-----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, JRuSgHsbT8BKKzB4WPkHZfRR8PWQfMclrt2pYJ8Ilp5OUwZ+rNBeC7ZO5mTsnP+n zfetq9xwxp+VaUj/jI+pFA== 0000820062-98-000022.txt : 19981111 0000820062-98-000022.hdr.sgml : 19981111 ACCESSION NUMBER: 0000820062-98-000022 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980930 FILED AS OF DATE: 19981110 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: 98743349 BUSINESS ADDRESS: STREET 1: 1466 9TH AVE CITY: SAN DIEGO STATE: CA ZIP: 92101 BUSINESS PHONE: 6192261212 MAIL ADDRESS: STREET 1: 1466 9TH AVE CITY: SAN DIEGO STATE: CA ZIP: 92101 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, 1998 // 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 September 30, 1998 and December 31, 1997. Statement of Operations for the three and nine month periods ended September 30, 1998 and September 30, 1997. Statement of Cash Flows for the three and nine month periods ended September 30, 1998 and September 30, 1997. Notes to Financial Statements. MISSION VALLEY COMFORT SUITES LTD. A California Limited Partnership Balance Sheet September 30, 1998 and December 31, 1997 (Unaudited) (Part 1 of 2)
September 30 December 31, ASSETS 1998 1997 --------- ---------------- ---------------- Current Assets: Cash and cash equivalents $ 283,541 $ 146,672 Accounts receivable 867 14,255 Operating supplies 0 15,011 Prepaid expenses 19,678 36,150 ----------- ----------- Total current assets 304,086 212,088 Investment property, at cost: Building and improvements 0 4,617,037 Furniture, fixtures & equipment 0 1,225,209 ------------ ------------ 0 5,842,246 Less accumulated depreciation 0 2,357,571 ------------ ------------- Total investment property, net of accumulated depreciation 0 3,484,675 Franchise fees, net (note 2) 0 26,667 ------------- -------------- $ 304,086 $ 3,723,430 ========== ===========
See accompanying notes to financial statements. Page 1 MISSION VALLEY COMFORT SUITES LTD. A California Limited Partnership Balance Sheet September 30, 1998 and December 31, 1997 (Unaudited) (Part 2 of 2)
LIABILITIES AND September 30, 1998 December 31, 1997 PARTNER'S CAPITAL ACCOUNTS ----------------- ----------------- -------------------------- Current liabilities: Current portion on long-term debt $ 0 $ 9,891 Accounts payable and accrued expenses 11,135 67,510 Due to Affiliates (note 4) 11,547 28,629 ---------- ---------- Total current liabilities 22,682 106,030 ---------- ---------- Long-term debt, less current portion 0 197,190 Deferred rent liability (note 6) 0 1,453,917 ---------- ---------- Total liabilities 22,682 1,757,137 ---------- ---------- Partners' capital accounts: General partners: Capital contributions 31,210 31,210 Cumulative net earnings 192,462 (101,786) Cumulative cash distributions (223,672) (209,140) ----------- ------------ 0 (279,716) ----------- ------------ Limited partners: Capital contributions, net of offering costs 5,117,287 5,117,287 Cumulative net earnings 1,696,465 ( 916,070) Cumulative cash distributions (6,532,348) (1,955,208) ------------ ------------- 281,404 2,246,009 ------------ ------------- Total partners' capital accounts 281,404 1,966,293 ------------ ------------- $ 304,086 $3,723,430 ============= =============
See accompanying notes to financial statements Page 2 MISSION VALLEY COMFORT SUITES LTD., A California Limited Partnership Statement of Operations Three Months and Nine Months Ended September 30, 1998 and September 30, 1997 (Unaudited)
THREE MONTHS ENDED NINE MONTHS ENDED September 30, September 30, September 30, September 30, 1998 1997 1998 1997 ------------- ------------ ----------- ------------ Income (Loss) from Continuing Operations $ 0 $ 0 $ 0 $ 0 Income (Loss) from Discontinued Operations $ (38,126) $ 73,170 $ 108,111 $ 177,551 Gain on disposal of Discontinued Operations $2,798,671 $ 0 $2,798,671 $ 0 ------------ ----------- ------------ ----------- Net Earnings (Loss) $2,760,545 $ 73,170 $2,906,782 $ 177,551 ========== =========== ============ =========== Net earnings per limited partnership interest $421.10 $ 11.16 $443.41 $27.08 ======= ======= ======= =======
See accompanying notes to financial statements. Page 3 MISSION VALLEY COMFORT SUITES LTD., A California Limited Partnership Statement of Cash Flows Three Months and Nine Months Ended September 30, 1998 and September 30, 1997 (Unaudited) (Part 1 of 2)
THREE MONTHS ENDED NINE MONTHS ENDED September 30, September 30, 1998 1997 1998 1997 ------- ------- ------- ------- Cash flows from operating activities: Net earnings (loss) $ 2,760,545 $ 73,170 $2,906,782 $177,551 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization (1,511) 49,325 101,115 147,297 Gain on Sale of Hotel (2,798,671) 0 (2,798,671) 0 Expenses paid from escrow 24,235 0 24,235 0 Expenses refunded from escrow (21,020) 0 (21,020) 0 (Increase) decrease in: Accounts receivable 18,805 (10,773) 13,388 16,126 Operating supplies 1,574 (2,153) 627 (1,965) Prepaid expenses 1,038 19,943 16,472 3,922 Increase (decrease) in: Accounts payable and accrued expenses (68,105) 47,043 (56,375) 58,279 Due to/from Affiliates (24,436) (4,279) (17,082) (5,498) Deferred rent liability 0 (7,418) (14,835) (22,254) Net cash provided by (used in)---------- ---------- --------- --------- operating activities (107,548) 164,858 154,634 373,458 ---------- ---------- --------- --------- Cash flows from investing activities: Investment property expenditures 0 (11,469) (44,772) (21,862) Sale of Hotel 4,647,699 0 4,647,699 0 Expenses related to sale of hotel paid outside of escrow (10,902) 0 (10,902) 0 ----------- ---------- ---------- ---------- Net cash used in investing activities 4,636,797 (11,469) 4,592,025 (21,862) ------------ ---------- ---------- ---------- Cash flows from financing activities: Proceeds/(Payments) of notes payable 0 (8,618) (18,116) (21,039) Cash distributions to partners (4,561,673) 0 (4,591,673) (65,000) Net cash provided by (used in) ------------ ---------- ----------- ---------- financing activities (4,561,673) (8,618) (4,609,789) (86,039) ------------- ---------- ----------- ---------- Net increase in cash and cash equivalents (32,417) 144,772 136,870 265,557 Cash and cash equivalents beginning of period 315,959 196,326 146,672 75,541 ------------ ----------- ----------- --------- Cash and cash equivalents, end of period 283,541 341,098 283,541 341,098 ========= ======== ======== =======
See accompanying notes to financial statements Page 4 MISSION VALLEY COMFORT SUITES LTD., A California Limited Partnership Statement of Cash Flows Three Months and Nine Months Ended September 30, 1998 and September 30, 1997 (Unaudited) (Part 2 of 2)
THREE MONTHS ENDED NINE MONTHS ENDED September 30, September 30, 1998 1997 1998 1997 ------- ------- ------- -------- Supplemental disclosure of cash flow information: Interest paid 1,639 4,635 10,028 14,234 ======== ======== ======== ======= Supplemental schedule of non-cash investing and financing activities: Sale of Hotel 5,000,000 0 5,000,000 0 Note payable (188,965) 0 (188,965) 0 Commission (150,000) 0 (150,000) 0 Other (13,336) 0 (13,336) 0 ------------- ---------- ------------ ----------- Cash flow from Sale of Hotel 4,647,699 0 4,647,699 0 ========== ========= ========= =========
See accompanying notes to financial statements. Page 5 MISSION VALLEY COMFORT SUITES LTD., A California Limited Partnership Notes to Financial Statements September 30, 1998 Readers of this quarterly report should refer to the partnership audited financial statements andannual report Form 10-KSB (File No. 33-11224-LA) for the period ended December 31, 1997, 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. As more fully discussed in Note 8, the motel was sold on July 2, 1998. 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) Page 6 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 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. After the sale of the motel on July 2, 1998 (see Note 8), the partnership notified Choice Hotels International (Choice) that it was electing to terminate the franchise agreement. Under the terms of the franchise agreement, the partnership may be liable to Choice for certain fees and other costs resulting from the sale of the motel and the election to terminate the franchise agreement. The buyer is presently negotiating with Choice regarding a possible new franchise agreement, and the buyer has agreed to indemnify the partnership for any and all claims made by Choice related to the sale of the motel and the election to terminate the franchise agreement. 4. RELATED PARTY TRANSACTIONS The motel was 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 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 7 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 ended September 30, 1998 and September 30, 1997 are as follows:
Three Months Ended Nine Months Ended 9/30/98 9/30/97 9/30/98 9/30/97 --------- --------- ---------- ---------- Management Fees $ 0 $39,448 $64,342 $98,613 Reimbursement for partnership administration expenses $ 9,237 $ 9,387 $27,715 $28,160 Salaries and other allocated expenses $ 16,845 $30,594 $51,667 $74,601
In addition, all motel employees are paid by GMS. For the nine months ended September 30, 1998, the Partnership reimbursed GMS $223,800. for the wages of these employees which includes a one percent processing fee. At September 30, 1998, $11,547. was due to GHG and GMS relating to reimbursement for these operating expenses. 5. LONG-TERM DEBT The Partnership had a note payable which is due in monthly installments of $2,175, including 8% interest, through April 2013. In March 1997, The Partnership voluntarily began making monthly payments of $4,350 in order to retire the note earlier that scheduled and reduce interest expense over the term of the note. The note was secured by a trust deed on the Partnership's motel. (Continued) Page 8 MISSION VALLEY COMFORT SUITES LTD., A California Limited Partnership Notes to Financial Statements (Continued) LONG TERM DEBT (continued) Long term debt was paid in full in connection with the sale of the motel on July 2, 1998 (see Note 8). 6. LEASE The Partnership leased the land underlying its motel under an operating lease which expired 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 were still subject to annual increases based on the increase in the Consumer Price Index, but the maximum annual increase was 5% and there was no minimum annual increase. The rent payment was $21,744. per month at the date of sale of July 1, 1998 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, was being credited to income on a straight-line basis over the remaining term of the lease. The Partnership was required to pay real estate taxes, insurance, and maintenance for the leased land and improvements thereon. The lease was assumed by the buyer in connection with the sale of the motel on July 2, 1998 (see Note 8). 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 nine months ended September 30, 1998. (Continued) Page 9 MISSION VALLEY COMFORT SUITES LTD., A California Limited Partnership Notes to Financial Statements (Continued) 8. SALE OF HOTEL On July 2, 1998 after obtaining a majority approval of the limited partners holding a majority of the Partnership's limited partner interests, the motel was sold for $5,000,000. in cash. The sale resulted in a gain of $2,798,671. for financial statement purposes. Net cash proceeds from the sale were $4,647,699. after deducting the payment of the first trust deed on the motel and closing costs. In July 1998, the Partnership paid a liquidating distribution of $4,446,371.($753.62 per limited partner interest) and an operating distribution of $115,301. ($17.59 per limited partner interest). The partnership will remain in existence through the remainder of the year and will be required to continue to file quarterly reports with the SEC. Once any contingent and unexpected claims have been satisfied the partnership can be dissolved. The general partner hopes to accomplish this dissolution by the end of March, 1999 when the partnership will be mailing the final K-1's reporting the sale but there is no guaranty this will occur by this date. At the time of the dissolution the partnership will pay the second and final liquidating distribution of any remaining funds held and the Partnership will be dissolved. (Continued) Page 10 MISSION VALLEY COMFORT SUITES LTD., A California Limited Partnership Notes to Financial Statements (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. In 1993, the note was amended to add accrued interest of $60,000 to the principal balance so that the new balance was $260,000. The note was payable in monthly installments of $2,175, including interest at 8%, over a 20-year period. The note was secured by a trust deed on the Partnership's motel. In March 1997, the Partnership voluntarily began making monthly payments of $4,350 in order to retire the note earlier than scheduled and reduce interest expense over the term of the note. The note was paid in full with the sale of the motel on July 2, 1998 (see Note 8). 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, annual rent increases are based on the lesser of the increase in the Consumer Price Index or 5%, and there is no minium annual increase. The lease was assumed by the buyer in connection with the sale of the motel on July 2, 1998 (see Note 8). Based on an informal survey of a sample of limited partners conducted by the general partner, now that the partnership is nearing its 10th year, the majority of the limited partners surveyed wanted the motel to be sold and the partnership dissolved. Consequently, the hotel brokerage firm of Hotel Partners International was engaged by the partnership to market the hotel for sale to qualified buyers at the highest and best selling price. The initial listing price was $5,000,000. Marketing packages were sent out to hundreds of potential buyers and the level of interest was high. (Continued) Page 11 MISSION VALLEY COMFORT SUITES LTD., A California Limited Partnership Notes to Financial Statements (Continued) MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) In June 1998 the Partnership entered into a Hotel Purchase and Sale Agreement with Piyal, LLC whereby Piyal would purchase the motel from the Partnership for $5,000,000. (the purchase price). The Purchase Price was payable in cash at Closing. The Purchase was subjected to a downward adjustment of $3,333. per day if the limited partners' approval was not received by July 2, 1998. On July 2, 1998 after receiving a majority approval of the limited partners the motel was sold to Piyal, LLC (an entity controlled by Tarsadia Hotels) for $5,000,000. Since the investors promptly returned their votes approving the sale prior to the deadline, there was no reduction in the selling price. This selling price exceeded the last appraised value of the motel ($4 million) as well as the hotel broker's opinion of value ($4.4 to $4.6 million). The proceeds of sale were used to pay: the loan owed to the ground lessor; broker's commissions; closing costs; and room taxes for June 1998. The net proceeds less a reserve of $300,000. were disbursed on 7/24/98 in the amount of $753.62 per unit, totaling $4,446,371. In addition an operating distribution of $115,301. was paid. The partnership will remain in existence through the remainder of the year and will be required to continue to file quarterly reports with the SEC. Once any contingent and unexpected claims have been satisfied the partnership can be dissolved. The general partner hopes to accomplish this dissolution by the end of March, 1999 when the partnership will be mailing the final K-1's reporting the sale but there is no guaranty this will occur by this date. At the time of the dissolution the partnership will pay the second and final liquidating distribution of any remaining funds held. (Continued) Page 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/ Stephen D. Burchett (NAME AND TITLE) Stephen D. Burchett, Vice President (DATE) November 10, 1998 By:(SIGNATURE) /s/ Sylvia Mellor Clark (NAME AND TITLE) Sylvia Mellor Clark, Controller (DATE) November 10, 1998 Page 13 EX-27 2
5 9-MOS DEC-31-1998 SEP-30-1998 283,541 0 867 0 0 304,086 0 0 304,086 22,682 0 0 0 0 0 304,086 0 0 0 0 0 0 0 0 0 0 108,111 2,798,671 0 2,906,782 443.41 443.41
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