SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[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 SECURITIES EXCHANGE ACT OF 1934
Commission file number 33-96716
ESSEX HOSPITALITY ASSOCIATES IV L.P.
(Exact name of registrant as specified in charter)
NEW YORK
(State or other jurisdiction of incorporation or organization)
16-1485632
(I.R.S. Employer Identification No.)
100 CORPORATE WOODS
ROCHESTER, NEW YORK 14623
(Address of principal executive office)
Registrant's telephone number, including area code: (716) 272-2300
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No
------ ------
As of November 10, 1997, a total of 2,945 Limited Partnership Units were
outstanding.
<PAGE>
PART 1
FINANCIAL INFORMATION
Item 1. Financial Statements
- ----------------------------------------------------------------------------
Essex Hospitality Associates IV L.P.
Balance Sheets
September 30, 1997 and 1996
(Unaudited)
ASSETS 1997 1996
-------- ------ ----
Investments in real estate, at cost:
Land $ 2,069,129 2,640,300
Land improvements 4,044
Building 4,430,468
FF&E 512,003
Construction in progress 334,462 6,507,304
------------ -----------
7,350,106 9,147,604
Less accumulated depreciation (27,076) --
------------ -----------
Net investments in real estate 7,323,030 9,147,604
------------ -----------
Investment in partnership 444,210 --
Cash and cash equivalents 345,220 2,454,055
Restricted cash 1,221,819
Deferred costs:
Debt issuance 842,578 690,253
Franchise 85,000 128,000
Other 73,224 60,766
------------ -----------
1,000,802 879,019
Less accumulated amortization (128,676) (51,361)
------------ -----------
872,126 827,658
------------ -----------
Other assets 253,090 494,340
------------ -----------
Total assets $ 10,459,495 12,923,657
============ ===========
LIABILIITIES AND PARTNERS' CAPITAL
----------------------------------
Liabilities
Accounts payable - construction $ 54,425 47,696
Accounts payable and accrued expenses 34,210 46,241
Subordinated notes payable 5,298,000 4,920,000
First mortgage loan payable 4,500,000 --
Construction loan payable -- 4,213,008
Notes payable -- 1,500,000
------------ -----------
Total liabilities 9,886,635 10,726,945
------------ -----------
Minority interest - Essex Glenmaura L.P. -- 973,087
------------ -----------
Commitments and contingencies (notes 5 and 6)
Partners' capital 594,375 1,396,824
Less notes receivable from partners (21,515) (173,199)
------------ -----------
Total partners' capital 572,860 1,223,625
------------ -----------
Total liabilities and partners' capital $ 10,459,495 12,923,657
============ ===========
See accompanying notes to unaudited financial statements.
<PAGE>
Essex Hospitality Associates IV L.P.
Statement of Income
For the Quarters ended September 30, 1997 and 1996
(Unaudited)
1997 1996
------ -----
REVENUE:
--------
Rooms 420,440 56,629
Food and beverage -- 11,265
Telephone and other commissions 17,055 4,313
------- --------
437,495 72,207
------- --------
OPERATING EXPENSES:
- ------------------
Rooms 103,770 27,924
Food & beverage expenses -- 21,148
Commissions expenses 3,039 402
Advertising & promotion 16,521 13,817
Repairs & maintenance 12,240 8,885
Utilities 8,135 --
Administrative & general 20,125 9,438
Property taxes -- --
Insurance 2,114 1,095
Royalty fees 9,234 2,265
Management fees 15,417 3,254
Partnership management fees 2,570 542
Depreciation and amortization 57,912 10,995
Miscellaneous 20,266 2,762
------- --------
271,343 102,527
------- --------
Income from operations 166,152 (30,320)
Interest expense (128,881) (111,187)
Interest income 759 17,541
Equity (loss) of partnership (62,384) --
------- --------
(190,506) (93,646)
------- --------
Income (loss) before minority interest
in loss of partnership (24,354) (123,966)
------- --------
Minority interest in income/(loss) of partnership -- (46,697)
------- --------
Net loss (loss) (24,354) (77,269)
======== ========
Net loss - general partners (244) (773)
- limited partners (24,110) (76,496)
------- --------
(24,354) (77,269)
======================
Net loss per limited partner unit (10) (52)
======================
See accompanying notes to unaudited financial statements.
<PAGE>
<TABLE>
<CAPTION>
Essex Hospitality Associates IV L.P.
Statements of Cash Flows
For the Quarters ended September 30, 1997 and 1996
(Unaudited)
1997 1996
------ ------
<S> <C> <C>
Cash flows from operating activities
Cash received from customers 385,863 53,310
Cash paid to suppliers (284,003) (52,775)
Interest received 759 17,551
Interest paid (128,881) (111,187)
---------- ----------
Net cash from operating activities (26,262) (93,101)
---------- ----------
Cash flows from investing activities
Payments for land and construction in progress (2,023,556) (3,236,046)
Increase in restricted cash (1,221,819) --
Payments for deposits (46,314) 126,756
---------- ----------
Net cash used in investing activities (3,291,689) (3,109,290)
---------- ----------
Cash flows from financing activities
Partners' capital contributions 16,927 270,972
Payments for syndication costs (12,341) (30,085)
Proceeds from subordinated notes payable -- 277,000
Proceeds from construction loan -- 3,035,859
Proceeds from first mortgage loan 4,500,000 --
Repayment of advance from affiliate (596,156) --
Payments for debt acquisition costs (232,431) (38,032)
Distributions received from partnership investment 22,900 --
Payments for distributions (46,741) (34,488)
---------- ----------
Net cash from financing activities 3,652,158 3,481,226
---------- ----------
Net increase in cash and cash equivalents 334,207 278,835
Cash and cash equivalents - beginning of quarter 11,013 1,354,265
---------- ----------
Cash and cash equivalents - end of quarter 345,220 1,633,100
========== ==========
</TABLE>
See accompanying notes to unaudited financial statements.
<PAGE>
<TABLE>
<CAPTION>
Essex Hospitality Associates IV L.P.
Statements of Cash Flows
For the Quarters ended September 30, 1997 and 1996
(Unaudited)
<S> <C> <C>
Reconciliation of net income to net cash flows from operating activities:
Net loss (24,354) (77,269)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization 57,912 10,995
Minority interest in net loss of partnership -- (46,697)
Equity loss of partnership 62,384 --
Changes in:
Other assets (153,308) (18,228)
Accounts payable and other expenses 31,104 38,098
---------- ----------
(26,262) (93,101)
========== ==========
Supplemental schedule of noncash investing and financing
activities:
Obligations incurred (repaid) in connection with
construction in progress (1,509,106) (1,299,340)
Notes received from (paid by) general and limited
partners (16,927) 2,389
</TABLE>
See accompanying notes to unaudited financial statements.
<PAGE>
ESSEX HOSPITALITY ASSOCIATES IV L.P
(A New York Limited Partnership)
Notes to Financial Statements
September 30, 1997
1) ORGANIZATION
------------
Essex Hospitality Associates IV L.P. (the Partnership) is a New York
limited partnership formed on August 30, 1995 for the purpose of
acquiring land and constructing, owning and operating a series of
hotels. The Partnership may also invest in and lend funds to other
partnerships that own hotels. The Partnership is financing its
activities through a public offering of notes and limited partnership
units. The Partnership's general partner is Essex Partners Inc. (Essex
Partners), a subsidiary of Essex Investment Group, Inc. (Essex).
The Partnership has acquired land in order to construct and operate
hotels. In December 1995, land was purchased in Solon, Ohio. Hampton
Inn hotel opened on the Solon site on August 1, 1997. As a condition to
receiving permanent financing, a special purpose entity was created to
own the Solon Hampton Inn, Solon Hotel LLC. The managing member of
Solon Hotel LLC is Essex Hotel LLC, a single purpose entity created to
act as the managing member of Solon Hotel LLC. The membership interests
in Solon Hotel LLC are owned 99% by the Partnership and 1% by Essex
Hotel LLC, whose sold member is the Partnership.
In December 1995, the Partnership also purchased land in Warwick, Rhode
Island in anticipation of the construction of a Homewood Suites hotel.
Construction was delayed as a result of higher than projected
construction costs and a change in market conditions. The Partnership
has decided not to proceed with construction of the Homewood Suites and
is currently pursuing a sale of the site. The disposal is not expected
to have a significant impact on the Partnership's financial statements.
In June 1997, the Partnership purchased land in Erie, Pennsylvania for
construction of a Hampton Inn hotel. In June 1997, the Partnership
transferred the Erie property to a single purpose entity, Erie Hotel
LLC. The managing member of Erie Hotel LLC is Essex Hotels II LLC, a
single purpose entity created to act as the managing member of Erie
Hotel LLC. The membership interests in Erie Hotel LLC are owned 99% by
the Partnership and 1% by Essex Hotels II LLC, whose sole member is the
Partnership. The Partnership is currently negotiating with GMAC for a
first mortgage loan in the principal amount of $4.5 million to finance
the construction of the Erie Hampton Inn hotel.
In January 1996, the Partnership acquired a 54% limited partnership
interest in Essex Glenmaura L.P. (Glenmaura) through the purchase of
12.5 limited partnership units for $1,250,000. The purchase price was
equal to the prorata portion of the fair value of the net assets
acquired. Glenmaura owns and operates a Courtyard by Marriott hotel
near Scranton, Pennsylvania. Construction of the hotel was completed
during 1996 and operations began on September 4, 1996. As a condition
to receiving permanent financing for the Solon Hampton Inn, the
Partnership was required to reduce its investment in Glenmaura to less
than 50%. In June 1997, 1.05 units were sold to the general partner for
$105,000 reducing the Partnership's interest to 49.8%.
<PAGE>
ESSEX HOSPITALITY ASSOCIATES IV L.P
(A New York Limited Partnership)
Notes to Financial Statements
September 30, 1997
1) ORGANIZATION (CONTINUED)
------------------------
The following is a general description of the allocation of income,
loss, and distributions. For a more comprehensive description see the
Partnership Agreement:
Allocation of income from operations will be allocated 99% to
the limited partners and 1% to the general partner until the
amount allocated to the limited partners equals the cumulative
annual return of 8% of their contribution. Any remaining
income from operations is allocated 80% to the limited
partners and 20% to the general partner. Income on the sale of
any or all of the hotels is allocated 99% to the limited
partners until each limited partner has been allocated income
in an amount equal to his or her pro rata share of the
nondeductible syndication expenses and sales commission and 1%
to the general partner. Thereafter, income on the sale of any
or all the hotels is allocated in the same manner as income
from operations.
Allocations of losses from operations will be allocated 80% to
the limited partners and 20% to the general partner in the
amounts sufficient to offset all income which was allocated
80% to the limited partners. Thereafter, operating losses are
allocated 99% to the limited partners and 1% to the general
partner. Loss on the sale of any or all of the hotels will be
first allocated in the same manner as losses from operations,
except that the allocation of such loss would be made prior to
allocations of income from operations. All other losses are
allocated 99% to the limited partners and 1% to the general
partner.
Cash distributions will initially be made 99% to the limited
partners and 1% to the general partner. After the limited
partners have received a cumulative annual return of 8% of
their contribution, additional distributions may then be made
80% to the limited partners and 20% to the general partner.
Distributions of the net proceeds of sale or refinancing of
any or all hotels will be made 1% to the general partner and
99% to the limited partners prorata in accordance with the
number of units held by each limited partner until the limited
partners have received distributions from sale or refinance of
hotels equal to $1,000 per unit. Thereafter, distributions
shall next be made 1% to the general partner and 99% to the
limited partners until each limited partner has received any
unpaid cumulative return accrued through the date of the
distribution. Additional distributions will then be made 20%
to the general partner and 80% to the limited partners.
Essex Partners and its affiliates are receiving substantial fees in
connection with the offering of notes and limited partnership units.
Additional fees will be paid to them in connection with the
acquisition, development and operation of the hotels and management of
the Partnership (see note 5).
In accordance with the Partnership agreement, the ratio of gross
proceeds from the offering of limited partnership units to total gross
proceeds from the public offering of notes and limited partnership
units prior to the termination of the offering may not be less than .15
to 1. At September 30, 1997, that ratio was .36 to 1.
<PAGE>
ESSEX HOSPITALITY ASSOCIATES IV L.P
(A New York Limited Partnership)
Notes to Financial Statements
September 30, 1997
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
------------------------------------------
BASIS OF ACCOUNTING
-------------------
The financial statements of the Partnership were prepared on the
accrual basis of accounting in conformity with generally accepted
accounting principles.
UNAUDITED INTERIM FINANCIAL INFORMATION
---------------------------------------
The interim financial data included in these financial statements is
unaudited; however, in the opinion of management, such financial data
includes all adjustments of a normal recurring nature necessary for a
fair presentation of the Partnership's financial condition and results
of operation.
INVESTMENT IN PARTNERSHIP
-------------------------
Investment in partnership with a 50% or less ownership interest will be
accounted for by the equity method. Ownership interests exceeding 50%
will be accounted for under the consolidated method.
INVESTMENT IN REAL ESTATE
-------------------------
Investment in real estate is stated at cost. Investment in real estate
is reviewed for possible impairment when events or changed
circumstances may affect the underlying basis of the asset.
Depreciation is calculated using the straight-line method for buildings
and accelerated methods for land improvements, furniture, fixtures and
equipment over the following estimated useful lives of the assets as
each hotel commences operations:
Buildings 39 years
Land improvements 15 years
Furniture, fixtures and equipment 5 - 7 years
CASH AND CASH EQUIVALENTS
-------------------------
Cash investments with maturities of three months or less at the time of
purchase are considered to be cash equivalents.
DEFERRED COSTS
--------------
Costs of issuing the subordinated notes payable will be amortized on a
straight-line basis over the term of the notes.
Franchise fees paid for the right to own and operate the hotels will be
amortized on a straight-line basis over the term of each franchise
agreement, as each hotel commences operations.
<PAGE>
ESSEX HOSPITALITY ASSOCIATES IV L.P
(A New York Limited Partnership)
Notes to Financial Statements
September 30, 1997
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
------------------------------------------------------
SYNDICATION COSTS
-----------------
Selling commissions and legal, accounting, printing and other filing
costs totaling $339,479 related to the offering of the limited
partnership units were charged against the proceeds of the public
offering.
INCOME TAXES
------------
No provision for income taxes has been provided since any liability is
the individual responsibility of the partners.
RECOGNITION OF REVENUE
----------------------
Revenues are recognized as earned in accordance with contractual
arrangements for each transaction.
LIMITED PARTNERSHIP PER UNIT DATA
---------------------------------
Net loss per limited partner unit is calculated by dividing net loss by
the weighted average number of units outstanding during the year. The
weighted average number of units outstanding was 2,402 during the third
quarter, 1997.
USE OF ESTIMATES
----------------
The preparation of the financial statements in conformity with
generally accepted accounting principles requires the general partner
to make estimates and assumptions that affect the reported amounts of
asset and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported
amounts of income and expenses during the reporting period. Actual
results could differ from those estimates.
(3) DEBT
----
FIRST MORTGAGE LOAN
-------------------
On July 7, 1997, Solon Hotel LLC obtained permanent financing from GMAC
Commercial Mortgage Corporation for $4,500,000. The term of the loan
will be for four years with a one year extension available upon the
payment of an extension fee and if certain debt service coverage is
attained. Interest will accrue at 3.25% over the 30-day LIBOR index.
Monthly payments of interest only will be due for the first year.
Principal and interest payments are due thereafter based on a 25-year
amortization. Starting in the second year of the loan, Solon Hotel LLC
will be required to maintain a replacement reserve of 2% of monthly
room revenues. The replacement reserve payment will increase to 4% of
monthly room revenues in the third year of the loan. The loan is
collateralized by the real and personal property and certain other
assets.
<PAGE>
ESSEX HOSPITALITY ASSOCIATES IV L.P
(A New York Limited Partnership)
Notes to Financial Statements
September 30, 1997
(3) DEBT (CONTINUED)
----------------
SUBORDINATED NOTES PAYABLE
--------------------------
Subordinated notes payable of the Partnership of $5,182,000 bear
interest at a rate of 10.5% per annum, payable monthly, and mature
December 31, 2001, unless extended by the Partnership to December 31,
2002 upon payment to holders of an extension fee equal to .5% of the
principal amount of the subordinated notes outstanding. The notes are
issued as unsecured obligations of the Partnership.
The aggregate annual principal payments of the debt obligations for the
three months ended December 31, 1997 and years subsequent to 1997 are
as follows:
1997 -0-
1998 24,039
1999 51,484
2000 56,383
2001 9,666,094
------------------------
9,798,000
========================
In the third quarter 1997, interest of $73,057 was capitalized in
investments in real estate as the debt was used to finance construction
of hotels. No interest was capitalized in the third quarter, 1996.
(4) FRANCHISE FEES
--------------
In 1995, Promus Corporation (Promus) approved a license agreement for
the Partnership to operate a Hampton Inn hotel in Solon, Ohio. An
initial franchise fee of $40,000 was paid. In 1997, the Partnership
entered into a license agreement with Promus to operate a Hampton Inn
in Erie, Pennsylvania which required an initial franchise fee of
$45,000. The term and amortization period of the license agreements are
twenty years. In addition, for each hotel, the Partnership will be
required to pay Promus a monthly royalty fee of 4% of gross rooms
revenues, a monthly marketing/reservation fee of 4% of gross rooms
revenue, an initial software license fee of $3,000 plus $85 per guest
room with a monthly maintenance charge of $300 to $400 per month, and a
monthly amount equal to any sales tax or similar tax imposed on Promus
on payments received under the license agreement. The Partnership
incurred royalty and marketing/ reservation fees of $9,234 during the
third quarter, 1997. No royalty or marketing/reservation fees were
incurred in the third quarter, 1996.
Promus requires the Partnership to establish a capital reserve escrow
account based on a percentage of gross revenues generated by each hotel
which will be used for product quality requirements of the hotel.
Cumulative funding of the reserve for the first five years increases
<PAGE>
ESSEX HOSPITALITY ASSOCIATES IV L.P
(A New York Limited Partnership)
Notes to Financial Statements
September 30, 1997
(4) FRANCHISE FEES (CONTINUED)
--------------------------
from 1% to 5% of gross revenues and stabilizes at 5% for the term of
the agreement. The Promus franchise agreements impose certain
restrictions on the transfer of limited partnership units. Promus
restricts the sale, pledge or transfer of units in excess of 25%
without their consent.
In 1995, the Partnership entered into a license agreement with Promus
to operate a Homewood Suites hotel in Warwick, Rhode Island. An initial
franchise fee of $40,000 was paid. The franchise agreement for the
Homewood Suites in Warwick has expired. The franchise fee has been
written off since the franchise agreement has expired.
(5) RELATED PARTY TRANSACTIONS
--------------------------
A summary of fees earned by Essex Partners or its affiliates for the
three months ended September 30, 1997 under the terms of the
Partnership agreement follows:
<TABLE>
<CAPTION>
3RD QTR 3RD QTR
TYPE OF FEE AMOUNT OF FEE 1997 1996
----------- ------------- ---- ----
<S> <C> <C> <C>
Selling Commission Up to $80 per limited partnership $ -0- $ 36,120
unit and $55 per $1,000 sold
Organization and 3.4% of the gross proceeds of the -0- 18,620
Offering Fee offering
Acquisition Fee $110,000 per hotel site -0- -0-
Development Fee $160,000 per hotel, plus 5% of the 34,000 -0-
total cost of the hotel in excess of
$2.7 million (not to exceed $325,000
per hotel)
Property 4.5% of gross operating revenues 15,417 -0-
Management Fee from the hotels
Partnership .75% to 1.25% of gross operating 2,570 -0-
Management Fee revenues from the hotels
Accounting Fee $800 per month 1,600 -0-
$ 53,587 $ 54,740
======== ========
</TABLE>
<PAGE>
ESSEX HOSPITALITY ASSOCIATES IV L.P
(A New York Limited Partnership)
Notes to Financial Statements
September 30, 1997
(5) RELATED PARTY TRANSACTIONS (CONTINUED)
--------------------------------------
The above fees are reflected in the accompanying financial statements
as follows:
<TABLE>
<CAPTION>
3rd Qtr 3rd Qtr
Balance Sheet: 1997 1996
---------- --------
<S> <C> <C>
Investment in real estate $ 34,000 $ -0-
Deferred debt issuance costs -0- 24,655
Syndication costs, charged to partner's capital -0- 30,085
$ 34,000 $ 54,740
========== ========
Statements of Operations:
Management fees to affiliates $15,417 -0-
Administrative expense 1,600 -0-
Partnership management fees 2,570 -0-
$19,587 $ -0-
========== ========
</TABLE>
Organization and offering fees are allocated to syndication costs and
debt issuance costs based on the pro-rata share of limited partner's
units and notes payable to the total offering.
Under the terms of the Partnership agreement, Essex Partners or its
affiliates will also earn other fees as follows:
TYPE OF FEE AMOUNT OF FEE
----------- -------------
Investor Relations Fee .25% of the gross proceeds of the offering
payable annually in 1998 through 2001
Refinancing Fee 1% of the gross proceeds of re-financing any
or all of the hotels
Sales Fee 3% of the gross sale price of any or all
of the hotels
The Partnership will also be subject to a number of conflicts of
interest arising from its relationships with the general partner, its
owners and affiliates and due to other activities and entities in which
the general partner and its affiliates have or may have a direct or
indirect financial interest.
<PAGE>
ESSEX HOSPITALITY ASSOCIATES IV L.P
(A New York Limited Partnership)
Notes to Financial Statements
September 30, 1997
(6) INVESTMENT IN PARTNERSHIP
-------------------------
The Partnership owns a 49.8% interest in Essex Glenmaura L.P. (see note
1). Summarized financial information for Essex Glenmaura as of and for
the three monthls ended June 30, 1997 follows:
Assets $ 7,620,000
Liabilities 6,649,000
Partners' capital 971,000
Revenues 587,000
Net loss (125,000)
<PAGE>
Essex Glenmaura L.P.
Balance Sheet
September 30, 1997 and 1996
(unaudited)
ASSETS 1997 1996
-------- ------ -----
Investments in real estate, at cost:
Land $ 1,223,636 1,223,636
Land improvements 283,116 --
FF&E 1,387,260 --
Building 4,969,620 --
Construction in progress -- 6,004,688
----------- ----------
7,863,632 7,228,324
Less accumulated depreciation (577,136) --
----------- ----------
Net investments in real estate 7,286,497 7,228,324
----------- ----------
Unrestricted cash and cash equivalents (44,265) 56,731
Restricted cash and cash equivalents 89,005 --
Deferred costs:
Debt issuance 268,887 192,115
Franchise 48,000 48,000
Other 10,000 10,000
----------- ----------
326,887 250,115
Less accumulated amortization (173,583) (18,376)
----------- ----------
153,304 231,739
----------- ----------
Other assets 135,429 492,386
----------- ----------
Total assets $ 7,619,970 8,009,180
=========== ==========
LIABILIITIES AND PARTNERS' CAPITAL
----------------------------------
Liabilities
Accounts payable and accrued expenses $ 129,307 39,047
Accounts payable - construction 19,876 21,491
First mortgage loan payable 5,000,000 --
Construction loan payable -- 4,213,008
Notes payable 1,500,000 1,500,000
----------- ----------
Total liabilities 6,649,183 5,773,546
----------- ----------
Commitments and contingencies (notes 5 and 6)
Partners' capital 970,787 2,235,634
----------- ----------
Total liabilities and partners' capital $ 7,619,970 8,009,180
=========== ==========
See accompanying notes to unaudited financial statements.
<PAGE>
Essex Glenmaura L.P.
Statements of Income
For the Quarters ended September 30, 1997 and 1996
(unaudited)
1997 1996
---- ----
Revenue:
Rooms 499,710 56,629
Food and beverage 54,153 11,265
Telephone and other commissions 33,132 7,136
------- ------
586,995 75,030
------- ------
Operating expenses:
Rooms 133,012 27,991
Food & beverage expenses 55,130 21,148
Administrative & general 46,431 9,104
Utilities 29,888 --
Advertising & promotion 35,287 12,684
Repairs & maintenance 26,713 8,885
Management fees 27,204 --
Royalty fees 22,075 --
Commissions expenses 15,648 402
Property taxes 28,592 --
Insurance 4,906 1,095
Miscellaneous 433 --
Partnership management fees 4,534 --
Depreciation and amortization 133,418 --
------- ------
563,271 81,309
------- ------
Income (loss) from operations before interest 23,724 (6,279)
Interest expense (149,010) --
Interest income 18 10
------- ------
(148,992) 10
------- ------
Net loss (125,268) (6,269)
-------- ------
Net loss - general partners (5,011) (251)
- limited partners (120,257) (6,018)
-------- ------
$(125,268) $ (6,269)
========= ========
Net loss per limited partner unit $ (5,466) $ (274)
========= ========
See accompanying notes to unaudited financial statements.
<PAGE>
<TABLE>
<CAPTION>
Essex Glenmaura L.P.
Statements of Cash Flows
For the Quarters Ended September 30, 1997 and 1996
(unaudited)
1997 1996
---- ----
<S> <C> <C>
Cash flows from operating activities
Cash received from customers $ 623,564 42,895
Cash paid to suppliers (427,153) (288,801)
Interest received 18 10
Interest paid (149,010) --
--------- ----------
Net cash from operating activities 47,419 (245,896)
--------- ----------
Cash flows from investing activities
Payments for land and construction in progress (68,863) (2,865,208)
Payments for deposits 5,732 126,756
--------- ----------
Net cash used in investing activities (63,131) (2,738,452)
--------- ----------
Cash flows from financing activities
Construction loan advances -- 3,035,859
Escrow account deposits (34,653) --
Escrow account disbursements 66,167 --
Payments for debt acquisition costs (457) (11,435)
Payments for distributions (46,000) --
--------- ----------
Net cash from financing activities (14,943) 3,024,424
--------- ----------
Net increase in cash and cash equivalents (30,655) 40,076
Cash and cash equivalents - beginning of period (13,610) 16,655
--------- ----------
Cash and cash equivalents - end of period $ (44,265) 56,731
========= ==========
Reconciliation of net income to net cash flows
from operating activities:
Net loss (125,268) (6,269)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization 133,418 --
Changes in:
Shortterm assets 13,104 (203,346)
Accounts payable and other expenses 26,165 38,749
--------- ----------
$ 47,419 (245,896)
========= ==========
Supplemental schedule of noncash investing and financing
activities:
Obligations paid in connection with
construction in progress -- 1,320,000
</TABLE>
See accompanying notes to unaudited financial statements.
<PAGE>
ESSEX GLENMAURA L.P.
(A Limited Partnership)
Notes to Unaudited Financial Statements
September 30, 1997 and 1996
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
SCOPE OF BUSINESS
The Partnership is a New York Limited Partnership formed to construct, own
and operate a 120-room hotel, Courtyard by Marriott, Southeast of
Scranton, Pennsylvania under a franchise agreement with Marriott
International, Inc. (the Project). Construction was completed during 1996
and operations began on September 4, 1996.
The Partnership was formed on May 18, 1995 and will terminate on the
earlier of December 31, 2045 or the date the Partnership is terminated
pursuant to the partnership agreement or by law.
UNAUDITED INTERIM FINANCIAL INFORMATION
The interim financial data included in these financial statements is
unaudited; however, in the opinion of management, such financial data
includes all adjustments of a normal recurring nature necessary for a fair
presentation of the Partnership's financial condition and results of
operations
.
ALLOCATIONS OF INCOME OR LOSS
The Partnership agreement provides that net losses of the Partnership be
first allocated among the Partners to the extent of the positive balances
in the Partners' capital accounts, to make the respective balances equal
to the distributions that would have been made had the aggregate balances
in all Partners' capital accounts been distributed in accordance with each
Partner's pro rata share. Losses are next allocated in accordance with
each Partner's pro rata share in an amount equal to the difference between
nonrecourse debt of the Partnership and the adjusted basis of the
Partnership property securing such nonrecourse debt. All additional losses
are allocated to the General Partner. Net income is allocated first to the
General Partner in an amount equal to the loss allocated to the General
Partner as described above. Next, income is allocated in accordance with
each Partner's pro rata share in an amount equal to the loss allocated to
the Partners as described above. Income is then allocated to those
Partners with negative balances in their capital accounts. All additional
income is then allocated in accordance with each Partner's pro rata share.
CASH AND CASH EQUIVALENTS
For the purposes of the financial statements, cash and cash equivalents
include money market funds and commercial savings accounts.
METHOD OF ACCOUNTING
The Partnership has prepared its financial statements on the accrual
method of accounting.
INCOME TAXES
No provision for income taxes has been provided since any liability is the
individual responsibility of the Partners.
INVESTMENT IN REAL ESTATE
The investment in real estate is stated at cost and includes $261,929 of
capitalized interest. Depreciation is calculated using straight-line and
accelerated methods over the estimated useful lives of the assets.
1
<PAGE>
ESSEX GLENMAURA L.P.
(A Limited Partnership)
Notes to Unaudited Financial Statements
September 30, 1997 and 1996
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
DEFERRED COSTS
Organization costs are being amortized on a straight-line basis over a
period of sixty months, beginning the first month of operation.
Debt acquisition fees are being amortized over the life of the related
debt on a straight-line basis.
DISTRIBUTIONS
Distributions shall be made in accordance with each Partner's pro rata
share at an amount and time determined by the General Partner.
SYNDICATION COSTS
Selling commissions, legal and other costs totaling $46,617 related to the
offering of limited Partnership units were charged against Partner's
capital.
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
REVENUE RECOGNITION
Revenues are recognized as earned in accordance with contractual
arrangements fro each transaction.
IMPAIRMENT OF LONG-LIVED ASSETS
In accordance with Statement of Financial Accounting Standards No. 121,
"Accounting for Impairment of Long-Lived Assets and for Long-Lived Assets
to Be Disposed Of", the Partnership reviews long-lived assets and certain
identifiable intangibles for possible impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may
not be recoverable.
2. DEPOSIT
The Partnership has made a non-refundable deposit of $55,000 pursuant to
an option to purchase a second parcel of land (the Second Project)
adjacent to the Project for purposes of constructing a second hotel. The
option agreement expired in December of 1996 but is currently being
renegotiated.
2
<PAGE>
ESSEX GLENMAURA L.P.
(A Limited Partnership)
Notes to Unaudited Financial Statements
September 30, 1997 and 1996
3. FINANCING OF INVESTMENT IN REAL ESTATE
Financing of real estate consists of the following at September 30, 1997
and 1996:
NOTES PAYABLE
Notes payable consist of $1,500,000 of unsecured notes requiring monthly
installments of interest only at 10.5% per annum. The notes mature on June
1, 1998 upon which all principal will be due unless the Partnership
exercises its early repayment or note extension options. The Partnership
has the right to repay the notes at face value. The Partnership also has
the option to exercise two one-year extensions at extension fees ranging
from one-half to one percent. Essex Partners Inc. guarantees payment of
principal and interest on the notes.
MORTGAGE LOAN
On February 28, 1997, the Partnership obtained permanent financing from
GMAC Corporation for $5,000,000. The term of the loan is four years with a
one year extension available if certain debt service coverage is attained.
Monthly payments of interest only are due for the first year. Interest
accrues at 3% over the LIBOR rate. Principal and interest payments are due
thereafter based on a twenty-five year loan amortization. Starting in the
second year of the loan, the Partnership will be required to maintain a
replacement reserve escrow at 4% of room revenues. A commitment fee of
$50,000 (1% of the loan proceeds) was paid, 50% of the fee upon acceptance
of the commitment and 50% at closing. The loan is collateralized by the
real and personal property and certain other assets.
The aggregate annual principal payments for the years subsequent to 1997
are as follows: (there are no principal payments required in 1997)
1998 $ 1,539,129
1999 51,449
2000 56,836
2001 4,852,586
-------------
$ 6,500,000
=============
CONSTRUCTION LOAN
The Partnership received construction financing from Key Bank of up to
$4,500,000, of which $1,177,149 had been drawn down as of June 30, 1996
and required monthly payments of interest only at a rate of 2.5% over the
LIBOR rate. The construction loan was repaid with proceeds from the first
mortgage loan.
3
<PAGE>
ESSEX GLENMAURA L.P.
(A Limited Partnership)
Notes to Unaudited Financial Statements
September 30, 1997 and 1996
4. RELATED PARTY TRANSACTIONS
A summary of the fees earned by Essex Partners or its affiliates in 1996
and 1995 under the terms of the Partnership agreement are as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-------------------
TYPE OF FEE AMOUNT OF FEE SEPT 1997 SEPT 1996
- ----------- ------------- --------- ---------
<S> <C> <C> <C>
Property Management Fee 4.5% of gross operating revenues from the hotel 27,204 --
Partnership Management Fee .75% of gross operating revenues from the hotel 4,534 --
Accounting Fee $800 per month 2,400 --
</TABLE>
In addition, Essex Partners may receive the following fees:
a) a refinancing fee upon the closing of a refinancing of the Project,
in the aggregate amount of 1% of the gross proceeds of the
refinancing,
b) a sales fee upon the closing of a sale of the Project, in the
aggregate amount of 2.5% of the gross sales price, provided that the
sum of such fee and any competitive real estate commission paid by
the Partnership with respect to such sale does not exceed 5% of the
gross sale price, and that Essex Partners Inc. renders substantial
services in connection with the sale,
c) in the event the General Partner elects to proceed with the Second
Project on behalf of the Partnership, Essex Partners Inc. will
receive additional compensation related to the acquisition of the
second parcel, construction of the Second Project and securing
additional equity and debt financing to fund such activities. Such
compensation will include an acquisition fee equal to $50,000 for
its services related to the acquisition of the second parcel and a
development fee up to $150,000 plus 3% of total construction, site
development and fixtures, furniture and equipment costs, as
compensation for its services related to the development of the
Second Project. In addition, as compensation for arranging
construction and permanent financing for the Second Project, Essex
Partners Inc. may receive a financing fee equal to 1% of the gross
proceeds of the financing. Essex Partners Inc. also will receive an
additional property management fee and partnership management fee
calculated as described in the summary schedule above based on the
gross operating revenues of the Second Project. If the Second
Project is sold and/or refinanced, Essex Partners Inc. will receive
additional sales and/or refinancing fees calculated as described in
paragraphs (a) and (b) above based on the gross sales and/or
refinancing proceeds of the Second Project, and
d) Essex Partners Inc. and its affiliates also will receive
offering-related fees for services in connection with (I) the
offering of additional partnership interests and/or notes, or (ii)
the possible refinancing of the Project or the Second Project to
fund the acquisition of the land and/or construction or one or both
of those projects. Essex Partners Inc. and its affiliates are
expressly authorized to receive from the Partnership the fees and
sales commissions customarily charged by Essex Partners Inc. and its
affiliates for rendering comparable services on competitive terms.
4
<PAGE>
ESSEX GLENMAURA L.P.
(A Limited Partnership)
Notes to Unaudited Financial Statements
September 30, 1997 and 1996
5. FRANCHISE FEES
The Partnership has entered into a franchise agreement with Marriott
International, Inc. Under the terms of the agreement, the Partnership paid
an initial franchise fee of $48,000. The term and amortization period of
the franchise agreement is twenty years, with an option to renew for an
additional ten-year period.
The Partnership is required to pay a monthly royalty fee in an amount
equal to 4% of gross room rentals for the first two years of operations
and 5% during the remainder of the term of the agreement, a marketing fee
of 2-3% of gross revenues, a reservation system fee, a property management
system fee, a communication support fee and a revenue management fee.
Payments to Marriott for the three month period ending September 30, 1997
included royalty fees of $22,074, marketing fees of $11,037, reservation
system fees of $14,680 and other fees of $13,765. There were no fees paid
in the three months ending September 30, 1996.
5
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
- ------- ---------------------------------------------------------
The Partnership was formed on August 30, 1995. Since its formation, the
Partnership has been involved in raising capital pursuant to the Original
Prospectus, and the acquisition and construction of properties. The Partnership
has received Gross Offering Proceeds of $7.6 million, including approximately
$6.3 million from the sale of subordinated notes and approximately $2.3 million
from the sale of limited partnership units. The two sites specified in the
Prospectus were acquired on December 29, 1995, a 2.535 acre site in Warwick,
Rhode Island and a 2.28 acre site in Solon, Ohio. Limited partnership units in
another partnership were purchased in the first quarter, 1996.
The Partnership began construction of a 103-room Hampton Inn in Solon, Ohio in
late 1996, which opened August 1, 1997. The Solon Hampton Inn is expected to
cost about $7,000,000, including the cost of the land, cost of construction,
cost of furnishings, construction period interest, financing costs (debt and
equity) and all soft costs such as architectural costs, engineering, franchise
fee and working capital. The General Partner secured first mortgage financing
from GMAC Commercial Mortgage Corporation (GMAC) in July, 1997. As a condition
of receiving financing, the Partnership was required to create special purpose
entities to own each of its properties. Solon Hotel LLC was created to own the
Solon Hampton Inn. The membership interests of the Solon Hotel LLC are owned 99%
by the Partnership and 1% by Essex Hotel LLC, whose sole member is the
Partnership. The first mortgage is in the amount of $4.5 million and is to be
advanced in three installments. The first installment of $1,000,000 (net of
offering costs) was received upon the closing of the loan. The second
installments was received at the end of August, 1997. The third installment has
been delayed until the final negotiations with the general contractor over the
total cost of construction are completed, which is expected to be by the end of
November. The term of the first mortgage loan is for a period of four years,
with a one year extension upon the payment of an extension fee and the
achievement of a specified debt service coverage ratio. Monthly payments of
interest only are due for the first year, thereafter, monthly payments of
principal and interest are due based on a 25 year amortization. Interest will
accrue at the rate of 3.25% over the 30-day LIBOR index. Starting in the second
year of the loan, Solon Hotel LLC will be required to maintain a replacement
reserve escrow at 2% of room revenues. The required replacement reserve
increases to 4% of room revenues in the third year of the loan. The balance of
the amount required to complete the Solon Hampton Inn was provided through the
Partnership's offering of Notes and Units.
The Partnership acquired a site in Erie Pennsylvania in June, 1997 as a possible
location for the construction and operation of a Hampton Inn hotel. The site is
approximately 2.5 acres and was acquired for an aggregate purchase price of
$650,000 plus closing costs of $27,000 and demolition costs of approximately
$15,000. The Partnership has obtained a license agreement from Promus Hotel to
construct and operate a 100-room Hampton Inn hotel. The General Partner started
construction of the Erie Hampton Inn in October, 1997. The hotel is expected to
open in the late spring, 1998. The Partnership does not have sufficient funds to
complete construction of the Erie Hampton Inn. So as to enable the Partnership
to pursue favorable external financing opportunities with respect to the Erie
Hampton Inn, in June 1997 the Partnership transferred the Erie property to Erie
Hotel LLC, a single purpose entity. The membership interests of the Erie Hotel
LLC are owned 99% by the Partnership and 1% by Essex Hotels II LLC, whose sole
member is the Partnership. The Partnership is currently negotiating with GMAC
for a first mortgage loan in the principal amount of $4.5 million to finance
construction of the Erie Hampton Inn. As of the date of this filing, the
Partnership has received no commitment for external financing.
The Partnership acquired 12.5 limited partnership units in Essex Glenmaura for
$1,250,000 with proceeds from the offering, representing a limited partnership
interest of 54.3%. Essex Glenmaura completed construction of a 120- room
Marriott Courtyard in Scranton, Pennsylvania in September, 1996. The total cost
of the project was $8.7 million, including the cost of the land, cost of
construction, cost of furnishings, construction period interest, financing costs
(debt and equity) and all soft costs such as architectural costs, engineering,
franchise fee and working capital. The project was funded with $2,300,000 of
partner equity, $1,500,000 of unsecured notes and a $5,000,000 first mortgage
loan from GMAC. The term of the first mortgage loan is for a period of four
years, with a one year extension upon the payment of an extension fee and the
achievement of a specified debt service coverage ratio. Monthly payments of
interest only are due for the first year, thereafter, monthly payments of
principal and interest are due based on a 25 year amortization. Interest will
accrue at the rate of 3% over the 30-day LIBOR index. Starting in the second
year of the loan, Essex Glenmaura will be required to maintain a replacement
reserve
<PAGE>
escrow at 4% of room revenues. As a condition of receiving the first mortgage
loan for the Solon Hampton Inn, the Partnership was required to reduce its
investment in Essex Glenmaura to less than 50%. In June 1997, the Partnership
sold 1.05 limited partnership units to the General Partner at a purchase price
of $105,000, which is equal to the purchase price originally paid by the
Partnership. As a result, the Partnership now owns a 49.8% interest in Essex
Glenmaura.
The Partnership intended to build an 80-room Homewood Suites hotel in Warwick,
Rhode Island. The purchase price for the property was $501,400. However, prior
to commencing construction, the Partnership learned that additional hotels were
planned for construction near the Warwick site which would be competitive with
the Partnership's hotel and result in a 57% potential increase in the number of
hotel rooms in the area. The Partnership elected to postpone construction until
it could better assess the effect of the additional hotel rooms on the expected
performance of the Partnership's hotel. Based on the results of an updated
market survey, the Partnership concluded that the estimated 57% potential
increase in the number of hotel rooms in the area would have a significant
negative impact upon the expected performance of the Partnership's hotel. In
light of these findings, the Partnership has elected not to proceed with
development of the Warwick site and is currently pursuing the sale of the site.
In the second quarter, 1997, the franchise agreement for the Warwick site
expired. Although the Partnership has received some interest in the site from
potential buyers, there is no assurance that the Partnership will sell the
Warwick site or that it will be sold at a price sufficient to enable the
Partnership to recover all the costs and expenses incurred by the Partnership
with respect to the Warwick site. The Partnership has invested approximately
$682,000 in the Warwick site, including the cost of the site, the cost of the
franchise fee and engineering and architectural costs.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
The following discussion analyzes the financial statements of the Partnership as
of September 30, 1997 and 1996. The Partnership had an ownership interest of
54.3% in Essex Glenmaura until June 9, 1997, at which time the Partnership's
ownership interest was reduced to 49.8%. For the third quarter, 1997 the
Partnership's investment in Essex Glenmaura is accounted for on the equity
method. The financial statements of the Partnership and Essex Glenmaura for the
third quarter 1996 are consolidated. The consolidated financial statements
include the accounts of the Partnership and Essex Glenmaura. Also attached are
the financial statements for Essex Glenmaura for the third quarter, 1997 and
1996.
From July 1, 1997 to September 30, 1997, the total assets of the Partnership
increased approximately $2.4 million. The investments in real estate increased
$459,000 for additional costs incurred for the Solon and Erie construction. The
Partnership's unrestricted cash balance increased approximately $334,000 from
proceeds of the Solon first mortgage loan. The restricted cash balance increased
$1,222,000, which represents primarily the remaining proceeds of the Solon first
mortgage loan which are expected to be advanced by the end of November. The
assets of the Partnership at September 30, 1997 include $444,000 of investment
in partnership, which represents the Partnership's investment in Glenmaura, net
of reductions for net losses of $665,000 incurred through September 30, 1997,
the sale of 1.05 limited partnership units for $105,000 and distributions of
$35,400. The deferred assets of the Partnership increased $202,000 from costs
incurred for the Solon first mortgage loan.
The Partnership's liabilities increased approximately 2.4 million from July 1,
1996 to September 30, 1997, primarily from the receipt of the $4.5 million first
mortgage loan for Solon. Accounts payable-construction decreased $1.5 million
from the payment of the outstanding construction invoices for the Solon Hampton
Inn. The Due to affiliate of $596,000 was also repaid in the third quarter from
proceeds from the first mortgage loan. Partners' capital was reduced $67,000 in
third quarter. During the quarter, the Partnership incurred a $24,000 net loss,
received $16,000 in promissory note payments from investors, incurred $12,000 in
additional syndication costs and paid $47,000 in partner distributions.
The primary revenue source for the quarter ended September 30, 1997 was room
revenues of $420,000 from the Solon Hampton Inn, which was the only hotel in
operation. Telephone and other commission revenue totaled $17,000, for total
revenues of $437,000. For the quarter ended September 30, 1996, total revenues
were $72,200, which represents revenue generated by Essex Glenmaura L.P. after
opening on September 4, 1996. Operating
<PAGE>
expenses for the quarter ended September 30, 1997, before depreciation and
amortization, totaled $213,000. Depreciation and amortization of $57,000 was
recorded for income from operations of $166,000. The single largest operating
expense for the Partnership is rooms expense, which totaled $104,000 for the
quarter. Operating expenses for the third quarter 1996 totaled $103,000 after
depreciation and amortization of $10,000 composed primarily of rooms expenses of
$28,000 and food and beverage expenses of $21,000. The loss from operations for
the third quarter 1996 totaled $30,000. The Partnership's interest expense for
the third quarter 1997, net of interest income was $128,000, representing
interest incurred on the subordinated notes payable and the first mortgage loan
for Solon since August 1, 1997. Interest expense prior to August 1, 1997 was
capitalized. Net interest expense for the third quarter 1996 totaled $94,000,
and represented interest incurred by Essex Glenmaura since the opening of the
Courtyard hotel in September, 1996, and interest incurred by the Partnership to
the extent not required for construction. Also included in other expenses are
the Partnership's equity in the loss of Glenmaura for the third quarter of
$62,000. The net loss for the quarter is $187,000 before allocating $23,000 of
the net loss to the minority interest in Glenmaura. The net loss for the
Partnership for the quarter ended September 30, 1997 was $24,000. For the
quarter ended September 30, 1996, the loss before minority interest was
$124,000, and the net loss was $77,000 after allocating $47,000 of loss to the
minority interests in Glenmaura.
The Solon Hampton Inn opened in August, 1997. The property achieved an average
occupancy of 81% for the two months it was open in the third quarter, at an
average daily rate of $82.61. The revenue per available room was $66.92. The
Solon Hampton Inn is located in a commercial area outside Cleveland, close to
some major tourist attractions which generate heavy travel in the summer months.
The Solon Hampton Inn has had a much stronger start than the typical hotel due
to its location and the timing of its opening. The general partner expects Solon
to generate strong revenues until the holiday season, when commercial travel
typically slows down.
The Courtyard by Marriott owned by Glenmaura opened in September, 1996. The
property achieved an average occupancy of 69% for the third quarter of 1997, at
an average daily rate of $65.77. The revenue per available room for the third
quarter of 1997 was $45.38. Glenmaura is in the start-up phase of operations.
New hotels require from several months to a couple years to establish a stable
customer base. During the start-up phase, occupancy is building, and room rates
may be lower to attract new customers. When a strong customer base is
established, room rates can be raised to a more competitive level.
As of September 30, 1997 the Partnership had approximately $9.8 million of
outstanding long term indebtedness comprised of the subordinated notes of $5.3
million and the first mortgage loan for Solon of $4.5 million. The subordinated
notes are due in December 2001, unless extended by their terms for one year to
December 2002. The Solon loan is due in July 2001 unless extended by its terms
for one year to July 2002. Once the Solon Hampton Inn hotel reaches more
stabilized operations, the Partnership expects to be able to place a larger new
first mortgage loan on the property, such that when it needs to refinance the
total outstanding indebtedness, which is expected to be $9.8 million in July
2001, it can do so through a combination of retained excess working capital, new
first mortgage financing and, if necessary, new subordinated note financing. If
additional Offering proceeds are sold and the Partnership secures External
Financing and/or a General Partner Loan to finance construction of the Erie
Hampton Inn, it is expected the Partnership's long term indebtedness would total
between $12.5 million and $14.5 million. Again, once the Solon Hampton Inn and
the Erie Hampton Inn hotels reach more stabilized operations, the Partnership
would expect to be able to refinance the total outstanding indebtedness through
a combination of retained excess working capital, larger new first mortgage
loans and, if necessary, new subordinated note financing.
At the current time, the Partnership does not have sufficient funds to complete
the construction of the Erie Property. The Partnership intends to raise
additional funds from the Offering and obtain External Financing from an
institutional lender. No commitments have been received as of the date of this
Prospectus for such External Financing. Since the Partnership can control the
timing of construction, the construction of the Erie Property can be delayed
until the required additional financing can be obtained. If the Partnership is
unable to secure sufficient External Financing, however, the Partnership will
not be able to complete the construction of the Erie Hampton Inn and it will try
to sell the Erie Property. A portion of any excess working capital generated as
a result of the sale of the Erie Property ( and the Warwick Property) can also
be used to reduce the outstanding indebtedness.
<PAGE>
The Partnership included a working capital reserve in its total costs for the
Solon Hampton Inn. The Partnership expects that the working capital reserve will
be sufficient to fund any operating deficits of the Solon Hampton Inn.
<PAGE>
PART II
-------
OTHER INFORMATION
-----------------
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- ------- --------------------------------
a. EXHIBITS
--------
None
b. REPORTS ON FORM 8-K
-------------------
There was one report 8-K filed in the third quarter, 1997. The
report was dated June 9, 1997 and described the sale of
limited partnership units in Essex Glenmaura L.P.. A balance
sheet of Essex Glenmaura L.P. and pro forma statements of
operations for the year ended December 31, 1996 and the six
months ended June 30, 1997 were included, reflecting the sale
of the limited partnership units. The amended report was filed
on September 18, 1997.
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.
ESSEX HOSPITALITY ASSOCIATES IV L.P.
Registrant
Dated: November 13, 1997 /s/ Lorrie L. LoFaso
--------------------
Essex Hospitality Associates IV L.P.
Essex Partners Inc.
Lorrie L. LoFaso
Vice President and Chief Accounting Officer
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0001000375
<NAME> ESSEX HOSPITALITY ASSOCIATES IV L.P.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 444
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<FN>
<F1> UNCLASSIFIED BALANCE SHEET USED
</FN>
<PP&E> 7,350
<DEPRECIATION> 27
<TOTAL-ASSETS> 10,459
<CURRENT-LIABILITIES> 0
<BONDS> 9,798
0
0
<COMMON> 0
<OTHER-SE> 573
<FN>
<F2> EQUITY IS PARTNERS' CAPITAL
</FN>
<TOTAL-LIABILITY-AND-EQUITY> 10,459
<SALES> 420
<TOTAL-REVENUES> 437
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 333
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 128
<INCOME-PRETAX> (24)
<INCOME-TAX> 0
<INCOME-CONTINUING> (24)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (24)
<EPS-PRIMARY> (10)
<EPS-DILUTED> (10)
<FN>
<F3> ENTITY IS A PARTNERSHIP, EPS IS LOSS PER LIMITED PARTNERSHIP UNIT
</FN>
</TABLE>
