-----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, H+P64U0bPnSZauTCPKQZIDqbJNvpVTpnKdIe26Z0jG/hM9mOoygbWqdj51Jut5e/ i/gbk+G08Gpcd9H8KZ+HCg== 0000769129-98-000007.txt : 19980518 0000769129-98-000007.hdr.sgml : 19980518 ACCESSION NUMBER: 0000769129-98-000007 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980515 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: 98624467 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 U.S. 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, 1998 [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period.........to......... (Amended by Exchange Act Rel. No. 312905, eff. 4/26/83) 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) (864) 239-1000 (Issuer's phone 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 I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS a) GROWTH HOTEL INVESTORS STATEMENT OF NET ASSETS IN LIQUIDATION (in thousands) March 31, December 31, 1998 1997 (Unaudited) (Note) Assets Cash and cash equivalents $2,502 $2,562 Escrow receivable 1,613 1,595 4,115 4,157 Liabilities Accounts payable and state withholding taxes payable 502 522 Distribution payable to general partner 502 502 Estimated costs during the period of liquidation 91 130 1,095 1,154 Net Assets in liquidation $3,020 $3,003 Note: The Statement of Net Assets in Liquidation at December 31, 1997, 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 STATEMENT OF CHANGES IN NET ASSETS IN LIQUIDATION (Unaudited) Three Months Ended March 31, 1998 (in thousands) Net assets in liquidation at beginning of period $ 3,003 Changes in net assets in liquidation attributed to: Decrease in cash and cash equivalents (60) Increase in escrow receivables 18 Decrease in accounts payable and state withholding taxes payable 20 Decrease in estimated costs during the period of liquidation 39 Net assets in liquidation at end of period $ 3,020 See Notes to Consolidated Financial Statements c) GROWTH HOTEL INVESTORS CONSOLIDATED STATEMENT OF OPERATIONS Three Months Ended March 31, 1997 (Unaudited) (in thousands, except unit data) Revenues: Hotel operations $ 1,689 Equity in unconsolidated joint venture operations 221 Interest income 47 Total revenues 1,957 Expenses: Hotel operations 1,166 Interest 149 Depreciation 265 General and administrative 113 Total expenses 1,693 Net income before minority interest in joint ventures' operations 264 Minority interest in joint ventures' operations 14 Net income allocated to general partners $ 19 Net income allocated to limited partners 259 Net income $ 278 Net income per limited partnership unit $ 7.00 See Notes to Consolidated Financial Statements d) GROWTH HOTEL INVESTORS CONSOLIDATED STATEMENT OF PARTNERS' EQUITY (DEFICIT) (Unaudited) Three Months Ended March 31, 1997 (in thousands, except unit data) Limited General Limited Partnership Partners' 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 three months ended March 31, 1997 19 259 278 Partners' (deficit) equity at March 31, 1997 36,932 $ (946) $23,669 $22,723 See Notes to Consolidated Financial Statements e) GROWTH HOTEL INVESTORS CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited) Three Months Ended March 31, 1997 (in thousands) Cash flows from operating activities: Net income $ 278 Adjustments to reconcile net income to cash provided by operating activities: Depreciation and Amortization 286 Equity in unconsolidated joint venture operations (221) Minority interest in joint ventures' operations (14) Change in accounts: Accounts receivables and other assets (57) Accounts payable and other liabilities (78) Net cash provided by operating activities 194 Cash flows from investing activities: Property improvements and replacements (540) Restricted cash decrease (30) Net cash used in investing activities (570) Cash flows from financing activities: Notes payable principal payments (8) Net cash used in financing activities (8) Net decrease in cash and cash equivalents (384) Cash and cash equivalents at beginning of period 4,644 Cash and cash equivalents at end of period $ 4,260 Supplemental information: Interest paid $ 114 See Notes to Consolidated Financial Statements f) GROWTH HOTEL INVESTORS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) NOTE A - BASIS OF PRESENTATION On February 15, 1996, Devon Associates, a New York general partnership, commenced a tender offer (the "Offer") for up to 15,000 of the outstanding Limited Partnership Units ("the Units") at a purchase price of $705.00 per Unit. An affiliate of the Managing General Partner has an interest in Devon Associates. Devon Associates acquired 13,401 Units with respect to this offer. The Partnership sold its investment properties on June 24, 1997 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. As a result of the decision to liquidate the Partnership, the Partnership changed its basis of accounting for its financial statements at December 31, 1997 to the liquidation basis of accounting. Consequently, assets have been valued at their estimated net realizable value and liabilities are presented at their estimated settlement amounts, including estimated costs associated with carrying out the liquidation. The valuation of assets and liabilities necessarily requires many estimates and assumptions and there are substantial uncertainties in carrying out the liquidation. The actual realization of assets and settlement of liabilities could be higher or lower than amounts indicated and is based upon the Managing General Partner's estimates as of the date of the financial statements. The statement of net assets in liquidation as of March 31, 1998, includes approximately $91,000 of accrued costs, net of income, that the Managing General Partner estimates will be incurred during the period of liquidation, based on the assumption that the liquidation process will be completed during 1998. These costs principally include legal and administrative expenses. Because the success in realization of assets and the settlement of liabilities is based on the General Partner's best estimates, the liquidation period may be shorter than projected or it may be extended beyond the projected period. NOTE B - 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 $13,502,000. 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 $4,830,000. Additionally, North Coast Syracuse Limited Partnership sold its investment property, Hampton Inn-Syracuse for a sales price of approximately $2,294,000. 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 $107,576,000. 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. Hampton/GHI's last hotel property, the Hampton Inn-Mountain Brook, was sold on August 1, 1997 for a sales price of $8,758,000. The aggregate sale price for all 22 properties was approximately $136,960,000. The Partnership received net proceeds, after satisfaction of outstanding indebtedness and closing costs, from the sale of its investment properties of approximately $14,411,000. In addition, the Partnership received approximately $26,207,000 from its unconsolidated joint venture in distributions from operations and the sale of its properties. The Partnership made aggregate distributions of $32,720,000 ($885.95 per unit) to its limited partners and approximately $668,000 to the General Partners from these net proceeds in 1997. It is anticipated that the Partnership will be dissolved during 1998 and the remaining cash and any funds from operations will be distributed to the partners at that time. The Partnership recognized a gain of approximately $3,908,000 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 a gain of approximately $18,422,000 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 1997. NOTE C - TRANSACTIONS WITH THE GENERAL PARTNER AND AFFILIATES The managing general partner of the Partnership is Montgomery Realty Corporation-85 ("MRC-85"). The general partners of MRC-85 are Fox Realty Investors ("FRI") and NPI Realty Management Corporation ("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 Partnership has no employees and is dependent on the Managing General Partner and its affiliates for the administration of all partnership activities. The Partnership Agreement provides for payments to affiliates for services and as reimbursement of certain expense incurred by affiliates on behalf of the Partnership. The following expenses were paid or accrued to the Managing General Partner and affiliates during the three months ended March 31, 1998 and 1997 (in thousands): 1998 1997 Reimbursements for services of affiliates $31 $37 On March 17, 1998, Insignia entered into an agreement to merge its national residential property management operations, and its controlling interest in Insignia Properties Trust, with Apartment Investment and Management Company ("AIMCO"), a publicly traded real estate investment trust. The closing, which is anticipated to happen in the third quarter of 1998, is subject to customary conditions, including government approvals and the approval of Insignia's shareholders. If the closing occurs, AIMCO will then control the Managing General Partner of the Partnership. It is anticipated, however, that the Partnership will be liquidated prior to the consummation of the AIMCO transaction. In any event, it is not anticipated that this transaction will have a material effect on the Partnership. NOTE D - COMMITMENT AND CONTINGENCIES In connection with the sale of the properties owned by Hampton/GHI Associates No. 1 and the liquidation of the joint venture, 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 Joint Venture Agreement, Hampton was obligated to contribute to the joint venture an amount equal to the deficit of its tax capital account, which amount was 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. The Joint Venture received such payment from Hampton for its deficit restoration obligation on November 5, 1997 in the amount of approximately $9,067,000. The classification of the funds received from Hampton is not clearly defined in the partnership agreement. If the funds are classified as funds from operations, the General Partners would be due a partnership management incentive on the distribution of these funds in the amount of approximately $1,004,000. The General Partners have agreed to take 50% of such allocation or $502,000, which has been accrued at December 31, 1997 and March 31, 1998. The Partnership holds a warranty reserve escrow account in the amount of approximately $1,613,000 at March 31, 1998. This escrow must be held for the period of one year from the closing date of the sale of the investment properties. If the purchaser has not notified the Partnership of any amounts owed to it, the Partnership will distribute such funds to its partners. At March 31, 1998, no notification had been given from the purchaser that any amounts were due the purchaser under the agreement. ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This item should be read in conjunction with the financial statements and other items contained elsewhere in this report. 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 "Item 1. Financial Statements Note B - Sale of Properties." As a result of the sale of its investment properties and the decision to liquidate the Partnership, the Partnership changed its basis of accounting to the liquidation basis of accounting for its financial statements at December 31, 1997. Consequently, assets have been valued at their estimated net realizable value (including subsequent actual transactions described below) and liabilities are presented at their estimated settlement amounts, including estimated costs associated with carrying out the liquidation. The valuation of assets and liabilities necessarily requires many estimates and assumptions and there are substantial uncertainties in carrying out the liquidation. The actual realization of assets and settlement of liabilities could be higher or lower than the amounts indicated and is based upon the Managing General Partner's estimates as of the date of the financial statements. The statement of net assets in liquidation as of March 31 1998, includes approximately $91,000 of accrued costs, net of income, that the Managing General Partner estimates will be incurred during the period of liquidation, based on the assumption that the liquidation process will be completed during the third quarter of 1998. These costs principally include legal and administrative expenses. Because the success in realization of assets and the settlement of liabilities is based on the Managing General Partner's best estimates, the liquidation period may be shorter than projected or it may be extended beyond the projected period. No cash distributions were made in the first quarter of 1998 or 1997. In connection with the sale of the properties owned by Hampton/GHI and the liquidation of the joint venture, 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 was obligated to contribute to Hampton/GHI an amount equal to the deficit of its tax capital account, which amount was 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 $9,067,000. The classification of the funds received from Hampton is not clearly defined in the partnership agreement. If the funds are classified as funds from operations, the General Partners would be due a partnership management incentive on the distribution of these funds in the amount of approximately $1,004,000. The General Partners have agreed to take 50% of such allocation or $502,000, which was accrued at December 31, 1997 and March 31, 1998. The Partnership holds a warranty reserve escrow account in the amount of approximately $1,613,000 at March 31, 1998. This escrow must be held for the period of one year from the closing date of the sale of the investment properties. If the purchaser has not notified the Partnership of any amounts owed to it, the Partnership will distribute such funds to its partners. At March 31, 1998, no notification had been given from the purchaser that any amounts were due the purchaser under the agreement. Certain items discussed in this quarterly report may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 ("the Reform Act") and as such may involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Partnership to be materially different from any future results, performance or achievements of the Partnership expressed or implied by such forward-looking statements. Such forward-looking statements speak only as of the date of this quarterly report. The Partnership expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in the Partnership's expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based. 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 filed during the quarter ended March 31, 1998. 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. Its Managing General Partner /s/William H. Jarrard, Jr. President and Director /s/Ronald Uretta Principal Financial Officer and Principal Accounting Date: May 15, 1998 EX-27 2
5 This schedule contains summary financial information extracted from Growth Hotel Investors 1998 First Quarter 10-Q and is qualified in its entirety by reference to such 10-Q filing. 0000769129 GROWTH HOTEL INVESTORS 1,000 3-MOS DEC-31-1998 MAR-31-1998 2,502 0 0 0 0 0 0 0 4,115 0 0 0 0 0 3,020 4,115 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Registrant has an unclassified balance sheet.
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