-----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, RevGh0O7EJ3VnAVOjEAXhm56gZ1mUJwh8TI+ou1fTERTy4T+KSuPS/TFtnd1aA/C QpkWF0gmD/u4P2E+b13RsQ== 0000810661-97-000020.txt : 19970513 0000810661-97-000020.hdr.sgml : 19970513 ACCESSION NUMBER: 0000810661-97-000020 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970512 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: 97601111 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 March 31, 1997 / / TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT Commission File Number 33-11224-LA 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) (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 1 PART I. -- FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS Incorporated herein is the following unaudited financial information: Balance Sheet as of March 31, 1997 and December 31, 1996. Statement of Operations for the three month period ended March 31, 1997 and March 31, 1996. Statement of Cash Flows for the three month period ended March 31, 1997 and March 31, 1996. Notes to Financial Statements. 2 MISSION VALLEY COMFORT SUITES LTD. A California Limited Partnership Balance Sheet March 31, 1997 and December 31, 1996 (Unaudited) (Part 1 of 2)
March 31, December 31, ASSETS 1997 1996 -------- -------- ------------ Current Assets: Cash and cash equivalents $ 216,550 $ 75,541 Accounts receivable 25,057 38,797 Operating supplies 15,981 15,540 Prepaid expenses 6,677 22,422 Due from Affiliates (note 4) 0 4,848 ----------- ----------- Total current assets 264,265 157,148 Investment property, at cost: Building and improvements 4,605,934 4,603,619 Furniture, fixtures & equipment 1,211,442 1,211,442 ----------- ----------- 5,817,376 5,815,061 Less accumulated depreciation 2,211,384 2,163,096 ----------- ----------- Total investment property, net of accumulated depreciation 3,605,992 3,651,965 Franchise fees, net (note 2) 28,542 29,167 ----------- ----------- $ 3,898,799 $ 3,838,280 =========== ===========
See accompanying notes to financial statements. 3 MISSION VALLEY COMFORT SUITES LTD. A California Limited Partnership Balance Sheet March 31, 1997 and December 31, 1996 (Unaudited) (Part 2 of 2)
LIABILITIES AND March 31, 1997 December 31, 1996 PARTNER'S CAPITAL ACCOUNTS ------------------ ---------------- Current liabilities: Current portion on long-term debt $ 7,698 $ 7,415 Accounts payable and accrued expenses 61,570 54,996 Due to Affiliates (note 5) 29,820 11,440 ---------- ---------- Total current liabilities 99,088 73,851 ---------- ---------- Long-term debt, less current portion 225,239 229,496 Deferred rent liability (note 6 and note 8) 1,476,172 1,483,590 ----------- ----------- Total liabilities 1,800,499 1,786,937 ------------ ------------ Partners' capital accounts: General partners: Capital contributions 31,210 31,210 Cumulative net earnings (110,085) (114,781) Cumulative cash distributions (187,640) (187,640) ------------- ------------- (266,515) (271,211) --------------- ------------- Limited partners: Capital contributions, net of offering costs 5,117,287 5,117,287 Cumulative net earnings (990,764) (1,033,025) Cumulative cash distributions (1,761,708) (1,761,708) ------------- -------------- 2,364,815 2,322,554 ------------- -------------- Total partners' capital accounts 2,098,300 2,051,343 ------------- -------------- $3,898,799 $3,838,280 =========== ==========
See accompanying notes to financial statements. 4 MISSION VALLEY COMFORT SUITES LTD., A California Limited Partnership Statement of Operations Three Months Ended March 31, 1997 and March 31, 1996 (Unaudited)
THREE MONTHS ENDED March 31, 1997 1996 ----- ---- Revenues: Room revenues $ 457,555 $ 428,784 Phone revenue 10,182 8,751 Interest income 71 225 Other income 7,615 5,048 ---------- ---------- 475,423 442,808 ----------- ---------- Expenses: Property operating expenses 154,336 149,938 Depreciation 48,288 41,025 General and administrative 42,779 45,350 Amortization 625 625 Management fees 28,526 26,555 Royalties and advertising 28,950 29,225 Real estate taxes 17,424 11,930 Interest expense 4,726 5,043 Lease expense 57,038 55,770 Marketing 19,126 11,491 Property and liability insurance 9,568 9,615 Repairs & Maintenance 17,080 21,609 ---------- ---------- 428,466 408,176 ---------- ---------- Net earnings $ 46,957 $ 34,632 ========== ========== Net earnings per limited partnership interest $ 7.16 $ 5.28 ========== ==========
See accompanying notes to financial statements. 5 MISSION VALLEY COMFORT SUITES LTD., A California Limited Partnership Statement of Cash Flows Three Months Ended March 31, 1997 and March 31, 1996 (Unaudited)
THREE MONTHS ENDED March 31, 1997 1996 --------- -------- Cash flows from operating activities: Net earnings (loss) $ 46,957 $ 34,632 Adjustments to reconcile net income to cash: Depreciation and amortization 48,913 41,650 (Increase) decrease in: Accounts receivable 13,740 (10,870) Operating supplies (441) (1,335) Prepaid expenses 15,745 17,484 Increase (decrease) in: Accounts payable/accrued expenses 6,574 20,134 Due to/from Affiliates 23,228 21,960 Deferred rent liability (7,418) (7,418) Net cash provided by (used in) ------------ ------------- operating activities 147,298 81,269 ------------- ------------ Cash flows from investing activities: Investment property expenditures ( 2,315) (15,233) -------------- ------------ Net cash used in investing activities (2,315) (15,233) -------------- ------------ Cash flows from financing activities: Proceeds/(Payments) of notes payable (3,974) (1,661) Cash distributions to partners 0 0 Net cash provided by (used in) ------------- ------------- financing activities ( 3,974) ( 1,661) ------------- ------------- Net increase/(decrease) in cash and cash equivalents 141,009 64,375 Cash and cash equivalents, beginning of period 75,541 55,694 ------------- ------------- Cash and cash equivalents, end of period $216,550 $120,069 ========= ========
6 See accompanying notes to financial statements. MISSION VALLEY COMFORT SUITES LTD., A California Limited Partnership Notes to Financial Statements March 31, 1997 Readers of this quarterly report should refer to the partnership audited financial statements and annual report Form 10-KSB (File No. 33-11224-LA) for the period ended December 31, 1996, 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 renovations 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) 7 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 limitedpartners 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 distri- bution; 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 Hospital- ity, 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) 8 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 ended March 31, 1997 and March 31, 1996 are as follows:
Three Months Ended 3/31/97 3/31/96 --------- --------- Management Fees $28,526 $26,555 Reimbursement for partnership administration expenses 9,387 9,038 Salaries and other allocated expenses 19,954 25,590 In addition, all motel employees are paid by GMS. For the three months ended March 31, 1997, the Partnership reimbursed GMS $90,238. for the wages of these employees which includes a one percent processing fee. At March 31, 1997, $29,820 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 $232,937. as of March 31,1997 and $242,097 as of March 31, 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. Begin- ning with the March 1997 note payment, the Partnership elected to pay $4,350 per mont (double the $2,175 installment amount due each month). The results of this increase in the monthly payments will save the Partnership $126,169 in interest expense over the remaining term of the note, and the note will pay in full in October 2002 rather than April 2013. Principal payments on this note are due as follows: April 1997- December 1997 $ 5,750 1998 8,222 1999 8,905 2000 9,644 2001 10,444 Thereafter 189,132 -------- $ 232,097 ==========
(Continued) 9 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 $21,485 per month as of March 31, 1997. 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: 1997 $ 257,820 1998 257,820 1999 257,820 2000 257,820 2001 257,820 Thereafter 11,580,751 ---------- $12,869,851 =========== 7. ADJUSTMENTS In the opinion of the general partner, 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 three months ended March 31, 1997. 8. SUBSEQUENT EVENT In May 1997, the Partnership paid a distribution of $58,501 to the limited partners.
(Continued) 10 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. Beginning with the March 1997 note payment, the Partnership elected to pay $4,350 per month (double the $2,175 installment amount due each month). The results of this increase in the monthly payments will save the Partnership $126,169 in interest expense over the term of the note, and the note will pay in full in October 2002 rather than April 2013. An independent appraisal valued the Partnership's motel property at $3,440,000 as of October 21, 1996. The carrying amount of investment property on the Partnership's financial statements was $3,651,965 as of December 31, 1996. Management expects that undiscounted cash flows from the motel will exceed its carrying value and, therefore, an impairment loss has not been recorded. The deferred rent liability represents amounts accrued under the Partner- ship'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. The rent payment was $21,485 per month as of March 31, 1997. 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 March 31, 1997, room revenues were $457,555 the occupancy rate was 73.2% and the average daily rate was $56.93. This compares to the three months ended March 31, 1996 when room revenues were $428,784, the occupancy rate was 70.48% and the average daily rate was $54.80. (Continued) 11 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) The three months ended March 31,1997 compared with the three months ended March 31, 1996, shows an average daily rate increase of $2.13 per room while occupancy increased by approximately three percentage points, resulting in an increase in room revenue of $28,177. Profit for the three months ended March 31, 1997 increased by $12,325 when compared with the three months ended March 31, 1996. Choice contributed a total of 3,097 room nights (approximately 38.5% of our business) through its reservation system, approximately 583 room nights greater than last year. The effect of current operations on liquidity was net cash provided by operating activities of $147,298 for the three months ended March 31, 1997 and $81,269 for the three months ended March 31, 1996. 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. 12 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) May 9, 1997 By (SIGNATURE) /s/ Sylvia Mellor Clark (NAME AND TITLE) Sylvia Mellor Clark, Controller (DATE) May 9, 1997 13 EX-27 2
5 3-MOS DEC-31-1997 MAR-31-1997 216,550 0 25,057 0 15,981 264,265 5,817,376 2,211,384 3,898,799 99,088 0 0 0 0 0 3,898,799 0 475,423 0 423,740 0 0 4,726 46,957 0 46,957 0 0 0 46,957 7.16 7.16
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