-----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, RfRJrTjnshTa4vVrLzjN3S8K4i2d7Uhc+6qONNLjou0Myn/jL6Ix4HUuH+Uui1TD OMQzwY+G6ITAIu4c9cfmPQ== 0000705752-97-000018.txt : 19971115 0000705752-97-000018.hdr.sgml : 19971115 ACCESSION NUMBER: 0000705752-97-000018 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971113 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: GROWTH HOTEL INVESTORS CENTRAL INDEX KEY: 0000769129 STANDARD INDUSTRIAL CLASSIFICATION: HOTELS & MOTELS [7011] IRS NUMBER: 942964750 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-15347 FILM NUMBER: 97717144 BUSINESS ADDRESS: STREET 1: 1 INSIGNIA FINANCIAL PLAZA PO BOX 1089 STREET 2: C/O INSIGNIA FINANCIAL GROUP INC CITY: GREENVILLE STATE: SC ZIP: 29602 BUSINESS PHONE: 8032391000 MAIL ADDRESS: STREET 1: 1 INSIGNIA FINANCIAL PLAZA PO BOX 1089 STREET 2: C/O INSIGNIA FINANCIAL GROUP INC CITY: GREENVILLE STATE: SC ZIP: 29602 FORMER COMPANY: FORMER CONFORMED NAME: MRI BUSINESS HOTEL INVESTORS 85 DATE OF NAME CHANGE: 19850819 10-Q 1 FORM 10-Q--QUARTERLY REPORT UNDER SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934 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 September 30, 1997 [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period.........to......... Commission file number 0-15347 GROWTH HOTEL INVESTORS (Exact name of registrant as specified in its charter) California 94-2964750 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) One Insignia Financial Plaza Greenville, South Carolina 29602 (Address of principal executive offices) (Zip Code) (864) 239-1000 (Issuer's phone number) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Exchange Act 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 X . No . PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS a) GROWTH HOTEL INVESTORS CONSOLIDATED BALANCE SHEET (in thousands, except unit data) September 30, December 31, 1997 1996 (Unaudited) (Note) Assets Cash and cash equivalents $ 2,635 $ 4,644 Restricted cash -- 268 Deferred costs -- 652 Receivables and other assets 23 189 Investment in unconsolidated joint venture 4,199 7,767 Investment properties: Land -- 3,098 Buildings and related personal property -- 21,479 -- 24,577 Less accumulated depreciation -- (9,675) -- 14,902 Total assets $ 6,857 $28,422 Liabilities and Partners' Equity (Deficit) Accounts payable and other liabilities $ 401 $ 523 Notes payable -- 5,412 Minority interest in joint ventures -- 42 Partners' Equity (Deficit): General partner -- (965) Limited partners' (36,932 units outstanding at September 30, 1997 and December 31, 1996) 6,456 23,410 Total partners' equity 6,456 22,445 Total liabilities and partners' equity $ 6,857 $28,422 Note: The balance sheet at December 31, 1996 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. See Notes to Consolidated Financial Statements b) GROWTH HOTEL INVESTORS CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (in thousands, except unit data) Three Months Ended Nine Months Ended September 30, September 30, 1997 1996 1997 1996 Revenues: Hotel operations $ (11) $ 2,323 $ 3,658 $ 6,046 Equity in unconsolidated joint venture operations 1,605 614 17,619 1,759 Interest income 52 33 145 101 Gain on sale of investment properties (4) -- 3,790 -- Total revenues 1,642 2,970 25,212 7,906 Expenses: Hotel operations 109 1,428 2,571 3,849 Interest -- 150 280 495 Depreciation -- 236 562 668 General and administrative 246 138 547 519 Litigation settlement -- -- 583 -- Total expenses 355 1,952 4,543 5,531 Net income before minority interest in joint ventures' operations 1,287 1,018 20,669 2,375 Minority interest in joint ventures' operations -- 11 42 20 Net income $ 1,287 $ 1,029 $20,711 $ 2,395 Net income allocated to general partners $ 914 $ 71 $ 1,934 $ 166 Net income allocated to limited partners 373 958 18,777 2,229 $ 1,287 $ 1,029 $20,711 $ 2,395 Net income per limited partnership unit $ 10.10 $ 25.94 $508.42 $ 60.35 See Notes to Consolidated Financial Statements c) GROWTH HOTEL INVESTORS CONSOLIDATED STATEMENT OF PARTNERS' (DEFICIT) EQUITY (Unaudited) (in thousands, except unit data) Limited General Limited Partnership Partner's Partners' Total Units Deficit Equity Equity Original capital contributions 36,932 $ -- $ 36,932 $ 36,932 Partners' (deficit) equity at December 31, 1996 36,932 $ (965) $ 23,410 $ 22,445 Net income for the nine months ended September 30, 1997 -- 1,934 18,777 20,711 Cash distributions for the nine months ended September 30, 1997 -- (969) (35,731) (36,700) Partners' equity at September 30, 1997 36,932 $ -- $ 6,456 $ 6,456 See Notes to Consolidated Financial Statements d) GROWTH HOTEL INVESTORS CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited) (in thousands) Nine Months Ended September 30, 1997 1996 Cash flows from operating activities: Net income $ 20,711 $ 2,395 Adjustments to reconcile net income to cash provided by operating activities: Depreciation and amortization 604 733 Equity in unconsolidated joint venture operations (17,629) (1,759) Minority interest in joint ventures' operations (42) (20) Gain on sale of investment properties (3,790) -- Change in accounts: Accounts receivables and other assets 140 (55) Accounts payable and other liabilities (122) 151 Net cash (used in) provided by operating activities (128) 1,445 Cash flows from investing activities: Property improvements and replacements (1,201) (761) Unconsolidated joint venture distributions 21,197 1,473 Restricted cash decrease (increase) 268 (63) Net proceeds from sale of investment properties 19,967 -- Net cash provided by investing activities 40,231 649 Cash flows from financing activities: Cash distributions to partners (36,700) (794) Notes payable principal payments (13) (16) Repayment of notes payable (5,399) -- Net cash used in financing activities (42,112) (810) Net (decrease) increase in cash and cash equivalents (2,009) 1,284 Cash and cash equivalents at beginning of period 4,644 3,600 Cash and cash equivalents at end of period $ 2,635 $ 4,884 Supplemental information: Cash paid for interest $ 317 $ 445 See Notes to Consolidated Financial Statements e) GROWTH HOTEL INVESTORS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) NOTE A - BASIS OF PRESENTATION The accompanying unaudited consolidated financial statements of Growth Hotel Investors (the "Partnership") have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of NPI Realty Management Corp. (the "Managing General Partner" or "NPI Realty"), all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and nine month periods ended September 30, 1997, are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 1997. For further information, refer to the financial statements and footnotes thereto included in the Partnership's annual report on Form 10-K for the year ended December 31, 1996. Certain reclassifications have been made to the 1996 information to conform to the 1997 presentation. NOTE B - TRANSACTIONS WITH AFFILIATED PARTIES The Partnership has no employees and is dependent on the Managing General Partner and its affiliates for the management and administration of all partnership activities. The Partnership Agreement provides for payments to affiliates for services and as reimbursement of certain expenses incurred by affiliates on behalf of the Partnership. The general partner of the Partnership is Montgomery Realty Company-85 ("MRC- 85"), a California general partnership. The general partners of MRC-85 are Fox Realty Investors ("FRI"), a California general partnership, and NPI Realty. On February 13, 1996, NPI Realty, which acquired its interest in MRC-85 from Montgomery Realty Corporation on November 15, 1995, became the managing general partner of MRC-85. On January 19, 1996, all of the issued and outstanding shares of stock of National Property Investors, Inc. ("NPI"), the sole shareholder of both NPI Equity Investments II, Inc. ("NPI Equity"), the managing general partner of FRI, and NPI Realty was acquired by an affiliate of Insignia Financial Group, Inc. ("Insignia"). In connection with these transactions, affiliates of Insignia appointed new officers and directors of NPI Equity and NPI Realty. The following transactions with affiliates of the Managing General Partner were charged to expense in 1997 and 1996: For the Nine Months Ended September 30, 1997 1996 (in thousands) Reimbursement for services of affiliates (primarily included in general and administrative expenses) $ 93 $180 In accordance with the Partnership Agreement, the general partner receives cash distributions as follows: (a) a partnership management incentive not to exceed ten percent, determined on a cumulative, noncompounded basis, of cash from operations available for distribution (as defined in the partnership agreement) distributed to partners, and (b) a continuing interest representing a two percent share of cash distributions, after allocation of the partnership management incentive. A portion of the partnership management incentive is subordinated to certain cash distributions to the limited partners. Cash distributions to the general partner for the periods ended September 30, 1997 and 1996 are as follows: 1997 1996 (in thousands) Partnership management incentive $239 $ 40 Continuing interest 80 15 Sales proceeds 650 -- Total $969 $ 55 NOTE C - DISTRIBUTIONS The Partnership made distributions in May 1997 and June 1996, of approximately $794,000, including $739,000 distributed to the limited partners ($20 per limited partnership unit) and $55,000 to the general partner. A cash distribution of approximately $35,906,000 was made in July 1997 from cash from operations and sales proceeds (see "Note E"). Approximately $34,992,000 was distributed to the limited partners and approximately $914,000 was distributed to the general partner. NOTE D - INVESTMENT IN UNCONSOLIDATED JOINT VENTURE The following are the condensed balance sheets as of September 30, 1997, and December 31, 1996, and condensed statements of operations for the three and nine month periods ended September 30, 1997 and 1996, for the Partnership's investment in Growth Hotel Investors Combined Fund No. 1 (the "Combined Fund"), which is reported under the equity method of accounting. CONDENSED BALANCE SHEETS (in thousands) September 30, December 31, 1997 1996 (Unaudited) (Note) Assets Cash and cash equivalents $ 6,850 $ 2,228 Restricted cash -- 3 Deferred costs and other assets -- 1,108 Investment Properties Land -- 10,369 Buildings and related personal property -- 79,891 -- 90,260 Less accumulated depreciation -- (31,400) -- 58,860 Total assets $ 6,850 $ 62,199 Liabilities and Partners' Equity Liabilities Accounts payable and other liabilities $ 5,428 $ 1,337 Due to an affiliate of the joint venture partner 26 827 Notes payable -- 40,185 Minority interest in consolidated joint venture (9,672) (5,268) Partners' Equity GHI 4,198 7,767 GHI II 6,870 17,351 Total partners' equity 11,068 25,118 Total Liabilities and Partners' Equity $ 6,850 $ 62,199 Note: The balance sheet at December 31, 1996 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. CONDENSED STATEMENTS OF OPERATIONS (Unaudited) (in thousands, except unit data) Three Months Ended Nine Months Ended September 30, September 30, 1997 1996 1997 1996 Revenues $ 434 $ 10,607 $ 18,578 $ 29,793 Gain on sale of investment properties 5,569 -- 54,322 -- Expenses (1,070) (8,570) (17,084) (24,537) Income before minority interest in joint venture's operations 4,933 2,037 55,816 5,256 Minority interest in joint venture's operations 126 (102) (293) 287 Net income $ 5,059 $ 1,935 $ 55,523 $ 5,543 Allocation of income: GHI $ 1,595 $ 614 $ 17,619 $ 1,759 GHI II 3,464 1,321 37,904 3,784 Net income $ 5,059 $ 1,935 $ 55,523 $ 5,543 NOTE E - SALE OF PROPERTIES On June 24, 1997, the Partnership sold all of its investment properties, consisting of the Hampton Inn-Brentwood, and Hampton Inn-Albuquerque for a sales price of approximately $13,213,000. The Partnership has a controlling interest in two joint venture partnerships, Aurora/GHI Associates No. 1, and North Coast Syracuse Limited Partnership. The Partnership has a non-controlling interest in the joint venture Growth Hotel Investors Combined Fund No. 1. On June 24, 1997, Aurora/GHI Associates No. 1 sold its investment property, Hampton Inn-Aurora for a purchase price of approximately $4,546,000. Additionally, North Coast Syracuse Limited Partnership sold its investment property, Hampton Inn-Syracuse for a sales price of approximately $1,953,000. Finally, on June 24, 1997, Hampton/GHI Associates No. 1 ("Hampton/GHI"), a joint venture in which Growth Hotel Investors Combined Fund No. 1 owns 80% sold 17 of its 18 investment properties, Hampton Inn-Memphis-I-40, Hampton Inn-Columbia West, Hampton Inn- Spartanburg, Hampton Inn-Little Rock, Hampton Inn-Amarillo, Hampton Inn- Greenville, Hampton Inn-Charleston, Hampton Inn-Memphis-Poplar, Hampton Inn- Greensboro, Hampton Inn-Birmingham, Hampton Inn-Atlanta, Hampton Inn-Chapel Hill, Hampton Inn-Dallas, Hampton Inn-Nashville, Hampton Inn-San Antonio, Hampton Inn-Madison Heights, Hampton Inn-Northlake for a purchase price of approximately $105,936,000. The investment properties were sold to an unrelated third party, Equity Inns Partnership, L.P., a Tennessee limited partnership. The properties were sold in accordance with the settlement of the class action lawsuit brought in connection with the tender offer made by Devon Associates (discussed in Item 3 of the Partnership's Annual Report on Form 10-K for the period ending December 31, 1996). Hampton/GHI's last hotel property, the Hampton Inn-Mountain Brook, was sold on August 1, 1997 for a sales price of $8,651,000. The aggregate sale price for all 22 properties was approximately $134,300,000. The Partnership received net proceeds, after satisfaction of outstanding indebtedness and closing costs, from the sale of its investment properties of approximately $14,568,000. In addition, the Partnership received approximately $21,197,000 from its unconsolidated joint venture in distributions from operations and the sale of its properties. The Partnership made a distribution of $31,782,000 ($860.55 per unit) to its limited partners and approximately $650,000 to the General Partners from these net proceeds in July 1997. It is anticipated that the Partnership will be dissolved during the fourth quarter of 1997 and the remaining proceeds, after establishment of sufficient reserves, will be distributed to the partners. In connection with the sale of Hampton/GHI of its properties, the Partnership's joint venture partner, Hampton Inns, Inc. ("Hampton"), was to be distributed a portion of the net sale proceeds. However, pursuant to the terms of the Hampton/GHI Joint Venture Agreement, Hampton is obligated to contribute to Hampton/GHI an amount equal to the deficit of its capital account, which amount is in excess of the amount to be distributed to Hampton. As a result, the Partnership set aside as a reserve the amount which otherwise would have been distributed to Hampton. Hampton/GHI received such payment from Hampton for its deficit restoration obligation on November 5, 1997 in the amount of approximately $9,093,000. It is expected that this amount, after establishment of reserves, will be distributed by the Partnership prior to year end, at which time the Partnership will be dissolved. The Partnership recognized a gain of approximately $3,790,000 due to the sale of its investment properties and the properties in which the Partnership had a controlling interest. In addition, the Partnership was allocated approximately $17,238,000 from its unconsolidated joint venture, Growth Hotel Investors Combined Fund No. 1, from the sale of the joint venture's properties. Pursuant to the terms of the settlement agreement with respect to the class actions brought by limited partners of the Partnership and Growth Hotel Investors II ("GHI II"), an affiliated partnership, against among others, the Partnership, GHI II and their general partners, the Partnership and GHI II were required to pay the plaintiffs' attorneys' fees associated with such actions. As a result, an aggregate of $1,800,000 ($583,000 of which is allocable to the Partnership) was paid in the third quarter of 1997. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS On June 24, 1997 and August 1, 1997, the Partnership sold all of its investment properties and all of its joint venture properties as discussed in "Note E - Sale of Properties." Cash distributions were made in the second quarters of 1997 and 1996 totaling approximately $794,000 each. Approximately $739,000 was paid to the limited partners and approximately $55,000 was distributed to the general partner. A cash distribution of approximately $35,906,000 was made in July 1997 from cash from operations and sales proceeds. Approximately $34,992,000 was distributed to the limited partners and approximately $914,000 was distributed to the general partner. It is anticipated that the Partnership will be dissolved during the fourth quarter of 1997 and the remaining proceeds, after establishment of sufficient reserves, will be distributed to the partners. In this regard, it should be noted that in connection with the sale of Hampton/GHI of its properties, the Partnership's joint venture partner, Hampton Inns, Inc. ("Hampton"), was to be distributed a portion of the net sale proceeds. However, pursuant to the terms of the Hampton/GHI Joint Venture Agreement, Hampton is obligated to contribute to Hampton/GHI an amount equal to the deficit of its capital account, which amount is in excess of the amount to be distributed to Hampton. As a result, the Partnership set aside as a reserve the amount which otherwise would have been distributed to Hampton. Hampton/GHI received such payment from Hampton for its deficit restoration obligation on November 5, 1997, in the amount of approximately $9,093,000. The Partnership's net income for the three and nine month periods ended September 30, 1997, was approximately $1,287,000 and $20,711,000, respectively, compared to net income of approximately $1,029,000 and $2,395,000, respectively, for the corresponding periods of 1996. The increase in net income is primarily attributable to the increase in revenue from the Partnership's unconsolidated joint venture due to the sale of the eighteen properties in the joint venture. The Partnership was allocated approximately $17,238,000 of the gain from the sale of these properties. Also contributing to the increase in net income is the gain on sale of investment properties due to the sale of the Partnership's investment properties. Net income also increased due to decreases in hotel operations expense and depreciation expense due to the sale of all of the Partnership's investment properties. In addition, interest expense decreased and interest income increased. The decrease in interest expense is due to the payoff of the mortgages encumbering Hampton Inn-Albuquerque and Hampton Inn- Aurora. The increase in interest income is related to an increase in interest- bearing reserves. Offsetting the above increases to net income are a decrease in hotel operations revenue and an increase in litigation settlement expense. The decrease in hotel operations revenue is due to the sale of all of the Partnership's investment properties. The litigation settlement in 1997 relates to amounts paid in connection with the legal settlement as discussed in "Note E- Sale of Properties". The change in minority interest in joint ventures' operations is due to the sale of the Hampton Inn-Aurora. (See "Note E- Sale of Properties" for more information relating to these sales.) At September 30, 1997, the Partnership had cash and cash equivalents of approximately $2,635,000 as compared to approximately $4,884,000 at September 30, 1996. The change from net cash provided by operations to net cash used in operations is due to a decrease in accounts payable and other liabilities as the result of timing of payments and due to the decrease in operating income related to the sale of the Partnership's investment properties. Net cash provided by investing activities increased due to the receipt of approximately $19,967,000 in net proceeds from the sale of investment properties sold during the second quarter of 1997, as discussed above. In addition, unconsolidated joint venture distributions increased due to the sale of the joint venture's eighteen properties. Net cash used in financing activities increased due to the distribution of approximately $35,906,000 in July 1997 from sales proceeds and the payoff of the mortgages encumbering Hampton Inn-Albuquerque and Hampton Inn- Aurora. PART II - OTHER INFORMATION ITEM 1. LEGAL Pursuant to the terms of the settlement agreement with respect to the class actions brought by limited partners of the Partnership and Growth Hotel Investors II ("GHI II"), an affiliated partnership, against among others, the Partnership, GHI II and their general partners, the Partnership and GHI II were required to pay the plaintiffs' attorneys' fees associated with such actions. As a result, an aggregate of $1,800,000 ($583,000 of which is allocable to the Partnership) was paid in the third quarter of 1997. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K a) Exhibits: Exhibit 27, Financial Data Schedule, is filed as an exhibit to this report. b) Reports on Form 8-K: None were filed during the quarter ended September 30, 1997. SIGNATURES 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. GROWTH HOTEL INVESTORS By: MONTGOMERY REALTY COMPANY 85, its general partner By: NPI REALTY MANAGEMENT CORP. MANAGING GENERAL PARTNER By: /s/William H. Jarrard, Jr. William H. Jarrard, Jr. President and Director By: /s/Ronald Uretta Ronald Uretta Principal Financial Officer and Principal Accounting Officer Date: November 13, 1997 EX-27 2
5 This schedule contains summary financial information extracted from Growth Hotel Investors 1997 Third Quarter 10-Q and is qualified in its entirety by reference to such 10-Q filing. 0000769129 GROWTH HOTEL INVESTORS 1,000 9-MOS DEC-31-1997 SEP-30-1997 2,635 0 0 0 0 0 0 0 6,857 0 0 0 0 0 6,456 6,857 0 25,212 0 0 4,543 0 280 0 0 0 0 0 0 20,711 508.42 0 Registrant has an unclassified balance sheet. Multiplier is 1.
-----END PRIVACY-ENHANCED MESSAGE-----