-----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, U3RnffuPc8nPnoZ26FZR5IQdx3Ao9n29fiA9nBhZperVnjFHLVOGYWi5jQxlDpgD 9FRu+Jy+voOQ6pO93pEhhA== 0000705752-97-000019.txt : 19971115 0000705752-97-000019.hdr.sgml : 19971115 ACCESSION NUMBER: 0000705752-97-000019 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 II CENTRAL INDEX KEY: 0000791346 STANDARD INDUSTRIAL CLASSIFICATION: HOTELS & MOTELS [7011] IRS NUMBER: 942997382 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-16491 FILM NUMBER: 97717147 BUSINESS ADDRESS: STREET 1: C/O INSIGNIA FINANCIAL GROUP INC STREET 2: P O BOX 1089 CITY: GREENVILLE STATE: SC ZIP: 29602 BUSINESS PHONE: 8642391513 MAIL ADDRESS: STREET 1: C/O INSIGNIA FINANCIAL GROUP INC STREET 2: P O BOX 1089 CITY: GREENVILLE STATE: SC ZIP: 29602 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 0-16491 GROWTH HOTEL INVESTORS II (Exact name of registrant as specified in its charter) California 94-2997382 (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) (Issuer's phone number) (864) 239-1000 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 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 II CONSOLIDATED BALANCE SHEETS (in thousands, except unit data)
September 30, December 31, 1997 1996 (Unaudited) (Note) Assets Cash and cash equivalents $16,015 $ 8,302 Restricted cash -- 208 Deferred costs -- 1,692 Accounts receivable and other assets 128 1,104 Investment properties: Land -- 15,725 Buildings and related personal property -- 111,335 -- 127,060 Less accumulated depreciation -- (43,677) -- 83,383 Total Assets $16,143 $ 94,689 Liabilities and Partners' Capital (Deficit) Accounts payable and other liabilities $ 7,340 $ 2,271 Due (from) to affiliate of the joint venture partner (38) 827 Notes payable -- 49,215 Minority interest in joint ventures (6,421) 2,374 Partners' Capital (Deficit): General partners' $ (721) $ (227) Limited partners' (58,982 units outstanding) 15,983 40,229 15,262 40,002 Total liabilities and partners' capital $16,143 $ 94,689 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 II CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except unit data) (Unaudited) Three Months Ended Nine Months Ended September 30, September 30, 1997 1996 1997 1996 Revenues: Hotel operations $ 202 $ 14,523 $ 24,684 $ 40,031 Interest income 331 82 574 231 Gain on sale of investment properties 5,589 -- 63,689 -- Total revenues 6,122 14,605 88,947 40,262 Expenses: Hotel operations 806 8,617 16,867 24,551 Mortgage interest 36 1,199 2,355 3,608 Depreciation 43 1,378 3,094 4,070 General and administrative 559 426 1,167 1,238 Litigation settlement -- -- 1,217 -- Total expenses 1,444 11,620 24,700 33,467 Income before minority interest in joint venture's operations and extraordinary loss on early extinguishment of debt 4,678 2,985 64,247 6,795 Minority interest in joint venture's operations (1,485) (769) (17,985) (1,571) Income before extraordinary item 3,193 2,216 46,262 5,224 Extraordinary loss on early extinguishment of debt -- -- (107) -- Net income $ 3,193 $ 2,216 $ 46,155 $ 5,224 Net income allocated to general partners (2%) $ 64 $ 44 $ 923 $ 104 Net income allocated to limited partners (98%) 3,129 2,172 45,232 5,120 Net income $ 3,193 $ 2,216 $ 46,155 $ 5,224 Per limited partnership unit: Income before extraordinary loss $ 53.05 $ 36.82 $ 768.65 $ 86.80 Extraordinary loss -- -- $ (1.77) -- Net income per limited partnership unit $ 53.05 $ 36.82 $ 766.88 $ 86.80 See Notes to Consolidated Financial Statements c) GROWTH HOTEL INVESTORS II CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL (DEFICIT) (in thousands, except unit data) (Unaudited) Limited General Limited Partnership Partners' Partners' Total Units Equity Equity Equity Original capital contributions 58,982 $ -- $ 58,982 $ 58,982 Partners' (deficit) capital at December 31, 1996 58,982 $ (227) $ 40,229 $ 40,002 Net income for the nine months ended September 30, 1997 -- 923 45,232 46,155 Distributions -- (1,417) (69,478) (70,895) Partners' (deficit) capital at September 30, 1997 58,982 $ (721) $ 15,983 $ 15,262 See Notes to Consolidated Financial Statements d) GROWTH HOTEL INVESTORS II CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (Unaudited) Nine Months Ended September 30, 1997 1996 Cash flows from operating activities: Net income $ 46,155 $ 5,224 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 3,195 4,324 Minority interest in joint ventures' operations 17,984 1,571 Gain on sale of investment properties (63,689) -- Extraordinary loss on early extinguishment of debt 107 -- Change in accounts: Accounts receivable and other assets 679 (904) Accounts payable, and other liabilities (513) 533 Net cash provided by operating activities 3,918 10,748 Cash flows from investing activities: Property and improvements and replacements (3,350) (3,482) Restricted cash increase 208 573 Proceeds from sale of investment properties 149,190 -- Net cash provided by (used in) investing activities 146,048 (2,909) Cash flows from financing activities: Notes payable principal payments (287) (649) Distributions to joint venture partner (21,197) (2,170) Cash distribution to partners (70,895) (2,596) Repayment of notes payable (48,928) -- Prepayment penalties (81) -- Due (from) to affiliate (865) (79) Net cash used in financing activities (142,253) (5,494) Net increase in cash and cash equivalents 7,713 2,345 Cash and cash equivalents at beginning of period 8,302 7,105 Cash and cash equivalents at end of period $ 16,015 $ 9,450 Supplemental information: Interest paid $ 2,376 $ 3,782 Non-cash investing activity: Purchase of joint venture partners interest-Note D See Notes to Consolidated Financial Statements e) GROWTH HOTEL INVESTORS II NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE A - BASIS OF PRESENTATION The accompanying unaudited consolidated financial statements of Growth Hotel Investors II (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 Corporation, (the "Managing General Partner"), 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. 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. Balances and other transactions with affiliates of the Managing General Partner in 1997 and 1996 are (in thousands): For the Nine Months Ended September 30, 1997 1996 Reimbursement for services of affiliates (included in general and administrative expenses) $132 $198 In accordance with the partnership agreement, the general partner and affiliates received a partnership management fee in the amount of 10 percent of cash from operations available for distribution (as defined in the partnership agreement). Fees paid pursuant to this agreement for the nine months ended September 30, 1997 and 1996 were approximately $224,000 and $288,000, respectively, and are included in general and administrative expenses. In addition to the fees paid to the Managing General Partner and affiliates as set forth above, the Partnership has agreements with affiliates of its joint venture partners, which provide for the management and operations of the joint venture properties and services provided under each property's franchise agreement. Fees paid pursuant to these agreements are generally based on a percentage of gross revenues from operations of the property and for the nine months ended September 30, 1997 and 1996 were approximately $2,846,000 and $4,838,000, respectively. In addition, affiliates of the joint venture partners received reimbursement of expenses during the nine monthsended September 30, 1997 and 1996 of approximately $485,000 and $658,000, respectively. These expenses are included in operating expenses. NOTE C - DISTRIBUTIONS The Partnership distributed approximately $1,177.95 per unit (approximately $69,478,000) to the holders of limited partnership units and approximately $1,417,000 to the general partners for the nine month period ended September 30, 1997. The Partnership distributed approximately $43.13 per unit (approximately $2,544,000) to the holders of limited partnership units and approximately $52,000 to the general partners for the nine month period ended September 30, 1996. NOTE D - JOINT VENTURE PURCHASE On December 7, 1995, the Partnership acquired all of the economic rights of its joint venture partner in GHI II Big River Associates, a California partnership. This purchase was effective January 1, 1996, at a cost of $375,000. The Partnership had an 80% ownership interest in GHI-II Big River Associates, which in turn, owned the Hampton Inn-St. Louis property. The carrying value of the property was increased by $500,000 which reflects the purchase of $375,000 and $125,000 receivable from the joint venture partner. NOTE E - SALE OF PROPERTIES On June 24, 1997, the Partnership, sold all of its investment properties, consisting of the Hampton Inn-Kansas City, Hampton Inn-Eden Prairie, Hampton Inn-Dublin, and Hampton Inn-Colorado Springs for a sales price of approximately $19,619,000. The Partnership has a controlling interest in three joint venture partnerships, GHI II Big River Associates, Hampton/GHI Associates No. 2 and Growth Hotel Investors Combined Fund No. 1. On June 24, 1997, GHI II Big River Associates sold its investment property, Hampton Inn-St. Louis for a purchase price of approximately $4,881,000. Additionally, Hampton/GHI Associates No. 2 sold its investment property, Hampton Inn-North Dallas for a sales price of $10,200,000. 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, consisting of the 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, and 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.) The Partnership's last hotel property, the Hampton Inn-Mountain Brook, was sold on August 1, 1997 for a sales price of approximately $8,651,000. The aggregate purchase price for all 24 properties was approximately $151,924,000. The Partnership received net proceeds, after satisfaction of outstanding indebtedness and closing costs, from the sale of its investment properties of approximately $25,918,000. In addition, the Partnership received approximately $48,376,000 from its consolidated joint venture in distributions from the sale of its properties and from operations. The Partnership made a distribution of $67,782,000 ($1,149.19 per unit) to its limited partners and approximately $1,383,000 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. The Partnership recognized a gain of approximately $63,689,000 due to the sale of its investment properties and the properties in which the Partnership had a controlling interest. Approximately $17,238,000 of the gain from the sale of the properties in Growth Hotel Investors Combined Fund No. 1 was allocated to the Partnership's joint venture partner, Growth Hotel Investors. 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 ("GHI"), an affiliated partnership, against, among others, the Partnership, GHI and their general partners, the Partnership and GHI were required to pay the plaintiff's attorneys' fees associated with such actions. As a result, an aggregate of $1,800,000 ($1,217,000 of which is allocable to the Partnership) was paid in the third quarter of 1997 to the plaintiff's attorneys for fees and expense reimbursements. In connection with the sale by 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. The joint ventures received such payment from Hampton for its deficit restoration obligation on November 5, 1997 in the amount of approximately $9,164,000. ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS On June 24 and August 1, 1997, the Partnership sold all of its investment properties and joint venture properties (see "Note E - Sale of Properties" for information related to the sale). In July, a cash distribution of approximately $69,165,000 was made from sales proceeds and operations. Approximately $67,782,000 was distributed to the limited partners and approximately $1,383,000 was distributed to the general partners. 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 by 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. The joint venture received such payment from Hampton for its deficit restoration obligation on November 5, 1997 in the amount of approximately $9,164,000. 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's net income for the three and nine month periods ended September 30, 1997, was approximately $3,193,000 and $46,155,000, respectively, compared to net income of approximately $2,216,000 and $5,224,000, respectively, for the same periods of 1996. The increase in net income is attributable to the gain on sale of approximately $63,689,000 due to the sale of all of the Partnership's investment properties and all of the investment properties in which the Partnership had a controlling interest. (See "Note E- Sale of Properties" for more information relating to these sales.) In addition, hotel operations expense and depreciation expense decreased due to the sale of the Partnership's investment properties. Net income also increased due to a decrease in interest expense and an increase in interest income. The decrease in interest expense is due to the payoff of all the mortgages encumbering the Partnership's investment properties. The increase in interest income is related to an increase in interest-bearing reserves. Offsetting the above increases to net income are an increase in income allocated to the minority interest in joint venture operations, a decrease in hotel operations revenue, and increases in litigation settlement expense and the extraordinary loss on early extinguishment of debt expenses. The increase in income allocated to the minority interest in joint venture operations is due to the allocation of income to the Partnership's joint venture partner in the GHI Combined Fund. The increase in income of the GHI Combined Fund is attributable to the gain on sale of the Combined Fund's eighteen properties. The decrease in hotel operations revenue is due to the sale of the Partnership's investment properties. The litigation settlement expense in 1997 relates to amounts paid in connection with the legal settlement as discussed in "Note E- Sale of Properties." The extraordinary loss on early extinguishment of debt in 1997 is due to prepayment penalties and the write off of unamortized loan costs in connection with the sale of the Partnership's investment properties. At September 30, 1997, the Partnership had unrestricted cash of approximately $16,015,000 as compared to approximately $9,450,000 at September 30, 1996. The net cash provided by operations decreased primarily due to the decrease in net income due to the sale of the Partnership's investment properties. The change from net cash used in investing activities to net cash provided by investing activities is due to the receipt of approximately $149,190,000 in net proceeds from the sale of investment properties sold during the nine months ended September 30, 1997. Net cash used in financing activities increased due to increased distributions to the partners and the joint venture partner in 1997 and due to the payoff of all the mortgages encumbering the Partnership's investment properties. The Partnership distributed approximately $1,177.95 per unit (approximately $69,478,000) to the holders of limited partnership units and approximately $1,417,000 to the general partners for the nine month period ended September 30, 1997. The Partnership distributed approximately $43.13 per unit (approximately $2,544,000) to the holders of limited partnership units and approximately $52,000 to the general partners for the nine month period ended September 30, 1996. 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 ("GHI"), an affiliated partnership, against, among others, the Partnership, GHI and their general partners, the Partnership and GHI were required to pay the plaintiff's attorneys' fees associated with such actions. As a result, an aggregate of $1,800,000 ($1,217,000 of which is allocable to the Partnership) was paid in the third quarter of 1997 to the plaintiff's attorneys for fees and expense reimbursements. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K a) 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 II By: MONTGOMERY REALTY COMPANY 85, its general partner By: NPI REALTY MANAGEMENT CORP. MANAGING GENERAL PARTNER By: /s/William H. Jarrard, Jr. President and Director By: /s/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 II 1997 Third Quarter 10-Q and is qualified in its entirety by reference to such 10-Q filing. 0000791346 GROWTH HOTEL INVESTORS II 1,000 9-MOS DEC-31-1997 SEP-30-1997 16,015 0 0 0 0 0 0 0 16,143 0 0 0 0 0 15,262 16,143 0 88,947 0 0 24,700 0 2,355 0 0 46,262 0 (107) 0 46,155 766.88 0 Registrant has an unclassified balance sheet. Multiplier is 1.
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