-----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, TlHBqn7vOpe2ffPEMhdrMUMkQCOaO+ik6AtKn9G15BsM3b8DTxnpoaBTPf3DbtH4 zUUagvifegt1KQ2V4jnPIA== 0000948524-97-000060.txt : 19970515 0000948524-97-000060.hdr.sgml : 19970515 ACCESSION NUMBER: 0000948524-97-000060 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970514 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: METRIC PARTNERS GROWTH SUITE INVESTORS LP CENTRAL INDEX KEY: 0000800730 STANDARD INDUSTRIAL CLASSIFICATION: HOTELS & MOTELS [7011] IRS NUMBER: 943050708 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-17660 FILM NUMBER: 97604957 BUSINESS ADDRESS: STREET 1: ONE CALIFORNIA ST STREET 2: SUITE 1400 CITY: SAN FRANCISCO STATE: CA ZIP: 94111-5415 BUSINESS PHONE: 4156872000 MAIL ADDRESS: STREET 1: ONE CALIFORNIA ST STREET 2: SUITE 1400 CITY: SAN FRANCISCO STATE: CA ZIP: 94111-5415 FORMER COMPANY: FORMER CONFORMED NAME: FOX GROWTH SUITE INVESTORS DATE OF NAME CHANGE: 19880412 FORMER COMPANY: FORMER CONFORMED NAME: MRI BUSINESS PROPERTIES FUND LTD IV DATE OF NAME CHANGE: 19871104 10-Q 1 FROM 10-Q AT 3/31/97 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, 1997 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES - --- EXCHANGE ACT OF 1934 For the transition period from ____________________ to __________________ Commission file number 0-17660 METRIC PARTNERS GROWTH SUITE INVESTORS, L.P., a California Limited Partnership (Exact name of Registrant as specified in its charter) CALIFORNIA 94-3050708 - --------------------------------------- ----------------------------------- (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) One California Street San Francisco, California 94111-5415 - --------------------------------------- ----------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (415) 678-2000 (800) 347-6707 in all states Indicate by check mark whether the registrant (1) has filed all 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 ___ Page 1 of 17 PART I FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited). METRIC PARTNERS GROWTH SUITE INVESTORS, L.P., a California Limited Partnership BALANCE SHEETS (UNAUDITED) March 31, December 31, 1997 1996 ---- ---- ASSETS CASH AND CASH EQUIVALENTS $ 7,230,000 $ 3,436,000 CASH INVESTMENTS -- 3,893,000 RESTRICTED CASH 322,000 308,000 ACCOUNTS RECEIVABLE 564,000 715,000 PREPAID EXPENSES AND OTHER ASSETS 137,000 209,000 PROPERTIES AND IMPROVEMENTS 90,746,000 90,456,000 ACCUMULATED DEPRECIATION (32,566,000) (31,825,000) ------------ ------------ NET PROPERTIES AND IMPROVEMENTS 58,180,000 58,631,000 DEFERRED FINANCING COSTS 60,000 73,000 DEFERRED FRANCHISE FEES 160,000 171,000 ------------ ------------ TOTAL ASSETS $ 66,653,000 $ 67,436,000 ============ ============ LIABILITIES AND PARTNERS' EQUITY ACCOUNTS PAYABLE $ 994,000 $ 1,107,000 ACCRUED PROPERTY TAXES 294,000 311,000 ACCRUED INTEREST 273,000 263,000 OTHER LIABILITIES 1,271,000 1,347,000 DEFERRED GAIN ON SALE OF PROPERTY 300,000 300,000 NOTES PAYABLE 42,464,000 42,518,000 ------------ ------------ TOTAL LIABILITIES 45,596,000 45,846,000 ------------ ------------ PARTNERS' EQUITY (DEFICIENCY): GENERAL PARTNERS 59,000 59,000 LIMITED PARTNERS (59,932 Units outstanding) 20,998,000 21,531,000 ------------ ------------ TOTAL PARTNERS' EQUITY 21,057,000 21,590,000 ------------ ------------ TOTAL LIABILITIES AND PARTNERS' EQUITY $ 66,653,000 $ 67,436,000 ============ ============ See notes to financial statements (unaudited). Page 2 of 17 METRIC PARTNERS GROWTH SUITE INVESTORS, L.P., a California Limited Partnership STATEMENTS OF OPERATIONS (UNAUDITED) For the Three Months Ended March 31, -------------------------- 1997 1996 ---- ---- REVENUES: Hotel operations $ 5,712,000 $ 5,407,000 Interest and other 102,000 112,000 ----------- ----------- Total revenues 5,814,000 5,519,000 ----------- ----------- EXPENSES: Hotel operations: Rooms 1,162,000 1,138,000 Administrative 685,000 696,000 Marketing 636,000 625,000 Energy 336,000 347,000 Repair and maintenance 313,000 325,000 Management fees 220,000 199,000 Property taxes 154,000 191,000 Other 223,000 240,000 ----------- ----------- Total hotel operations 3,729,000 3,761,000 Depreciation and other amortization 752,000 764,000 Interest 1,083,000 1,093,000 General and administrative 172,000 219,000 ----------- ----------- Total expenses 5,736,000 5,837,000 ----------- ----------- NET INCOME (LOSS) $ 78,000 $ (318,000) =========== =========== NET INCOME (LOSS) PER LIMITED PARTNERSHIP ASSIGNEE UNIT $ 1 $ (5) =========== =========== CASH DISTRIBUTIONS PER LIMITED PARTNERSHIP ASSIGNEE UNIT $ 10 $ 8 =========== =========== See notes to financial statements (unaudited). Page 3 of 17 METRIC PARTNERS GROWTH SUITE INVESTORS, L.P., a California Limited Partnership STATEMENTS OF PARTNERS' EQUITY (DEFICIENCY) (UNAUDITED) For the Three Months Ended March 31, 1997 and 1996 General Limited Partner Partners Total ------- -------- ----- BALANCE, JANUARY 1, 1997 $ 59,000 $ 21,531,000 $ 21,590,000 NET INCOME 12,000 66,000 78,000 CASH DISTRIBUTIONS (12,000) (599,000) (611,000) --------- ------------ ------------ BALANCE, MARCH 31, 1997 $ 59,000 $ 20.998,000 $ 21,057,000 ========= ============ ============ BALANCE, JANUARY 1, 1996 $ 100,000 $ 25,150,000 $ 25,250,000 NET INCOME (LOSS) 9,000 (327,000) (318,000) CASH DISTRIBUTIONS (9,000) (450,000) (459,000) --------- ------------ ------------ BALANCE, MARCH 31, 1996 $ 100,000 $ 24,373,000 $ 24,473,000 ========= ============ ============ See notes to financial statements (unaudited). Page 4 of 17 METRIC PARTNERS GROWTH SUITE INVESTORS, L.P., a California Limited Partnership STATEMENTS OF CASH FLOWS (UNAUDITED)
For the Three Months Ended March 31, -------------------------- 1997 1996 ---- ---- OPERATING ACTIVITIES Net Income (Loss) $ 78,000 $ (318,000) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 801,000 811,000 Changes in operating assets and liabilities: Accounts receivable 151,000 (238,000) Prepaid expenses and other assets 72,000 (53,000) Accounts payable, accrued expenses, and other liabilities (196,000) 963,000 ----------- ------------ Net cash provided by operating activities 906,000 1,165,000 ----------- ------------ INVESTING ACTIVITIES Proceeds from sale of cash investments 3,893,000 -- Capital improvements (290,000) (177,000) Restricted cash - increase (14,000) (4,000) ----------- ------------ Net cash provided (used) by investing activities 3,589,000 (181,000) ----------- ------------ FINANCING ACTIVITIES Notes payable principal payments (90,000) (90,000) Cash distribution to partners (611,000) (459,000) ----------- ------------ Cash used by financing activities (701,000) (549,000) ----------- ------------ INCREASE IN CASH AND CASH EQUIVALENTS 3,794,000 435,000 Cash and cash equivalents at beginning of period 3,436,000 10,248,000 ----------- ------------ CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 7,230,000 $ 10,683,000 =========== ============ SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Interest paid in cash during the period $ 1,024,000 $ 1,083,000 =========== ============
See notes to financial statements (unaudited). Page 5 of 17 METRIC PARTNERS GROWTH SUITE INVESTORS, L.P., a California Limited Partnership NOTES TO FINANCIAL STATEMENTS (UNAUDITED) 1. Reference to 1996 Audited Financial Statements These unaudited financial statements should be read in conjunction with the Notes to Financial Statements included in the 1996 audited financial statements. The financial information contained herein reflects all normal and recurring adjustments that are, in the opinion of management, necessary for a fair presentation. 2. Transactions with the Managing General Partner and Affiliates In accordance with the Partnership Agreement, the Partnership is charged by the managing general partner and affiliates for services provided to the Partnership. The amounts are as follows: For the Three Months Ended March 31, -------------------------- 1997 1996 ---- ---- Partnership management fees $ 53,000 $ 40,000 Reimbursement of administrative expense 75,000 62,000 -------- -------- Total $128,000 $102,000 ======== ======== 3. Net Income (Loss) Per Limited Partnership Assignee Unit The net income (loss) per limited partnership assignee Unit is computed by dividing the net income (loss) allocated to the limited partners by 59,932 assignee Units outstanding. 4. Cash Investments The Partnership considers cash investments to be those investments with an original maturity date of more than three months at the time of purchase. There were no cash investments at March 31, 1997. 5. Legal Proceedings The Partnership is a plaintiff and counterclaim defendant in legal proceedings relating to the management agreement at the Residence Inn - Ontario, a defendant in legal proceedings seeking damages for alleged failure to consummate a settlement of the Residence Inn - Ontario case, and a plaintiff and defendant in legal proceedings related to the Residence Inn - Nashville; see Part II, Item 1, Legal Proceedings, for a detailed description of these matters. 6. Subsequent Events On April 1, 1997, Metric Holdings, Inc. and Metric Realty Corp., the partners of the Managing General Partner, Metric Realty, were involved in certain corporate transactions. Pursuant to these transactions, (i) Metric Holdings, Inc. was merged into a newly-formed corporation known as SSR Realty Advisors, Inc. ("SSR Realty"), which became the managing partner of Metric Realty, and (ii) Metric Realty Corp. was merged into Metric Property Management, Inc., a subsidiary of SSR Realty. Accordingly, the partners of Metric Realty are now SSR Realty and Metric Property Management, Inc. After consummation of these transactions, both partners of Metric Realty continue to be wholly-owned individual subsidiaries of Metropolitan Life Insurance Company, as were both partners prior to the occurrence of such transactions. Page 6 of 17 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. This Item should be read in conjunction with Financial Statements and other Items contained elsewhere in this Report. Properties A description of the properties in which the Partnership has an ownership interest, along with the occupancy and room rate data, follows: OCCUPANCY AND ROOM RATE SUMMARY
Average Average Occupancy Daily Rate Room Rate (%) (%) ---------------- ------------------ Three Three Months Months Ended Ended Date March 31, March 31, of ---------------- ------------------ Name and Location Rooms Purchase 1997 1996 1997 1996 ----------------- ----- -------- ---- ---- ---- ---- Residence Inn - Ontario 200 04/88 76 73 79.09 68.80 Ontario, California Residence Inn - Fort Wayne 80 06/88 73 92 66.65 64.61 Fort Wayne, Indiana Residence Inn - Columbus (East) 80 06/88 86 83 69.74 72.80 Columbus, Ohio Residence Inn - Indianapolis (North) 88 06/88 73 77 73.11 73.51 Indianapolis, Indiana Residence Inn - Lexington 80 06/88 87 90 70.06 63.72 Lexington, Kentucky Residence Inn - Louisville 96 06/88 86 84 86.47 79.05 Louisville, Kentucky Residence Inn - Winston-Salem 88 06/88 77 85 79.13 71.21 Winston-Salem, North Carolina Residence Inn - Nashville (Airport) 168 05/89 68 67 82.16 70.80 Nashville, Tennessee Residence Inn - Altamonte Springs 128 03/90 93 87 93.84 89.89 Altamonte Springs, Florida
Page 7 of 17 Results of Operations Net income was $78,000 in the first quarter of 1997 compared to a loss of $318,000 in the first quarter of 1996. The change is primarily attributable to improved operations at the Residence Inns - Nashville, Lexington, Ontario, and Indianapolis. Revenues from hotel operations increased 6% for the first quarter of 1997 compared to the same period in 1996 particularly as a result of increased revenues from the Residence Inns - Nashville and Ontario. Many of the hotel operating expense categories decreased in 1997 compared to 1996 and were only partially offset by slight increases in room, marketing, and management fee expenses. In particular, the property tax expenses decreased as a result of a tax refund at the Residence Inn - Indianapolis. Interest expense and depreciation and amortization decreased only slightly in 1997 compared to 1996. General and administrative expenses decreased in the first quarter of 1997 compared to 1996 primarily as a result of a decrease in legal expenses. As reported in the letter to investors dated December 10, 1996, the Partnership intends to proceed with the marketing for sale of the nine remaining hotels in the Partnership's Portfolio. The Partnership has since interviewed and chosen real estate brokers to market the properties for sale. Investors will be kept appraised as to the status of operations and the potential sale of properties either through regularly scheduled reports or special communications. The following discussion provides information concerning the operations of the Partnership's remaining nine hotels: Residence Inn - Ontario: Room revenues increased 15% for the first quarter of 1997 as compared to the same period of the prior year. Occupancy improved by 3% to 76%, while the average daily room rate climbed $10.29 to $79.09. These increases were only offset in part by an increase of 14% in operating expenses. The hotel continues to receive its largest share of business from the federal government, which recently raised its per diem rates. This patronage will be curtailed, however, as a nearby defense contractor's facility is scheduled to close in the second quarter. Management anticipates that the business previously generated by that facility may be replaced through the increasing number of companies moving into the area. A concentration on direct sales accompanied by special attention to existing clients has proven to be a successful marketing strategy for the hotel. Two discount extended stay hotels continue to provide strong competition for the Partnership's hotel, and a third, with an additional 126 rooms and superior visibility, is expected to open this month. Residence Inn- Columbus (East): Room revenues remained unchanged for the quarter as compared to the same period of the prior year. The average daily room rate declined $3.06 to $69.74 while occupancy increased 3% to 86%. One of the hotel's largest corporate patrons signed a contract with a competitor which significantly impacted operations. Management has been able to replace a portion of the business, in part by aiming sales strategies towards the weekend stay market while continuing to target new longer term corporate clients. A total of 544 new hotel rooms were added to the Columbus market during the first quarter, but with only a limited impact on the Partnership's hotel. However, two new extended stay hotels are scheduled to open in the second quarter, and a third in September which are expected to provide considerable competition. Residence Inn - Fort Wayne: Room revenues decreased 19% over the same quarter of the prior year, primarily resulting from a substantial decline in occupancy of 19%, to 73%. This decrease was partially offset by an increase of $2.04 in the average daily room rate to $66.65, and a decrease in operating expenses of 13%. Labor disputes in the automobile industry were the primary reason for the difficulties in operations, as strikes caused a suspension of travel and training and a slow down in the overall Fort Wayne economy. A merger involving another of the hotel's largest clients has also impacted operations. Competition, already intense, grew stronger as hotels competed for a share of the market. It is anticipated that market pressure will be relieved once the labor issues have been settled. The hotel has managed to increase business from smaller accounts for short to mid-term stays. In addition, special attention has been focused on servicing existing clients to retain their patronage. Residence Inn - Indianapolis: Room revenues decreased by 5% for the first quarter of 1997 as compared to the same period of the prior year. Occupancy declined by 4% to 73% while the average daily room rate remained relatively stable. However, significant savings in general operating expenses, coupled by a large tax refund, more than offset the decline in revenues. The hotel market in Indianapolis was sluggish for the first quarter of the year, although the Partnership's property outperformed the competition, which averaged a decline in occupancy of 11% from the prior year. Hotel sales and management staff participated in a sales blitz focused on small to mid-sized companies in an effort to increase exposure to clients that may have extended-stay needs. They Page 8 of 17 have also taken advantage of the opportunity to renegotiate higher long-term rates from some of the largest accounts. Two new hotels opened in the market during the first quarter, a third is scheduled to open in September, and plans have been announced for the construction of four more. An existing competitor will also be adding 30 new suites this summer. It is anticipated that the Partnership's hotel will face strong competition in the market in the year ahead. Residence Inn - Lexington: Operating results were positive and significantly improved for the first quarter of 1997 as compared to the same period of the prior year, primarily due to a decline of 19% in operating expenses, coupled with an increase of $6.34 in the average daily room rate to $70.06. The first quarter, typically a slow season in the Lexington hotel market, received a considerable boost this year due to the influx of FEMA employees into the area to assist with relief efforts after severe flooding in February. This infusion temporarily eliminated competition in the market, as several hotels, including the Partnership's Residence Inn, had waiting lists. This business, although beginning to decline, will positively impact operations into the second quarter. The Partnership's hotel currently enjoys a relatively stable market, with no new hotels on the horizon. Residence Inn - Louisville: Room revenues increased by 12% for the quarter as compared to the first quarter of 1996, resulting primarily from an increase of $7.42 in the average daily room rate to $86.47, coupled with an increase of 2% in occupancy, to 86%. These increases were only offset in part by an escalation in overall operating expenses. The Louisville economy remains strong, supporting the local extended-stay hotel market through continued training, project work, and relocations. One of the largest clients of the Partnership's hotel recently announced plans to sell a portion of its business; however, Management anticipates it will be replaced with alternative patronage. Sales and advertising campaigns conducted in conjunction with other Marriott products continue to be successful for the hotel, as have direct sales calls, and participation in a statewide trade show. Competition will increase dramatically in 1997 as two new extended-stay hotels are expected to open during the second quarter, followed by three more by the end of the year. Additionally, two others are anticipating openings in 1998. Residence Inn - Winston-Salem: Room revenues remained unchanged for the period, as compared to the first quarter of 1996. Occupancy declined to 77% for the first quarter in comparison to 85% for the same period of the prior year; however the decrease was offset by an increase in the average daily room rate of $7.92 to $79.13. The local economy continues its shift from an industrial to a service base, largely due to the relocation of several divisions of a major employer in the area. Management is centering its attention on direct sales focused on the mid-term extended-stay market, with the specific goal of raising the average daily room rate. Additional business has also been secured from one of the hotel's larger clients, and Management anticipates further increases in patronage from this source. Despite the flat economy, one new extended stay hotel opened within the market during the quarter, and four more, with a total of 410 rooms are scheduled to open by the end of the year. The Partnership's hotel will face strong competition in the year ahead. Residence Inn - Nashville: Room revenues increased by nearly 15% for the quarter, due to an increase in the average daily room rate of $11.36 to $82.16. Overall operating results for the quarter, although negative, improved substantially over the same period of 1996. Average occupancy increased slightly to 68%. The hotel continues to face a sales and use tax levied against it by the State of Tennessee covering the period from 1989 through 1993. The estimated liability for the potential payment of this tax totaled $211,000 at March 31, 1997. The Partnership filed a lawsuit against the State disputing this tax, but recently learned that the lawsuit was dismissed for lack of prosecution by the Partnership's attorneys. On April 25, 1997, the Court granted the Partnership's motion to reinstate the case and a trial is expected to occur later this year. The Residence Inn - Nashville gained significant business from FEMA resulting from winter flooding. Additionally, expanded convention business at the Opryland theme park has boosted demand across the market, allowing for growth in room rates. Management is participating in cluster advertising in the local convention and visitors bureaus, while pursuing new accounts from businesses relocating into the Nashville area. Residence Inn - Altamonte Springs: Room revenues increased for the quarter by 6% as compared to the first quarter of 1996 as a result of an increase in occupancy of 6% to 93%, coupled with an increase in the average daily room rate of $3.95 to $93.84 for the first quarter of 1997. The winter season is traditionally a strong one for the Orlando-Altamonte Springs hotel market as patronage from local businesses is augmented by the tourist industry. Management has been utilizing telemarketing campaigns and sales blitzes focused on attracting new businesses in addition to follow up servicing calls to maintain existing clients. Currently, three hotels directly compete with the Partnership's hotel for the extended-stay market, with five others competing for shorter term patronage; however, one existing hotel is in the process of adding 67 suites, and ground breaking for five new hotels is planned for this year. Page 9 of 17 Partnership Liquidity and Capital Resources First Quarter of 1996 As presented in the Statement of Cash Flows, cash was provided by operating activities. Cash was provided by investing activities from proceeds from sale of cash investments and was used for capital improvements. Cash was used by financing activities for distributions to partners and principal payments on notes payable. The results of project operations before capital improvements for the quarter ended March 31, 1997 and 1996 (as shown in the tables on pages 12 and 13) are determined by net income or loss adjusted for non-cash items such as depreciation and amortization and reduced by principal payments made on the notes payable. The project operations before capital improvements is an indication of the operational performance of the property. During the first quarter of 1997, eight of the Partnership's nine remaining hotel properties generated positive project operations before deduction for capital improvements, while the Residence Inn - Nashville (Airport) experienced negative operations. The Partnership, after taking into account results of project operations before capital improvements, interest income, and general and administrative expenses, on an accrual basis, experienced positive results from operations for the period. Project operations should not be considered as an alternative to net income or loss (as presented in the financial statements) as an indicator of the Partnership's operating performance or as an alternative to cash flow as a measure of liquidity. The project operations after capital improvements for any given period may not be indicative of the property's general performance as capital improvements are likely to be made in large amounts associated with renovation programs. In the first quarter of 1997, the Partnership spent $290,000 on capital improvements. The majority was spent on room renovations at the Residence Inns - Ontario and Nashville. In addition, capital was spent on extensive stairway work at the Residence Inn - Nashville. In the remainder of 1997, depending on the sales activity, the Partnership anticipates spending approximately $2,000,000 on capital improvements, which are necessary to keep the properties competitive in their respective markets and are required under the agreements with Marriott. In accordance with, and as is customary in the management of hotels, a percentage of revenues is placed in capital replacement funds. The capital replacement funds are used to fund on-going capital improvements as well as room or other major renovation programs. In general, the capital replacement funds are being held in separate interest-bearing accounts with additions made monthly based on revenues and expenditures which are based on approved capital expenditure budgets by the Partnership. To the extent not available from an individual property's capital replacement fund, a capital improvement or renovation may be funded from the Partnership's working capital reserve. As reported in the Partnership's special communication dated February 27, 1997, resale transactions reached 4.9% of the total number of outstanding Units as of February 26, 1997, at which point the Managing General Partner suspended the processing of resale transactions for the remainder of the calendar year. This action was taken by the Managing General Partner in accordance with its fiduciary responsibility and with the advice of Counsel to protect the Partnership's tax status as a limited partnership. IRS regulations provide that should 5% or more of the outstanding assignee limited partnership Units be traded in a calendar year, the partnership could be classified as a publicly traded partnership for federal tax purposes, and could therefore be taxed as a corporation. Gemisys, the Partnership's Servicing and Transfer Agent, has been instructed to return all paperwork regarding such transactions to the originators. The Partnership regrets this suspension, but believes that such action is in the best interest of the Partnership and its investors. Conclusion The Partnership established an estimated value for the assignee Units in the Partnership as of December 31, 1996. Appraisals of the hotels were commissioned and undertaken by a firm which is a recognized appraiser and consultant to the hotel industry. The primary methodology employed in the appraisals used in the evaluation, which was selected by the appraiser and, not pursuant to any instructions from the Partnership, was the income approach to value utilizing a discounted cash flow analysis. In conjunction with the preparation of the appraisals, a discount rate was determined by the appraiser based on several relevant factors, including, but not limited to, the current investment climate for hotel properties, local hotel market and economic conditions, comparisons of occupancy and room rates with prevailing market rates for similar properties and the status of the management contract for each hotel. The Partnership believes that the assumptions utilized in the process were not unreasonable. The value of Page 10 of 17 the properties as determined by the appraisal process, in combination with the book value of other Partnership assets, resulted in an estimated net asset value of each assignee Unit of $503 as of December 31, 1996. As of December 31, 1995, the value of the properties as determined by the appraisal process, in combination with the book value of other Partnership assets, resulted in an estimated net asset value of each assignee Unit of $521. It should be noted that appraised values represent the opinion of the appraisal firm as of the date of the appraisals and are based on market conditions at the time of the appraisals and on assumptions concerning future circumstances which may or may not be accurate. The change in value (from December 31, 1995 to December 31, 1996) was primarily due to the distribution of a portion of the proceeds from the sale of the Residence Inn - Atlanta, in the amount of $33.37 per Unit in conjunction with the August 1996 regular quarterly distribution, and to only modest changes in values of the hotels over the past year. This valuation is an estimate of the assignee Unit value only which has been made as of December 31, 1996 based on the methodology described herein and does not represent a market value. There can be no assurance that the sales of the assets in the current market or at any time in the future would yield net proceeds which on a per assignee Unit basis would be equal to or greater than the estimated value. Further, there can be no assurance that sales of assignee Units now or in the future would yield net proceeds equal to or greater than this value. The assignee Units are illiquid and there is no formal liquid market where they are regularly traded. However, the Partnership is aware that some resales have taken place in the informal secondary market. In this informal market, transactions may or may not take place in any time period and occur at a price negotiated between buyer and seller. We have no knowledge concerning how a particular price may be determined. Resale transactions of which the Partnership has knowledge, reflect prices ranging from $191 to $466 in 1997 (through February 26, 1997, at which time trading was suspended, as discussed above). The Partnership's knowledge of these transactions is based solely on the books and records of its Transfer Agent. The Partnership anticipates that it will have sufficient resources to meet its capital and operating requirements into the foreseeable future. A cash distribution to investors for the first quarter of 1997 will be made at an annualized rate of 4%. The cash distribution for the first quarter of 1996 was made at an annualized rate of 3%; cash distributions from operations for the second, third and fourth quarters of 1996 were made at an annualized rate of 4%. Page 11 of 17 METRIC PARTNERS GROWTH SUITE INVESTORS, L.P. a California Limited Partnership Project Operations of the Residence Inns for the Three Months Ended March 31, 1997 (000's)
Columbus Fort Ontario (East) Wayne Indianapolis Lexington Louisville ------- ------- ------- ------- ------- ------- REVENUES: Hotel operations: Rooms $ 1,052 $ 404 $ 325 $ 397 $ 410 $ 600 Telephone and other 62 25 15 13 27 36 ------- ------- ------- ------- ------- ------- Hotel operations 1,114 429 340 410 437 636 Interest and other 0 0 0 0 0 0 ------- ------- ------- ------- ------- ------- Total revenues 1,114 429 340 410 437 636 ------- ------- ------- ------- ------- ------- EXPENSES: Hotel operations: Rooms 194 106 82 115 74 126 Administrative 132 57 43 30 61 73 Marketing 129 43 36 46 49 69 Energy 54 35 29 21 24 22 Repair and maintenance 51 23 16 34 30 29 Management fees 50 13 10 12 13 19 Property taxes 23 20 10 (32) 12 22 Other 32 12 9 12 18 18 ------- ------- ------- ------- ------- ------- Hotel operations 665 309 235 238 281 378 Depreciation and other amortization 129 57 60 70 69 74 Interest 214 69 72 84 82 94 General and administrative 0 0 0 0 0 0 ------- ------- ------- ------- ------- ------- Total expenses 1,008 435 367 392 432 546 ------- ------- ------- ------- ------- ------- NET INCOME(LOSS) 106 (6) (27) 18 5 90 Plus non-cash items - net 129 58 61 71 70 76 Less notes payable principal payments 0 5 5 6 6 7 ------- ------- ------- ------- ------- ------- Project operations 235 47 29 83 69 159 Capital Improvements 101 5 2 31 9 8 ------- ------- ------- ------- ------- ------- Project operations after capital improvements $ 134 $ 42 $ 27 $ 52 $ 60 $ 151 ======= ======= ======= ======= ======= ======= Occupancy 76% 86% 73% 73% 87% 86% ADR $ 79.09 $ 69.74 $ 66.65 $ 73.11 $ 70.06 $ 86.47
Winston Altamonte Salem Nashville Atlanta Springs Partnership Total ------- ------- ------- ------- ------- ------- REVENUES: Hotel operations: Rooms $ 450 $ 816 $ 0 $ 967 $ 0 $ 5,421 Telephone and other 27 51 0 35 0 291 ------- ------- ------- ------- ------- ------- Hotel operations 477 867 0 1,002 0 5,712 Interest and other 0 0 0 0 102 102 ------- ------- ------- ------- ------- ------- Total revenues 477 867 0 1,002 102 5,814 ------- ------- ------- ------- ------- ------- EXPENSES: Hotel operations: Rooms 103 201 0 161 0 1,162 Administrative 67 109 0 113 0 685 Marketing 53 113 0 98 0 636 Energy 30 67 0 54 0 336 Repair and maintenance 31 60 0 39 0 313 Management fees 14 26 0 63 0 220 Property taxes 17 40 0 42 0 154 Other 18 75 0 29 0 223 ------- ------- ------- ------- ------- ------- Hotel operations 333 691 0 599 0 3,729 Depreciation and other amortization 78 126 0 89 0 752 Interest 83 215 0 170 0 1,083 General and administrative 0 0 0 0 172 172 ------- ------- ------- ------- ------- ------- Total expenses 494 1,032 0 858 172 5,736 ------- ------- ------- ------- ------- ------- NET INCOME(LOSS) (17) (165) 0 144 (70) 78 Plus non-cash items - net 79 126 0 131 0 801 Less notes payable principal payments 6 32 0 23 0 90 ------- ------- ------- ------- ------- ------- Project operations 56 (71) 0 252 (70) 789 Capital Improvements 0 129 0 5 0 290 ------- ------- ------- ------- ------- ------- Project operations after capital improvements $ 56 ($ 200) $ 0 $ 247 ($ 70) $ 499 ======= ======= ======= ======= ======= ======= Occupancy 77% 68% 0% 93% -- 79% ADR $ 79.13 $ 82.16 $ 0.00 $ 93.84 -- $ 79.50
Page 12 of 17 METRIC PARTNERS GROWTH SUITE INVESTORS, L.P. a California Limited Partnership Project Operations of the Residence Inns for the Three Months Ended March 31, 1996 (000's)
Columbus Fort Ontario (East) Wayne Indianapolis Lexington Louisville ------- ------- ------- ------- ------- ------- REVENUES: Hotel operations: Rooms $ 913 $ 405 $ 400 $ 417 $ 387 $ 537 Telephone and other 55 24 25 17 34 37 ------- ------- ------- ------- ------- ------- Hotel operations 968 429 425 434 421 574 Interest and other 0 0 0 0 0 0 ------- ------- ------- ------- ------- ------- Total revenues 968 429 425 434 421 574 ------- ------- ------- ------- ------- ------- EXPENSES: Hotel operations: Rooms 164 91 77 102 84 105 Administrative 106 66 43 71 97 58 Marketing 107 44 55 51 54 64 Energy 61 33 33 33 31 25 Repair and maintenance 48 21 15 29 33 26 Management fees 30 13 17 13 13 19 Property taxes 27 13 16 19 12 20 Other 39 14 15 11 23 23 ------- ------- ------- ------- ------- ------- Hotel operations 582 295 271 329 347 340 Depreciation and other amortization 125 54 53 63 63 73 Interest 214 70 73 85 82 95 General and administrative 0 0 0 0 0 0 ------- ------- ------- ------- ------- ------- Total expenses 921 419 397 477 492 508 ------- ------- ------- ------- ------- ------- NET INCOME(LOSS) 47 10 28 (43) (71) 66 Plus non-cash items - net 125 55 55 65 65 74 Less notes payable principal payments 1 4 5 5 5 6 ------- ------- ------- ------- ------- ------- Project operations 171 61 78 17 (11) 134 Capital Improvements 0 26 24 15 35 63 ------- ------- ------- ------- ------- ------- Project operations after capital improvements $ 171 $ 35 $ 54 $ 2 ($ 46) $ 71 ======= ======= ======= ======= ======= ======= Occupancy 73% 83% 92% 77% 90% 84% ADR $ 68.80 $ 72.80 $ 64.61 $ 73.51 $ 63.72 $ 79.05
Winston Altamonte Salem Nashville Atlanta Springs Partnership Total ------- ------- ------- ------- ------- ------- REVENUES: Hotel operations: Rooms $ 450 $ 713 $ 0 $ 914 $ 0 $ 5,136 Telephone and other 25 27 0 27 0 271 ------- ------- ------- ------- ------- ------- Hotel operations 475 740 0 941 0 5,407 Interest and other 0 0 0 0 112 112 ------- ------- ------- ------- ------- ------- Total revenues 475 740 0 941 112 5,519 ------- ------- ------- ------- ------- ------- EXPENSES: Hotel operations: Rooms 102 243 0 170 0 1,138 Administrative 69 108 5 73 0 696 Marketing 57 99 0 94 0 625 Energy 32 53 0 46 0 347 Repair and maintenance 29 87 0 37 0 325 Management fees 14 22 0 58 0 199 Property taxes 12 28 0 44 0 191 Other 14 80 0 21 0 240 ------- ------- ------- ------- ------- ------- Hotel operations 329 720 5 543 0 3,761 Depreciation and other amortization 62 134 0 137 0 764 Interest 83 223 0 168 0 1,093 General and administrative 0 0 0 0 219 219 ------- ------- ------- ------- ------- ------- Total expenses 474 1,077 5 848 219 5,837 ------- ------- ------- ------- ------- ------- NET INCOME(LOSS) 1 (337) (5) 93 (107) (318) Plus non-cash items - net 64 134 0 174 0 811 Less notes payable principal payments 5 29 0 30 0 90 ------- ------- ------- ------- ------- ------- Project operations 60 (232) (5) 237 (107) 403 Capital Improvements 14 0 0 0 0 177 ------- ------- ------- ------- ------- ------- Project operations after capital improvements $ 46 ($ 232) ($ 5) $ 237 ($ 107) $ 226 ======= ======= ======= ======= ======= ======= Occupancy 85% 67% 0% 87% -- 80% ADR $ 71.21 $ 70.80 $ 0.00 $ 89.89 -- $ 73.15
Page 13 of 17 PART II OTHER INFORMATION Item 1. Legal Proceedings. Metric Partners Growth Suite Investors, L.P. vs. Kenneth E. Nelson, The Nelson Group, et al., San Francisco County Superior Court, Case No. 928065 (the "SF Lawsuit). [This lawsuit is related to the other proceedings described below (other than the sales tax related case). Terms defined in the description of one case may be used in the description of the other cases.] This lawsuit relates to disputes in connection with management of the Partnership's Residence Inn - Ontario by an entity controlled by Kenneth E. Nelson ("Nelson") from April 1988 to February 1991. In March 1993, the Partnership and Nelson verbally agreed to settle the SF Lawsuit at a settlement conference (the "SF Settlement"), whereby the Partnership would purchase the land (the "Land") underlying the Partnership's Residence Inn - Nashville (the "Hotel") currently leased by the Partnership from Nashville Lodging Company ("NLC"), an entity controlled by Nelson. Various disagreements between the Partnership and Nelson regarding the SF Settlement arose after March 1993 and documents to effectuate the SF Settlement were never completed or executed. In July 1994, the Court in the Nashville Case I, discussed below, ruled that the Hotel had been fraudulently conveyed to NLC in 1986 and voided the conveyance. The Court in the Nashville Case I ordered a sale of the Land, subject to all prior encumbrances, including the ground lease of the Land by the Partnership (the "Lease"). As discussed in more detail below (see "Nashville Case I"), subsequent to a judicial sale held on July 24, 1996, the Court ruled in a confirmation hearing held in August 1996 that the Land would be sold to Orlando Residence, Ltd ("Orlando"). In December, 1996, the Tennessee Court of Appeals reversed the judgement underlying the judicial sale; this reversal is not yet final, but could result in NLC regaining ownership of the Land pending the outcome of a new trial. Unless NLC regains ownership of the Land, the Partnership will not be able to purchase the Land as agreed in the SF Settlement. Orlando Residence Ltd. vs. Metric Partners Growth Suite Investors, L.P. et al., Chancery Court for Davidson County, in Nashville, Tennessee, Case No. 92-3086-III ("Nashville Case I") 2300 Elm Hill Pike, Inc. ("2300") (formerly known as Nashville Residence Corporation until 1986) was the original owner of the Hotel (including the Land). 2300 conveyed its interest in the Hotel (including the Land) to NLC in 1986 by unrecorded quitclaim deed. In April 1989, NLC sold the Hotel and leased the Land to the Partnership pursuant to the Lease. In October 1992, Orlando filed this lawsuit against NLC and its general partners and the Partnership, alleging that the sale of the Hotel and the Land by 2300 to NLC in 1986 and NLC's subsequent sale of the Hotel and lease of the Land to the Partnership in 1989 were fraudulent conveyances, intended to hinder Plaintiff's recovery of a judgment against 2300. In August 1993, the Court dismissed this action against the Partnership. The Partnership's only material continuing interest in the case is its effect on ownership of the Land and the Lease. In August 1994, the Court held that the sale of the Hotel by 2300 to NLC was a fraudulent conveyance and voided the conveyance. The defendants appealed the judgment for Orlando in this case to the Tennessee Court of Appeals, but the judgment was not stayed pending appeal. Oral argument on this appeal was held on November 1, 1996, and in December 1996, the Court of Appeals reversed the judgement for Orlando, sending the case back to the lower court for further proceedings. Prior to this reversal, Orlando requested and the Court ordered a judicial sale of the Land, with the sale subject to encumbrances of record, including the Lease. The sale was a credit sale, with the purchase price due in six months. This sale was held on July 24, 1996. At a confirmation hearing in August 1996, the Court ordered the Land to be sold to Orlando. He further ordered that Orlando was to become the landlord under the Lease. If the afore-referenced reversal becomes final, NLC will likely regain ownership of the Land and the landlord under the Lease, pending the outcome of a new trial. Page 14 of 17 Nashville Lodging Company vs. Metric Partners Growth Suite Investors, L.P. et al., Circuit Court, State of Wisconsin, Case No. 94CV001212. In February 1994, NLC served this lawsuit on the Partnership. NLC alleges fraud, breach of settlement contract and breach of good faith and fair dealing and seeks compensatory, punitive and exemplary damages in an unspecified amount for the Partnership's failure to consummate the SF Settlement. In February 1994, the Partnership filed an answer and requested that the Court stay the action pending resolution of the SF Lawsuit including all appeals. The Court refused to stay the action and discovery commenced. In February 1995, the Court determined that the Partnership could be sued in Wisconsin but stayed the case until the settlement of the SF Lawsuit has been finalized. Orlando Residence Ltd. vs. 2300 Elm Hill Pike, Inc. and Nashville Lodging Company vs. Metric Partners Growth Suite Investors, L.P., Chancery Court for Davidson County, in Nashville, Tennessee, Case No. 94-1911-I ("Nashville Case II"). Orlando filed this action against 2300 and NLC in the Davidson County Chancery Court to attempt to execute on its judgment against Nelson, NLC and 2300 in Nashville Case I by subjecting the Land to sale. In May 1995, 2300 and NLC filed a third-party complaint against the Partnership, alleging it had refused to purchase the Land as required by the SF Settlement. 2300 and NLC demand payment by the Partnership of 2300 and NLC's costs of defending Nashville Case II and indemnification for any loss resulting from the claims of Orlando, among other claims of damage. In February 1996, the Court granted a motion filed by 2300 and NLC for partial summary judgement, ruling that the Partnership had breached the SF Settlement. The action will continue to determine damages and other issues. The Partnership does not believe it breached the SF Settlement and will appeal this ruling at an appropriate time. However, no assurance can be given that its appeal will be successful. In any event, the Partnership does not believe that any damages it might ultimately be required to pay in this action will have a material adverse effect on the Partnership. In June 1996, the Partnership filed a counterclaim, claiming damages for the failure of NLC to complete the SF Settlement. The Partnership also added the general partners of NLC as additional counterclaim defendants to the case. In July 1996, the counterclaim defendants filed an answer to the counterclaim and a motion for summary judgment dismissing the counterclaim. A hearing on this motion was held in January 1997 and the Partnership's counterclaim was dismissed. In April 1997, the Court denied a motion for summary judgment filed by NLC and 2300 which, in essence, claimed that the Partnership had breached the duty of good faith and fair dealing in not consummating the SF Settlement. Metric Partners Growth Suite Investors, L.P., vs. Nashville Lodging Co., 2300 Elm Hill Pike, Inc., Orlando Residence, Ltd., and LaSalle National Bank, as trustee under that certain pooling and servicing agreement, dated July 11, 1995, for the holders of the WHP Commercial Mortgage Pass Through Certificates, Series 1995C1 and Robert Holland, Trustee, Chancery Court for Davidson County, in Nashville, Tennessee, Case No. 96-1405-III ("Nashville Case III"). GSI filed this action May 3, 1996 to obtain, among other things, a judicial determination of the rights and obligations of GSI and NLC under the senior mortgage on the Hotel ("Senior Mortgage"), a note held by NLC "wrapped around" the Senior Mortgage (the "Wrap Note") and the Lease as a consequence of GSI's cure of certain defaults by NLC under the Senior Mortgage. GSI believed that as a result of such cure, it became the direct obligor to the lender under the Senior Mortgage and that the Wrap Note had been satisfied and the payments due under the Lease reduced by $50,000 per year. GSI also sought preliminary and permanent injunctive relief to prevent NLC from attempting to accelerate or foreclose the Wrap Note and/or from attempting to enforce any remedies with regard to the Lease in connection with this matter and a judgment establishing that GSI is the owner of the Hotel, subject only to the Lease and certain specified security interests. In May 1996, the Partnership obtained a temporary injunction staying NLC from undertaking any efforts to exercise any remedies pursuant to the Wrap Note or the Lease. NLC and 2300 filed an answer in June, together with a counterclaim against the Partnership. NLC and 2300 claimed damages from the Partnership and asked the Court to permit acceleration of the Wrap Note and termination of the Lease. In July 1996, the Partnership filed a motion for summary judgment in this case, asking that the Court award the relief sought by it and that the Court dismiss the counterclaim of NLC and 2300. At a hearing on this motion held in August 1996 the Court granted the Partnership's motion. The defendants will appeal all judgments for the Partnership in this case. Page 15 of 17 Metric Partners Growth Suite Investors, L.P. vs. Joe Huddleston, Commissioner of Revenue for the State of Tennessee, Chancery Court for Davidson County, in Nashville, Tennessee, Case No. 94-1227-II. GSI filed this action April 25, 1994 to challenge the assessment of a sales and use tax deficiency by the State for the period 1989 through 1993 in the amount of $122,799 with accrued interest through February 20, 1994 of $35,248 (the alleged deficiency plus estimated accrued interest totaled 211,000 at March 31, 1997). In general, the claimed deficiency relates primarily to sales tax related to food and beverage items used in the Hotel's complimentary breakfast and evening social hour. In February 1997, GSI learned that this case had been dismissed for failure to prosecute by its attorneys. On April 25, 1997, the Court granted the Partnership's motion to reinstate the case and a trial is expected to occur later this year. The ultimate disposition of these lawsuits cannot be predicted at this time; however, based solely on the facts known to it as of the date hereof, the Partnership does not believe the lawsuits will have a material adverse effect on the Partnership. Item 6. Exhibits and Reports on Form 8-K (a) No reports on Form 8-K were required to be filed during the period covered by this Report. Page 16 of 17 SIGNATURE 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. METRIC PARTNERS GROWTH SUITE INVESTORS, L.P., a California Limited Partnership By: Metric Realty, an Illinois general partnership, its Managing General Partner By: SSR Realty Advisors, Inc., a Delaware corporation, its Managing General Partner By: /s/ William A. Finelli ----------------------------- William A. Finelli Managing Director, Principal Financial and Accounting Officer of SSR Realty Advisors, Inc. Date: May 14, 1997 ------------ Page 17 of 17 EX-27 2 FDS
5 3-MOS DEC-31-1997 JAN-01-1997 MAR-31-1997 7,230,000 0 564,000 0 0 7,931,000 90,746,000 32,566,000 66,653,000 2,832,000 42,464,000 0 0 0 20,998,000 66,353,000 0 5,712,000 0 3,729,000 0 0 1,083,000 78,000 0 0 0 0 0 78,000 1.00 0
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