-----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, I2fsjD7kHdTHzT08Okv19Xhp/FNbkcfw4DR06vtmxr9gdxPeOvDKyDsIR0W5PMMp OKZITXRDyCi7L2nvGwuSwA== 0000810661-96-000012.txt : 19961115 0000810661-96-000012.hdr.sgml : 19961115 ACCESSION NUMBER: 0000810661-96-000012 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961113 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: MISSION VALLEY COMFORT SUITES LTD CENTRAL INDEX KEY: 0000810661 STANDARD INDUSTRIAL CLASSIFICATION: HOTELS & MOTELS [7011] IRS NUMBER: 330213497 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-18080 FILM NUMBER: 96661201 BUSINESS ADDRESS: STREET 1: 3145 SPORTS ARENA BLVD CITY: SAN DIEGO STATE: CA ZIP: 92110 BUSINESS PHONE: 6192261212 MAIL ADDRESS: STREET 1: 631 CAMINO DEL RICO SOUTH CITY: SAN DIEGO STATE: CA ZIP: 92108 FORMER COMPANY: FORMER CONFORMED NAME: MOTELS OF AMERICA SERIES X DATE OF NAME CHANGE: 19900418 10QSB 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-QSB - Quarterly or Transitional Report / X / QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1996 OR / / TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT For the transition period from to Commission File Number 000-18080 Mission Valley Comfort Suites Ltd., A California Limited Partnership (Exact name of small business issuer as specified in its charter) California 33-0213497 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 1466 9th Avenue, San Diego, CA 92101 (Address of principal executive offices) (619) 699-6100 (Issuer's telephone number) 3145 Sports Arena Blvd., San Diego, CA 92110 (Former name, former address and former fiscal year, if changed since last report) Check whether the registrant (1) has filed all reports required to be filed by Sections 13 or 15(d) of the Exchange Act during the last 12 months (or for such shorter period that the issuer was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes / X / No / / State the number of limited partnership interests outstanding as of the latest practicable date: 5,900 PART I. -- FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS Incorporated herein is the following unaudited financial information: Balance Sheet as of September 30, 1996 and December 31, 1995. Statement of Operations for the three- and nine-month periods ended September 30, 1996 and September 30, 1995. Statement of Cash Flows for the three- and nine-month periods ended September 30, 1996 and September 30, 1995. Notes to Financial Statements.
MISSION VALLEY COMFORT SUITES LTD. A California Limited Partnership Balance Sheet September 30, 1996 and December 31, 1995 (Unaudited) (Part 1 of 2) September 30, December 31, ASSETS 1996 1995 --------- ------------ ------------ Current Assets: Cash and cash equivalents $ 257,545 $ 55,694 Accounts receivable 40,445 26,647 Operating supplies 16,724 15,603 Prepaid expenses 32,048 14,207 Due from Affiliates (note 4) 0 821 ----------- ----------- Total current assets 346,762 112,972 Investment property, at cost: Building and improvements 4,558,026 4,541,600 Furniture, fixtures & equipment 1,209,805 1,177,560 ----------- ----------- 5,767,831 5,719,160 Less accumulated depreciation 2,108,505 1,983,846 ----------- ----------- Total investment property, net of accumulated depreciation 3,659,326 3,735,314 Construction in progress 26,005 0 Franchise fees, net (note 3) 29,792 31,667 ----------- ----------- $ 4,061,885 $ 3,879,953 =========== =========== See accompanying notes to financial statements.
MISSION VALLEY COMFORT SUITES LTD. A California Limited Partnership Balance Sheet September 30, 1996 and December 31, 1995 (Unaudited) (Part 2 of 2) LIABILITIES AND September 30, December 31, PARTNER'S CAPITAL ACCOUNTS 1996 1995 -------------------------- ------------- ------------ Current liabilities: Notes payable (note 5) $ 7,269 $ 6,847 Accounts payable and accrued expenses 75,923 43,538 Due to Affiliates (note 4) 5,522 11,852 ---------- ---------- Total current liabilities 88,714 62,237 ---------- ---------- Long-term debt, less current portion (note 5) 231,405 236,911 Deferred rent liability (note 6) 1,491,008 1,513,261 ---------- ---------- Total liabilities 1,811,127 1,812,409 ---------- ---------- Partners' capital accounts: General partners: Capital contributions 31,210 31,210 Cumulative net earnings (111,840) (143,161) Cumulative cash distributions (170,640) (157,640) ---------- ---------- (251,270) (269,591) ---------- ---------- Limited partners: Capital contributions, net of offering costs 5,117,287 5,117,287 Cumulative net earnings (1,006,552) (1,288,444) Cumulative cash distributions (1,608,707) (1,491,708) ---------- ---------- 2,502,028 2,337,135 ---------- ---------- Total partners' capital accounts 2,250,758 2,067,544 ---------- ---------- $4,061,885 $3,879,953 =========== ========== See accompanying notes to financial statements.
MISSION VALLEY COMFORT SUITES LTD., A California Limited Partnership Statement of Operations Three Months and Nine Months Ended September 30, 1996 and September 30, 1995 (Unaudited) THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ------------------- ------------------ 1996 1995 1996 1995 ------- ------ ------ ------ Revenues: Room revenues $ 605,118 $ 577,963 $1,550,809 $1,423,486 Phone revenue 13,800 12,037 34,756 32,595 Interest income 697 451 1,334 505 Other income 7,248 11,216 21,358 21,370 ---------- ---------- ---------- ---------- 626,863 601,667 1,608,257 1,477,956 ---------- ---------- ---------- ---------- Expenses: Property operating expenses 177,998 171,164 488,701 450,579 Depreciation 42,002 42,839 124,659 122,518 General and administrative 50,331 45,022 154,695 139,913 Amortization 625 625 1,875 1,875 Management fees 37,566 36,073 96,357 88,643 Royalties and advertising 47,686 45,250 116,188 109,364 Real estate taxes 10,893 11,951 35,815 36,653 Interest expense 4,796 5,230 14,491 15,417 Lease expense 55,771 54,625 167,311 163,875 Marketing 10,285 18,494 31,451 41,112 Repairs & Maintenance 18,161 18,511 63,501 63,921 ---------- ---------- ---------- ---------- 456,114 449,784 1,295,044 1,233,870 ---------- ---------- ---------- ---------- Net earnings $ 170,749 $ 151,883 $ 313,213 $ 244,086 ========== ========== ========== ========== Net earnings per limited partnership interest $ 26.05 $ 23.17 $ 47.78 $ 37.23 See accompanying notes to financial statements.
MISSION VALLEY COMFORT SUITES LTD., A California Limited Partnership Statement of Cash Flows Three Months and Nine Months Ended September 30, 1996 and September 30, 1995 (Unaudited) THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ------------------ ----------------- 1996 1995 1996 1995 ---- ---- ---- ---- Cash flows from operating activities: Net earnings (loss) $ 170,749 $ 151,883 $ 313,213 $ 244,086 Adjustments to reconcile net income to cash: Depreciation and amortization 42,627 43,464 126,534 124,393 (Increase) decrease in: Accounts receivable (9,939) 1,767 (13,800) (6,217) Operating supplies (1,313) (795) (1,121) (1,276) Prepaid expenses 6,221 17,948 (17,841) 28,567 Increase (decrease) in: Accounts payable and accrued expenses 19,073 (5,412) 32,385 8,941 Due to Affiliates (24,964) 25,611 (5,509) 24,792 Deferred rent liability (7,418) (7,418) (22,253) (22,254) ---------- ---------- ---------- ---------- Net cash provided by (used in) operating activities 195,036 227,048 411,608 401,032 ---------- ---------- ---------- ---------- Cash flows from investing activities: Investment property expenditures (48,041) (13,671) (74,676) (118,366) ---------- ---------- ---------- ---------- Net cash used in investing activities (48,041) (13,671) (74,676) (118,366) ---------- ---------- ---------- ---------- Cash flows from financing activities: Proceeds/(Payments) of notes payable (1,728) (1,596) (5,084) (4,694) Cash distributions to partners (90,000) (65,000) (129,999) (95,000) Net cash provided by (used in) ---------- ---------- ---------- ---------- financing activities (91,728) (66,596) (135,083) (99,694) ---------- ---------- ---------- ---------- Net increase in cash and cash equivalents 55,269 146,783 201,851 182,972 Cash and cash equivalents, beginning of period 202,276 65,231 55,694 29,042 ---------- ---------- ---------- ---------- Cash and cash equivalents, end of period 257,545 212,014 257,545 212,014 ========== ========== ========== ========== See accompanying notes to financial statements.
MISSION VALLEY COMFORT SUITES LTD., A California Limited Partnership Notes to Financial Statements September 30, 1996 Readers of this quarterly report should refer to the partnership audited financial statements and annual report Form 10-KSB (File No. 000-18080) for the period ended December 31, 1995, as certain footnote disclosures which would substantially duplicate those contained in such financial reports have been omitted from this report. 1. THE PARTNERSHIP AND A SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Mission Valley Comfort Suites Ltd., A California Limited Partnership (the Partnership), (formerly Motels of America Series X), a California Limited Partnership, was formed on September 18, 1987 pursuant to the California Revised Uniform Limited Partnership Act. The purpose of the Partnership is to construct, own, and operate a 122-room "suites only" motel under a franchise agreement with Choice Hotels International, Inc. The motel was opened in September 1988. The following is a summary of the Partnership's significant accounting policies: Cash and Cash Equivalents The Partnership considers all highly liquid instruments purchased with an original maturity of three months or less to be cash equivalents. Investment Property Investment property is recorded at cost. Depreciation is computed using the straight-line method based on estimated useful lives of 5 to 35 years. Maintenance and repair costs are expensed as incurred, while significant improvements, replacements, and major renovation are capitalized. Franchise Fees Franchise fees are amortized over the 20-year life of the franchise agreement. Income Taxes No provision for income taxes has been made as any liability for such taxes would be that of the partners rather than the Partnership. Net Income per Interest Net income per interest is based upon the 90% allocated to limited partners divided by 5,900 limited partner interests outstanding throughout the year. (Continued) MISSION VALLEY COMFORT SUITES LTD., A California Limited Partnership Notes to Financial Statements (Continued) 2. PARTNERSHIP AGREEMENT Net income or loss and cash distributions from operations of the Partnership are allocated 90% to the limited partners and 10% to the general partner. Profits from the sale or other disposition of Partnership property are to be allocated to the general partner until its capital account equals zero; thereafter, to the limited partners until their capital accounts equal their capital contributions reduced by prior distributions of cash from sale or refinancing plus an amount equal to a cumulative but not compounded annual 8% return thereon which cumulative return shall be reduced (but not below zero) by the aggregate amount of prior distributions of cash available for distribution; thereafter, gain shall be allocated 15% to the general partner and 85% to the limited partners. Loss from sale shall be allocated 1% to the general partner and 99% to the limited partners. 3. FRANCHISE AGREEMENT The Partnership has entered into a twenty-year franchise agreement with Choice Hotels International, Inc. to provide the Partnership with consultation in the areas of design, construction and operation of the motel. The agreement required the payment of initial franchise fees of $50,000 and requires ongoing royalty and chain-affiliated advertising fees based on a percentage of gross room revenues. 4. RELATED PARTY TRANSACTIONS The motel is operated pursuant to a management agreement with GHG Hospitality, Inc. (GHG), the general partner. The agreement provides for the payment of monthly management fees of 6% of gross revenues. The Partnership has agreed to reimburse GHG for certain expenses related to services performed in maintaining the books and administering the affairs of the Partnership. GHG and an affiliate, GMS Management Services, Inc. (GMS), formerly Grosvenor Management Services, Inc., allocate to the Partnership certain marketing, accounting, and maintenance salaries and certain other expenses directly related to the operation of the Partnership. (Continued) MISSION VALLEY COMFORT SUITES LTD., A California Limited Partnership Notes to Financial Statements (Continued) 4. RELATED PARTY TRANSACTIONS (Continued) Fees and reimbursements for partnership administration expenses paid to GHG and GMS for the three months and nine months ended September 30, 1996 and September 30, 1995 are as follows:
Three Months Ended Nine Months Ended 9/30/96 9/30/95 9/30/96 9/30/95 ------------------ ------------------ Management Fees $37,566 $36,073 $96,357 $88,643 Reimbursement for partnership admini- stration expenses $ 9,875 $ 8,105 $29,624 $24,316 Salaries and other allocated expenses $31,873 $32,111 $80,990 $86,504
In addition, all motel employees are paid by GMS. For the three months ended September 30, 1996, the Partnership reimbursed GMS $83,737 for the wages of these employees which includes a one percent processing fee. At September 30, 1996, $5,522 was due to GHG and GMS relating to reimbursement for these operating expenses. 5. LONG-TERM DEBT The Partnership has a note payable which is due in monthly installments of $2,175, including 8% interest, through April 2013. The note is secured by a trust deed on the Partnership's motel. The balance outstanding was $238,674 as of September 30, 1996. The fair value of long-term debt approximates its carrying amount based on borrowing rates currently available to the Partnership for loans with similar terms. Principal payments on this note are due as follows: 1996 $ 1,763 1997 7,415 1998 8,031 1999 8,697 2000 9,419 Thereafter 203,349 -------- $238,674 ======== (Continued) MISSION VALLEY COMFORT SUITES LTD., A California Limited Partnership Notes to Financial Statements (Continued) 6. LEASE The Partnership leases the land underlying its motel under an operating lease which expires in 2046. Prior to April 1, 1993, rents were subject to annual increases based on the greater of 2- 1/2% or the increase in the Consumer Price Index. The total minimum rentals over the life of the lease, including the effects of the 2-1/2% minimum annual increases, were being recognized on the straight-line basis as required by generally accepted accounting principles. Effective April 1, 1993, the lease was amended to lower the rent payment to $20,000 per month. Rents are still subject to annual increases based on the increase in the Consumer Price Index, but the maximum annual increase is 5% and there is no minimum annual increase. The rent payment was $21,063 per month as of December 31, 1995. As a result of the amendment to the lease agreement, a deferred rent liability of $1,594,894, which was incurred prior to April 1, 1993, is being credited to income on a straight-line basis over the remaining term of the lease. The Partnership is required to pay real estate taxes, insurance, and maintenance for the leased land and improvements thereon. Future minimum lease payments are due as follows: 1996 $ 252,756 1997 252,756 1998 252,756 1999 252,756 2000 252,756 Thereafter 11,605,713 ----------- $12,869,493 =========== 7. ADJUSTMENTS In the opinion of the general partners, all adjustments (consisting solely of normal recurring adjustments) necessary for a fair presentation have been made to the accompanying figures as of and for the nine months ended September 30, 1996. 8. SUBSEQUENT EVENT In November 1996, the Partnership paid a distribution of $152,999.71 to the limited partners. (Continued) MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Financial Condition: On February 6, 1987, the Partnership commenced its public offering pursuant to its Prospectus. On March 21, 1988, the Partnership completed the public offering. The Partnership received $5,117,287 (net of offering costs of $782,713) from the sale of limited partnership interests. These funds were available for investment in property, to pay legal fees and other costs related to the investments, to pay operating expenses, and for working capital. The majority of the proceeds were used to acquire and construct the property identified in Item 2 above. As a result of cost overruns related to the acquisition and construction of the motel, the Partnership borrowed $200,000 from the party that is the lessor under its land lease. The note is payable in monthly installments of $2,175, including interest at 8%, over a 20-year period. The deferred rent liability represents amounts accrued under the Partnership's land lease prior to April 1, 1993. Under the original land lease, annual rent increases were based on the greater of 2-1/2% or the increase in the Consumer Price Index. The Partnership was required by generally accepted accounting principles to record rent expense and a deferred rent liability based on projecting the 2-1/2% minimum annual rent increase over the 60-year term of the lease. Effective April 1, 1993, the land lease was amended. Under the amended land lease, monthly rent payments were reduced from $30,138 per month to $20,000 per month. Annual rent increases are based on the lesser of the increase in the Consumer Price Index or 5%, and there is no minimum annual increase. Rent expense under the amended lease is significantly lower than under the previous lease. In addition, the deferred rent liability accrued prior to April 1, 1993 is being credited to income on a straight-line basis over the remaining term of the lease. Results of Operations: For the three months ended September 30, 1996, room revenues were $605,118, the occupancy rate was 82.4% and the average daily rate was $65.31. This compares to the three months ended September 30, 1995 when room revenues were $577,963, the occupancy rate was 83.56% and the average daily rate was $61.62. For the nine months ended September 30, 1996, room revenues were $1,550,809, the occupancy rate was 77.59% and average daily rate was $59.79. This compares to September 30, 1995 with room revenues of $1,423,487, occupancy rate of 72.7% and average daily rate of 58.79. (Continued) MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) The three months ended September 30, 1996 compared with the three months ended September 30, 1995, shows an average daily rate increase of $3.69 per room while occupancy increased by approximately one percentage point, resulting in an increase in room revenue of $27,155. Profit for the three months ended September 30, 1996 increased by $18,866 when compared with the three months ended September 30, 1995. Year-to-date figures for the nine months ended September 30, 1996 show occupancy increased by approximately five percentage points and room revenue is $127,322 more than the nine months ended September 30, 1995. Choice contributed a total of 3228 room nights (approximately 35% of our business) through its reservation system, approximately 190 room nights greater than last year. The San Diego Union published an article in early November 1996 reporting that the Mission Valley area of San Diego had experienced an occupancy increase for the nine months ended September 30, 1996 compared to the nine months ended September 30, 1995 of 4.2%. The partnership's occupancy for this same period increased by 4.9%. This same article in the San Diego Union reported that the Mission Valley area experienced an increase to average rate of 7% for the nine months ended September 30, 1996 compared to the nine months ended September 30, 1995. The partnership's rate for this nine month period increased by approximately 2%. In compliance with Choice requirements, the electronic locks installation was completed in October in all the guest rooms for a total costs of $39,055. The effect of current operations on liquidity was net cash provided by operating activities of $411,608 for the nine months ended September 30, 1996 and $401,032 for the nine months ended September 30, 1995. Seasonality: The motel business is seasonal with the third quarter being the strongest due to the tourist business and the last half of the fourth quarter and the first half of the first quarter being the weakest. It is not unusual for the motel operations to have negative cash flow during this weak period. 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. (REGISTRANT) Mission Valley Comfort Suites Ltd., A California Limited Partnership By: GHG Hospitality, Inc. Corporate General Partner BY (SIGNATURE) /s/ J. Mark Grosvenor (NAME AND TITLE) J. Mark Grosvenor, President and Director (DATE) November 14, 1996 BY (SIGNATURE) /s/ Sylvia Mellor Clark (NAME AND TITLE) Sylvia Mellor Clark, Controller (DATE) November 14, 1996 EX-27 2
5 9-MOS DEC-31-1996 SEP-30-1996 257,545 0 40,445 0 16,724 346,762 5,767,831 2,108,505 4,061,885 88,714 0 0 0 0 0 4,061,885 0 1,608,257 0 1,280,553 0 0 14,491 313,213 0 313,213 0 0 0 313,213 47.78 47.78
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