-----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, SHw9R7Qb9ciTYLDQaBcSnjEf34WABk+ANAH/3+qyw2ax4QXSgwlb7ip9HNxPFbzb GxqroOwmWtNRcFACZ1PPSw== 0000769129-98-000008.txt : 19980518 0000769129-98-000008.hdr.sgml : 19980518 ACCESSION NUMBER: 0000769129-98-000008 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 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: 98624470 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 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. 4/26/93) 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) (864) 239-1000 (Issuer's phone number) Indicate by check mark whether the Registrant (1) has filed all documents and reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 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 II STATEMENT OF NET ASSETS IN LIQUIDATION (in thousands) March 31, December 31, 1998 1997 (Unaudited) (Note) Assets Cash and cash equivalents $ 4,153 $ 4,228 Restricted escrow 3,468 3,432 7,621 7,660 Liabilities Accounts payable and state withholding taxes payable 1,281 1,351 Accounts payable affiliates 6 9 Distribution payable to General Partners 291 291 Fees due to General Partners 532 532 Estimated costs during period of liquidation 198 107 2,308 2,290 Net assets in liquidation $ 5,313 $ 5,370 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 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 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 $ 5,370 Changes in net assets in liquidation attributed to: Decrease in cash and cash equivalents (75) Increase in restricted escrow 36 Decrease in accounts payable and other 70 Decrease in accounts payable affiliate 3 Increase in estimated costs during the period of liquidation (91) Net assets in liquidation at end of period $ 5,313 See Notes To Consolidated Financial Statements c) GROWTH HOTEL INVESTORS II CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited) Three Months Ended March 31, 1997 (in thousands, except unit data) Revenues: Hotel operations $ 11,552 Interest income 89 Total revenues 11,641 Expenses: Hotel operations 7,742 Mortgage interest 1,196 Depreciation 1,463 General and administrative 219 Total expenses 10,620 Income before minority interest in joint venture's operation 1,021 Minority interest in joint ventures' operations (422) Net income $ 599 Net income allocated to general partners (2%) $ 12 Net income allocated to limited partners (98%) 587 Net income $ 599 Net income per limited partnership unit $ 9.97 See Notes to Consolidated Financial Statements d) GROWTH HOTEL INVESTORS II 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 58,982 $ -- $ 58,982 $ 58,982 Partners' (deficit) equity at December 31, 1996 58,982 $ (227) $ 40,229 $ 40,002 Net income for the three months ended March 31, 1997 -- 12 587 599 Distributions -- (17) (848) (865) Partners' (deficit) equity at March 31, 1997 58,982 $ (232) $ 39,968 $ 39,736 See Notes to Consolidated Financial Statements e) GROWTH HOTEL INVESTORS II CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited) Three Months Ended March 31, 1997 (in thousands) Cash flows from operating activities: Net income $ 599 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 1,514 Minority interest in joint ventures' operations 422 Change in accounts: Accounts receivable and other assets (331) Accounts payable and other liabilities 809 Net cash provided by operating activities 3,013 Cash flows from investing activities: Property and improvement and replacements (1,044) Restricted cash increase (36) Net cash used in investing activities (1,080) Cash flows from financing activities: Notes payable principal payments (169) Cash distribution to partners (865) Due (from) to affiliate (270) Net cash used in financing activities (1,304) Net increase (decrease) in cash and cash equivalents 629 Cash and cash equivalents at beginning of period 8,302 Cash and cash equivalents at end of period $ 8,931 Supplemental information: Interest paid $ 1,194 See Notes to Consolidated Financial Statements f) GROWTH HOTEL INVESTORS II 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 21,000 of the outstanding Limited Partnership Units ("the Units") at a purchase price of $750.00 per Unit. An affiliate of the Managing General Partner has an interest in Devon Associates. Devon Associates acquired 17,302 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. The Partnership's last hotel property, the Hampton Inn - Mountain Brook, was sold to Equity Inns on August 1, 1997. 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 $198,000 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 Managing 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-Kansas City, Hampton Inn-Eden Prairie, Hampton Inn-Dublin, and Hampton Inn-Colorado Springs for a sales price of approximately $20,162,000. 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 $5,057,000. Additionally, Hampton/GHI Associates No. 2 sold its investment property, Hampton Inn-North Dallas for a sales price of $10,371,000. 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 $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. The Partnership's last hotel property, the Hampton Inn-Mountain Brook, was sold on August 1, 1997 for a sales price of approximately $8,758,000. 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 $19,771,000. In addition, the Partnership received approximately $59,658,000 from its consolidated joint ventures in distributions from the sale of its properties and from operations. The Partnership made distributions of $68,464,000 ($1,160.76 per unit) to its limited partners and approximately $1,688,000 to the General Partners from these net proceeds in 1997. Included in the distributions paid to the General Partners is approximately $291,000 of accrued distributions of subordinated sales incentives. 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 $67,008,000 due to the sale of its investment properties and the properties in which the Partnership had a controlling interest. Approximately $18,422,000 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 1997 to the plaintiff's attorneys for fees and expense reimbursements. NOTE C - TRANSACTIONS WITH AFFILIATED PARTIES The managing general partner of the Partnership is Montgomery Realty Company-85 ("MRC-85"). The general partners of MRC-85 are Fox Realty Investors ("FRI"), and NPI Realty Management Corp. ("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. The associate general partner is GHI Associates of which FRI is the general partner and Prudential-Bache Properties, Inc. is the limited partner. 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 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 following expenses were paid or accrued to the General Partners and affiliates during the three months ended March 31, 1998 and 1997: 1998 1997 (in thousands) Reimbursement for services of affiliates $ 44 $ 38 In accordance with the partnership agreement, the general partner and affiliates received a partnership management fee in the amount of 10 percent of cumulative cash from operations available for distribution (as defined in the partnership agreement). Fees paid or accrued pursuant to this agreement during the three months ended March 31, 1997 was $96,000 and are included in general and administrative expenses. There were no such fees paid during the three months ended March 31, 1998. In addition to the fees paid to the general partner and affiliates as set forth above, the Partnership had 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 three months ended March 31, 1997 was $1,349,000. In addition, affiliates of the joint venture partners received reimbursement of expenses during the three months ended March 31, 1997 of $240,000. These expenses are included in operating expenses. 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 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 - DISTRIBUTIONS The Partnership distributed approximately $14 per unit (approximately $848,000 in total) to the holders of limited partnership units and approximately $17,000 to the general partners during the three months ended March 31, 1997. NOTE E - COMMITMENT AND CONTINGENCIES In connection with the sale of the properties owned by the Hampton/GHI's and the liquidation of the joint ventures, 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's Joint Venture Agreements, Hampton was obligated to contribute to Hampton/GHI's an amount equal to the deficit of its tax capital accounts, 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's received such payment from Hampton for its deficit restoration obligation on November 5, 1997 in the amount of approximately $9,163,000. 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 $1,063,000. The general partners have agreed to take 50% of such fee or $532,000, which has been accrued at December 31, 1997 and March 31, 1998. In addition, the general partners are entitled to a subordinated sales incentive of approximately $582,000. The general partners have agreed to take 50% of such fee or $291,000. The Partnership holds a warranty reserve escrow account in the amount of approximately $3,468,000 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 and August 1, 1997, the Partnership sold all of its investment properties and joint venture properties (see "Item 1. Financial Statements Note B - Sale of Properties" for information related to the sale). 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 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 $198,000 of 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 include anticipated legal fees and administrative expenses, net of estimated interest income. 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. A cash distribution of approximately $865,000 from cash from operations was made in February 1997. Approximately $848,000 was paid to the limited partners and $17,000 was distributed to the general partners. In connection with the sale by Hampton/GHI Associates No. 1 and No. 2 ("Hampton/GHI's") of their 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's Joint Venture Agreements, Hampton was obligated to contribute to Hampton/GHI's an amount equal to the deficit of its tax capital accounts, 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 $9,163,000. 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 $1,063,000. The general partners have agreed to take 50% of such fee or $532,000, which has been accrued at December 31, 1997 and March 31, 1998. In addition, the general partners are entitled to a subordinated sales incentive of approximately $582,000. The general partners have agreed to take 50% of such fee or $291,000. The Partnership holds a warranty reserve escrow account in the amount of approximately $3,468,000 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 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. PART II - OTHER INFORMATION 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 held 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 II 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 Officer Date: May 15, 1998 EX-27 2
5 This schedule contains summary financial information extracted from Growth Hotel Investors II 1998 First Quarter 10-Q and is qualified in its entirety by reference to such 10-Q filing. 0000791346 GROWTH HOTEL INVESTORS II 1,000 3-MOS DEC-31-1998 MAR-31-1998 4,153 0 0 0 0 0 0 0 7,621 0 0 0 0 0 5,313 7,621 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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