-----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, B/m9tVX3I8ueh6ywA/pxnBCpKoesrSStmyKCn3P8YCiV3LTjFsWlSUKT3MAfKFyj gAKX09ZDehhF6JHo85VDAA== 0000810661-97-000023.txt : 19970814 0000810661-97-000023.hdr.sgml : 19970814 ACCESSION NUMBER: 0000810661-97-000023 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970813 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: 97658738 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 June 30, 1997 / / TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT For the transition period from to 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 PART I. -- FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS Incorporated herein is the following unaudited financial information: Balance Sheet as of June 30, 1997 and December 31, 1996. Statement of Operations for the three and six month periods ended June 30, 1997 and June 30, 1996. Statement of Cash Flows for the three and six month periods ended June 30, 1997 and June 30, 1996. Notes to Financial Statements. MISSION VALLEY COMFORT SUITES LTD. A California Limited Partnership Balance Sheet June 30, 1997 and December 31, 1996 (Unaudited) (Part 1 of 2)
June 30, December 31, ASSETS 1997 1996 Current Assets: Cash and cash equivalents $ 196,326 $ 75,541 Accounts receivable 11,896 38,797 Operating supplies 15,352 15,540 Prepaid expenses 38,443 22,422 Due from Affiliates (note 4) 0 4,848 ----------- ----------- Total current assets 262,017 157,148 Investment property, at cost: Building and improvements 4,607,371 4,603,619 Furniture, fixtures & equipment 1,218,083 1,211,442 ------------ ------------ 5,825,455 5,815,061 Less accumulated depreciation 2,259,819 2,163,096 ------------ ------------- Total investment property, net of accumulated depreciation 3,565,636 3,651,965 Franchise fees, net (note 2) 27,917 29,167 ------------- -------------- $ 3,855,570 $ 3,838,280 ========== =============
See accompanying notes to financial statements. MISSION VALLEY COMFORT SUITES LTD. A California Limited Partnership Balance Sheet June 30, 1997 and December 31, 1996 (Unaudited) (Part 2 of 2)
LIABILITIES AND June 30, 1997 December 31, 1996 PARTNER'S CAPITAL ACCOUNTS Current liabilities: Current portion on long-term debt $ 8,446 $ 7,415 Accounts payable and accrued expenses 66,232 54,996 Due to Affiliates (note 4) 5,373 11,440 --------- ---------- Total current liabilities 80,051 73,851 ---------- ---------- Long-term debt, less current portion 216,044 229,496 Deferred rent liability (note 6) 1,468,754 1,483,590 ----------- ----------- Total liabilities 1,764,849 1,786,937 ------------ ------------ Partners' capital accounts: General partners: Capital contributions 31,210 31,210 Cumulative net earnings (104,343) (114,781) Cumulative cash distributions (194,140) (187,640) ------------- ------------- (267,273) (271,211) --------------- ------------- Limited partners: Capital contributions, net of offering costs 5,117,287 5,117,287 Cumulative net earnings (939,085) (1,033,025) Cumulative cash distributions (1,820,208) (1,761,708) ------------- -------------- 2,357,994 2,322,554 ------------- -------------- Total partners' capital accounts 2,090,721 2,051,343 ------------- -------------- $3,855,570 $3,838,280 =========== ==========
See accompanying notes to financial statements. MISSION VALLEY COMFORT SUITES LTD., A California Limited Partnership Statement of Operations Three Months and Six Months Ended June 30, 1997 and June 30, 1996 (Unaudited)
THREE MONTHS ENDED SIX MONTHS ENDED June 30, June 30, June 30, June 30, 1997 1996 1997 1996 Revenues: Room revenues $ 492,526 $ 516,907 $ 950,081 $945,691 Phone revenue 8,953 12,205 19,135 20,956 Interest income 244 412 315 637 Other income 9,178 9,062 16,793 14,110 ------------- ------------ ------------ ------------ 510,901 538,586 986,324 981,394 ------------ ------------ ------------ ------------ Expenses: Property operating expenses 173,018 160,765 327,354 310,703 Depreciation 48,434 41,632 96,722 82,657 General and admin 58,318 49,399 110,665 104,364 Amortization 625 625 1,250 1,250 Management fees 30,639 32,236 59,165 58,791 Royalties and advertising 37,643 39,277 66,593 68,502 Real estate taxes 19,045 12,992 36,469 24,922 Interest expense 4,873 4,652 9,599 9,695 Lease expense 57,038 55,770 114,076 111,540 Marketing 11,066 9,675 30,192 21,166 Repairs & Maint 12,778 23,731 29,858 45,340 ------------ -------------- ------------- ---------- 453,477 430,754 881,943 838,930 ------------ -------------- ------------- ---------- Net earnings $ 57,424 $ 107,832 $ 104,381 $ 142,464 ======== ========= ======== ======== Net earnings per limited partnership interest $ 8.76 $ 16.45 $15.92 $21.73 ======= ======= ======= =======
See accompanying notes to financial statements. MISSION VALLEY COMFORT SUITES LTD., A California Limited Partnership Statement of Cash Flows Three Months and Six Months Ended June 30, 1997 and June 30, 1996 (Unaudited)
THREE MONTHS ENDED SIX MONTHS ENDED June 30, June 30, 1997 1996 1997 1996 Cash flows from operating activities: Net earnings (loss) $ 57,424 $ 107,832 $ 104,381 $142,464 Adjustments to reconcile net income to cash: Depreciation and amortization 49,059 42,257 97,972 83,907 (Increase) decrease in: Accounts receivable 13,161 7,011 26,899 (3,861) Operating supplies 629 1,527 188 192 Prepaid expenses (31,766) (6,578) (16,021) (24,062) Accounts payable and accrued expenses 4,662 (6,825) 11,236 13,312 Due to/from Affiliates (24,447) (2,505) (1,219) 19,455 Deferred rent liability (7,418) (7,417) (14,836) (14,835) Cash provided by(used in) ---------- ----------- ---------- --------- operating activities 61,302 135,302 208,600 216,572 ------------ ----------- ---------- --------- Investing activities: Investmt property expenditures (8,079) (11,402) (10,394) (26,635) ---------- ------------ ---------- ---------- Net cash used in investing activities (8,079) (11,402) (10,394) (26,635) ---------- ----------- ---------- ----------- Cash flows from financing activities: Proceeds/(Payments) of notes payable (8,447) (1,665) (12,421) (3,356) Cash distrib to partners (65,000) (39,999) (65,000) (39,999) Net cash provided by(Usedin)---------- ----------- ----------- ---------- financing activities (73,447) (41,694) (77,421) (43,355) ----------- ----------- ----------- ----------- Net increase in cash and cash equivalents (20,223) 82,207 120,785 146,582 Cash and cash equivalents, beginning of period 216,550 120,069 75,541 55,694 ---------- ------------ ----------- ----------- Cash and cash equivalents, end of period 196,326 202,276 196,326 202,276 ========= ======== ======== ========
See accompanying notes to financial statements. MISSION VALLEY COMFORT SUITES LTD., A California Limited Partnership Notes to Financial Statements June 30, 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) 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 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 Hospitality, Inc. (GHG), formerly Grosvenor Hospitality, Inc., 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 and six month periods ended June 30, 1997 and June 30, 1996 are as follows:
Three Months Ended Six Months Ended 6/30/97 6/30/96 6/30/97 6/30/97 Management Fees $30,639 $32,236 $59,165 $58,791 Reimbursement for partnership administration expenses $ 9,387 $10,711 $18,774 $19,749 Salaries and other allocated expenses $19,804 $23,527 $39,758 $49,117
In addition, all motel employees are paid by GMS. The Partnership reimbursed GMS $96,111. for the wages of these employees which includes a one percent processing fee. At June 30, 1997, $5,373. 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 $224,490 as of June 30,1997 and $240,402 as of June 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. 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 $169,169 in interest expense over the remaining term of the note, and the note will pay in full in October 2002 rather than March 2013. Principal payments on this note are due as follows:
July 1997 - December 1997 $ 4,139 1998 8,790 1999 9,519 2000 10,309 2001 11,165 Thereafter 180,568 ------------ $224,490 =======
(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 $21,485 per month as of June 30, 1997. As a result of the amendment to the lease agree- ment, 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:
July 1997 - December 1997 $ 128,910 1998 257,820 1999 257,820 2000 257,820 2001 257,820 Thereafter 11,580,751 ------------ $12,740,941 ===========
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 six months ended June 30, 1997. 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 $169,169 in interest expense over the remain- ing term of the note, and the note will pay in full in October 2002 rather than March 2013. An independent appraisal valued the Partnership's motel property at $3,440,000 as of October 21, 1996. An update of this appraisal was made as of July 28, 1997 showing a value of $4,000,000. The carrying amount of investment property on the Partnership's financial statements was $3,565,636 as of June 30, 1997. 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. The rent payment was $21,485 per month as of June 30, 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 June 30, 1997, room revenues were $492,526, the occupancy rate was 72.59% and the average daily rate was $61.06. This compares to the three months ended June 30, 1996 when room revenues were $516,908, the occupancy rate was 79.7% and the average daily rate was $58.42. For the six months ended June 30, 1997, room revenues were $950,081, the occupancy rate was 72.92% and average daily rate was $59.00. This compares to the six months ended June 30, 1996 when room revenues were $945,691, occupancy rate was 75.09% and average daily rate was $56.72. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The three months ended June 30,1997 compared with the three months ended June 30, 1996, shows an average daily rate increase of $2.64 per room while occupancy decreased by approximately seven percentage points, resulting in an decrease in room revenue of $24,382 for the three months ended June 30, 1997. Profit for the three months ended June 30, 1997 decreased by $50,408 when compared with the three months ended June 30, 1996. Year-to-date figures for the six months ended June 30, 1996 show occupancy decreased by approximately two percentage points but room revenue, because of the increase in average rate, is $4,390 greater than the six months ended June 30, 1996. Profit for the six months ended June 30, 1997 decreased by $38,083. Choice central reservations accounted for 1935 room nights (24%) for the three months ended June 30,1997 for a year to date percentage of 22.6% in 1997 compared to 29% in 1996. Several conventions will be hosted this summer both in Mission Valley and at the San Diego Convention Center downtown which will drive rates higher and create greater demand. The third quarter 1997 promises to surpass pro- jections in both occupancies and average daily rate. The hotel's Web sites continue to generate reservation inquiries. Promotions with Visa and San Diego Convention and Visitors Bureau have also contributed to occupancies despite the increased competition the hotel is facing in comparable rooms in the immediate area. These factors force management to remain competitive in pricing and amenity services. The General Partner is currently considering strategic opportunities which the Partnership could pursue in an effort to maximize the value of the Limited Partners' investment in the Partnereship. Because the General Partner wishes to maintain as much flexibility to enter into any such strategic transaction which may be identified, the General Partner has determined to retain the amounts which it would normally distribute for the second quarter. General and administrative expenses relating to this matter in the amount of $9,092 attributed to the decreased profit. The effect of current operations on liquidity was net cash provided by operating activities of $208,600 for the six months ended June 30, 1997 and $216,572 for the six months ended June 30, 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. 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, Chief Executive Officer and Director (DATE) August 13, 1997 By (SIGNATURE) / s / Sylvia Mellor Clark (NAME AND TITLE) Sylvia Mellor Clark, Controller (DATE) August 13, 1997 EX-27 2
5 6-MOS DEC-31-1997 JUN-30-1997 196,326 0 11,896 0 15,352 262,017 5,825,455 2,259,819 3,855,570 80,051 0 0 0 0 0 3,855,570 0 986,324 0 872,344 0 0 9,599 104,381 0 104,381 0 0 0 104,381 15.92 15.92
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