee for the
development of the senior living facility and a management fee for its operation
and might exercise its option, if any, to purchase the senior living facility.
The unaffiliated third-party entity would benefit through the attainment of a
turnkey senior living facility.
UVH's development program will initially focus on site selection and
residence size, both of which UVH believes are essential to the success of its
development projects. In evaluating a prospective development site, UVH will
consider primarily the strength of the market demand and the ability to maximize
the efficiency of its management resources in a specific market or "cluster."
Accordingly, UVH intends to select sites so that it can strategically place
three to five senior living facilities within a 200-mile radius, creating a
regional cluster of senior living facilities. UVH believes that the clustering
concept will allow it to reduce costs by sharing certain management, marketing
and operational resources within the regional cluster. UVH intends to locate its
assisted living facilities in well-established residential neighborhoods in
communities where the population typically ranges from 40,000 to 100,000 people.
The size of a typical community for a CCRC would generally be somewhat larger,
ranging between 100,000 and 500,000 people. UVH intends to pursue the
development of senior living facilities in communities that show a strong need
for senior living services and a higher than average percentage of middle-aged
or elderly individuals. Other factors that are considered in the site selection
process include the level of competition, the local labor market, the state and
local legislative and regulatory environment and the presence of strong
community support for senior living facilities.
Once a site is selected, UVH may either advance funds to the
unaffiliated third owner of the facility, which funds would be secured by the
assets of the unaffiliated third-party entity acquired with the advanced funds,
principally the land for the proposed facility, or expend funds itself, on
behalf of the third parties. To the extent such advances are not secured by
land, they will be reserved as uncollectible until the unaffiliated entity can
repay the advances. While these advances may at times consist of UVH's working
capital, UVH may also seek to arrange, through Vanguard or other sources, short
term financing to satisfy the project's initial funding requirements. UVH may
set up a special purpose wholly-owned subsidiary which would issue the debt,
which debt may then be convertible into UVH's Common Stock. It is intended that
these advances would be repaid from the proceeds of construction financing
arranged by UVH on behalf of the unaffiliated third-party entity. UVH may be
restricted from recording as a receivable any advances to the unaffiliated
third-party entity under certain circumstances. UVH would then, pursuant
tproject development agreements, act as the project developer for what would
typically be a development fee of 7.5 percent of the project's soft and hard
costs. Once the project is completed, UVH may act as the manager of the facility
pursuant to a management agreement, which would provide for a management fee of
between four and five percent of the facility's gross revenue, depending on the
type of facility.
ACQUISITION OF PROPERTIES. In addition to the development and
management of senior living facilities for third parties, UVH may acquire
existing senior living facilities. These acquisitions may be effected either
through the exercise of a purchase option obtained on properties which UVH had
developed for third parties or through acquisitions in the open market.
When a facility managed by UVH attains a level of profitability after
the payment of debt service and management fees (usually after stabilized
occupancy in excess of 90% and at times lower depending on the level of debt
service) and UVH has a purchase option, the exercise of UVH's option will be
SERVICES AND AMENITIES
UVH's senior living facilities offer residents a supportive,
"home-like" setting and availability of assistance with assistance in daily
living (ADLs). The independent and assisted living community is very similar in
many respects to conventional apartment living with enhanced services allowing
the residents to live independently but yet socialize in a safe environment.
Residents are individuals who, for a variety of reasons, cannot live alone but
do not typically need the 24-hour skilled medical care provided in skilled
nursing facilities. Services provided or available to these residents are
designed to respond to their individual needs and to improve their quality of
life. This individualized assistance is available 24 hours a day, to meet both
anticipated and unanticipated needs. General services in UVH's residences
include the provision of three meals per day, laundry, housekeeping and
maintenance. Available support services provided by facility staff or outside
agencies include personal and routine nursing care, social and recreational
services, transportation and special services needed by the resident. Personal
care includes assistance with activities such as bathing, dressing, personal
hygiene, grooming, as well as eating and ambulating assistance. Routine nursing
services, which are made available and are provided according to the rindividual
need and state regulatory requirements, include assistance with taking
medication, scare and injections. Organized activities are available for social
interaction and entertainment. Special services available include banking,
grocery shopping and pet care. Although a typical package of basic services
provided to a resident includes meals, housekeeping, laundry and personal care,
UVH does not have a standard service package for all residents. Instead, it is
able to accommodate the changing needs of its residents through the use of
individual service contracts and flexible staffing patterns.
As UVH's residents age, the level of care required by particular
residents is expected to increase. UVH's multi-tiered rate structure for the
services it provides is based upon tacuity of, or level of services needed by,
each resident. Supplemental and specialized health and personal care services
for those residents requiring 24-hour supervision or more extensive assistance
with ADLs is provided to the residents by third-party providers who are
reimbursed directly by the resident or a third-party payor (such as Medicaid or
Medicare). In the event that a resident's acuity reaches a level such that UVH
is unable to meet such resident's needs, UVH maintains relationships with local
hospitals and skilled nursing facilities to facilitate a transfer of the
resident. A resident oUVH's CCRCs would be transferred to the skilled nursing
component at the facility, if there are available beds at such facility.
Phoenix Lifecare Corp., a 501(c)(3) organization, provides home
healthcare services to residents of Whittier and Whitcomb, which are managed by
UVH. Phoenix owns Presidential Care Corp. and Whittier Towers, Inc. and has
agreed to purchase the Hillside Terrace and Whitcomb Tower facilities, subject
to financing being obtained.
The day-to-day operations of each senior living facility are managed by
an on-site administrator who is responsible for the overall operation of the
senior living facility, including
quality of care, marketing, social services and financial performance. The
administrator is assisted by professional and non-professional personnel, some
of whom may be independent providers or part-time personnel, including nurses,
personal service assistants, maintenance and dietary personnel. The routine
nursing services are provided by a nurse who is typically employed by UVH,
subject to state regulatory requirements. The nursing hours vary depending on
the residents' needs. UVH consults with outside providers, such as pharmacists
and dieticians, for purposes of medication review, menu planning and responding
to any special dietary needs of its residents. Personal care, dietary services,
housekeeping and laundry services are performed primarily by personal service
assistants who are full-time employees of UVH. At Whitcomb Tower and Whittier
Towers, which are not licensed to provide personal care or nursing services,
such services are provided by Phoenix Lifecare Corp.
UVH provides management services to each of its senior living
facilities which include the development of operating standards and the
provision of recruiting, training and accounting services. It is anticipated
that, if UVH grows, it will establish regional offices that will include a
regional manager to oversee six to ten senior living facilities. The regional
manager will be responsible for monitoring and supervising all aspects of
operations in the region, including reviewing and monitoring compliance with
corporate policies and procedures and acting as a liaison between the senior
living facilities and corporate headquarters.
Presently, senior living facility personnel are supported by a
corporate staff based at UVH's headquarters. Corporate personnel work with the
on-site administrator with respect to the establishment of senior living
facility goals and strategies, quality assurance oversight, development of UVH
policies and procedures, development and implementation of new programs, cash
management and treasury functions, human resource management and development.
UVH's executive team has been carefully selected based upon each
member's knowledge and experience in the senior living field and related areas.
UVH has sought talented self-starters who are capable of handling many aspects
of the senior living business. UVH believes that asuccessful senior living
facility is operationally related to the hotel/hospitality field and
programmatically related to the residential/social model of healthcare.
UVH's senior living facilities provide affordably priced housing,
personalized support and healthcare services and primarily target private-pay
residents. By targeting senior living facility development projects primarily in
upper middle income communities and by maintaining competitive pricing, UVH
believes it will be able to achieve high occupancy levels. UVH has found an
effective niche in the upper middle income market between the high income
prospect who can afford to obtain services at home and the low income prospect
who cannot afford to lin UVH's senior living facilities.
The marketing of independent living facilities is done through a
combination of media and direct mail advertising, referrals from residents and
various centers of influence (e.g., hospital
administrators, religious leaders, service clubs, attorneys, accountants,
bankers, etc.) and various types of social functions at a senior living
facility. Marketing assisted living facilities is better accomplished through
networking with major referral sources. During the rent-up stage of a project,
the marketing staff would consist of a Director of Marketing, two sales persons,
and a secretary. The senior living facility's administrator would also assist
with special events and market-oriented social affairs. After the senior living
facility is substantially rented, the staff can be reduced to asingle or
part-time Marketing Director and secretary.
PAYING FOR SENIOR LIVING CARE
The residents of CCRCs and assisted living facilities or their families
generally pay the cost of care from their own financial resources. Depending on
the nature of an individual's health insurance program or long-term care
insurance policy, the individual may receive reimbursement for the costs of
Government payments for assisted living outside of a skilled nursing
facility hbeen limited. Some state or local governments offer subsidies for rent
or services for low income elderly. Others may provide subsidies in the form of
additional payment for those who receive SSI payments. Medicaid provides
reimbursement for certain financially or medically needy persons, regardless of
age, and is funded jointly by federal, state and local governments. Medicaid
reimbursement varies from state to state. Only a limited number of states have
Medicaid Waiver programs that allow them to pay for assisted living care.
Without a Medicaid Waiver Program, states can only use federal Medicaid funds
for care in skilled nursing facilities.
GOVERNMENT REGULATION OF SENIOR LIVING FACILITIES
In general, senior living facilities and healthcare services are
subject to egovernment regulation. The senior living facilities owned and
managed by UVH are subject to state regulation and licensing requirements and to
Certificates of Need (CON) or similar statutes under which a proposed operator
must demonstrate public need for skilled nursing beds or assisted living units
and satisfy other criteria. The operators of those facilities must also comply
with any cost reporting or other reporting requirements imposed by the Medicaid
program as well as any reimbursement limitations on amounts that may be charged
to the program or to program beneficiaries. In order to qualify as a state
licensed facility and, where applicable, qualify for Medicaid reimbursement
and/or resident SSI supplemental payments, the senior living facilities owned
and managed by UVH must comply with regulations that address, among other
things, staffing, physical design, required services and resident
characteristics. Such facilities are also subject to various local building
codes and similar ordinances, including fire safety codes. These requirements
vary from state to state and are monitored by varying state and local agencies.
Currently, assisted living facilities are not regulated as such by the
federal government. Current state requirements for assisted living providers in
many states are typically less stringent than the requirements for skilled
nursing facilities. Management anticipates that states that regulate assisted
living facilities, to the extent they do not already do so, will require
licensing as an assisted
living facility and will establish varying requirements with respect to such
licensing. The facilities that UVH intends to develop and manage will apply for
The facilities owned and managed by UVH are subject to periodic survey
or inspection by governmental authorities. From time to time, in the ordinary
course of business a facility may be cited for one or more deficiencies which
are typically addressed in a plan of correction by the facility. UVH believes
that the properties managed by it are in substantial compliance with all
applicable licensing, reimbursement and similar regulatory requirements.
UVH and the facilities it manages are also subject to various state and
federal "fraud and abuse" laws, including "anti-kickback" and "physician
self-referral" laws. UVH believes that properties that it manages are in
material compliance with such laws and regulations.
The laws, rules and regulations which govern UVH, its owned and managed
properties and other persons with whom UVH has relationships are very broad and
are subject to continuing change and interpretation. Thus, it is possible that
certain of the past or present contractual arrangements or business practices of
UVH might be challenged. No assurance can be given that UVH or the facilities
managed by UVH will be able to obtain or maintain the CONs, licenses and
approvals necessary to conduct their current or proposed businesses. Further, no
assurance can be given that federal, state and local laws, rules and regulations
will not be amended or interpreted so as to require UVH or a facility managed by
UVH to change its contracts or practices or to obtain additional CONs, approvals
or licenses to conduct its business as now conducted or as proposed to be
conducted or that UVH or such facility will be able to obtain such CONs,
approvals or licenses. The failure to obtain or maintain requisite CONs,
licenses or approvals or to otherwise comply with existing or future laws, rules
and regulations or interpretations thereof could have a material adverse effect
on UVH's results of operations and financial condition.
The long-term care industry generally is highly competitive and UVH
expects tthe assisted living business in particular will become more competitive
in the future. UVH will be competing with numerous other companies providing
similar long-term care asuch as home health agencies, lifecare at home,
community-based service programs, congregate care communities and convalescent
centers. Providers of senior living facilities compete for residents primarily
on the basis of quality of care, price, reputation, physical appearance of the
facilities, services offered, family preferences, physician referrals and
location. Some of UVH's competitors are significantly larger than UVH and have,
or may obtain, greater resources than tof UVH.
At March 31, 2000 UVH had approximately 287 employees of whom
approximately 131 were full-time employees.
Item 2. Description of Property.
The table below sets forth certain information regarding the properties
owned or managed by UVH :
Independent Assisted Skill Occupancy (%)(a)
Name and Location Living Living Nursing 2000 2001
------------------- --------------- -------- ------- ----------- ----
Hillside Terrace, Ann Arbor, MI (b) 63 12(c) 23 86 87
Olds Manor, Grand Rapids, MI (b) 113 39(c) 44 80 76
Presidential Place, Hollywood, FL (d) 104 NA 15
Whitcomb Tower, St. Joseph, MI (b) 100 34 83 87
Whittier Towers, Detroit, MI 143(e) 50 86(e) NA (e)
PROPERTIES UNDER DEVELOPMENT:
Camelot Cove (f)(g)
North Bergen, NJ 270 30 60
Camelot Village (b)(f) 120
Camelot Village (b)
Huntington, NY 120
Orchard Terrace(b)(f) 64
Ann Arbor, MI
(a) Percentage of units available for occupancy as of March 31, 2000 and 2001.
(b) Owned by UVH.
(c) These units currently licensed as Homes for the Aged.
(d) Occupancy commenced in November 2000.
(e) This represents units available for occupancy at March 31, 2000, a
reduction from 205 units at March 31, 1999. This facility was closed in
(f) Subject to funding being secured.
(g) Owned in part by UVH.
HILLSIDE TERRACE. Hillside Terrace is a CCRC located in Ann Arbor,
Michigan, approximately 30 miles from Detroit. The facility is located 1.5 miles
from downtown Ann Arbor, the main business district and home to the University
of Michigan, which enables residents to attend nearby cultural and athletic
events. Hillside Terrace was built in 1969 and was renovated in 1994. The
facility currently has 75 apartment units and 23 nursing beds, and a 64-unit
expansion has been approved by the city of Ann Arbor. This will facilitate the
conversion of a majority of the existing independent living apartment units to
assisted living units.
OLDS MANOR. Olds Manor is a CCRC located in Grand Rapids, Michigan.
Olds Manor was built as a hotel in the 1920s but was renovated in the 1960s for
use as a retirement center and nursing facility. Olds Manor borders the central
business district of Grand Rapids, adjacent to the Post Office and across the
street from city and county administrative offices. UVH estimates ____ that Olds
Manor needs approximately $1 million for deferred maintenance.
WHITCOMB TOWER. Whitcomb Tower is an independent living facility with
assisted living services, as required, provided by the outside home care
agencies of the residents' choice, located in downtown St. Joseph, Michigan,
which is on Lake Michigan at the mouth of the St. Joseph River. St. Joseph's
population, approximately 80,000 residents, and proximity to four cosmopolitan
cities, make Whitcomb Tower accessible to a large population and secondary
market. St. Joseph is 85 miles from Chicago, 195 miles from Detroit, 80 miles
from Grand Rapids, Michigan and 35 miles from South Bend, Indiana. Whitcomb
Tower, formerly a hotel, was built in 1928. It was renovated in 1973 and in
WHITTIER TOWERS. Whittier Towers, located in Detroit, Michigan, was
built in the 1920s and renovated in 1972 and 1989. UVH estimates that Whittier
Towers needs approximately $1.5 million for deferred maintenance. The Whittier
closed down operations in April 2001 and is in the process of being sold.
PROJECTS IN DEVELOPMENT
To provide the appropriate level of personal care efficiently and
economically, UVH intends to develop, subject to the availability of additional
capital resources, for itself or on behalf of others, or acquire assisted living
facilities generally ranging in size from 80 to 120 units. UVH has developed a
prototype assisted living facility. It is anticipated that the prototype aliving
facility will be built on the Properties under Development listed on the
preceding page and other qualified sites presently being negotiated. Each
assisted living facility will generally be built on a parcel of land ranging in
size from 3 to 10 acres and will contain approximately 70,000 to 105,000 square
feet. Approximately 40 percent of the building will be devoted to common areas
and amenities, including reading rooms, family or living rooms and other areas
designed to promote social interaction among residents. These areas will be
located primarily in a basic central core structure which is essentially
repeatable in all of UVH's proposed facilities. Modular wings of similar design
are added to the central core, depending upon the size of the facility.
Tbuilding is usually two or three stories and of either steel frame or masonry
construction built to institutional healthcare standards but strongly
residential in appearance. The interior layout is designed to
promote a "home-like" environment, efficient delivery of resident care and
resident independence. Each residential unit will be between approximately 375
to 550 square feet and is expected to cost approximately $60,000 to $90,000 to
construct, depending upon construction costs which vary from state to state.
Resident units in UVH's prototype assisted living facility are
functionally arranged in eight to twelve apartment clusters surrounding a
"neighborhood" living area in order to foster social interaction between
residents. UVH's prototype may be configured with several dtypes of resident
units, including a mix of one- and two-bedroom suites and large studio or alcove
apartments. All units have a small kitchen and roll-in showers for easy
wheelchair access. The ground level typically contains a kitchen and common
dining area, administrative offices, exercise or physical therapy room, arts and
crafts, beauty salon, laundry room, a private dining room, library, living room,
and TV room. Typically, one floor or one or two wings of a facility contain
resident units and common areas, including separate dining facilities,
specifically designed to serve residents with cognitive impairments (e.g.,
Alzheimer's disease) or other special needs.
CCRCs will generally be built on a parcel of land ranging from 10 to 30
acres and will contain from 150 to 200 units with an average size independent
living unit of between 900 and 1,000 square feet. The cost will average between
$100,000 and $200,000 per independent living uEach CCRC will be tailored to the
specific needs of each site selected.
In order to increase the number of senior living facilities UVH
develops and manages for itself or on behalf of others, UVH may enter into an
agreement with an affiliated or unaffiliated third-party entity, which may be a
limited liability company or 501(c)(3) organization, to develop a senior living
facility for such entity. UVH would generally attempt to obtain a management
agreement to operate the facility upon its completion as well as a fair market
value option to purchase the facility at a future time. Through this type of
transaction, if the third-party entity is adequately financed, UVH would not
incur the start-up development costs and operating losses typically associated
with the development and initial operation of a senior living facility because
UVH would not be the owner. However, prior to entering into such agreement, UVH
may incur certain initial expenses associated with its site selection process.
UVH would earn a development fee for the dof the senior living facility and a
management fee for its operation and might exercise its option, if any, to
purchase the senior living facility. The third-party entity would benefit
through the attainment of a turnkey senior living facility. To date, neither UVH
nor any of the 501(c)(3) organizations involved with UVH has received any
inquiry or comment from any regulatory authority with respect to its contractual
arrangements with 501(c)(3) organizations.
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
As of March 31, 2000, Hillside Terrace, Inc., the owner of Hillside
Terrace, which is managed by UVH, was indebted to Great-West Life & Annuity
Insurance Company ("GWL") in taggregate principal amount of approximately $2.2
million. Such indebtedness is secured by a first mortgage
on Hillside Terrace. As of March 31, 2000, Whitcomb Tower Corporation, the owner
of Whitcomb Tower, which is managed by UVH, was indebted to GWL in the aggregate
principal amount of approximately $2 million. Such indebtedness is secured by a
first mortgage on Whitcomb Tower. The payment of principal and interest on each
of the foregoing first mortgages has bguaranteed by Vanguard. In addition, as of
March 31, 2000, Whittier Towers, Inc., the owner of Whittier Towers, was
indebted to GWL in the aggregate principal amount of approximately $4 million.
Such indebtedness is secured by a first mortgage on Whittier Towers. Each of the
foregoing first mortgages is due December 31, 2001 and bears interest at 9
percent per annum. The first mortgage encumbering Whittier Towers provides that
a default under such loan is also a default under both of the first mortgages
encumbering Hillside Terrace and Whitcomb Tower. Consequently, a default under
the first mortgage encumbering Whittier Towers could result in the foreclosure
of Hillside Terrace and Whitcomb Tower. The restrictions and cross collateral
provisions of Whittier Towers mortgage will be eliminated if Whittier Towers is
sold and the GWL mortgage on the property satisfied.
In the event that any of Whittier Towers, Inc., Whitcomb Tower
Corporation, or Hillside Terrace, Inc. sells, conveys, transfers, pledges or
further encumbers its property wthe prior written consent of GWL, then GWL has
the right to declare due and payable the entire balance of the unpaid principal
with accrued and unpaid interest due thereon, plus the prepayment premium
provided in the promissory note related to its mortgage.
Olds Manor, Inc. has agreed that prior to the date on which the loans
of GWL to Whittier Towers, Inc., Whitcomb Tower Corporation, and Hillside
Terrace, Inc. are repaid in full, Olds Manor, Inc. will not, without the prior
written consent of GWL, sell, assign, transfer, or otherwise dispose of or
encumber the Olds Manor retirement facility.
Hillside Terrace, Whittier Towers, and Whitcomb Tower are required to
deposit all net operating income from the mortgaged properties into a reserve
account, which account is being used to fund property improvements and certain
other expenditures. The Reserve Account also has been pledged to GWL as
additional security for repayment of the GWL loans.
OLD KENT BANK
As of March 31, 2000, Olds Manor, Inc., a wholly-owned subsidiary of
UVH and the owner of Olds Manor, was indebted to Old Kent Bank ("Old Kent") in
the aggregate principal amount of $94,382. Such indebtedness was secured by a
first mortgage lien on Olds Manor. Tloan was paid in full in February 2001.
OLDS MANOR MORTGAGE TRUST
As of March 31, 2000, Olds Manor, Inc. was indebted to Olds Manor
Mortgage Tin the aggregate principal amount of $360,000. Such obligation is
secured by a mortgage on Olds Manor that is subordinate to the first mortgage on
Olds Manor held by Old Kent. The loan bears interest at prime plus 3 percent per
annum, is due in 2000, and is convertible into shares of UVH's Common
Stock . UVH is the guarantor of the Olds Manor Mortgage Trust certificates. The
Olds Manor Trust mortgage has routine covenants respecting payment of taxes,
insurance, repairs, etc., except that Olds Manor, Inc. cannot permit any
increase of the principal of the Old Kent Mortgage without the consent of the
trustee of the Olds Manor Mortgage Trust. The trustee is Carl G. Paffendorf, the
Chief Executive Officer of UVH.
WHITCOMB MORTGAGE TRUST
As of March 31, 2000, Whitcomb Tower Corporation was indebted to
Whitcomb Mortgage Trust in the aggregate principal amount of $850,000. Such
obligation is secured by a mortgage on Whitcomb Tower that is subordinate to the
first mortgage on Whitcomb Tower held by GWL. The loan bears interest at 12
percent per annum, is currently due and is convertible into shares of UVH's
Common Stock. UVH is guarantor of the Whitcomb Mortgage Trust certificates. The
Whitcomb Trust mortgage is subordinate to GWL's mortgage. Whitcomb Tower Trust
mortgage has routine covenants respecting payment of taxes, insurance, repairs,
etc., except that Whitcomb Tower Corporation cannot permit any increase of the
principal of the GWL mortgage without the consent of the trustee of Whitcomb
Mortgage Trust. The trustee is Carl G. Paffendorf.
At March 31, 2000 UVH's property in Hicksville, New York was encumbered
by a $750,000 mortgage held by Rome Savings Bank, with interest only payable
monthly at 7.5 percent per annum, due July 1, 2000. The due date of this loan,
$675,000 in principal amount as of March 31, 2001, has been extended to April 1,
2002, with interest only payable monthly at 8.75 percent per annum.
UVH's property in Huntington, New York is encumbered by a $23,000,000
mheld by the Bank of New York, issued to secure an industrial revenue bond
issue, which bonds are payable in installments due through 2031.
MERCURY CAPITAL CORP.
In February 2001 Mercury Capital Corp. made a $1.2 million loan to
Hillside Terrace, Inc., Olds Manor, Inc., Whitcomb Tower Corp. and Whittier
Towers, Inc. The loan is secured by a first priority mortgage on the Olds Manor
property in Grand Rapids, Michigan, a smortgage on Whitcomb Tower, and by the
stock of the four corporations that own the four Michigan properties: Hillside
Terrace, Olds Manor, Whitcomb Tower, and Whittier Towers. UVH has guaranteed the
loan. The loan is due on March 1, 2002 with certain mandatory prepayments
required if any of the four Michigan properties are sold.
Item 3. Legal Proceedings. UVH is not a party to any material legal proceedings.
Item 4. Submission of Matters to a Vote of Security Holders. Not applicable.