-----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, CxrMapr8upBJswyVyf2NAa9gS1nUktw4xKCJ18JQ6VBtr6WuF6RyjwB3Ps98xZU1 Klvf80k9sM9hYPvdX0s+3Q== 0000810661-97-000025.txt : 19971115 0000810661-97-000025.hdr.sgml : 19971115 ACCESSION NUMBER: 0000810661-97-000025 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971113 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: SEC FILE NUMBER: 000-18080 FILM NUMBER: 97717322 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-Q.B. - 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, 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 Identification No) incorporation or organization) 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 September 30, 1997 and December 31, 1996. Statement of Operations for the three months and the nine months ended September 30, 1997 and September 30, 1996. Statement of Cash Flows for the three months and the nine months ended September 30, 1997 and September 30, 1996. Notes to Financial Statements. MISSION VALLEY COMFORT SUITES LTD. A California Limited Partnership Balance Sheet September 30, 1997 and December 31, 1996 (Unaudited) (Part 1 of 2)
September 30, December 31, ASSETS 1997 1996 Current Assets: Cash and cash equivalents $ 341,097 $ 75,541 Accounts receivable 22,669 38,797 Operating supplies 17,505 15,540 Prepaid expenses 18,500 22,422 Due from Affiliates (note 4) 0 4,848 ----------- ----------- Total current assets 399,771 157,148 Investment property, at cost: Building and improvements 4,614,717 4,603,619 Furniture, fixtures & equipment 1,222,206 1,211,442 ------------ ------------ 5,836,923 5,815,061 Less accumulated depreciation 2,308,518 2,163,096 ----------- ------------- Total investment property, net of accumulated depreciation 3,528,405 3,651,965 Franchise fees, net (note 3) 27,292 29,167 ------------- -------------- $ 3,855,468 $ 3,838,280 =========== =============
See accompanying notes to financial statements. Page 1 MISSION VALLEY COMFORT SUITES LTD. A California Limited Partnership Balance Sheet September 30, 1997 and December 31, 1996 (Unaudited) (Part 2 of 2)
LIABILITIES AND September 30, December 31, PARTNER'S CAPITAL ACCOUNTS 1997 1996 Current liabilities: Current portion on long-term debt (note 5) $ 9,161 $ 7,415 Accounts payable and accrued expenses 113,275 54,996 Due to Affiliates (note 4) 1,094 11,440 ---------- ---------- Total current liabilities 123,530 73,851 ---------- ---------- Long-term debt,less current portion (note 5) 206,710 229,496 Deferred rent liability (note 6) 1,461,336 1,483,590 ----------- ------------ Total liabilities 1,791,576 1,786,937 ------------ ------------ Partners' capital accounts: General partners: Capital contributions 31,210 31,210 Cumulative net earnings (97,026) (114,781) Cumulative cash distributions (194,140) (187,640) ------------- ------------- (259,956) (271,211) ------------- ------------- Limited partners: Capital contributions, net of offering costs 5,117,287 5,117,287 Cumulative net earnings (873,232) (1,033,025) Cumulative cash distributions (1,820,208) (1,761,708) ------------- -------------- 2,423,847 2,322,554 ------------- -------------- Total partners' capital accounts 2,163,847 2,051,343 ------------- -------------- $3,955,468 $3,838,280 =========== ==========
See accompanying notes to financial statements. Page 2 MISSION VALLEY COMFORT SUITES LTD., A California Limited Partnership Statement of Operations For the Three Months and the Nine Months Ended September 30, 1997 and September 30, 1996 (Unaudited)
THREE MONTHS ENDED NINE MONTHS ENDED September 30, September 30, September 30, September 30, 1997 1996 1997 1996 Revenues: Room revenues $ 636,763 $ 605,118 $1,586,844 $1,550,809 Phone revenue 6,676 13,800 25,811 34,756 Interest income 739 697 1,054 1,334 Other income 14,027 7,248 30,820 21,358 ------------- ------------ ------------ ------------ 658,205 626,863 1,644,529 1,608,257 ------------- ------------ ------------ ------------ Expenses: Property operating expenses 197,770 177,998 525,124 488,701 Depreciation 48,700 42,002 145,422 124,659 General & administrative 140,119 50,331 250,784 154,695 Amortization 625 625 1,875 1,875 Management fees 39,448 37,566 98,613 96,357 Royalties and advertising 50,401 47,686 116,994 116,188 Real estate taxes 12,718 10,893 49,187 35,815 Interest expense 4,635 4,796 14,234 14,491 Lease expense 57,038 55,771 171,114 167,311 Marketing 12,565 10,285 42,757 31,451 Repairs & Maintenance 21,016 18,161 50,874 63,501 ------------ -------------- ------------- ------------ 585,035 456,114 1,466,978 1,295,044 ------------ -------------- ------------- ------------ Net earnings $ 73,170 $ 170,749 $ 177,551 $ 313,213 =========== ============ ============ =========== Net earnings per limited partnership interest $11.16 $ 26.05 $27.08 $47.78 ========== ========== ========== ==========
See accompanying notes to financial statements. Page 3 MISSION VALLEY COMFORT SUITES LTD., A California Limited Partnership Statement of Cash Flows For the Three Months and the Nine Months Ended September 30, 1997 and September 30, 1996 (Unaudited)
THREE MONTHS ENDED NINE MONTHS ENDED September 30, September 30, 1997 1996 1997 1996 Cash flows from operating activities: Net earnings (loss) $ 73,170 $ 170,749 $ 177,551 $313,213 Adjustments to reconcile net income to cash: Depreciation and amortization 49,325 42,627 147,297 126,534 (Increase) decrease in: Accounts receivable (10,773) (9,939) 16,126 (13,800) Operating supplies (2,153) (1,313) (1,965) (1,121) Prepaid expenses 19,943 6,221 3,922 (17,841) Increase (decrease) in: Accounts payable and accrued expenses 47,043 19,073 58,279 32,385 Due to/from Affiliates (4,279) (24,964) (5,498) (5,509) Deferred rent liability (7,418) (7,418) (22,254) (22,253) Net cash provided by (used in)-------- ----------- ---------- ----------- operating activities 164,858 195,036 373,458 411,608 ------------ ----------- ---------- ----------- Cash flows from investing activities: Investment property expenditures (11,469) (48,041) (21,862) (74,676) ------------ ----------- ---------- ----------- Net cash used in investing activities (11,469) (48,041) (21,862) (74,676) ------------ ----------- ---------- ----------- Cash flows from financing activities: Proceeds/(Paymts) notes payable (8,618) (1,728) (21,039) (5,084) Cash distributions to partners 0 (90,000) (65,000) (129,999) Net cash provided by (used in)---------- ----------- ----------- ----------- financing activities (8,618) (91,728) (86,039) (135,083) ------------ ----------- ----------- ----------- Net increase in cash and cash equivalents 144,772 55,269 265,557 201,851 Cash and cash equivalents, beginning of period 196,326 202,276 75,541 55,694 ------------ ----------- ----------- ----------- Cash and cash equivalents, end of period $341,098 $257,545 $341,098 $257,545 ============ =========== =========== =========
See accompanying notes to financial statements. Page 4 MISSION VALLEY COMFORT SUITES LTD., A California Limited Partnership Notes to Financial Statements September 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 nine 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) Page 5 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; there- after, 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), 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) Page 6 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 the nine months periods ended September 30, 1997 and September 30, 1996 are as follows:
Three Months Ended Nine Months Ended 9/30/97 9/30/96 9/30/97 9/30/97 Management Fees $39,448 $37,566 $98,613 $96,357 Reimbursement for partnership administration expenses $ 9,387 $ 9,875 $28,160 $29,624 Salaries and other allocated expenses $30,594 $31,873 $74,601 $80,990
In addition, all motel employees are paid by GMS. The Partnership reimbursed GMS $103,169 for the wages of these employees which includes a one percent processing fee. At September 30, 1997, $1,094. 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 $215,872 as of September 30,1997 and $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. 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 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:
October 1997-December 1997 $ 2,222 1998 9,346 1999 10,121 2000 10,961 2001 11,872 Thereafter 171,350 ---------- $215,872 =======
Page 7 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 September 30, 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:
Oct. 1997 - December 1997 $ 64,455 1998 257,820 1999 257,820 2000 257,820 2001 257,820 Thereafter 11,580,751 ---------------- $12,676,486 ================
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 and the nine months ended September 30, 1997. 8. SUBSEQUENT EVENT In November 1997, the Partnership paid a distribution of $134,999.29 to the limited partners. Page 8 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 remaining 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 $3,528,405 as of September 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 September 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. Page 9 Results of Operations: For the three months ended September 30, 1997, room revenues were $636,763, the occupancy rate was 83.65% and the average daily rate was $67.82. This compares to the three months ended September 30, 1996 when room revenues were $605,118, the occupancy rate was 82.4% and the average daily rate was $65.31. For the nine months ended September 30, 1997, room revenues were $1,586,844, the occupancy rate was 76.54% and average daily rate was $62.25. This compares to the nine months ended September 30, 1996 when room revenues were $1,550,809, occupancy rate was 77.59% and average daily rate was $59.79. The three months ended September 30,1997 compared with the three months ended September 30, 1996, shows an average daily rate increase of $2.51 per room while occupancy increased by approximately one percentage points, resulting in an increase in room revenue of $31,645 for the three months ended September 30, 1997. Profit for the three months ended September 30, 1997 was $73,170 compared to profit of $170,749 for the three months ended September 30, 1996. Year-to-date figures for the nine months ended September 30, 1996 show occupancy decreased by approximately one percentage points but room revenue, because of the increase in average rate, is $36,035 greater than the nine months ended September 30, 1996. Profit for the nine months ended September 30, 1997 was $177,551 compared to $313,213 for the nine months ended September 30, 1997. Page 10 Choice central reservations accounted for room nights (24%) for the three months ended September 30, 1997 and a year to date percentage of 24% in 1997 compared to 20% in 1996. A complete property appraisal was recently completed by Steven L. Bowen, MAI, of San Diego, California, in July of 1997. The estimated fair market value for the property including furniture, fixtures and equipment therein was assessed at $4,000,000 or $677.96 per unit. This reflects a $600,000 increase in assessed value from the prior appraisal completed in 1996. In order to remain competitive with other mid-size properties in the Mission Valley area, the hotel installed coffee makers in all guest rooms. In addition, the hotel has begun accepting bids for lobby and hallway carpet, to be installed in early 1998. The General Partner is currently considering strategic opportunities which the Partnership could pursue in an effort to increase cash returns to the partners and preserve and enhance the value of the Limited Partners' investment in the Partnership. These opportunities include a sale of the property, a reorgan- ization into another entity, and maintaining the status quo. In connection with the evaluation of these opportunities the Partnership has incurred pro- fessional fees in the amount of $95,852 which are included in general and administrative expenses. This has contributed to the decreased profit for the nine months ended September 30, 1997. The effect of current operations on liquidity was net cash provided by operating activities of $373,458 for the nine months ended September 30, 1997 and $411,608 for the nine months ended September 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. Page 11 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. 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) November 13, 1997 By (SIGNATURE) / s / Sylvia Mellor Clark (NAME AND TITLE) Sylvia Mellor Clark Controller (DATE) November 13, 1997 Page 12 EX-27 2
5 9-MOS DEC-31-1997 SEP-30-1997 341,097 0 22,669 0 17,505 399,771 5,836,923 2,308,518 3,955,468 123,530 0 0 0 0 0 3,955,468 0 1,644,529 0 1,452,744 0 0 14,234 177,551 0 177,551 0 0 0 177,551 27.08 27.08
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