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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
----------------------------
FORM 10-KSB
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1996
OR
[ ] 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 16-1485632
(State of other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
100 Corporate Woods
Rochester, New York 14623
(Address of principal executive office)
Registrant's telephone number, including area code: (716) 272-2300
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act: NONE
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
--- ---
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB [X]
State issuer's revenues for its most recent fiscal year: 483,000
As of March 24, 1997, a total of 2,241 Limited Partnership Units were held by
non-affiliates who purchased the Units from the issuer at an aggregate offering
price of $2,157,000. There is no trading market for the Units and none is
expected to develop.
Documents incorporated by reference: NONE
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PART I
Certain of the information contained in this Form 10-KSB, including the
Management's Discussion and Analysis or Plan of Operation found in Item 6 of
this Report, contains forward-looking statements. A number of important factors
including, but not limited to actions of competitors and franchisors, adverse
changes in general economic conditions and adverse local conditions, increases
in real estate taxes and operating costs and adverse changes in real estate
zoning, health, safety, environmental and other laws and regulations, could
cause actual results to differ materially from the forward-looking statements.
Item 1. Business
Essex Hospitality Associates IV L.P., a New York limited partnership, was formed
on August 30, 1995 (the "Partnership") to purchase, lease or sublease
undeveloped land and construct and operate a series of hotels thereon. Since its
formation, the Partnership has been involved in raising capital and the
acquisition and construction of properties. The Partnership has identified the
Courtyard by Marriott, Fairfield Inn by Marriott, Hampton Inn, Homewood Suites,
Hampton Inn & Suites, or Microtel Inn as possible hotel franchises under which
to construct and operate the hotels. The General Partner may, however, identify
other hotel franchises for construction and operation. The hotels will be
operated pursuant to franchises or licenses to be obtained from the Franchisors
of such hotels. The Partnership has also acquired a limited partnership interest
in Essex Glenmaura L.P., (AEssex Glenmaura@) a New York limited partnership
formed to acquire land, construct, own and operate a Courtyard by Marriott in
the Borough of Moosic, near the City of Scranton, Pennsylvania.
The General Partner of the Partnership is Essex Partners Inc., a New York
corporation (the "General Partner"). The Partnership acquired a 2.28 acre site
outside Cleveland, Ohio in December, 1995 and began construction of a 100 room
Hampton Inn in the fall of 1996. The hotel is expected to open in mid-summer
1997. The Partnership also acquired a 2.54 acre site in Warwick, Rhode Island in
December, 1995, for a 80-92 room Homewood Suites. However, during 1996, the
project was delayed as the Partnership learned that additional new hotels are
planned for the area which would be directly competitive with the Partnership's
hotel. Therefore, the Partnership is reviewing the market for the Warwick area
to determine if the market exists to support the additional hotel rooms before
proceeding with construction. Additional capital will be necessary before
construction of any hotels can be completed and operations can commence.
The Partnership's registration statement for a public offering of subordinated
notes (the "Subordinated Notes"), mortgage notes (the "Mortgage Notes") and
limited partnership units (the "Units") was declared effective on November 24,
1995 (the "Public Offering"). As of March 27, 1997, gross offering proceeds of
$7,095,000 were closed into the Partnership, representing $4,920,000 in
Subordinated Notes and $2,175,000 in Units. The Partnership is not currently
offering and selling the Mortgage Notes, and does not anticipate offering and
selling such notes unless the Partnership is unable to secure external
financing. The ratio of equity to total proceeds is .31 to 1.
In 1996, the Partnership acquired a 12.5 unit limited partnership interest in
Essex Glenmaura, for $100,000 per unit for a total investment of $1,250,000, an
equity interest of 54%. The Partnership's consolidated financial statements
include the accounts of the Partnership and Essex Glenmaura. All significant
intercompany transactions and balances have been eliminated in consolidation.
The general partner of Essex Glenmaura is the General Partner. Essex Glenmaura
built a 120-room, three story Courtyard by Marriott hotel in the Glenmaura
Corporate Center in the Borough of Moosic, Pennsylvania, just southeast of the
City of Scranton. The hotel was completed and opened in September, 1996. The
hotel is operated under a Courtyard by Marriott franchise, and has a restaurant
and lounge, meeting room, indoor pool and spa, and exercise room.
Description of the Hotel Concepts
The General Partner believes good investment opportunities exist in the extended
stay and limited service segments of the lodging industry. The extended stay
segment of the lodging market is one of the fastest growing in the lodging
industry. The Homewood Suites hotel is one of the premier extended stay hotel
chains. Demand for quality limited
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service properties is growing as more business and leisure travelers seek to
maximize value from their travel budgets. In addition, because they offer few
amenities, these properties are less expensive to build and to operate. Microtel
hotels, while a relatively new concept, have demonstrated solid operating
performance by offering comfortable lodging at rates below much of its
competition. Courtyard by Marriott, Fairfield Inn by Marriott, and Hampton Inn
hotels are more established chains and have been successfully targeting the
economy to moderate sectors of the limited service market. Hampton Inn & Suites
hotel is a unique blend of the limited service and extended stay hotel,
combining the best and most flexible features of both.
The Homewood Suites hotel is oriented toward the business travel market.
Homewood Suites hotels are designed for business travelers who are away from
home for several consecutive nights as a result of corporate relocation, field
assignments or training programs. Each Homewood Suites hotel features a unique
"community concept" with a complex of residential style suites built around
landscaped gardens and a central hospitality center. Each apartment-style suite
features separate sleeping and living areas, as well as fully equipped kitchens.
The Hampton Inn & Suites hotel is an extended stay, all-suite hotel oriented
toward both the business and the leisure travel markets. Hampton Inn & Suites
hotels offer the best features of the limited service hotels and extended stay
hotels at a moderate price. Each Hampton Inn & Suites hotel combines standard
guest rooms with a large block of two-room suites at moderate prices.
The Hampton Inn hotel is a high quality hotel with limited amenities and
moderate prices. Hampton Inn hotels are located in high-visibility, high traffic
areas, usually near full-service restaurants. Hampton Inn hotels are designed to
maintain affordability by offering a superior product with those select services
most valued by travelers, but without the extraneous amenities, such as
full-service restaurants and room service, that can inflate prices. Hampton Inn
hotels are designed primarily to accommodate business travelers with limited
expense accounts, non-destination business and leisure travelers and
value-conscious vacationers. Most Hampton Inn hotels offer a lobby/breakfast
area, small meeting rooms, a swimming pool, and a selection of room types. The
selected services offered by Hampton Inn hotels include a free, self-serve
continental breakfast in the lobby, free local telephone calls, frequent
travelers' discount programs, and an unconditional 100% Satisfaction Guarantee.
A toll-free number provides access to a nationwide reservation system. Started
in 1984, there were over 600 Hampton Inn hotels open and operating throughout
the United States at the end of 1996.
Courtyard by Marriott hotel is considered one of the strongest affiliations in
the upper mid-market segment of the lodging industry. Courtyard by Marriott
hotels are designed to offer consistently superior lodging at a moderate price
with an appealing, friendly, residential character. Courtyard by Marriott hotels
are typically found in suburban markets near metropolitan cities, near
industrial parks, airports, malls and entertainment attractions. Courtyard by
Marriott hotels feature high quality rooms supported by services tailored to
meet the needs of frequent business and pleasure travelers. Typical features of
Courtyard by Marriott hotels include meeting rooms, a restaurant and lounge, a
swimming pool, exercise room, and complimentary coffee in each guest room.
Fairfield Inn by Marriott hotel is an economy lodging facility providing
business and pleasure travelers with high quality lodging at an economical
price. Fairfield Inn by Marriott hotels offer those services and amenities most
valued by travelers at moderate prices. Typical features of Fairfield Inn by
Marriott hotels include a swimming pool, complimentary continental breakfast
each morning, free local phone calls, a fax machine, a copier, vending machines,
and smoking and non-smoking rooms. Some hotels offer meeting rooms.
The Microtel Inn hotel offers downsized rooms with higher quality furnishings at
rates below those available at competing national lodging chains. The growth
strategy for Microtel Inn hotels is to locate in areas where other budget hotels
are operating successfully, typically along major highways, and to compete
primarily on the basis of price. Single rooms are generally priced at 15% to 25%
below that of most other budget hotel chains. The rate is economically feasible
since the standardized, compact design of Microtel hotels and the elimination of
nonessential amenities, such as swimming pools, restaurants and large lobbies,
results in reduced construction, operating and overhead costs.
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Franchise Agreements
The following is a summary of some of the principal terms of franchise
agreements currently being used by the franchisors of the potential hotel
franchises.
Pursuant to each such franchise agreement, the franchisor will provide to the
Partnership certain prototype plans and specifications, operations manuals and
consulting and advisory services in connection with the construction and
operation of the hotel. The Partnership is also granted a license during the
term of such franchise agreement to use the service marks designated by the
franchisor. None of such franchise agreements grant to the Partnership an
exclusive territory.
In addition to initial franchise or license application fees, the Partnership is
required to pay continuing monthly royalty fees of between 4% and 6%, and
marketing fees of between 2% and 4% of gross room revenues. Such franchise
agreements require the Partnership to maintain certain insurance coverage, to
meet certain standards of the franchisor with respect to furniture, fixtures,
maintenance and repair and to refurbish and upgrade the hotel to conform to the
franchisor's then-current standards. Under the current Hampton Inn & Suites,
Homewood Suites, and Hampton Inn franchise agreements offered to franchisees,
the Partnership is required to pay a software license fee of $3,000 plus $85 per
guest room, and monthly maintenance ranging from $200 per month to $400 per
month. Under the current Courtyard by Marriott franchise agreement offered to
franchisees, the Partnership is required to pay a software license fee of
$5,800, plus a monthly maintenance fee of $485. Additionally, Courtyard by
Marriott franchisees are required to pay monthly reservation fees equal to 1.25%
of gross room revenues plus $2.90 for each reservation confirmed by the hotel,
and a communication support fee of the lesser of $4.5 per room or $785 per
month. The current Fairfield Inn by Marriott franchise agreement would require
the Partnership to pay a software license fee, plus a monthly maintenance fee.
In addition, Fairfield Inn by Marriott franchisees are required to pay monthly
reservation fees equal to 1% of gross room revenues plus $2.45 for each
reservation confirmed. The fees summarized herein are subject to change by the
franchisors.
The term of the current Hampton Inn & Suites, Homewood Suites, Hampton Inn,
Fairfield Inn by Marriott and Microtel Inn franchise agreements is 20 years, and
is not renewable. The term of the current Courtyard by Marriott franchise
agreement is 20 years with an option to renew the franchise for an additional 10
years subject to compliance with certain conditions, which include substantial
compliance with all of the terms and conditions of the Courtyard by Marriott
franchise agreement during the term, satisfaction of all monetary obligations
owed to the Franchisor, completion of upgrades to the hotel to conform to the
then-current standards and specifications and training of the staff to comply
with the then-current training requirements, and payment of a renewal fee equal
to 50% of the then-current initial franchise fee. None of such franchise
agreements may be voluntarily terminated by the Partnership without incurring
substantial liquidated damages, payable in a lump sum equal to the amount of
monthly fees paid during the preceding 24 or 36 months.
All rights of the Partnership under such franchise agreements would
automatically terminate upon the happening of certain events, which include: (I)
bankruptcy, insolvency or dissolution of the Partnership, (ii) execution by a
creditor of the Partnership against any asset of the Partnership, (iii)
commencement of an action to foreclose a lien or mortgage against any asset of
the Partnership or entry of a judgment against the Partnership which is not
dismissed within 60 or 90 days, (iv) loss of possession of the hotel by the
Partnership, (v) conviction of a felony by the Partnership or any of its
principals or the maintenance of false books and records by the Partnership or
(vi) breach of the provisions in the franchise agreement which restrict
transfers of interests in the Partnership (including a change in the identity of
the General Partner).
Under the franchise agreements, the franchisor has the option to terminate such
franchise agreements upon the happening of certain other events, which include:
(I) failing to complete construction of the hotel within a specified period
after the commencement of construction; (ii) unauthorized disclosure of the
franchisor's proprietary information or the misuse or unauthorized use of the
franchisor's trademarks; (iii) failing to pay any monies owed to the franchisor,
after receipt of notice and after a reasonable period to cure (which cure period
may be between 10 to 30 days);
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(iv) ceasing to do business at any hotel location for any reason, including
condemnation, fire or other casualty (provided that with the franchisor's
approval, which may not be unreasonably withheld, the Partnership shall have a
period of 6 months or 24 months in which to reconstruct the hotel in the event
that the Partnership was not at fault); and (v) allowing a continued violation
of any law, rule, regulation or ordinance to occur for a period of 30 days after
receipt of notice.
Upon termination or expiration of such franchise agreements the Partnership
would be required to immediately cease using the franchisor's service marks and
all confidential methods, procedures and techniques provided by the franchisor
and to remove and discontinue using all signs, fixtures, advertising materials,
stationery, supplies and other articles which could cause the business to be
associated with the franchisor. In addition, if the termination occurs for
reasons other than condemnation, the Partnership may be required to pay a
termination fee in a lump sum equal to the amount of monthly fees paid during
the preceding 24 or 36 months.
The franchisor of Microtel Inn hotels has agreed that Manufacturers and Traders
Trust Company, the trustee for the holders of the Mortgage Notes and the
Subordinated Notes pursuant to an indenture dated November 1, 1995 (the
"Trustee") shall have a period of 30 days after receipt of notice from such
franchisor in which to cure any default under the Microtel franchise agreement.
Such franchisor has further agreed that a sale of a hotel following foreclosure
by the Trustee will not result in a default and termination under the Microtel
franchise agreement if certain conditions are satisfied, including the
following: (I) all monies owed to the franchisor and affiliates with respect to
the hotel must have been paid; (ii) the Partnership must not be in default under
any provision of the Microtel franchise agreement; (iii) the Partnership must
execute a general release in favor of the franchisor and the transferee must
assume the obligations of the Partnership under the franchise agreement; (iv)
the transferee must satisfy such franchisor's educational, managerial and
business standards; (v) if requested by such franchisor, the transferee must
agree to execute such franchisor's then-current franchise agreement at the
expiration of the franchise agreement; and (vi) the Partnership must pay a
$7,500 transfer fee.
The franchisor of Hampton Inn & Suites, Homewood Suites, Hampton Inn hotels has
historically agreed that mortgagees and trustees under indentures shall have a
period of 30 days after receipt of notice from such franchisor in which to cure
any default under its franchise agreement, and the General Partner believes it
will agree in connection with any additional franchise granted to the
Partnership. If the Partnership loses possession of the hotel, however, the
franchise agreement will be terminated and the hotel may no longer be operated
as a Hampton Inn hotel or Homewood Suites hotel unless the Trustee locates a
purchaser and the purchaser applies for and obtains a new franchise agreement
(and pays a new initial franchise fee) from the franchisor. The effect of this
provision may be to cause the Trustee to delay commencement of foreclosure
proceedings until such a purchaser can be located.
Generally, the franchise agreements restrict the transfer of any interest in the
franchise, the Partnership (including, with respect to Hampton Inn & Suites,
Homewood Suites, Hampton Inn and Microtel Inn hotel franchises, the transfer of
limited partnership interests) and the General Partner.
Generally, the franchise agreements for Hampton Inn & Suites, Homewood Suites,
and Hampton Inn hotel franchises provide that for "publicly-traded equity
interests," no consent of the franchisor is required with respect to any
transfers of less than a 25% interest in the Partnership unless the transferee
owns, or would own after the transfer is completed, an interest in the
Partnership of 25% or more. These franchisors have advised the Partnership that,
solely for purposes of the franchise agreement, the limited partnership units
would be considered "publicly-traded equity interests" since they will have been
sold in a large real estate syndication transaction. The current Microtel Inn
franchise agreement provides that transfers of more than a 50% equity interest
in the Partnership in a single transaction, or transfers of less than a 50%
equity interest in a single transaction which has the effect of transferring
control in the Partnership, requires the franchisor's prior written consent,
which may not be unreasonably withheld.
Generally, the Courtyard by Marriott, Fairfield Inn by Marriott, and Microtel
Inn franchise agreements also provide that no sale, transfer, conveyance,
mortgage, or other encumbrances may occur with respect to a substantial portion
of the assets of the Partnership relating to the hotel (including the hotel and
real estate) without the prior written consent of the franchisor, which may not
be unreasonably withheld.
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Construction of the Hotels
Each of the hotels will be constructed by the Partnership in accordance with
plans and specifications provided by the franchisor. It is expected that each
hotel will contain between 60 and 150 rooms and will be constructed on a parcel
of approximately 1.8 to 3.5 acres, depending on the size of the hotel and the
properties available for purchase, lease or sublease by the Partnership. The
General Partner estimates that construction of a hotel typically will be
completed within six to nine months, depending upon the size and type of hotel
and the weather conditions during the construction period. Construction
techniques and materials will depend upon the specifications relating to each
hotel design and also local building codes. Construction of a Microtel Inn hotel
involves a two or three story wood frame construction only. The franchisors of
the other potential franchises will typically allow the franchisee to choose
between wood frame construction or reinforced concrete with masonry walls for
any property not in excess of three stories in height. Hotels in excess of three
stories will require reinforced concrete construction with masonry walls
although non-load-bearing interior walls may be of frame construction. Estimated
construction costs for the potential franchises including estimated land cost
range from a low of $29,000 per guest room for a Microtel Inn hotel to as much
as $70,000 per guest room for a Homewood Suites hotel. These costs may also vary
significantly depending upon the size and type of construction and the specific
location of each hotel.
An unaffiliated construction manager will be hired to provide an on-site
supervisor who will be responsible for selecting and supervising subcontractors
to complete various portions of the construction of the hotels. It is
anticipated that the construction manager will enter into a standard A.I.A.
contract and receive a competitive fee for its services and may receive
additional compensation at stated rates in the event that additional services
are requested.
Competition
The operation of hotels is a highly competitive business. Competition in the
lodging industry is primarily based on price, location, quality of facilities
and overall range of services. Courtyard by Marriott and Hampton Inn hotels
compete primarily in the moderately priced, upper-tier of the limited service
segment of the lodging industry. Fairfield Inn by Marriott and Microtel Inn
hotels compete primarily in the economy sector of the lodging industry. It is
expected that any Courtyard by Marriott, Fairfield Inn by Marriott, Hampton Inn,
and Microtel Inn hotels constructed by the Partnership will be located in areas
that contain other competitive limited service lodging facilities. Microtel Inn
hotels generally seek to compete by providing conveniently located, limited
service lodging at below market prices. Fairfield Inn by Marriott hotels, which
offer more amenities than Microtel Inn hotels, Courtyard by Marriott, and
Hampton Inn hotels, with their selected services and amenities, target the
moderate to upper tiers of the limited service segment of the lodging industry.
Competitors in the overall limited service lodging industry include Days Inn,
Comfort Inn, Holiday Inns, LaQuinta, Red Roof Inn, EconoLodge, Super 8, Motel 6
and Travelodge and in addition the potential franchises compete with each other.
These national chains have name recognition and operating advantages like
reservation systems, and typically have significant financial resources;
characteristics shared by Courtyard by Marriott, Fairfield Inn by Marriott, and
Hampton Inn hotels, but not by Microtel Inn hotels.
The Homewood Suites hotel will compete primarily in the extended stay segment of
the market. This segment is one of the fastest-growing in the lodging industry.
According to the franchisor, approximately one-third of all hotel rooms each
night are booked to travelers staying five or more consecutive nights. While
other all-suite hotels may target the long-stay traveler, most are not
specifically designed for extended-stay use. Competitors in the extended stay
segment of the lodging market include the full service hotels, and specifically
Residence Inn by Marriott and Hawthorne Suites.
Hampton Inn & Suites hotel can expect to encounter competition from all of the
above mentioned franchises, as it will compete in both the limited service and
extended stay segments of the market.
The hotel industry was negatively impacted by the recession of the early 1990's.
Occupancies and rates dropped significantly. According to published reports,
occupancies began to improve in 1993. Occupancies and rates continued to
increase in 1995, producing the strongest year in five years, but room supply
increased at the greatest level since 1991. According to published reports, the
supply of limited-service hotels continued to increase in 1996 and exceeded the
increase in demand. This produced a decrease in average occupancy. There was not
a decrease in revenues for the limited-service hotel segment, however, because t
he rates charged by limited-service hotels
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continued to increase in 1996 such that total revenue increased despite the
decrease in occupancy.
Partnership advertising activities are limited to advertising for Essex
Glenmaura. Essex Glenmaura has a full-time sales manager, responsible for
keeping in touch with current customers and promoting the hotel throughout the
community. Essex Glenmaura utilizes print advertising, such as in business
journals and in brochures distributed locally. A billboard has been placed on a
major interstate highway. Special rates are available for corporate customers
with high usage and to members of the Marriott Courtyard Club. Direct mail
campaigns are utilized, targeting selected travelers. As with the Microtel Inn
hotels, brochures describing the property are distributed locally. Local
businesses are visited by both the hotel manager and the sales manager.
The Partnership is not aware that it will have to make any unusual efforts in
order to comply with federal, state or local provisions which have been enacted
or adopted regulating the discharge of materials into the environment, or
otherwise relating to the protection of the environment. Accordingly, it does
not believe that any such efforts will have any material effect upon capital
expenditures, earnings or the competitive position of the Partnership.
Employees
The operations are limited to the investment in Essex Glenmaura, which has 46
full and part-time employees.
Item 2. Properties
Property Acquisition -- Solon, Ohio
The Partnership purchased a site in Solon, Ohio, a southeast suburb of Cleveland
for $740,000, for the construction of a 100-110 room Hampton Inn & Suites hotel.
However, upon receiving construction bids from prospective general contractors,
the General Partner concluded that the construction cost of the Hampton Inn &
Suites was much higher than expected. Based on its knowledge of the Solon
market, the General Partner believes a Hampton Inn can be built and operated
successfully. During the summer and fall of 1996, the General Partner revised
its architectural plans and obtained the necessary approvals for construction of
a 100-room Hampton Inn. The Partnership has a Commitment to Issue a Hampton Inn
License Agreement from the Hampton Inn franchisor for the Solon site. The
Partnership anticipates that a license agreement will be issued by the Hampton
Inn franchisor at the time the hotel opens. Cleveland is located in northeastern
Ohio on the shore of Lake Erie. The city and surrounding area are served by an
extensive transportation network including highway, water, rail and an
international airport. Cleveland is the largest city in Ohio and is located in
the Cleveland/Lorain/Elyria MSA. In 1993 the MSA had a population of 2,227,000
of which 1,410,000 resided in Cuyahoga County in which the Cities of Cleveland
and Solon are located. The Cleveland economy has rebounded from the smoke stack
industry decline of the 1970's. Despite problems which are common to many large
urban areas, the Cleveland economy has benefited from a diversified employment
base bolstered by the continuing presence of a number of Fortune 500
corporations, including Eaton Industries, American Greetings, Sherwin Williams,
Parker Hanefin, NAACO Industries, Ferro Corporation and Standard Products. The
unemployment rate of Cuyahoga County was 4.8% in 1996 just below the national
average.
The image of Cleveland and its desirability as a place to visit have been
enhanced by a series of development and redevelopment projects including the
construction of Jacobs Field, the new home of the Cleveland Indians; the
redevelopment of The Flats along the Cuyahoga River into a first class
entertainment district; the redevelopment of the Terminal Tower/ Tower City Rail
Station into The Avenues Shopping Mall which is connected to the recently built
Gund Arena, home of the Cleveland Cavaliers; the Rock and Roll Hall of Fame,
which opened in 1995; and a number of other projects that
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are currently underway, including redevelopment of Cleveland's Warehouse
District.
Market and Competition. The Solon site is located 14 miles southeast of the city
of Cleveland in the City of Solon. Over 700 businesses are located in Solon,
comprising over 15 million feet industrial and office space. Solon is the U.S.
headquarters for Nestle and the world headquarters for its Stouffers subsidiary,
employing over 1,600. Other major employers include Matrix-Essentials,
Kennametal, Allen Telecom Group and Keithley Instruments. An area in the
southwest portion of Solon has been designated as an urban job and enterprise
zone by the State of Ohio. Solon is well-served by a network of major highways.
Solon's economy has benefited from two attractions with are located just outside
the city. Sea World of Ohio and Geauga Lake Amusement Park, located six miles
southeast of the site, are major regional draws.
The Solon site is located in the Solon Commons, which is located just south of
Route 43. The Solon Commons is less than 1 mile from US Route 422, which a
divided limited access freeway. US Route 422 terminates approximately 2 miles to
the west at the junction of Route I-480 and Route I-271 and provides primary
access to Solon from Cleveland and other points west. To the east 422 continues
as mostly a four-lane highway to Warren, Ohio. The commercial area of Solon is
located approximately 1 mile to the east and can be easily accessed by Route 43.
Sea World of Ohio and Geauga Lake Amusement Park are located approximately 6
miles to the southeast from the Solon site on Route 43. While Sea World is the
dominant attraction, both parks constitute a major regional draw and Route 43
provides the access for a significant number of motorists en route to the parks.
The Solon Commons is a 27 acre mixed use development, designed to service the
nearly 2,200 acres of business and industrial park development surrounding the
Solon Commons. The Solon Commons currently has a 10 theater movie complex (but
is expanding to 16), a food court with four restaurants, a Ground Round
Restaurant, a small retail strip center, a Longhorn Steakhouse restaurant, a day
care center and a branch bank. Only 300 acres of the 2,200 acres of business and
industrial park development surrounding Solon Commons remain undeveloped. In
addition to the remaining undeveloped land in the City of Solon itself, a large
area of land zoned for industrial and business park development and served by
the necessary utilities is located immediately to the south of Solon in Glen
Willow less than 2 miles from the Solon Commons.
The Solon site is the only available land currently zoned for a hotel in the
City of Solon. The only other hotel currently in Solon is the Days Inn located
near the intersection of US Route 422 and Route 91, which is approximately a 2
mile from the Solon Commons. The 137-room Days Inn is an independent 2-story
exterior corridor motel which is approximately 17 years old and offers an
outdoor pool and no meal service. Renovation of the rooms and refurbishment of
the exterior are nearly complete. The majority of the business traveler demand
and also those leisure and group travelers seeking better accommodations,
migrate to Beachwood, Ohio, which is approximately 6 miles from the Solon
Commons. In Beachwood at Chagrin Boulevard and I-271 there are 4 lodging
facilities containing an aggregate of 608 rooms with which the Partnership's
hotel will be competitive. These lodging facilities consist of a Travelodge, a
Radisson Inn, a Holiday Inn, and a Courtyard by Marriott7 hotel. Also located in
the same area are a Marriott Hotel and an Embassy Suites Hotel, however, neither
of these lodging facilities is expected to compete directly with the
Partnership's hotel.
The Solon property is situated on approximately 2.28 acres, owned in fee by the
Partnership with no encumbrances.
Property Acquisition -- Warwick, Rhode Island
The Partnership purchased a site in Warwick, Rhode Island in December, 1995 for
a 80-92 room Homewood Suites hotel. Warwick is located in the center of Rhode
Island just south of the city of Providence. The cost of the property was
$640,000. In 1996, the Partnership learned that additional
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new hotels are planned for the area of the Partnership's site which would be
directly competitive with the Partnership's hotel. The Partnership has decided
to review the market for the Warwick area again to determine if the market
exists to support the additional hotel rooms before proceeding with
construction.
The Partnership has received a Commitment to Issue a Homewood Inn License
Agreement from the Homewood Inn franchisor for the Warwick site. The Partnership
anticipates that a license agreement would be issued by the Homewood Inn
franchisor at the time the hotel opens. Route I-95, which runs through the
center of Warwick, connects Providence and Warwick to Boston, Massachusetts,
which is 55 miles to the north of Warwick, and New York City, New York, which is
175 miles southwest of Warwick. Warwick is also served by excellent rail service
and a state airport, the T.F. Green Airport. The T.F. Green Airport is currently
in the process of being expanded and is a major factor in the development and
growth of Warwick's business and industrial markets. The T.F. Green Airport
absorbs some of the excess capacity from Logan Airport in Boston, Massachusetts
and much of Warwick's business and industrial development is centralized in the
airport area.
The Providence-Warwick Pawtucket Metropolitan Statistical Area ("MSA") is the
major metropolitan area in Rhode Island. During the 1980's, the area emerged as
a hub of the financial services industry, particularly banking and insurance.
This occurred as a natural outgrowth of its location relative to New York City,
New York, Boston, Massachusetts, and Hartford, Connecticut. The area also
benefits from the presence of Brown University, as well as Providence College,
the University of Rhode Island, and Rhode Island School of Design. Major
employers in the MSA include Fleet Financial Group, Metropolitan Life Insurance
Co., Hasbro, Inc. and Citizens Financial Group, Inc..
As with all of New England, the area felt the impact of the economic downturn in
the late 1980's and early 1990's. More recently the economic situation has
stabilized.
Market and Competition. The Warwick site is located in Metro Center South, a
business park which is located approximately one mile from the intersection of
Route 113 and Route I-95. The Warwick site is also visible from the Airport
Connector which connects Route I-95 directly into T.F. Green Airport. The area
in immediate proximity to the Airport Connector and the T.F. Green Airport, is
characterized by a mix of professional office buildings and light industrial
facilities. A Residence Inn hotel is located directly across from the Airport
Connector in the Metro Center North Business Park.
There are several local restaurants within a 0.75 mile radius of the Warwick
site. Rhode Island's major retail area is located approximately two miles from
the Warwick site, beginning at the intersection of Route 113 and Route 2. The
corridor along Route 2 includes two major shopping malls, numerous other retail
enterprises and numerous restaurants including national chain facilities such as
TGI Friday's, Applebees, Red Lobster, Chili's and The Olive Garden.
There are five other lodging facilities consisting of in the aggregate of
approximately 875 rooms within 0.5 miles of the Warwick site. The lodging
facilities include the Residence Inn hotel with 96 suites, which is located just
across the Airport Connector from the Warwick site; a 265 room Holiday Inn
hotel, which is located close to the intersection of Route 113 and Route I-95;
and three lodging facilities located on Post Road, which runs parallel and
adjacent to the T.F. Green Airport. There is also: a 207 room Sheraton Tara
hotel; an 111 room Radisson hotel; and a 196 room Comfort Inn hotel. The
Radisson hotel also serves as an adjunct facility of Johnson and Wales
University where students studying hotel management, culinary arts, and the
hospitality industry receive hands on experience.
The Warwick property is situated on approximately 2.54 acres, owned in fee by
the Partnership with no encumbrances.
Partnership Acquisition -- The Essex Glenmaura Investment
In 1996, the Partnership acquired a 12.5 unit limited partnership interest in
Essex Glenmaura for
<PAGE> 10
$100,000 per unit for a total investment of $1,250,000, an equity interest of
54%. Essex Glenmaura owns and operates a 120-room, three story Courtyard by
Marriott hotel in the Glenmaura Corporate Center in the Borough of Moosic,
Pennsylvania, just southeast of the City of Scranton. The hotel is operated
under a Courtyard by Marriott franchise, and has a restaurant and lounge,
meeting room, indoor pool and spa, and exercise room.
Description and Financing of the Hotel Project. The total cost of the Courtyard
by Marriott hotel project was $8.7 million. Essex Glenmaura funded land
acquisition and construction costs, and all related fees and expenses of the
Courtyard by Marriott hotel project with $2.3 million of equity, $1.5 million of
unsecured notes, and $5 million of permanent mortgage financing.
Essex Glenmaura purchased a 4.5-acre parcel of property. The hotel was
constructed in accordance with plans and specifications provided by Marriott
International, Inc.; and, it is constructed of reinforced concrete with masonry
walls. The property opened in September, 1996.
In addition to the acquisition of the property upon which the Courtyard by
Marriott hotel is being constructed, Essex Glenmaura has also acquired an option
to purchase approximately 3.1 acres of land adjacent to the hotel property, upon
which a second hotel or restaurant may be built. The option expired in December,
1996 but Essex Glenmaura is negotiating with the seller for an extension..
Market and Competition The Scranton/Wilkes-Barre/Hazleton MSA is located in
northeastern Pennsylvania and encompasses a four county region, including
Lackawanna County. Scranton is the county seat for Lackawanna County. The area
is served by four interstate highways and the northeast extension of the
Pennsylvania Turnpike, all providing access to major markets in the United
States and Canada. Interstate 84 from the east and the Northeast Extension of
the Pennsylvania Turnpike from Philadelphia both terminate in the Scranton area.
New York City, Philadelphia and Hartford, Connecticut, are less than 2.5 hours
away. The Wilkes-Barre/Scranton International Airport is a full service facility
which provides scheduled service to the regional hubs of most domestic airline
carriers and is located nine miles south of downtown Scranton.
In addition to distribution access to major markets in the northeast, the
Scranton area offers a low cost of living, low wage rates and a highly skilled
and well-trained work force. Major employers in Lackawanna County with work
forces exceeding 1,000 include, Specialty Records Corporation Division of WEA
Manufacturing a division of Time Warner Company, Mercy Hospital, Community
Medical Center, Allied Services (a not-for-profit health care system and
rehabilitation center), Lackawanna County, Pennsylvania State Offices, Thompson
Consumer Electronics, Fleet Bank, Technagelas, University of Scranton and the
U.S. Government. Some major employment additions include Prudential Asset
Management (500 jobs with plans to expand to 800 jobs) and J.C. Penney
Telemarketing (425 jobs).
Glenmaura Community The Courtyard by Marriott7 hotel project is located in the
220-acre Glenmaura Corporate Center, which is part of the Glenmaura Community, a
new 1,028-acre planned mixed use community development. The Glenmaura Community
is located five miles from downtown Scranton on Montage Mountain, just off Exit
51 of Interstate 81, near Montage Mountain Ski Resort and Lackawanna Stadium
which is the home of the Philadelphia Phillies triple A affiliate. The
Wilkes-Barre/Scranton International Airport is four miles south. At Exit 51,
I-81 has a daily count of over 70,000 vehicles. In order to handle the increased
activity at this location, the Exit 51 Interchange will be undergoing major
improvements which will significantly improve Glenmaura's access on and off
I-81.
The Glenmaura Corporate Center, the newest office park in the area, is to
contain a mix of office, hotel, restaurant and limited retail space. It will be
served by modern utility systems, including fiber optic lines, and backup
systems for power and telecommunications. It is expected to attract companies
requiring headquarter and back office facilities for credit card and data
processing,
<PAGE> 11
telemarketing, and accounting functions. Ultimately, the Glenmaura Corporate
Center is to include 2 million square feet of office space, in addition to
attendant service facilities. The major tenant at this point is Fleet Bank,
which occupies a new $33 million, 300,000 square foot facility.
There are seven hotels containing an aggregate of approximately 852 rooms within
a 12 mile radius of Glenmaura that are considered to be competitive. These
include a 129-room Hampton Inn hotel, which is located approximately 2 mile from
the site of the Courtyard by Marriott hotel project and is also accessible by
Exit 51 on I-81. There is a 140-room Holiday Inn, as well as a 90-room Day's
Inn. Both of these hotels are located less than 5 miles to the north in the Town
of Dunmore. In addition, there is a 103-room Victoria Inn, which is located
approximately 5 miles to the south in the Town of Pittston and a 148-room
Lackawanna Station Hotel which is located approximately 5 miles away in downtown
Scranton. Two other lodging facilities are located further to the north in
Clarks Summit, which is approximately 12 miles from the Property. They are The
Inn at Nichols Village which has 134 rooms and the Ramada Inn which has 108
rooms. With the exception of the Lackawanna Station Hotel, all of these
properties can be accessed fairly easily from exits on I-81.
<PAGE> 12
Investment Policies
The Partnership intends to purchase undeveloped land and, depending upon the
amount of gross proceeds derived from the Public Offering and from external
financing, construct and operate a series of hotels thereon. In addition to
owning and operating hotels, the Partnership acquired 12.5 limited partnership
units in Essex Glenmaura. The Partnership may also loan certain proceeds from
the Public Offering on a secured basis to other partnerships engaged in the
business of owning and operating hotels. It is expected that Partnership sites
will be chosen based on the result of market feasibility studies and the ability
of the Partnership to obtain a suitable franchise for the location. The General
Partner will execute a guaranty of completion for each property prior to the
start of construction. There are no limitations on the percentage of assets that
may be invested in one hotel. The principal investment objectives of the
Partnership are to: (I) preserve, protect and return the Partnership's invested
capital and to meet debt service requirements; (ii) provide quarterly
distributions of available cash to the limited partners in an annual amount
which will equal or exceed the cumulative return of 8% specified in the
Partnership's Partnership Agreement and (iii) provide appreciation in the market
value of the hotels which may be realized through their sale or refinancing. The
hotels will be held by the Partnership until the General Partner determines that
a sale or other disposition of any or all of the hotels would be advantageous in
light of the Partnership's objectives.
The Partnership has and expects to continue to finance its acquisition of hotel
sites and construction of hotels, and the provision of financing to other
partnerships, through a combination of equity and debt raised from the Public
Offering and through external financing obtained from institutional lenders and
franchisors or their affiliates, which may be secured by first mortgage liens on
the Partnership's real properties. The Partnership intends to first utilize the
proceeds from the sale of Subordinated Notes and Units in combination with
external financing to pursue such activities. In the event external financing is
not available, the Partnership will offer and sell the Mortgage Notes .
The Partnership may offer and sell an principal aggregate amount of up to
$10,000,000 of its Mortgage Notes in its Public Offering. The Mortgage Notes
require monthly payments of interest only at a fixed rate of between 9.5% and
10.5%. The actual interest rate will be established prior to the issuance of
Mortgage Notes. The Mortgage Notes will be due and payable upon maturity on
December 31, 2001 unless extended by the Partnership to December 31, 2002, upon
payment to the holders thereof, of an extension fee equal to .5% of the
principal amount of the Mortgage Notes outstanding. In the event that the
Partnership sells or refinances any of the hotels securing the Mortgage Notes,
the site and hotel sold or refinanced may be released from the lien of the
mortgage securing the Mortgage Notes, and the Partnership will have the right to
set aside the net proceeds from such sale or refinance and reinvest the proceeds
in additional hotel properties, including the real property and improvements
thereon whether owned by the Partnership or third parties; provided, however,
that the Partnership may only reinvest the proceeds from the sale or refinancing
of any particular hotel once prior to maturity of the Mortgage Notes; and
further provided, that the Partnership identify the real property to be acquired
or financed with the proceeds within six months of the sale or refinance and
reinvest such funds within twelve months from the date such real property is
identified (ASubstitute Collateral@). The Mortgage Notes will be secured by a
first mortgage on the hotel properties. The Mortgage Notes may be redeemed in
whole or in part, at the option of the Partnership, at any time without payment
of any premium or penalty, together with accrued interest to the redemption
date.
The Partnership's objective is that the ratio of gross offering proceeds from
the sale of Subordinated and Mortgage Notes (collectively the "Notes"), plus the
principal balance of external financing to the greater of (I) gross offering
proceeds from the sale of Notes and Units, or (ii) the aggregate fair market
value of the Partnership's hotels and Substitute Collateral plus the
Partnership's limited partnership interest in Essex Glenmaura will not be more
than .8 to 1.0, but in no event shall be more than .85 to 1.0, and that the
ratio of gross offering proceeds from the sale of Mortgage Notes, plus the
principal balance of external financing to the greater of (I) gross offering
proceeds from the sale of Notes and Units, or (ii) the aggregate fair market
value of the Partnership's hotels and Substitute Collateral,
<PAGE> 13
plus the Partnership's limited partnership interest in Essex Glenmaura will not
be more than .75 to 1.0, but in no event shall be more than .8 to 1.0. This
policy can only be changed with an affirmative vote of at least a majority in
interest of the Partnership's limited partners.
The funds required to operate the hotels (except for initial working capital,
which will be provided through the Public Offering and external financing), are
expected to be provided from operations.
Description of Real Estate and Operating Data
Included above is the description of each of the Partnership's specified
investments.
As of March 21, 1997, the Partnership raised gross offering proceeds of
approximately $7,095,000 from the sale of Subordinated Notes and Units. The
proceeds of the public offering have been used by the Partnership to pay
offering costs, interest expense on the Subordinated Notes, development of
properties and the $1,250,000 investment in Essex Glenmaura. Offering costs to
date are approximately $857,000. Interest payments on the Subordinated Notes
through February 28, 1997 total $512,000. Costs incurred for the development of
the Solon Hampton Inn site totaled approximately $1,100,000 in 1996, and an
additional $625,000 to date for 1997. Costs of approximately $665,000 were
incurred on the Warwick site in 1996. Since development of the site is currently
being postponed until the market study can be updated, very little has been
spent on the Warwick site in 1997. Additional financing of approximately $3.5
million must be obtained in order to have sufficient funds to complete
construction of the Solon property. In addition, the Partnership expects to
complete construction of at least one more property, which will require up to
$6.5 million to complete. Although the Partnership is optimistic that the
additional funding will be received from the sale of Notes and Units and from
external sources, there can be no assurance that the additional funding will be
obtained.
It is expected that the Partnership will obtain liability insurance in the
amount of $1,000,000 per occurrence upon purchase or sublease of a property. As
soon as development of a property is started, builders' risk insurance in the
estimated amount of the cost of construction of the building is added by the
general contractor. This amount will vary between properties. In the opinion of
the Partnership, the properties are adequately insured.
The tax basis and depreciation of the Parnership's assets are presented on the
following table. The table presents the total amount of each type of asset owned
by the Partnership, classified by approximate purchase date.
Item 3. Legal Proceedings
NONE
Item 4. Submission of Matters to a Vote of Security Holders
NONE
<PAGE> 14
Depreciation Table
<TABLE>
<CAPTION>
Date Current
Placed in Unadjusted Basis for Accumulated Conven- MACRS Year
Asset Description Service Cost or Basis Bus. % Depreciation Depreciation Method tion Class Depreciation
------------------ ------- ------------- ------ ------------ ------------ ------ ------- ------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BUILDING 09/04/96 4,884,114 100% 4,884,114 0 SL MM 39 36,582
LAND IMPROVEMENTS 09/04/96 271,348 100% 271,348 0 150DB HY 15 13,567
EQUIPMENT 09/04/96 693,033 100% 693,033 0 200DB HY 7 99,034
FURNITURE & FIXTURES 09/04/96 505,002 100% 505,002 0 200DB HY 7 72,165
COMPUTER EQUIPMENT 09/04/96 38,792 100% 38,792 0 200DB HY 5 7,758
SIGNS 09/04/96 43,525 100% 43,525 0 150DB HY 15 2,176
--------- --------- --------
6,435,814 6,435,814 0 231,282
========= ========= ========
</TABLE>
<PAGE> 15
Part II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
There is no established trading market for the Notes and Units and it is not
anticipated that any public market will exist for them. In addition, the
Partnership Agreement imposes a number of restrictions on the transferability of
the Units, including among others, the following: (I) an assignment may only be
made effective on the first day of a fiscal quarter of the Partnership; (ii) a
purported assignment of a fractional part of a Unit or less than 5 Units will
not be permitted or recognized (except in cases of inheritance and family
dissolution, and except for assignments of all of a limited partner's units);
(iii) no Units may be assigned if the proposed assignment would, in the opinion
of counsel for the Partnership, result in the termination of the Partnership or
a reclassification of the Partnership as an association taxable as an
association for federal or state tax purposes; (iv) no Units may be assigned
unless, in the opinion of counsel for the Partnership, such proposed assignment
would not result in the characterization of the Partnership as "publicly traded"
under Section 7704 of the Internal Revenue Code (dealing with transfers of 50%
or more of the outstanding interests in the Partnership).
Restrictions on the transfer of Notes and Units are also imposed under state
securities laws upon the residents of such states, including the requirement of
certain states that the suitability standards applied to initial purchasers of
the Notes and Units be applied to assignees where the assignment involves
residents of such states. In addition, the current franchise agreements for
Hampton Inn & Suites, Homewood Suites, and Hampton Inn hotel franchises provide
that for "publicly-traded equity interests," no consent of the franchisor is
required with respect to any transfers of less than a 25% interest in the
Partnership unless the transferee owns, or would own after the transfer is
completed, an interest in the Partnership of 25% or more. These franchisors have
advised the Partnership that, solely for purposes of the franchise agreement,
the Units would be considered "publicly-traded equity interests" since they will
have been sold in a large real estate syndication transaction. The current
Microtel franchise agreement provides that transfers of more than a 50% equity
interest in the Partnership in a single transaction, or transfers of less than a
50% equity interest in a single transaction which has the effect of transferring
control in the Partnership, requires the Franchisor's prior written consent,
which may not be unreasonably withheld.
As of the date of this filing, there are 183 limited partners owning 2,260
Units. The limited partners received distributions of $112,500 as of the date of
this filing. The Notes prohibit the Partnership from making distributions (I) at
any time when an event of default has occurred and is continuing or (ii) unless
it has established an adequate reserve to pay any amounts payable under the
Notes during the month in which the proposed distribution is to occur.
Item 6. 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 Public
Offering, and the acquisition and construction of properties. In 1995, the
Partnership purchased two sites, a site in Solon, Ohio and a site in Warwick,
Rhode Island. The Partnership began construction of a 100-room Hampton Inn hotel
on the site in Solon, Ohio in the fall of 1996 which is expected to open in
mid-summer, 1997. The Partnership had originally intended to build a Hampton Inn
& Suites in Solon, however, the construction cost of the Hampton Inn & Suites
was much higher than expected. Based on its knowledge of the Solon market, the
General Partner believed a Hampton Inn could be built and operated more
successfully. The General Partner secured approval from the Hampton Inn
franchisor to change brand designations. The Solon property is expected to cost
about $7,300,000, including the cost of the land, cost of
<PAGE> 16
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 is in the process of
securing external first mortgage financing for the Solon property.
The Partnership intended to build a 80-92 room Homewood Suites hotel at the
Warwick site. During 1996, the project was delayed. The Partnership learned that
additional new hotels are planned for the area of the Partnership's site which
would be directly competitive with the Partnership's hotel. The Partnership is
reviewing the market for the Warwick area to determine if the market exists to
support the additional hotel rooms before proceeding with construction. The
Partnership expects to have the results of the market study within the next two
months, and will be determining whether to proceed with the Warwick Homewood
Suites by the end of the second quarter. If the Warwick site is not developed,
the General Partner will refund the $110,000 acquisition fee previously earned
and paid upon the acquisition of the site. If the Partnership decides not to
construct the Homewood Suites in Warwick, the Partnership intends to sell the
Warwick site and specify at least one more site for development by the
Partnership. The General Partner has been investigating other possible hotel
sites and feels confident that another suitable site will be available for
development by the Partnership.
The Partnership does not have sufficient funds to complete construction of any
property at this time. The timing of construction is at the discretion of the
Partnership. If the Partnership does not have sufficient financing, construction
of a property will be delayed until the financing is assured.
In 1996, the Partnership also purchased a 12.5 unit limited partnership interest
in Essex Glenmaura for $1,250,000 ($100,000 per unit), for an equity interest of
54%. Essex Glenmaura built a 120-room, three story Courtyard by Marriott7 hotel
outside of Scranton, Pennsylvania. The Essex Glenmaura property opened in
September, 1996. For the last four months of 1996, average occupancy was 43%,
with an average daily rate of $65.00 The property has been in its ramp-up phase
of operations since opening. Typically, a new hotel needs from several months to
two years to establish itself in a market and build a customer base. Occupancies
are lower during the ramp-up phase until visitors to the community become
familiar with the hotel. The Courtyard should benefit from the Marriott central
reservation system, which will direct Courtyard customers looking for lodging in
the Scranton/Wilkes-Barre area to the Essex Glenmaura hotel. Occupancy has
increased since the end of the year, with average occupancy for 1997 through
March 17, 1997 at 58%. The General Partner expects that Glenmaura will achieve
an average occupancy of over 60% for all 1997, with an average daily rate of
just over $70.00.
In 1996, consolidated total assets of the Partnership increased $10,300,000. The
increase was caused by several factors. Net investment in real estate increased
$7,800,000, $7,500,000 of which was from the construction of the Courtyard by
Marriott hotel by Essex Glenmaura, and the additional $300,000 from development
activities by the Partnership. Cash and cash equivalents increased $1,900,000
from proceeds of the Partnership's offering of Subordinated Notes and Units.
Debt issuance costs increased $489,000, $295,000 from costs incurred in the
Partnership's offering of Subordinated Notes, and $194,000 of costs associated
with obtaining the financing for the Essex Glenmaura property. Partnership
consolidated liabilities increased $10,000,000, for several reasons.
Subordinated Notes payable increased $3,200,000 from the issuance of
Subordinated Notes payable in the Partnership's offering. Notes payable
increased $1,500,000, representing the notes payable issued by Essex Glenmaura.
The construction loan payable of $4,300,000 represents construction financing on
the Courtyard by Marriott hotel, which was replaced by $5,000,000 of permanent
first mortgage financing in February, 1997. Accounts payable increased $440,000,
primarily from outstanding construction invoices. Since most construction
activities commenced in 1996, the accounts payable at the end of 1995 was much
smaller. As Essex Glenmaura is consolidated with the Partnership, the $640,000
minority interest of Essex Glenmaura is presented in the liability section of
the balance sheet. Partners' equity increased $287,000 in 1996 from proceeds of
the Partnership's public offering of limited partnership units, net of
syndication costs and partners' notes, and from the consolidation of
<PAGE> 17
the Partnership's interest in Essex Glenmaura L.P.. In 1996, $1,500,000 of Units
were issued, which is offset by a decrease of $70,000 in limited partners'
notes, syndication costs of $170,000 and $114,000 of partner distributions. The
consolidated net loss for the Partnership for 1996 of $867,000 also decreased
partners' equity.
The Partnership incurred a consolidated net loss of $867,000 in 1996. The
primary revenue source was rooms revenue of $394,000 from Essex Glenmaura, which
is the only hotel in operation in 1996. Expenses in 1996, before interest and
depreciation, totaled $886,000, for a loss from operations before interest,
depreciation and amortization of $403,000.
Essex Glenmaura incurred significant expenses prior to opening the hotel due to
unanticipated construction delays. The hotel was originally anticipated to open
in July, 1996. Employees were hired and activities planned anticipating the
opening in July. With the two month delay in opening, payroll costs of over
$140,000 were incurred prior to opening. In total, costs of over $300,000 were
incurred by Essex Glenmaura prior to opening the hotel in September. Expenses
are also higher in the first few months of operation of a hotel as the employees
are trained. Payroll costs and supplies expenses will be higher during the
employees learning period. Although the employees were hired in July, they were
not able to perform their normal duties until the hotel opened in September.
The Partnership's consolidated interest expense, net of interest income was
$475,000, representing interest incurred by Essex Glenmaura after opening in
September, and interest on the proceeds from the Subordinated Notes which were
not used for construction in 1996. Interest on debt proceeds, primarily from the
construction loan used in construction in 1996 was capitalized. Depreciation and
amortization expenses totaled $346,000, for a net loss of $1,223,000 before
allocating $357,000 of the net loss to the minority interest in Essex Glenmaura.
The consolidated net loss for the Partnership was $867,000. With the Courtyard
open for all of 1997, and the Solon Hampton Inn opening around the middle of
1997, 1997 revenues are expected to increase by 500% over 1996. Significant cash
flow from operations is expected to be generated in 1997 as well.
In 1995, total assets increased $2,395,000 from inception in August, 1995 to
December 31, 1995. Assets at December 31, 1995 included $1,400,000 of real
estate investments, primarily from the acquisition of sites for future hotels,
the payment of $250,000 of debt issuance costs and cash of $630,000. Liabilities
increased $1,960,000, primarily from the issuance of $1,744,000 of Subordinated
Notes. Partners equity increased $431,000, representing limited partner equity
of $651,000, net of $137,000 in syndication costs and $89,000 in notes
receivable from partners.
Good investment opportunities exist in the extended stay and limited service
segments of the lodging industry. The extended stay and limited service segments
of the lodging industry have experienced significant growth in recent years as a
greater number of business persons require lodging facilities to stay away from
home for extended periods of time and as more business and leisure travelers
seek to maximize value. The continued success of the lodging industry will
depend upon, among other things, the continued demand for lodging facilities by
both business and leisure travelers, which demand is affected by general
economic conditions, including, costs of labor and materials, unemployment,
inflation and interest rates. In addition to, but directly affected by, economic
trends, is the availability of financing on favorable terms for the construction
and operation of hotels. In recent years a limited number of institutional
lenders have been more willing to provide financing for hotel construction and
operations, and franchisors or their affiliates have established financing
programs for construction and operation of the franchisors' particular hotels.
In addition to these industry considerations, the success of the Partnership's
hotels will depend upon the hotel franchises developed and operated by the
Partnership, as well as the location of the hotels. The Partnership intends to
finance the cost of acquiring undeveloped properties and constructing and
operating hotels thereon through a combination of offering proceeds and
institutional financing;, including financing from franchisors or their
affiliates. At this time, the Partnership is pursuing
<PAGE> 18
institutional first mortgage financing for the Solon property. If institutional
financing is not available for the property, construction will be delayed until
sufficient mortgage financing is raised through the Public Offering.
Partnership cash distributions will initially be made 99% to the limited
partners and 1% to the General Partner until the limited partners receive an
aggregate cumulative return of 8% on their contribution. Thereafter, additional
distributions may 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
of the hotels will be made 99% to the limited partners until they have received
a return of their capital investment ($1,000 per Unit) plus their aggregate
cumulative return and 1% to the General Partner. Additional distributions will
be made 80% to the limited partners and 20% to the General Partner.
For further information on the properties, please refer to Part I, Item 1.
Properties.
The Partnership is currently offering Subordinated Notes and Units for sale to
investors pursuant to its Prospectus dated November 24, 1995. Through March 21,
1997, $7,095,000 has been raised. The Partnership may offer Mortgage Notes to
investors pursuant to the Prospectus. Gross offering proceeds of up to
$21,000,000 may be raised through the Public Offering.
<PAGE> 19
Item 7. Financial Statements
The following Partnership financial statements are filed as part of this Report:
Consolidated Balance Sheets at December 31, 1996 and 1995
Consolidated Statements of Changes in Partners' Capital for the year
ended December 31, 1996 and for the period from August 30, 1995 (Date
of Inception) through December 31, 1995
Consolidated Statements of Cash Flows for the year ended December 31,
1996 and for the period from August 30, 1995 (Date of Inception)
through December 31, 1995
Notes to Consolidated Financial Statements
Independent Auditors' Report
The following General Partner financial statements are filed as part of this
Report:
Balance Sheets at December 31, 1996 and 1995
Statements of Income and Changes in Retained Earnings for the years
ended December 31, 1996 and 1995
Statements of Cash Flows for the years ended December 31, 1996 and 1995
Notes to Financial Statements
Independent Auditors' Report
Item 8. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure
NONE
<PAGE> 20
ESSEX HOSPITALITY ASSOCIATES IV L.P.
(A New York Limited Partnership)
Consolidated Financial Statements
December 31, 1996 and 1995
(With Independent Auditors' Report Thereon)
-1-
<PAGE> 21
Independent Auditors' Report
The Partners
Essex Hospitality Associates IV L.P.:
We have audited the accompanying consolidated balance sheets of Essex
Hospitality Associates IV L.P. (a New York limited partnership) and subsidiary
as of December 31, 1996 and 1995, and the related consolidated statements of
operations, changes in partners' capital and cash flows for the year ended
December 31, 1996 and for the period from August 30, 1995 (date of inception)
through December 31, 1995. These consolidated financial statements are the
responsibility of the Partnership's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Essex Hospitality
Associates IV L.P. and subsidiary as of December 31, 1996 and 1995, and the
results of their operations and their cash flows for the year ended December 31,
1996 and for the period from August 30, 1995 (date of inception) through
December 31, 1995, in conformity with generally accepted accounting principles.
KPMG PEAT MARWICK LLP
Rochester, New York
March 17, 1996
-2-
<PAGE> 22
ESSEX HOSPITALITY ASSOCIATES IV L.P.
(A New York Limited Partnership)
Consolidated Balance Sheets
December 31, 1996 and 1995
Assets 1996 1995
------ ---- ----
Investment in real estate, at cost:
Land $ 2,492,195 1,400,435
Land improvements 271,348 -
Buildings 4,961,102 -
Furniture, fixtures and equipment 1,280,352 -
Construction in progress 469,487 26,250
9,474,484 1,426,685
Less accumulated depreciation 231,420 -
----------- ---------
Net investment in real estate 9,243,064 1,426,685
Cash and cash equivalents 2,515,685 628,864
Due from affiliates 81,500 -
Other assets 147,512 5,153
----------- ---------
Deferred costs:
Debt issuance 743,075 253,841
Franchise fees 128,000 80,000
----------- ---------
871,075 333,841
Less accumulated amortization 191,324 -
----------- ---------
Net deferred costs 679,751 333,841
----------- ---------
$12,667,512 2,394,543
=========== =========
Liabilities and Partners' Capital
Liabilities:
Accounts payable - construction $ 335,914 155,400
Other accounts payable and accrued expenses 258,724 -
Due to affiliate - 64,495
Construction loan payable 4,294,243 -
Notes payable 1,500,000 -
Subordinated notes payable 4,920,000 1,744,000
---------- ---------
Total liabilities 11,950,249 1,963,895
---------- ---------
Minority interest in partnership 641,368 -
----------- ---------
Commitments and contingencies (notes 4 and 5)
Partners' capital 882,514 519,895
Less notes receivable from partners 165,251 89,247
----------- ---------
Net partners' capital 717,263 430,648
----------- ---------
$12,667,512 2,394,543
=========== =========
See accompanying notes to consolidated financial statements
-3-
<PAGE> 23
ESSEX HOSPITALITY ASSOCIATES IV L.P.
(A New York Limited Partnership)
Consolidated Statements of Operations
Year ended December 31, 1996 and
period from August 30, 1995 (date of inception) through December 31, 1995
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Revenue:
Rooms $ 394,134 -
Food and beverage 54,048 -
Telephone and other commissions 34,880 -
----------- -------
483,062 -
----------- -------
Operating expenses:
Rooms 249,766 -
Administrative 155,429 -
Food and beverage 128,541 -
Marketing 89,240 -
Repairs and maintenance 82,573 -
Utilities 28,822 -
Management fees to affiliate 25,338 -
Telephone and other commissions 19,869 -
Royalty fees 15,766 -
Insurance 12,058 -
Property taxes 6,569 -
Miscellaneous 72,214 -
----------- -------
886,185 -
----------- -------
Loss from operations before interest, depreciation
and amortization (403,123) -
Interest:
Income 74,202 -
Expense (548,788) -
Depreciation and amortization (345,756)
----------- -------
Loss before minority interest in loss of
partnership (1,223,465) -
Minority interest in loss of partnership 356,524 -
----------- -------
Net loss $ (866,941) -
=========== =======
</TABLE>
See accompanying notes to consolidated financial statements.
-4-
<PAGE> 24
ESSEX HOSPITALITY ASSOCIATES IV L.P.
(A New York Limited Partnership)
Consolidated Statements of Changes in Partners' Capital
Year Ended December 31, 1996 and Period for
August 30, 1995 (date of inception) through December 31, 1995
<TABLE>
<CAPTION>
Net
Partners' Capital Notes Partners'
General Limited Total Receivable Capital
------- ------- ----- ---------- ---------
<S> <C> <C> <C> <C> <C>
Balance at August 30, 1995
(date of inception) $ - - - - -
Capital contributions 6,574 650,898 657,472 (89,247) 568,225
Syndication costs - (137,477) (137,477) - (137,477)
Return of original limited
partners contribution - (100) (100) - (100)
---------- -------- ---------- -------- ----------
Balance at December 31, 1995 6,574 513,321 519,895 (89,247) 430,648
Capital contributions 15,120 1,496,830 1,511,950 (76,004) 1,435,946
Syndication costs - (168,799) (168,799) - (168,799)
Distributions to partners (1,136) (112,455) (113,591) - (113,591)
Net loss (8,669) (858,272) (866,941) - (866,941)
---------- -------- ---------- -------- ----------
Balance at December 31, 1996 $ 11,889 870,625 882,514 (165,251) 717,263
======== ========== ========== ======== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
-5-
<PAGE> 25
ESSEX HOSPITALITY ASSOCIATES IV L.P.
(A New York Limited Partnership)
Consolidated Statements of Cash Flows
Year ended December 31, 1996 and
period from August 30, 1995 (date of inception) through December 31, 1995
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Cash flows from investing activities:
Cash received from customers $ 444,876 -
Cash paid to suppliers and employees (717,237) -
Interest received 55,016 -
Interest paid (519,717) -
----------- ----------
Net cash used in operating
activities (737,062)
----------- ----------
Cash flows used in investing activities:
Investment in real estate (6,094,996) (1,276,438)
Cash acquired with acquisition of controlling interest
in partnership 248,522 -
Other assets - deposits (34,528) -
Franchise fees paid - (80,000)
----------- ----------
Net cash used in investing activities (5,881,002) (1,356,438)
----------- ----------
Cash flows from financing activities:
Proceeds from construction loan 4,294,243 -
Proceeds from issuance of subordinated notes payable 3,176,000 1,744,000
Debt issuance costs (418,800) (192,737)
Proceeds from offering of limited partnership units 1,435,946 568,225
Proceeds from offering of subsidiary limited partnership
units, net 303,277 -
Syndication costs (172,190) (134,086)
Distributions to partners (113,591) -
Return of original partner's contribution - (100)
----------- ----------
Net cash provided by financing activities 8,504,885 1,985,302
----------- ----------
Net increase in cash and cash
equivalents 1,886,821 628,864
Cash and cash equivalents - beginning of period 628,864 -
----------- ----------
Cash and cash equivalents - end of period $ 2,515,685 628,864
=========== ==========
</TABLE>
(Continued)
-6-
<PAGE> 26
ESSEX HOSPITALITY ASSOCIATES IV L.P.
(A New York Limited Partnership)
Consolidated Statements of Cash Flows (continued)
For the Years ended December 31, 1996 and period
from August 30, 1995 (date of inception) through December 31, 1995
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Reconciliation of net income to net cash used in
operating activities:
Net loss $ (866,941) -
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 345,756 -
Minority interest in net loss of partnership (356,524) -
Change in:
Other assets (72,896) -
Accounts payable and accrued expenses 213,543 -
----------- -------
Net cash used in operating
activities $ (737,062) -
=========== =======
Supplemental schedule of noncash investing and financing
activities:
Net assets acquired with acquisition of controlling
interest in partnership:
Investment in real estate $ 2,243,340 -
Cash 1,498,522 -
Deferred costs and other assets 518,749 -
Debt (1,500,000) -
Other liabilities (493,497) -
Minority interest $(1,017,114) -
=========== =======
Obligations incurred in connection with construction
in progress $ 180,514 150,247
=========== =======
Debt issuance and syndication costs due to affiliate $ - 64,495
=========== =======
Notes received from general and limited partners $ 76,004 89,247
=========== =======
</TABLE>
See accompanying notes to consolidated financial statements.
-7-
<PAGE> 27
ESSEX HOSPITALITY ASSOCIATES IV L.P.
(A New York Limited Partnership)
Notes to Consolidated Financial Statements
December 31, 1996 and 1995
(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 and Warwick, Rhode
Island in anticipation of the construction of a Hampton Inn and Suites
hotel and a Homewood Suites hotel, respectively. Construction was delayed
at both sites as a result of higher than projected construction costs and
change in market conditions. The Solon site is now under construction for a
Hampton Inn hotel while plans for the Warwick site have not yet been
resolved.
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.
A general description of the allocation of Partnership income, loss, and
distributions follows. For a more comprehensive description see the
Partnership Agreement.
Allocations 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 commissions 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.
1 (Continued)
<PAGE> 28
ESSEX HOSPITALITY ASSOCIATES IV L.P.
(A New York Limited Partnership)
Notes to Financial Statements
(1) Organization (continued)
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 pro rata 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 December 31,
1996, that ratio was .31 to 1.
(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.
Principles of Consolidation
The consolidated financial statements include the accounts of the
Partnership and Glenmaura. All significant intercompany transactions and
balances have been eliminated in consolidation.
2 (Continued)
<PAGE> 29
ESSEX HOSPITALITY ASSOCIATES IV L.P.
(A New York Limited Partnership)
Notes to Financial Statements
(2) Summary of Significant Accounting Policies (continued)
Investment in Real Estate
Investment in real estate is stated at cost. Depreciation is calculated
using the straight-line method over the estimated useful lives of the
assets as each hotel commences operations.
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 are being 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.
Syndication Costs
Selling commissions and legal, accounting, printing and other filing costs
totaling $306,276 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.
Use of Estimates
The preparation of the financial statements in conformity with generally
accepted accounting principles requires the managing general partner 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 income and
expenses during the reporting period. Actual results could differ from
those estimates.
(3) Debt
Construction Loan
Glenmaura received construction financing from a bank in the amount of
$4,500,000, of which $4,294,243 has been drawn as of December 31, 1996. The
term is for twelve months and requires monthly payments of interest only at
a rate of 2.5% over the LIBOR rate (7.875% at December 31, 1996). The loan
is guaranteed by Essex Partners and collateralized by the related hotel
property. Additionally, covenants require minimum net worth and limit
distributions.
3 (Continued)
<PAGE> 30
ESSEX HOSPITALITY ASSOCIATES IV L.P.
(A New York Limited Partnership)
Notes to Financial Statements
(3) Debt (continued)
Construction Loan (continued)
On February 28, 1997, Glenmaura obtained permanent financing from GMAC
Corporation for $5,000,000, the proceeds of which were used to repay the
construction loan. The term of the loan will be for four years with a one
year extension available if certain debt service coverage is attained.
Monthly payments of interest only will be due at 3% over the LIBOR rate for
the first year. Principal and interest payments are due thereafter. The
commitment fee is $50,000 (1% of the loan proceeds) with 50% of the fee due
upon acceptance of the commitment. The additional 50% is payable at
closing. The loan will be collateralized by the real and personal property
and certain other assets.
Notes Payable
Glenmaura has $1,500,000 of unsecured notes requiring monthly payments of
interest only at 10.5% through June 1, 1998, at which time all principal
will be due unless Glenmaura exercises its two one-year extensions at
extension fees ranging from one-half to one percent. Glenmaura also has the
right to prepay the notes at face value. Essex Partners guarantees payment
of principal and interest on the notes.
Subordinated Notes Payable
Subordinated notes payable of the Partnership of $4,920,000 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
of an extension fee equal to .5% of the principal amount of the notes
outstanding. The notes are issued as unsecured obligations of the
Partnership.
In 1996, interest of $193,354, was capitalized in investments in real
estate as the notes were used to finance construction of the hotels. No
interest was capitalized in 1995.
4 (Continued)
<PAGE> 31
ESSEX HOSPITALITY ASSOCIATES IV L.P.
(A New York Limited Partnership)
Notes to Financial Statements
(4) Franchise Fees
In 1995, the Partnership entered into license agreements with Promus
Corporation (Promus) to operate a Homewood Suites hotel in Warwick, Rhode
Island and a Hampton Inn and Suites hotel in Solon, Ohio site. An initial
franchise fee of $40,000 was paid for each hotel. 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 $200 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. During 1996 Promus approved
the conversion of the Solon, Ohio agreement to a Hampton_Inn.
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 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.
Glenmaura has a franchise agreement with Marriott International, Inc. Under
the terms of the agreement, Glenmaura paid an initial franchise fee of
$48,000 in 1995. The term and amortization period of the franchise
agreement is twenty years, with an option to renew for an additional
ten-year period. Glenmaura 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% gross revenues, a reservation system fee and a
property management system fee. In 1996, fees totaled $15,766.
5 (Continued)
<PAGE> 32
ESSEX HOSPITALITY ASSOCIATES IV L.P.
(A New York Limited Partnership)
Notes to Financial Statements
(5) Related Party Transactions
A summary of fees earned by Essex Partners or its affiliates from the
Partnership and Glenmaura in 1996 and 1995 follows:
<TABLE>
<CAPTION>
Type of Fee Amount of Fee 1996 1995
----------- ------------- ---- ----
<S> <C> <C> <C>
Selling Commission Up to $80 per limited partnership
unit and $55 per $1,000 note sold $ 289,063 147,154
Organization and 3.4% of the gross proceeds
Offering Fee of the offering 158,876 81,423
Offering and Up to $40,000 if proceeds of
Organization Fee the offering of limited partnership
- Glenmaura units is $4,000,000, reduced by
any selling commissions paid 16,000 -
Acquisition Fee $110,000 per hotel site - 220,000
Development Fee $160,000 per hotel, plus 5% of the
total cost of the hotel in excess of
$2.7 million (not to exceed $325,000
per hotel) 108,000 -
Development Fee $285,000 (less $171,000 paid prior
- Glenmaura to the Partnership's purchase of a
controlling interest of Glenmaura) 114,000 -
Property
Management Fee 4.5% of gross operating revenues
from the hotels 21,718 -
Partnership
Management Fee .75% to 1.25% of gross operating
revenues from the hotels 3,620 -
Accounting Fee $800 per month 3,200 -
----------- ---------
$ 714,477 448,577
=========== =========
</TABLE>
6 (Continued)
<PAGE> 33
ESSEX HOSPITALITY ASSOCIATES IV L.P.
(A New York Limited Partnership)
Notes to Financial Statements
(5) Related Party Transactions (continued)
The above fees are reflected in the accompanying financial statements as
follows:
1996 1995
---- ----
Balance sheets:
Investment in real estate $222,000 220,000
Deferred debt issuance costs 282,664 155,216
Partners' capital - syndication costs 165,275 73,361
$669,939 448,577
======== =======
Statements of operations:
Management fees to affiliate 25,338 -
Administrative expense 3,200 -
Miscellaneous expense 16,000 -
-------- -------
$ 44,538 -
======== =======
Organization and offering fees are allocated to syndication costs and debt
issuance costs based on the pro-rata share of limited partners' units and
notes payable to the total offering.
In 1995, the Partnership paid a $110,000 acquisition fee in connection with
the Warwick, Rhode Island site. As it is unlikely that a hotel will be
constructed on the Warwick site, the amount of the fee is included in due
from affiliates at December 31, 1996.
Under the terms of the Partnership agreement, Essex Partners or its
affiliates will also earn other fees as follows:
<TABLE>
<CAPTION>
Type of Fee Amount of Fee
----------- -------------
<S> <C>
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
(excluding the Glenmaura hotel which is 2.5%)
</TABLE>
7 (Continued)
<PAGE> 34
ESSEX HOSPITALITY ASSOCIATES IV L.P.
(A New York Limited Partnership)
Notes to Financial Statements
(5) Related Party Transactions
Glenmaura 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.
In the event that Essex Partners elects to proceed with the Second Project
on behalf of Glenmaura, Essex Partners 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. In addition, as
compensation for arranging construction and permanent financing, Essex
Partners may receive a financing fee equal to 1% of the gross proceeds of
the financing.
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.
8
<PAGE> 35
ESSEX PARTNERS INC.
(A Wholly Owned Subsidiary of
Essex Investment Group, Inc.)
Financial Statements
December 31, 1996 and 1995
(With Independent Auditors' Report Thereon)
-1-
<PAGE> 36
Independent Auditors' Report
The Board of Directors of
Essex Partners Inc.:
We have audited the accompanying balance sheets of Essex Partners Inc. (a wholly
owned subsidiary of Essex Investment Group, Inc.) as of December 31, 1996 and
1995, and the related statements of income and changes in retained earnings and
cash flows for the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Essex Partners Inc. as of
December 31, 1996 and 1995, and the results of its operations and its cash flows
for the years then ended in conformity with generally accepted accounting
principles.
KPMG Peat Marwick, LLP
Rochester, New York
February 21, 1997
-2-
<PAGE> 37
ESSEX PARTNERS INC.
(A Wholly Owned Subsidiary of Essex Investment Group, Inc.)
Balance Sheets
December 31, 1996 and 1995
<TABLE>
<CAPTION>
Assets 1996 1995
------ ---- ----
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 84,643 915,433
Advances receivable from partnerships 815,825 355,546
Prepaid and other 5,682 33,391
---------- ---------
Total current assets 906,150 1,304,370
Noncurrent receivables from partnerships 533,825 210,927
Investments in partnerships 506,224 415,257
Deferred tax asset 48,000 48,000
Office furniture and equipment, less accumulated
depreciation of $74,560 in 1996 and $49,162 in 1995 87,479 100,466
---------- ---------
$2,081,678 2,079,020
========== =========
Liabilities and Stockholder's Investment
Current liabilities:
Accounts payable and accrued expenses 40,504 185,380
Due to affiliates, net 216,006 -
---------- ---------
Total current liabilities 256,510 185,380
Accrued partnership contributions 91,770 163,542
---------- ---------
348,280 348,922
---------- ---------
Commitments and contingencies (note 6)
Stockholder's investment:
Common stock, par value $.01, authorized 2,000,000
shares; 100 shares issued and outstanding 1 1
Paid-in capital 999 999
Retained earnings 1,732,398 1,729,098
---------- ---------
Total stockholder's investment 1,733,398 1,730,098
---------- ---------
$2,081,678 2,079,020
========== =========
</TABLE>
See accompanying notes to financial statements.
-3-
<PAGE> 38
ESSEX PARTNERS INC.
(A Wholly Owned Subsidiary of Essex Investment Group, Inc.)
Statements of Income and Changes in Retained Earnings
For the years ended December 31, 1996 and 1995
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Revenues:
Organization, property acquisition, disposition
and development fees $ 652,156 1,269,313
Management and administrative fees 1,139,551 995,237
Equity income (loss) of partnerships (11,290) 29,752
----------- ---------
Total revenues 1,780,417 2,294,302
----------- ---------
Operating expenses:
Personnel 1,136,218 1,192,018
Office operations 170,883 151,749
Occupancy 143,666 117,711
Sales and marketing 51,280 164,217
Professional fees 57,594 51,626
Provision for losses on receivables from partnerships 210,653 155,212
----------- ---------
Total operating expenses 1,770,294 1,832,533
----------- ---------
Income from operations 10,123 461,769
----------- ---------
Other income (expense):
Interest income 75,920 30,942
Interest expense (80,743) (102,282)
Loss on sale of hotel franchise rights - (150,000)
----------- ---------
(4,823) (221,340)
----------- ---------
Income before income taxes
and extraordinary item 5,300 240,429
Income taxes 2,000 111,000
----------- ---------
Income before extraordinary item 3,300 129,429
Extraordinary item - gain on forgiveness of debt,
net of income tax expense of $40,000 - 60,000
----------- ---------
Net income 3,300 189,429
Retained earnings, beginning of year 1,729,098 1,552,069
Adjustment pursuant to tax sharing arrangement - 137,600
Dividend to parent - (150,000)
----------- ---------
Retained earnings, end of year $ 1,732,398 1,729,098
=========== =========
</TABLE>
See accompanying notes to financial statements.
-4-
<PAGE> 39
ESSEX PARTNERS INC.
(A Wholly Owned Subsidiary of Essex Investment Group, Inc.)
Statements of Cash Flows
For the years ended December 31, 1996 and 1995
1996 1995
---- ----
Cash flows from operating activities:
Net income $ 3,300 189,429
Adjustments to reconcile net income to net cash
provided by operating activities:
Equity (income) loss of partnerships 11,290 (29,752)
Depreciation 25,397 23,328
Provision for losses on receivables from
partnerships 210,653 155,212
Loss on sale of hotel franchise rights - 150,000
Deferred income taxes - (48,000)
Adjustment pursuant to tax sharing arrangement - 137,600
Extraordinary gain on forgiveness of debt - (100,000)
Cash provided (used) by changes in:
Prepaid and other current assets 27,709 (24,920)
Accounts payable and accrued expenses (144,876) 166,896
Accrued partnership contributions (71,772) (9,026)
----------- -------
Net cash provided by operating activities 61,701 610,767
----------- -------
Cash flows from investing activities:
Advances to partnerships, net (993,830) (116,849)
Investments in partnerships (242,500) (112,219)
Distributions from partnerships 140,243 54,831
Purchase of office furniture and equipment (12,410) (25,516)
Proceeds from sale of hotel franchise rights - 225,000
----------- -------
Net cash provided by (used in)
investing activities (1,108,497) 25,247
----------- -------
Cash flows from financing activities:
Advances from affiliates, net 216,006 87,038
Repayment of debt - (175,000)
Dividend to parent - (150,000)
----------- -------
Net cash provided by (used in)
financing activities 216,006 (237,962)
----------- -------
Net increase (decrease) in cash and
cash equivalents (830,790) 398,052
Cash and cash equivalents, beginning of year 915,433 517,381
----------- -------
Cash and cash equivalents, end of year $ 84,643 915,433
=========== =======
(Continued)
-5-
<PAGE> 40
ESSEX PARTNERS INC.
(A Wholly Owned Subsidiary of Essex Investment Group, Inc.)
Statements of Cash Flows, Continued
1996 1995
---- ----
Supplemental disclosure of cash flow information:
Cash paid during the year for interest $86,859 102,282
======= =======
See accompanying notes to financial statements.
-6-
<PAGE> 41
ESSEX PARTNERS INC.
(A Wholly Owned Subsidiary of Essex Investment Group, Inc.)
Notes to Financial Statements
December 31, 1996 and 1995
(1) Description of Business and Summary of Significant Accounting Policies
Essex Partners Inc. (the Company) is the managing general partner of real
estate partnerships. In addition to revenues earned as an investor, the
Company receives management, administrative, development and other fees for
services rendered to the partnerships.
The Company's parent, Essex Investment Group, Inc. (Essex), is an
integrated financial services and real estate company that develops and
markets a broad range of investment and insurance products and services for
individuals, businesses and individual pension accounts.
Cash Equivalents
Cash equivalents consist of money market accounts.
Investments in Partnerships
Investments in partnerships are accounted for by the equity method. Any
initial partnership capital contribution required by the Company which is
payable out of future distributions to the Company is accrued.
Income Taxes
Income taxes are accounted for under the asset and liability method whereby
deferred tax assets and liabilities are recognized for the estimated future
tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the year in
which those temporary differences are expected to be recovered or settled.
The effect of deferred tax assets and liabilities of a change in tax rates
is recognized in income in the period which includes the enactment date.
The Company is included in the consolidated federal and combined New York
State income tax returns of Essex. Essex allocates current federal and
state income taxes on a prorata basis to only its subsidiaries which have
taxable income. Any difference between current income taxes determined on a
separate company basis in accordance with the asset and liability method
and the amount allocated to the Company by Essex is reflected as an
adjustment of retained earnings.
1 (Continued)
<PAGE> 42
ESSEX PARTNERS INC.
(A Wholly Owned Subsidiary of Essex Investment Group, Inc.)
Notes to Financial Statements
(1) Description of Business and Summary of Significant Accounting Policies
(continued)
Use of Estimates
Management of the Company has made a number of estimates and assumptions
relating to the reporting of assets and liabilities and the disclosure of
contingent liabilities to prepare these financial statements in conformity
with generally accepted accounting principles. Actual results could differ
from those estimates.
(2) Partnership Investments and Advances Receivable
The Company is a general partner in partnerships which primarily own and
operate hotels, apartment buildings and manufactured home communities. The
Company also earns fees in connection with providing organization,
financing, acquisition, development, management, administration and due
diligence services to those partnerships. Such fees totaled $1,726,426 in
1996 and $2,192,192 in 1995.
The Company makes operating advances to those partnerships as well as in
connection with the acquisition and construction of real estate. Such
receivables, which are generally due on demand and unsecured, are
summarized as follows at December 31, 1996 and 1995:
Partnership 1996 1995
----------- ---- ----
Essex - Ashford River Oaks L.P.:
Mortgage note $ 270,000 -
Advances 472,372 267,086
Essex Microtel LeRay L.P. 313,084 -
Essex Geneseo Associates L.P. 173,293 101,211
Essex Albion Credits L.P. - 168,107
Others 360,901 270,069
---------- -------
1,589,650 806,473
Less allowance for uncollectible advances 240,000 240,000
---------- -------
1,349,650 566,473
Less current portion 815,825 355,546
---------- -------
$ 533,825 210,927
========== =======
2 (Continued)
<PAGE> 43
ESSEX PARTNERS INC.
(A Wholly Owned Subsidiary of Essex Investment Group, Inc.)
Notes to Financial Statements
(2) Partnership Investments and Advances Receivable (continued)
Essex - Ashford River Oaks L.P. (River Oaks) owns and operates a 300-site
manufactured home community in Springfield, Illinois which the Company
began managing in September 1995. River Oaks has experienced deficit
operating cash flow. The Company has advanced $742,372 to fund operations,
debt service requirements and capital improvements. During 1996, the
Company secured $270,000 of the $742,372 advance with a second mortgage.
The mortgage is receivable on demand with interest only due monthly at
prime plus 1% per annum (9.25% at December 31, 1996). Although no repayment
terms have been set, management of the Company expects to receive repayment
of substantially all amounts in 1997 upon completion of a securitized debt
offering by River Oaks. Summarized financial information for River Oaks as
of and for the years ended December 31, 1996 and 1995 follows:
1996 1995
---- ----
Assets $ 2,530,000 2,978,000
Liabilities 2,380,000 2,660,000
Partners capital 150,000 318,000
Revenue 370,000 389,000
Net loss (168,000) (157,000)
The Company also guarantees certain indebtedness of River Oaks (see note
6).
Essex Microtel LeRay L.P. (LeRay) owns and operates a 100-room Microtel
hotel located in LeRay, New York. During 1996, the Company advanced
$313,084 to LeRay, primarily to reduce outstanding mortgage debt. No
repayment terms have been set and management of the Company does not expect
to receive repayment until ultimate disposition of the property. Summarized
financial information for LeRay as of and for the years ended December 31,
1996 and 1995 follows:
1996 1995
---- ----
Assets $ 2,170,000 2,240,000
Liabilities 1,780,000 1,629,000
Partners capital 390,000 611,000
Revenue 577,000 698,000
Net loss (221,000) (128,000)
(3) Hotel Franchise Rights
In 1994, the Company purchased rights to 15 Microtel hotel franchises for
$375,000 in exchange for cash of $100,000 and a noninterest-bearing note
payable for $275,000. During 1995, the Company sold one franchise right for
$25,000 to an affiliate and the remaining 14 rights were resold to the
franchiser for $200,000, resulting in a loss of $150,000. The Company
repaid $175,000 of the related noninterest-bearing note payable and the
remaining $100,000 was forgiven, resulting in an extraordinary gain of
$60,000, net of the related income tax effect of $40,000.
3 (Continued)
<PAGE> 44
ESSEX PARTNERS INC.
(A Wholly Owned Subsidiary of Essex Investment Group, Inc.)
Notes to Financial Statements
(4) Related Party Transactions
The Company provides management and administrative services under contracts
with several other entities owned by officers of Essex, earning fees of
$65,281 in 1996 and $72,358 in 1995.
Essex allocated interest expense to the Company of $80,743 in 1996 and
$102,282 in 1995.
(5) Income Taxes
Total income taxes for 1996 and 1995 were allocated as follows:
1996 1995
---- ----
Income from operations $2,000 111,000
Extraordinary item - 40,000
------ -------
$2,000 151,000
====== =======
The components of income tax expense attributable to income from operations
are as follows:
Current Deferred Total
------- -------- -----
1996:
Federal $ 1,500 - 1,500
State 500 - 500
-------- ------- -------
$ 2,000 - 2,000
======== ======= =======
1995:
Federal 119,800 (38,500) 81,300
State 39,200 (9,500) 29,700
-------- ------- -------
$159,000 (48,000) 111,000
======== ======= =======
4 (Continued)
<PAGE> 45
ESSEX PARTNERS INC.
(A Wholly Owned Subsidiary of Essex Investment Group, Inc.)
Notes to Financial Statements
(5) Income Taxes (continued)
The difference between income tax expense and the amounts computed by
applying the U.S. Federal income tax rate of 34% to income before income
taxes and extraordinary item is primarily attributable to state income
taxes.
In 1996 and 1995, Essex allocated $2,000 and $21,400 of consolidated
current income tax expense to the Company pursuant to the inter-company tax
sharing arrangement. The difference between current income taxes allocated
to the Company under the tax sharing arrangement in 1995 and the amount
reflected above in accordance with the asset and liability method is
reflected in the accompanying statement of changes in retained earnings as
adjustments to retained earnings.
At both December 31, 1996 and 1995 the deferred tax asset of $96,000
results from temporary differences related to the allowance for
uncollectible receivables from partnerships, less a valuation allowance of
$48,000. In assessing the realizability of deferred tax assets, management
considers whether it is more likely than not that some portion or all of
the deferred tax assets will not be realized. The ultimate realization of
deferred tax assets is dependent upon the generation of future taxable
income during the periods in which those temporary differences become
deductible. Management considers the projected future taxable income and
tax planning strategies in making this assessment. Based on the level of
historical taxable income and estimates of future taxable income over the
periods which the deferred tax assets are deductible, management believes
it is more likely than not that the Company will realize the benefits of
these deductible differences, net of the valuation allowance at December
31, 1996.
5 (Continued)
<PAGE> 46
ESSEX PARTNERS INC.
(A Wholly Owned Subsidiary of Essex Investment Group, Inc.)
Notes to Financial Statements
(6) Commitments and Contingencies
As the general partner in several partnerships, the Company may, subject to
partnership agreement restrictions, be held liable for all recourse debt
and obligations of such partnerships to the extent that the obligations are
not otherwise funded. The amounts of such contingent liabilities include
guarantees of the following partnership obligations at December 31, 1996:
<TABLE>
<S> <C>
Essex - Ashford River Oaks L.P.
Subordinated notes payable to private investors, secured by
a third mortgage on the property $1,000,000
Mortgage payable to bank, secured by a first mortgage on
the property 600,000
Essex Microtel Lehigh L.P.
Mortgage payable to bank, secured by a first mortgage on
the property 2,600,000
Essex Geneseo Associates L.P.
Mortgage payable to bank, secured by a first mortgage on
the property 2,983,350
Essex Real Estate Partnership Notes
Mortgage notes payable, secured by first mortgage on certain
properties 976,000
Essex Glenmaura L.P.
Subordinated notes payable to private investors, secured by
a second mortgage on the property 1,500,000
Essex Mobile Home Properties IX L.P.
Subordinated notes payable to private investors, secured by
a second mortgage on the property 1,200,000
Greenport L.L.C
Mortgage payable to bank, secured by a first mortgage on the property 135,000
</TABLE>
6 (Continued)
<PAGE> 47
ESSEX PARTNERS INC.
(A Wholly Owned Subsidiary of Essex Investment Group, Inc.)
Notes to Financial Statements
(6) Commitments and Contingencies (continued)
In February 1997, the Company guaranteed a $5,000,000 mortgage payable to a
bank for Essex Glenmaura L.P. The loan is secured by a first mortgage on
the property.
Although there is no current plan or intention to do so, the capital of the
Company is available for withdrawal by Essex. Summarized consolidated
financial information for Essex as of and for the years ended December 31,
1996 and 1995 follows:
1996 1995
---- ----
Assets $ 6,400,000 5,100,000
Liabilities 5,200,000 4,700,000
Total stockholders' equity 1,200,000 400,000
Revenue 13,900,000 9,200,000
Net income 400,000 300,000
The Company guarantees a term note payable of Essex to a bank of $645,000
at December 31, 1996.
7
<PAGE> 48
PART III
Item 9. Directors and Executive Officers of the Registrant; Compliance with
Section 16 of the Exchange Act
The Partnership is managed by the General Partner, Essex Partners Inc. The
General Partner is a wholly-owned subsidiary of Essex Investment Group, Inc.
("Essex"). Essex was formed in January, 1987.
The directors and executive officers of the General Partner, as of March, 1997,
are as follows. Brief summaries of their business experience and certain other
information are set forth following the table.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
John E. Mooney 52 President, Chief Executive Officer and Director
Jerald P. Eichelberger 53 Executive Vice President, Secretary and Director
Thomas W. Blank 48 Senior Vice President, Chief Operating Officer of the Hotel Division and
Director
Richard C. Brienzi 39 Senior Vice President, Treasurer, Chief Operating Officer of the
Multi-Family Division and Director
Barbara J. Purvis 43 Senior Vice President and Director
David J. Whitaker 54 Vice President and Director
</TABLE>
Mr. Mooney has been the President, Chief Executive Officer and a Director of the
General Partner since its formation in December, 1986. Mr. Mooney is also the
President, Chief Executive Officer and a Director of Essex, and has served in
that capacity since its formation in January, 1987. His investment experience
includes serving as an individual general partner of over 40 real estate limited
partnerships, 10 oil and gas limited partnerships, and 3 venture funds. He is a
Director of Moscom Corporation, Performance Technologies, Inc., and the County
of Monroe Industrial Development Agency and is Chairman of the Executive
Committee of Genesee Capital, Inc., a Small Business Investment Company in the
Rochester, New York area.
Mr. Eichelberger has been the Executive Vice President and Director of the
General Partner since its formation in December, 1986. Mr. Eichelberger has also
been an Officer and Director of Essex since its formation in January, 1987. Mr.
Eichelberger has been an individual general partner in seven real estate limited
partnerships, one oil and gas partnership, and one venture capital fund. He is a
Director of Genesee Capital, Inc..
Mr. Blank joined Essex in July, 1990, was appointed Vice President of the
General Partner and Essex in January, 1991 and a Director in 1995. Mr. Blank is
responsible for Essex's Hotel Division and directly oversees all hotel
development and construction activities.
Mr. Brienzi joined Essex in April of 1993, and was appointed Vice President,
Treasurer and Chief Financial Officer in September, 1993. Prior to joining
Essex, from 1988 to 1993, he was the Chief Financial Officer of DiMarco
Constructors Corporation. While at DiMarco he established Baldwin Real Estate
Corp., a subsidiary which manages the properties of the DiMarco Group. He is a
member of the American Institute of Certified Public Accountants, New York State
Society of Certified Public Accountants, and Construction Financial Management
Association.
Ms. Purvis has been a Vice President and Director of the General Partner and
Essex since their formation. She is a Director of Genesee Capital, Inc. and
serves on the boards of a number of not-for-profit agencies.
Mr. Whitaker has been a Vice President and Director of the General Partner and
Essex since their formation. Mr. Whitaker is presently responsible for the
management of all multi-family real estate projects of Essex. Mr. Whitaker is
the chairman of the board of Bearium Metals Corporation and is past president of
the Al Sigl Center and The Rochester Friendly Home.
<PAGE> 49
Other significant employees of the General Partner, as of March, 1997, are as
follows. Brief summaries of their business experience and certain other
information are set forth following the table.
NAME AGE POSITION
---- --- --------
James A. Young 47 First Vice President Hotel Operations
Lorrie L. LoFaso 38 Assistant Secretary and Vice President
Mr. Young joined Essex in August of 1993, and is responsible for hotel
management and operations. Mr. Young was appointed Vice President in September,
1993. From 1990 to 1993 he worked for the Georgetown University, first as
General Manager of the Georgetown University Hotel and Conference Center, then
as Executive Director of Auxiliary Services of Georgetown University. Prior to
joining Georgetown University, from 1983 to 1990, he was Area Manager for
Courtyard by Marriott.
Ms. LoFaso joined Essex in June, 1989, was elected a Vice President of Essex and
the General Partner in January, 1991, and appointed to the position of Assistant
Secretary of the General Partner in March, 1990. Ms. LoFaso is responsible for
the financial control of the Hotel Division's properties.
Each officer and director of the General Partner is elected for a one year term
and until his or her successor is elected and has qualified. There are no
arrangements between any officer or director and any other person pursuant to
which he or she was elected as an officer or director of the General Partner.
The Partnership does not have a class of equity securities registered pursuant
to Section 12 of the Exchange Act.
Item 10. Executive Compensation
The Partnership has no employees and has not paid (or accrued) any cash or other
compensation to any executive officer of the General Partner for services
rendered to the Partnership for the period from August 30, 1995 (date of
inception) to December 31, 1996. The Partnership has no pension, option or other
benefit plans and no cash or non-cash compensation was paid or distributed, or
is proposed to be paid or distributed in the future, by the Partnership to any
executive officer of the General Partner pursuant to any benefit plan.
Item 11. Security Ownership of Certain Beneficial Owners and Management
There are no partners which own at least a 5% interest in the Partnership.
There are currently no limited partner interests in the Partnership held by
executive officers and directors.
<PAGE> 50
Item 12. Certain Relationships and Related Transactions
The General Partner will be the property manager for each of the Partnership's
properties and is the property manager for the Essex Glenmaura property. The
management agreements describe the property manager's responsibilities and fees.
Under the management agreements, the General Partner receives a monthly
management fee of 4.5% of gross revenues, and a monthly accounting fee of $800
from each property. Payments under the management agreements in 1996 were less
than $50,000. No payments were made under the management agreements in 1995.
The General Partner is entitled to receive a partnership management fee of 1.25%
of gross revenues under section 4.07(c) of the Partnership's partnership
agreement. The General Partner is entitled to receive a partnership management
for from Essex Glenmaura of .75% of gross revenues under the Essex Glenmaura
partnership agreement. Partnership management fees paid in 1996 were less than
$50,000. No partnership management fees were paid in 1995.
The General Partner and Essex Capital Markets Inc., an affiliate of the General
Partner, have received (or accrued) certain fees from the Partnership since its
inception:
<TABLE>
<CAPTION>
Type of Fee Amount of Fee 1996 1995
- ----------- ------------- ---- ----
<S> <C> <C> <C>
Selling commissions to Essex Up to $80 per limited partnership unit $289,063 147,154
Capital Markets Inc. and $55 per $1,000 note sold
Organization and Up to 3.4% of the gross proceeds of $158,876 81,423
Offering fee to the the offering
General Partner
Acquisition fee to the Up to $110,000 per hotel $- 220,000
General Partner
Development fee to the Up to $160,000 per hotel, plus 5% $108,000
Managing General Partner of the total cost of the hotel in
excess of $2.7 million (not to exceed
$325,000 per hotel)
</TABLE>
In addition, the General Partners and Essex Capital Markets Inc., have received
(or accrued) certain fees and reimbursements from Essex Glenmaura L.P. for the
years ended December 31, 1996 and 1995:
<TABLE>
<CAPTION>
Type of Fee Amount of Fee 1996 1995
- ----------- ------------- ---- ----
<S> <C> <C> <C>
Selling commissions to Essex $1,600 per $40,000 note sold and $2,000 $ - 72,000
Capital Markets Inc. Per limited partnership unit
Assignment fee $225,000 $ - 225,000
Development fee to the $285,000 $114,000 171,000
Managing General Partner
</TABLE>
Part IV
<PAGE> 51
Item 13. Exhibits and Reports on Form 8-K
(a) Exhibits and Index of Exhibits
Exhibit Number Description
- -------------- -----------
3-1* Certificate of Incorporation of Essex Partners Inc.
3-2* By-laws of Essex Partners Inc.
3-3* Certificate of Limited Partnership of Essex Hospitality Associates IV
L.P. (Filed as Exhibit 3(b) to the Registration Statement on Form S-1
of Essex Hospitality Associates IV L.P., SEC File No. 33-96716)
4-1* Form of Amended and Reinstated Limited Partnership Agreement of Essex
Hospitality Associates IV L.P. (Filed as Exhibit 3(a) to the
Prospectus included in the Registration Statement on Form S-1 of Essex
Hospitality Associates IV L.P., SEC File No. 33-96716)
4-2* Escrow Agreement, dated November 24, 1995, between Essex Hospitality
Associates IV L.P. and Manufacturers and Traders Trust Company.
4-3* Form of Subscription Agreement and Partner Note (Filed as Exhibit 4(a)
to the Prospectus included in the Registration Statement on Form S-1
of Essex Hospitality Associates IV L.P., SEC File No. 33-96716)
4-4* Indenture, dated as of November 1, 1995, between the Partnership and
Manufacturers and Traders Trust Company, relating to the Partnership's
First Mortgage Notes
4-5* Indenture, dated as of November 1, 1995, between the Partnership and
Manufacturers and Traders Trust Company, relating to the Partnership's
Subordinated Notes
4-6* Form of First Mortgage Note (Filed as Exhibit 4(e) to the Prospectus
included in the Registration Statement on Form S-1 of Essex
Hospitality Associates IV L.P., SEC File No. 33-96716)
4-7* Form of Subordinated Note (Filed as Exhibit 4(d) to the Prospectus
included in the Registration Statement on Form S-1 of Essex
Hospitality Associates IV L.P., SEC File No. 33-96716)
4-8* Form of Guaranty of Completion (Filed as Exhibit 4(i) to the
Prospectus included in the Registration Statement on Form S-1 of Essex
Hospitality Associates IV L.P., SEC File No. 33-96716)
10-1* Form of Dealer Manager Agreement between Essex Hospitality Associates
IV L.P. and Essex Capital Markets Inc. (Filed as Exhibit 1(a) to the
Registration Statement of Essex Hospitality Associates IV L.P., SEC
File No. 33-96716)
10-2* Form of Agreements - Promus Hotel Corporation to be entered into
between Essex Hospitality Associates IV L.P. and Promus Hotels (Filed
as Exhibit 28(a) to the Registration Statement of Essex Hospitality
Associates IV L.P., SEC File No. 33-96716)
10-3* Form of Franchise Agreement - Marriott International, Inc. (Courtyard
by Marriott) to be entered into between Essex Hospitality Associates
IV L.P. and Marriott International, Inc. (Filed as Exhibit 28(b) to
the Registration Statement of Essex Hospitality Associates IV L.P.,
SEC File No. 33-96716)
<PAGE> 52
10-4* Form of Franchise Agreement - Microtel Franchise and Development
Corporation to be entered into between Essex Hospitality Associates IV
L.P. and Marriott International, Inc. (Filed as Exhibit 28(c) to the
Registration Statement of Essex Hospitality Associates IV L.P., SEC
File No. 33-96716)
10-5* Form of Management Agreement to be entered into between Essex
Hospitality Associates IV L.P. and Essex Partners Inc. (Filed as
Exhibit 28(d) to the Registration Statement of Essex Hospitality
Associates IV L.P., SEC File No. 33-96716)
10-6* Real Estate Purchase Contract for the Warwick, Rhode Island site dated
as of June 22, 1995, between Essex Partners Inc. and Vito A. Scola
(Filed as Exhibit 10-6 to the 1995 Form 10KSB of Essex Hospitality
Associates IV L.P., SEC File No. 33-96716)
10-7* Real Estate Purchase Contract for the Solon, Ohio site dated as of
June 19, 1995, between Essex Partners Inc. and Solon Office Park
L.T.D. (Filed as Exhibit 10-7 to the 1995 Form 10KSB OF Essex
Hospitality Associates IV L.P., SEC File No. 33-96716)
10-8 Construction contract for the Solon Hampton Inn dated December 17,
1996 between Essex Partners Inc. and Heffner & Weber, L.L.C.
21 Subsidiaries
27 Financial Data Schedule
(b) No Form 8-K was filed during the quarter ended December 31, 1996.
* Incorporated by reference
<PAGE> 53
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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, in the City of Rochester,
State of New York on March 24, 1997.
ESSEX HOSPITALITY ASSOCIATES IV L.P.
By: Essex Partners Inc.
Its: Managing General Partner
By: s/John E. Mooney
------------------------------
John E. Mooney
President
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed by the following persons in the capacities and on the dates
indicated.
Dated: March 24, 1997 Principal Executive Officer of
Managing General Partner:
s/John E. Mooney
----------------------------------------
John E. Mooney
President and Chief
Executive Officer
Dated: March 24, 1997 Principal Financial and Accounting
Officer of Partnership
s/Lorrie L. LoFaso
----------------------------------------
Lorrie L. LoFaso
Principal
<PAGE> 54
The Board of Directors of Managing
General Partner:
Dated: March 24, 1997 s/John E. Mooney
----------------------------------------
John E. Mooney, Director
Dated: March 24, 1997 s/Jerald P. Eichelberger
----------------------------------------
Jerald P. Eichelberger, Director
Dated: March 24, 1997 s/David J. Whitaker
-----------------------------------------
David J. Whitaker, Director
Dated: March 24, 1997 s/Barbara J. Purvis
----------------------------------------
Barbara J. Purvis, Director
Dated: March 24, 1997 s/Thomas W. Blank
----------------------------------------
Thomas W. Blank, Director
Dated: March 24, 1997 s/Richard C. Brienzi
----------------------------------------
Richard C. Brienzi, Director
<PAGE> 55
EXHIBIT INDEX
-------------
Exhibit
No. Description
- -------- -----------
3-1* Certificate of Incorporation of Essex Partners Inc.
3-2* By-laws of Essex Partners Inc.
3-3* Certificate of Limited Partnership of Essex Hospitality Associates IV
L.P. (Filed as Exhibit 3(b) to the Registration Statement on Form S-1
of Essex Hospitality Associates IV L.P., SEC File No. 33-96716)
4-1* Form of Amended and Reinstated Limited Partnership Agreement of Essex
Hospitality Associates IV L.P. (Filed as Exhibit 3(a) to the
Prospectus included in the Registration Statement on Form S-1 of Essex
Hospitality Associates IV L.P., SEC File No. 33-96716)
4-2* Escrow Agreement, dated November 24, 1995, between Essex Hospitality
Associates IV L.P. and Manufacturers and Traders Trust Company.
4-3* Form of Subscription Agreement and Partner Note (Filed as Exhibit 4(a)
to the Prospectus included in the Registration Statement on Form S-1
of Essex Hospitality Associates IV L.P., SEC File No. 33-96716)
4-4* Indenture, dated as of November 1, 1995, between the Partnership and
Manufacturers and Traders Trust Company, relating to the Partnership's
First Mortgage Notes
4-5* Indenture, dated as of November 1, 1995, between the Partnership and
Manufacturers and Traders Trust Company, relating to the Partnership's
Subordinated Notes
4-6* Form of First Mortgage Note (Filed as Exhibit 4(e) to the Prospectus
included in the Registration Statement on Form S-1 of Essex
Hospitality Associates IV L.P., SEC File No. 33-96716)
4-7* Form of Subordinated Note (Filed as Exhibit 4(d) to the Prospectus
included in the Registration Statement on Form S-1 of Essex
Hospitality Associates IV L.P., SEC File No. 33-96716)
4-8* Form of Guaranty of Completion (Filed as Exhibit 4(i) to the
Prospectus included in the Registration Statement on Form S-1 of Essex
Hospitality Associates IV L.P., SEC File No. 33-96716)
10-1* Form of Dealer Manager Agreement between Essex Hospitality Associates
IV L.P. and Essex Capital Markets Inc. (Filed as Exhibit 1(a) to the
Registration Statement of Essex Hospitality Associates IV L.P., SEC
File No. 33-96716)
10-2* Form of Agreements - Promus Hotel Corporation to be entered into
between Essex Hospitality Associates IV L.P. and Promus Hotels (Filed
as Exhibit 28(a) to the Registration Statement of Essex Hospitality
Associates IV L.P., SEC File No. 33-96716)
10-3* Form of Franchise Agreement - Marriott International, Inc. (Courtyard
by Marriott) to be entered into between Essex Hospitality Associates
IV L.P. and Marriott International, Inc. (Filed as Exhibit 28(b) to
the Registration Statement of Essex Hospitality Associates IV L.P.,
SEC File No. 33-96716)
<PAGE> 56
EXHIBIT INDEX
-------------
Exhibit
No. Description
- ------- -----------
10-4* Form of Franchise Agreement - Microtel Franchise and Development
Corporation to be entered into between Essex Hospitality Associates IV
L.P. and Marriott International, Inc. (Filed as Exhibit 28(c) to the
Registration Statement of Essex Hospitality Associates IV L.P., SEC
File No. 33-96716)
10-5* Form of Management Agreement to be entered into between Essex
Hospitality Associates IV L.P. and Essex Partners Inc. (Filed as
Exhibit 28(d) to the Registration Statement of Essex Hospitality
Associates IV L.P., SEC File No. 33-96716)
10-6* Real Estate Purchase Contract for the Warwick, Rhode Island site dated
as of June 22, 1995, between Essex Partners Inc. and Vito A. Scola
(Filed as Exhibit 10-6 to the 1995 Form 10KSB of Essex Hospitality
Associates IV L.P., SEC File No. 33-96716)
10-7* Real Estate Purchase Contract for the Solon, Ohio site dated as of
June 19, 1995, between Essex Partners Inc. and Solon Office Park
L.T.D. (Filed as Exhibit 10-7 to the 1995 Form 10KSB OF Essex
Hospitality Associates IV L.P., SEC File No. 33-96716)
10-8 Construction contract for the Solon Hampton Inn dated December 17,
1996 between Essex Partners Inc. and Heffner & Weber, L.L.C.
21 Subsidiaries
27 Financial Data Schedule
(b) No Form 8-K was filed during the quarter ended December 31, 1996.
* Incorporated by reference
<PAGE> 1
EXHIBIT 10.8
------------
THE AMERICAN INSTITUTE OF ARCHITECTS
LOGO
AIA DOCUMENT A111
STANDARD FORM OF AGREEMENT
BETWEEN OWNER AND CONTRACTOR
Where the basis of payment is
COST OF THE WORK PLUS A FEE
With or without a Guaranteed Maximum Price
1987 EDITION
THIS DOCUMENT HAS IMPORTANT LEGAL CONSEQUENCES; CONSULTATION WITH AN
ATTORNEY IS ENCOURAGED WITH RESPECT TO ITS COMPLETION OR MODIFICATION.
The 1987 Edition of AIA Document A201, General Conditions of the Contract for
Construction, is adopted in this document by reference. Do not use with other
general conditions unless this document is modified.
This document has been approved and endorsed by The Associated General
Contractors of America.
_______________________________________________________________________________
AGREEMENT
made as of the 17th day of December in the year of Nineteen Hundred and Ninety
Six
BETWEEN the Owner: Essex Partners Inc.
(Name and address) 100 Corporate Woods, Suite 300
Rochester, NY 14623
and the Contractor: Heffner & Weber, L.L.C.
(Name and address) Box 8716 BWI Airport
Baltimore, MD 21240
the Project is: Hampton Inn
(Name and address) Enterprise Parkway
Solon, Ohio
the Architect is: Braun & Steidl Architects
(Name and address) 1041 West Market Street
Akron, OH 44313
The Owner and Contractor agree as set forth below.
<PAGE> 2
ARTICLE 1
_________
THE CONTRACTS DOCUMENTS
1.1 The Contract Documents consists of this Agreement, Conditions of the
Contract (General, Supplementary and other Conditions), Drawings,
Specifications, addenda issued prior to execution of this Agreement, other
documents listed in this Agreement and Modifications issued after execution of
thi Agreement; these form the Contract, and are as fully a part of the Contract
as if attached to this Agreement or repeated herein. The Contract represents
the entire and integrated agreement between the parties hereto and supersedes
prior negotiations, representations or agreements, either written or oral. An
enumeration of the Contract Documents, other than Modifications, appears in
Article 16. If anything in the other Contract Documents is inconsistent with
this Agreement, this Agreement shall govern.
ARTICLE 2
_________
THE WORK OF THIS CONTRACT
2.1 The Contractor shall execute the entire Work described in the Contract
documents, except to the extent soecifically indicated in the Contract
Documents to be the responsibility of others, or as follows:
ARTICLE 3
_________
RELATIONSHIP OF THE PARTIES
3.1 The Contractor accepts the relationship of trust and confidence
estblished by this Agreement and convenants with the Owner to cooperate with
the Architect and utilize the Contractor's best skill, efforts and judgement in
furthering the interests of the Owner; to furnish efficient business
administration and supervision; to make best efforts to furnish at all times an
adequate supply of workers and materials; and to perform the Work in the best
way and most expeditious and economical manner consistent with the interests of
the Owner. The Owner agrees to exercise best efforts to enable the Contractor
to perform the Work in the best way and most expeditious manner by furnishing
and approving in a timely way information required by the Contractor and making
payments to the Contractor in accordance with requirements of the Contract
Documents.
ARTICLE 4
_________
DATE OF COMMENCEMENT AND SUBSTANTIAL COMPLETION
4.1 The Date of Commencement is the date from which the Contract Time of
Subparagraph 4.2 is measured; it shall be the date of this Agreement, as first
written above, unless a different date is stated below or proovision is made
for the date to be fixed in a notice proceed issued by the Owner.
(insert the date of Commencement, if it differs from the date of this Agreement
or, if applicable, state that the date will be fixed in a notice to proceed.)
December 17, 1996
Unless the date of commencement is established by a notice to proceed issued by
the Owner, the Contractor shall notify the Owner in writing not less than five
days before commencing the Work to permit the timely filing of mortgages,
mechanic's liens and other security interests.
<PAGE> 3
4.2 The Contractor shall achieve Substantial Completion of the entire Work
not later than July 17, 1997
(Insert the calendar date or number of calendar days after the date of
commencement. Also insert any requirements for earlier Substantial Completion
of certain portions of the Work, if not stated elsewhere in the Contract
Documents.)
,subject to adjustments of this Contract Time as provided in the Contract
Documents.
(Insert provisions, if any, for liquidated damages relating to failure to
complete on time.)
ARTICLE 5
_________
CONTRACT SUM
5.1 The Owner shall pay the Contractor in current funds for the
Contractor's performance of the Contract the Contract Sum consisiting of the
Cost of the Work as defined in Article 7 and the Contractor's Fee determined as
follows:
(State a lump sum, percentage of Cost of the Work or the provision for
determining the Contractor's Fee to be adjusted for changes in the Work.)
Cost of Work: $3,999,000.00
Contractor's Fee: $ 100,000.00
_____________
CONTRACT SUM: $4,099,000.00
There shall be no overhead and/or profit charged by the contractor for change
orders (direct cost of labor, materials and subcontract costs, and any general
requirements costs) which do not impact on time, the contractor shall be
entitled to $1,200 per day for extended general conditions. A change order
which extends general conditions must reflect the increase in work and the
length of time of the extended general conditions and be signed by th owner
prior to commencement of the increase in work.
5.2 GUARANTEED MAXIMUM PRICE (IF APPLICABLE)
5.2.1 The sum of the Cost of the Work and the Contractor's Fee is guaranteed
by the Contractor not to exceed Four Million Ninety Nine Thousand Dollars
($4,099,000.00), subject to additions and deductions by Change Order as
provided in the Contract Documents. Such maximum sum is referred to in the
Contract Document as the Guaranteed Maximum Price. Costs which would cause the
Guaranteed Maximum Price to be exceeded shall be paid by the Contractor without
reimbursement by the Owner.
(Insert specific provisions if the Contractor is to participate in any
savings.)
If cost savings are realized which result in the total cost being less than the
Guaranteed Maximum price, they shall be handled as follows: The first
$100,000 shall go to the contractor. After this, there will be a 80/20 split
between the owner and the contractor. For purposes of calculating cost
savings, change orders will not increase the Guaranteed Maximum price. Costs
which are attributable to force majeure items contained in Article 8.3 of the
general conditions should be handled as a change order. If the actual cost of
work (excluding change orders) is greater than the cost of work stipulated in
Paragraph 5.1, the Contract Sum will not be increased and the contractor will
be responsible for the additional costs.
<PAGE> 4
5.2.2 The Guaranteed Maximum Price is based upon the following alternates, if
any, which are described in the Contract Documents abd are hereby accepted by
the Owner:
(State the numbers or other identification of accepted alternates, but only if
a Guaranteed Maximum Price is inserted in Subparagraph 5.2.1 If decisions on
other alternates are to be made by the Owner subsequent to the execution of
this Agreement , attach a schedule of such other alternates showing the amount
for each and the date until which that amount is valid.)
None
5.2.3 The amounts agreed to for unit prices, if any, are as follows:
(State unit prices only if a Guaranteed Maximum Price is inserted in
Subparagraph 5.2.1)
None
ARTICLE 6
_________
CHANGES IN THE WORK
6.1 CONTRACTS WITH A GUARANTEED MAXIMUM PRICE
6.1.1 Adjustments to hte Guaranteed Maximum Price on account of changes in
the Work may be determined by eny of the methods listed in subparagraph 7.3.3
of the general Conditions.
6.1.2 In calculating adjustments to subcontracts (except those awarded with
the Owner's prior consent on the basis of cost plus a fee), the terms "cost"
and "fee" as used in Clause 7.3.3 of the Genereal Conditions and the terms
"costs" and "a reasonable allowance for overhead and profit" as used in
Subparagraph 7.3.6 of the General Conditions shall have the meanings assigned
to them in the General Conditions and shall not be modified by Articles 5, 7
and 8 of this Agreement. sadjustments to subcontracts awarded with the Owner's
prior consent on the basis of cost plus a fee shall be calculated in accordance
with the terms of those subcontracts.
6.1.3 In calculating adjustments to this Contract, the terms "cost" and
"costs" as used in the above-referenced provisions of the General Conditions
shall mean the Cost of the Work as defined in Article 7 of this Agreement and
the terms "fee" and "areasonable allowance for overhead and profit" shall mean
the Contractor's Fee as defined in Paragraph 5.1 of this Agreement.
<PAGE> 5
6.2 CONTRACTS WITHOUT A GUARANTEED MAXIMUM PRICE
6.2.1 Increased costs for the items set forth in Article 7 which result from
changes in the Work shall become part of the Cost of the Work, and the
Contractor's Fee shall be adjusted as provided in Paragraph 5.1.
6.3 ALL CONTRACTS
6.3.1 If no specific provision is made in Paragraph 5.1 for adjustment of the
Contractor's Fee in the case of changes in the Work, or if the extent of such
changes is such, in the aggregate, that application of the adjustment
provisions of Paragraph 5.1 will cause substantial inequity to the Owner or
Contractor, the Contractors's Fee shall be adjusted on the basis of the Fee
established for the original Work.
ARTICLE 7
_________
COSTS TO BE REIMBURSED
7.1 The term Cost of the Work shall mean costs necessarily incurred by the
Contracor in the proper performance of the Work. Such costs shall be at rates
not higher than the standard paid at the place of the Project except with prior
consent of the Owner. The Cost otf the Work shall include only the items set
forth in Article 7.
7.1.1 LABOR COSTS
7.1.1.1 Wages of construction workers directly employed by the Contractor to
perform the construction of the Work at the site or, with the Owner's
agreement, at off-site workshops.
7.1.1.2 Wages or salaries of the Contractor's supervisory and administrative
personnel when stationed at the site with the Owner's agreement.
(If it is intended that the wages or salaries of certain personnel stationed at
the Contractor's principal or other offices shall be included in the Cost of
the Work, identify in Article 14 the personnel to be included and whether for
all or only part of their time.)
7.1.1.3 Wages and salaries of the Contractor's supervisory or administrative
personnel engaged, at factories, workshops or on the road, in expiditing the
production or transportation of materials or equipment required for the Work,
but only for that portion of their time required for hte Work.
7.1.1.4 Cost paid or incurred by the Contractor for taxes, insurance,
contributions, assessments and benefits requiredby law or collective bargaining
agreements and,for personnel not covered by such agreemnets, customary benefits
such assick leave, medical and health benefits, holidays vacationsand pensions,
provided such costs are based on wages and slaries included in the Cost of tjhe
Work under Clauses 7.1.1.1 through 7.1.1.3.
7.1.2 SUBCONTRACTS COSTS
Payments made by the Contractor to Subcontractors in accordance with
requirements of the subcontracts.
7.1.3 COSTS OF MATERIALS AND EQUIPMENT, INCORPORATED IN THE COMPLETED
CONSTRUCTION
7.1.3.1 Costs, including transportation, of materials and equipment
incorporated in the completed construction.
7.1.3.2 Costs of materials described in the preceding clause 7.1.3.1 in excess
of those actually installed but required to provide reasonable allowance for
wasteand for spoilage. Unused excess materials, if any, shall be handed over
at the completion of the Work or at the Owner's option, shall be sold by the
Contractor; amounts realized, if any, from such sales shall be credited to the
Owner as a dedution from the Cost of Work.
7.1.4 COSTS OF OTHER MATERIALS AND EQUIPMENT, TEMPORARY FACILITIES AND
RELATED ITEMS
7.1.4.1 Costs, including transportation, installation, maintenance, dismantling
and removal of materials, supplies, temporary facilities, machinery, equipment,
and hand tools not customarily owned by the construction workers, which are
provided by the Contractor at the site and fully consumed in the performance of
the Work; and cost less salvage value on such items if not fully consumed,
whether sold to others or retained by the Contractor. Cost for items
previously used by the Contractor shall mean fair market value.
7.1.4.2 Rental charges for temporary facilities, machinery, equipment, and hand
tools not customarily owned by the construction workers, which are provided by
the Contractor at the site, whether rented from the Contractor or others, and
costs of transportation, installation, minor repairs and replacements,
dismantling and removal thereof. Rates and quantities of equipment rented
shall be subject to the Owner's prior approval.
7.1.4.3 Costs of removal of debris from the site.
7.1.4.4 Costs of telegrams and long-distance telephone calls, postage and
parcel delivery charges, telephone service at the site and reasonable petty
cash expenses of the site office.
7.1.4.5 That portion of the reasonable travel and subsistence expenses of the
contractor's personnel incurred while traveling in discharge of duties
connected with the Work.
<PAGE> 6
7.1.5 MISCELLANEOUS COSTS
7.1.5.1 That portion directly attributed to this Contract of premiums for
insurance and books.
7.1.5.2 Sales, use or similar taxes imposed by a governmental authority which
are related to the Work and for which the Contractor is liable.
7.1.5.3 Fees and assessments for the building permit and for other permits,
licenses and inspections for which the Contractor is required by the Contract
Documnets to pay.
7.1.5.4 Fees of testing laboratories for test required by the Contract
Documents, except those related to defective or nonconforming Work for which
reimbursement is excluded by Subparagraph 13.5.3 of the General Conditions or
other provisions of the Contract Documents and which do not fall within the
scope of Subparagraphs 7.2.2 through 7.2.4 below.
7.1.5.5 Royalties and license fees paid for the use of a particular design,
process or product requoired bty the Contract Documents; the cost of defending
suits or claims for infringement of patents rights arising from such
requirement by the Contarct Documents; payments made in accordance with legal
judgments against the Contractor resulting from such suits or claims and
payments of settlements made with the Owner's consent; provided, however, that
such costs of legal defenses, judgment and settlements shall not be included in
the calculation of the Contractor's Fee or of a guaranteed Maximum price, if
any, and provided that such royalties, fees and costs are not excluded by the
last sentence of Subparagraph 3.17.1. of the General conditions or other
provisions of the Contract Documents.
7.1.5.6 Deposits lost for causes other than the contractor's fault or
negligence.
7.1.6. OTHER COSTS
7.1.6.1 Other costs incurred in the performance of the Work if and to the
exytent approval in advance in writing by the Owner. Including but not limited
to the cost of obtaining all permits, occupancy certificates and insurance in
connection with the contractor's work.
7.2 EMERGENCIES: REPAIRS TO DAMAGED, DEFECTIVE OR NONCONFORMING WORK
The Cost of the Work shall also include costs described in Paragraph 7.1 which
are incurred by the Contractor.
7.2.1 In taking action to prevent threatened damage, injury or loss in case
of an emergency affecting the safety of persons and property, as provided in
Paragraph 10.3 of the General Conditions.
7.2.2 In repairing or correcting Work damaged or improperly executed by
construction workers in the employ of the Contractor, provided such damage or
improper execution did not result from the fault or negligence of the
Contractor or the Contractor's foremen, engineers or superintendents, or other
supervisory, administrative or managerial personnel of the Contractor.
7.2.3 In repairing damaged Work other than that described in Subparagraph
7.2.2, provided such damage did not result from the fault or negligence of the
Contractor or the Contractor's personnel, and only to the extent that the cost
of such repairs is not recoverable by the Cintractor from others and the
Contractor is not compensated thereof by insurance or otherwise.
7.2.4 In correcting defective or nonconforming Work performed or supplied by
a Subcontractor or material supplier and not corrected by them, provided such
defective or nonconforming Work did not result from the fault or negligence of
the Contractor or the Contractor's personnel adequately to supervise and direct
the Work of the Subcontractor or material supplier, and only to the extent that
the cost of correcting the defective or nonconforming Work is not recoverable
by the Contractor from the Subcontractor or material supplier.
ARTICLE 8
__________
COSTS NOT TO BE REIMBURSED
8.1 The Cost of the Work shall not include:
8.1.1 Salaries and other compensation of the Contractor's personnel stationed
at the Contractor's principal office or offices other than the site office,
except as specifically provided in Clause 7.1.1.2 and 7.1.1.3 or as may be
provided in Article 14.
8.1.2 Expenses of the Contractor's principal office and offices other than
the site office.
8.1.3 Overhead and general expenses, except as may be expressly included in
Article 7.
8.1.4 The Contractor's capital expenses, including interest on the
Contractor's capital employed for the Work.
8.1.5 Rental costs of machinery and equipment, except as specifically
provided in Clause 7.1.4.2
8.1.6 Except as provided in Subparagraphs 7.2.2 through 7.2.4 and Paragraph
13.5 of this Agreement, costs due to the fault or negligence of the Contractor,
Subcontractors, anyone directly or indirectly employed by any of them, or
whose acts any of them may be laible, including but not limited to costs for
the correction of damaged, defective or nonconforming Work, disposal and
replacement of materials and equipment incorrectly ordered or supplied, and
making good damage to property not forming part of the Work.
8.1.7 Any cost not specifically and expressly described in Article 7.
8.1.8 Costs which would cause the Guaranteed Maximum Price, if any, to be
executed.
<PAGE> 7
ARTICLE 9
__________
DISCOUNTS, REBATES AND REFUNDS
9.1 Cash discounts obtained on payments made by the Contractor shall
accrue to the Owner if (1) before making the payment, the Contractor included
them in an Application for Payment and received payments therefor from the
Owner, or (2) the Owner has deposited funds with the Contractor with which to
make payments; otherwise, xcash discounts shall accrue to the Contractor.
Trade discounts, rebates, refunds and amounts received from sales of surplus
materials and equipment shall accrue to the Owner, and the Contractor shall
make provisions so that they can be secured.
9.2 Amounts which accrue to the Owner in accordance with the provisions of
Paragraph 9.1 shall be credited to the Owner as a deduction from the Cost of
the Work.
9.3 The Contractor shall advise owner of any unusual discount requirements;
otherwise it is anticipated that the requisition will be paid timely as
provided, herein to permit cash discounts.
ARTICLE 10
___________
ACCOUNTING RECORDS
10.1 Those portions of the Work that the Contractor does not customarily
perform with the Contractor's own personnel shall be performed under
subcontracts or by other appropriate agreements with the Contractor. The
Contractor shall obtain bids from Subcontractors and from suppliers of
materials or equipment fabricated especially for the Work and shall deliver
such bids to the architect. The Owner will then determine, with the advice of
the Contractor and subjecty to the reasonable objection of the Architect,
which bids will be accepted. The Ownermay designate specific persons or
entities from whom the Contractor shall obtain bids; however, if a Guaranteed
Maximum price has been established, the Owner may not prohibit the Contractor
from obtaining bids from others. The Contractor shall not be required to
contract with anyone to whom the Contractor has reasonable objection.
10.2 If a Guaranteed Maximum Price has been established and a specific bidder
among those whose bids are delivered by the Contractor to the Architect (1) is
reccommended to the Owner by the Contractor; (2) is qualified to perform that
portion of the work; and (3) has submitted a bid which conforms to the
requirements of the Contract Documents without reservations or exceptions, but
the Owner requires that another bid accepted; then the Contractor may require a
Change Order be issued to adjust the guaranteed Maximum Price by the Difference
between the bid of the person or entitiy reccommended to the Owner by the
Contractor and the amount of the subcontract or other agreement actually signed
with the person or entity designated by the Owner.
10.3 Subcontracts or other agreements shall conform to the payment provisions
of Paragraphs 12.7 and 12.8, and shall not be awarded on the basis of cost plus
a fee without the prior consent of the Owner.
ARTICLE 11
__________
ACCOUNTING RECORDS
11.1 The Contractor shall keep full and detailed accounts and exercise such
controls as may be necessary for proper financial management under this
Contract; the accounting and control systems shall be satifactory to the
Owner. The Owner and the Owner's accountants shall be afforded access to the
Contractor's records, books, correspondence, instructions, drawings, receipts,
subcontracts. purchase orders, vouchers, memoranda and other data relating to
this contract, and the Contractor shall preserve these for a period of three
years after final payment, or for such longer period as may be required by law.
ARTICLE 12
__________
PROGRESS PAYMENTS
12.1 Based upon Applications for Payment submitted to the Architect by the
Contractor and Certificates for Payment issued by the Architect, teh Owner
shall make progress payments on account of the Contract Sum to the Contractor
as provided below and elsewhere in the Contract Documents.
12.2 The period covered by each Application for paymentshall be one calendar
month ending on the last day of the month, or as follows: Said application
will be submitted on the twenty fifth (25th) day of the same month with the
percentage completion projectedthrough the last day of the month subject to
adjustment.
12.3 Provide an Application for Payment is received by the Architec not later
thanthe twenty fifth day of a month, the Owner shall make payment to the
Contractor not later than the Tenth day of the following month. if an
Application for Payment is received by the Architect after the application date
fixed above, payment shall be made by the owner not later than Twenty (20) days
after the architect recieves the Application for payment.
12.4 With the final Application for Payment the Contractor shall submit a
copy of contractor's job cost report to demonstrate that cash disbursements
already made by the Contractor on account of the Cost of the Work equal or
exceed (1) progress payments already received by the Contractor; less (2) that
portion of those payments attributable to the Contractor's Fee; plus (3)
payrolls for the period covered by the final Application for Payment; plus (4)
retainage provided in Subparagraph 12.5.4, if any, applicable to prior progress
payments.
<PAGE> 8
12.5 CONTRACTS WITH A GUARANTEED MAXIMUM PRICE
12.5.1 Each Application for Payment shall be based upon the most recent
schedule of values submitted by the Contractor in accordance with the Contract
Documents. The schedule of values shall allocate the entire Guaranteed Maximum
Price among the various portions of the Work, except that the Contractor's Fee
shall be known as a single separate item. The schedule of values shall be
prepared in such form and supported by such data to substantiate its accuracy
as the Architect may require. This schedule, unless objected by the Architect,
shall be used as a basis for reviewing the Contractor's applications for
Payment.
12.5.2 Applications for Payment shall show the percentage completion of each
portion of the Work as of hte end of the period covered by the Application for
Payment. The percentage completion shall be lesser of (1) the percentage of
that portion of Work which has actually been completed or (2) the percentage
obtained by dividing (a) the expense which has actually been incurred to the
next Application for Payment by (b) the share of the Guaranteed Maximum Price
allocated to that portion of the Work in the schedule of values.
12.5.3 Subject to other provisions of the Contract Documents, the amount of
each progress payment shall be computed as follows:
12.5.3.1 Take that portion of the Guaranteed Maximum Price properly allocable
to completed Work as determined by multiplying the percentage completion of
each portion of the Work in the schedule of values. Pending final
determination of cost to the Owner of changes in the Work, amounts not in
dispute may be included as provided in Subparagraph 7.3.7 of the General
Conditions, even though the Guaranteed Maximum Price has not yet been adjusted
by Change Order.
12.5.3.2 Add that portion of the Guaranteed Maximum Price properly allocable to
materials and equpmet delivered and suitably stored at the site for subsequent
incorporation in the Work or if approved in advance by the Owner, suitably
stored off the site at a location agreed upon in writing.
12.5.3.3 Add the Contractor's Fee, less retainage of Ten percent (10%). The
Contractor's fee shall be computed upon the Cost of the Work described in the
two preceding Clauses at the rate stated in Paragraph 5.1 or, if the
Contractor's Fee is stated as a fixed sum in that Paragraph, shall be an amount
which bears the same ratio to that fixed-sum Fee as the Cost of the Work in
the two preceding Clauses bears to a reasonable estimate of the probable Cost
of the Work upon its completion.
12.5.3.4 Subtract the aggregate of previous payments made by the Owner.
12.5.3.5 Subtract the shortfall, iff any, indicated by the contractor in the
documentation required by Paragraph 12.4 to substantiate prior Applications for
Payment, or resulting from errors subsequently discovered by Owner's
accountants in such documentation.
12.5.3.6 Subtract amounts, if any, for which the Architect has withheld or
nullified a Certificate for Payment as provided in Paragraph 9.5 of the General
Conditions.
12.5.4 Additional retainage, if any, shall be as follows:
(If it is intended to retain additional amounts from progress payments to the
Contractor beyond (1) the retainage from the Contractor's Fee provided in
Clause 12.5.3.3, (2) the retainage from subcontractors provuded in Paragraph
12.7 below, and (3) the retainage, if any, provided by other provisions of the
Contract insert provision for such provision additional retainage here. Such
provision, if made, should also describe any arrangement for limiting or
reducing the amount retained after the Work reaches a certain state of
completion.) Until the work is 50% complete, the owner will retain 10% of the
amount due the contractor on accounof progress payments. At the time the work
is 50% complete and thereafter, if the manner of sufficient reasons, the owner
will (on presentation by the contractor of consent or surety for each
application) authorize any remaining partial payments to be made in full. At
substantial completion, a punch list will be established with a dollar value.
The dollar value will be multiplied by 1.75 to arrive at the monies to be held
until final completion is achieved.
12.6 CONTRACTS WITHOUT A GUARANTEED MAXIMUM PRICE NOT APPLICABLE
12.6.1 Applications for Payment shall show the Cost of the Work actually
incurred by the Contractor through the end of the period covered by the
Application for payment and for which the Contractor has made or intends to
make actual payment prior to the next Application for Payment.
12.6.2 Subject to other provisions of the Contarct Documents, the amount of
each progress payment shall be computed as follows:
12.6.2.1 Take the Cost of the Work as described in Subparagraph 12.6.1
12.6.2.2 Add the Contractor's Fee, less retainage of percent ( %). The
Contractor's Fee shall be computed upon the Cost of the Work described in
Paragraph 12.6.2.1 at the rate in Paragraph 5.1 or, if the Contractor's Fee is
stated as a fixed sum in that Paragraph, an amaount which bears the same ratio
to that fixed-sum Fee as the Cost of the Work in the preceding Clause bears to
a reasonable estimate of the probable Cost of the Work upon its completion.
12.6.2.3 Subtract the aggregate of previous payments made by the Owner.
12.6.2.4 Subtract the shortfall, iff any, indicated by the contractor in the
documentation required by Paragraph 12.4 to substantiate prior Applications for
Payment, or resulting from errors subsequently discovered by Owner's
accountants in such documentation.
<PAGE> 9
12.6.2.5 Subtract amounts, if any for which the Architect has withheld or
withdrawn a Certificate for payment as provided in the Contract Documents.
12.6.3 Additional retainage, if any, shall be as follows:
12.7 Except with the Owner's prior approval, payments to Subcontractors
included in the Contractor's Application for Payment shall not exceed an amount
for each Subcontractor calculated as follows:
12.7.1 Take that portion of the Subcontract Sum properly allocable to compltede
Work as determined by multiplying the percentage completion of each portion of
the Subcontractor's Work by the share of the total Subcontract Sum allocated
to that portion in the Subcontractor's of values, less retainage of See Article
12.5.4 percent ( %). Pending final determination of amounts to be paid to
the Subcontractor for changes in the Work, amounts not in dispute may be
included as provided in Subparagraph 7.3.7 of the General Conditions even
though the Subcontract Sum has not yet been adjusted by Change Order.
12.7.2 Add that portion of that Subcontract Sum properly allocatble to
materials and equipment delivered and suitably stored at the site for
subsequent incorporation in the Work or, if approved in advance by the Owner, a
suitably stored off the site at a location agreed upon in wtiting, less
retainage of See Article 12.5.4 percent ( %)
12.7.3 Subtract the aggregate of previous payments made by the Contractor to
the Subcontractor.
12.7.4 Subtract amounts, if any, for which the Architect has withheld or
nullified a Certificate for Payment by the Owner to the Contractor for reasons
which are the fault of the Subcontractor.
12.7.5 Add, upon Substantial Completion of the entire Work of the Contractor, a
sum sufficient to increase the total payments to the Subcontractor to "See
Article 12.5.4" percent ( %) of the Subcontract Sum, less ammounts, if any,
for incomplete Work and unsettled claims; and, if final of the entire Work is
thereafter materially delayed through no fault of the Subcontractor, add any
additional amounts payable on account of Work of the Subcontarctor in
accordance with Subparagraph 9.10.3 of the General conditions.
(If it is intended, prior to Substantial Completion of the entire Work to of
the Contractor, to reduce or limit the retainage from the subcontractors
resulting from the percentages inserted in Subparagraphs 12.7.1 and 12.7.2
above, and this is not explained elsewhere in the Contracts Documebts, insert
here provisions for such reduction or limitation.)
The Subcontract Sum is the total amount stipulated in the subcontract to be
paid by the Contractor to the Suybcontractor for the Subcontractor's
performance of the Subcontract.
12.8 Except with the Owner's prior approval, the Contractor shall not make
advance payments to suppliers for materials or equipment which have not been
delivered and stored at the site.
12.9 In taking action on the Contractor's Application for Payment, the
Architect shall be entitled to rely on the accuracy and completeness of the
information furnished by the Contractor and shall not be deemed to represent
that the Architect has maed a detailed examination, audit or arithmetic
verification of the documentation submitted in accordance with Paragraph 12.4
or other supporting data; that the Architect has made exhaustive or continuous
on-site inspections or that the Architect has made examinations to ascertyain
how or for what purposes the Contractor has used amounts previously paid on
account of the Contract. Such examinations, audits and verifications, if
required by the Owner, will be performed by the Owner's accountants acting in
the sole interest of the Owner.
ARTICLE 13
___________
Final Payment
13.1 Final Payment shall be made by the Owner to the Contractor when (1) The
Contract has been fully performed by the Cotractor except for the Contractor's
responsibility to correct defective or nonconforming Work, as provided in
Subparagraph 12.2.2 of the General Conditions, and to satisfy other
requirements, if ay, which necessarily survive final payment; (2) a final
Application for pay-
<PAGE> 10
ment and a final accounting for the Cost of the Work have been submitted by the
Contractor and reviewed by the Owner's accountants; and (3) a final Certificate
for Payment has then been issued by the Architect; such final payment shall be
made by the Owner not more than 30 days after the issuance of the Architecht's
final Certificate for Payment, or as follows:
Contractor must also submit a final certificate from the City of Solon and
final certificates from other municipal or administrative agencies which are
required to allow the building to open and operate as a hotel. Additionally,
contractor must sibmit final lien releases from the contractor and all
subcontractors satisactory to owner's construction and permanent lender and the
contractor surety to allow for final payment.
To the extent final certificate of occupancu and/or final certification from
other municipal or administrative agencies required to allow the building to
open and operate as a hotel are held up, delayed or denied for reasons
unreleated to the Contractor's work or performance under the contract, this
shall have no impact on the Contractor's eligibility to receive or the timing
of its receipt or final payment.
13.2 The amount of the final payment shall be calculated as follows:
13.2.1 Take the sum of the Cost of the Work substantiated by the Contractor's
final accounting and the Contractor's Fee; but not more than the Guaranteed
Maximum Price, if any. Plus any change orders.
13.2.2 Subtract amounts, if any, for which the Architect withholds, in whole
or in part, a final Certificate for Payment as provided in Subparagraph 9.5.1
of the General Conditions or other provisions of the Contract Documents.
13.2.3 Subtract the aggregate of previous payments made by the Owner.
If the aggregate of previous payments made by the Owner exceeds the amount due
the Contractor, the Contractor shall reimburse the difference to the Owner.
13.3 The Owner's accountants will review and report in writing on the
Contractor's final accounting within 30 days after delivery of the final
accounting to the Architect by the Contractor. Based upon such Cost of the
Work as the Owner's accountants report to be substantiated by the Contractor's
final accounting, and provided the other conditions of Paragraph 13.1 have been
met, the Architect will, within seven days after receipt of the written report
of the Owner's accountants, either issue to the owner a final Certificate for
Payment with a copy of the Contractor, or notify the Contractor and Owner in
writing of the Architect's reasons for withholding a certificate as provided in
Subparagraph 9.5.1 of the General Conditions. The time periods stated in this
Paragraph 13.3 supercede those stated in Subparagraph 9.4.1 of the General
Conditions.
13.4 If the Owner's accountant's report the Cost of the Work as substantiated
by the Contractor's final accounting to be less than claimed by the Contractor,
the Contractor shall be made by the Contractor within 30 days after the
Contractor's receipt of a copy of the Architect's final Certificate for
Payment, failure to demane arbitration within this 30-day period shall result
in the substantiated amount reported by the Owner's accountants becoming
binding on the Contractor. Pending a final resolution by arbitration, the
Owner shall pay the Contractor the amount certified in the Architect's final
Certificate for Payment
13.5 If, subsequent to final payment and at the Owner's request, the
Contractor incurs costs described in Article 7 and not excluded by Article 8 to
correct defective or nonconforming Work, the Owner shall reimburse the
Contractor such costs and the Contractor's Fee applicable thereto on the same
basis as if such costs had been incurred prior to final payment, but not in
excess of the Guaranteed Maximum Price, if any. If the Contractor has
participated in savings as provided in Paragraph 5.2, the amount of such
savings shall be recalculated and appropriate credit given to the Owner in
determining the net amount to be paid by the Owner to the Contractor.
ARTICLE 14
__________
MISCELLANEOUS PROVISIONS
14.1 Where reference is made to this Agreement to a provision of the General
Conditions or another Contract Document, the reference refers to that provision
as amended or supplemented by other provisions of the Contract Documents.
14.2 Payments are unpaid under the Contract shall bear nterest from the date
payment is due at the rate stated belowm or in the absence thereof, at the
legal rage prevailing from time to time at the place where the Project is
located.
(Insert rate of interest agreed upon, if any.)
The prime rate of interest as published from time to time in the money rates
section of the Wall Street Journal plus two percent (2%).
<PAGE> 11
14.3 Other Provision
14.3.1 The costs of wages, salaries and expenses of the Project Manager, Jeff
Milliken, and an assistant Project manager to be named who will at times be
stationed at Contractor's principal office, shall be reimbursed in accordance
with the terms and conditions of Article Seven.
14.3.2 In regard to insurance requirements contained in Article Eleven of the
Supplementary conditions, (a) comprehensive general liability insurance, bodily
injury coverage shall be $1,000,000 each person, each occurance in lieu of
$3,000,000 each; (b) no asbestos liability is included; (c) for comprehensive
automobile liability coverage shall be combined single limit of $1,000,000.
14.3.3 In the case of a termination for convenience not for cause or
suspension, the contractor's fee shall be paid on a pro rata basis based on the
amount of work done to that date.
14.3.4 In the case of a termination fro cause, Owner shall not be entitled to
take possession of the materials, equipment or any tools owned by the
Contractor.
14.3.5 Contractor will cooperate with owner and Owner's construction and
permanent lender regarding any requirements and/or request of the lender
including reasonable request for amendments to this contract in order to
provide for monthly draws under the terms of the loan. To the extent this
results in any out of pocket expenses which would not otherwise be incurred,
said expenses shall be reimbursed as a change to the contract.
14.3.6 In the case of a termination for convenience not for cause or a
suspension, the Contractor's Fee may be up to 5% of the cost of the work
provided this does not result in a fee which exceeds $100,000 plus any mutually
known and verifiable aggregate cost savinngs which are ultimately accepted and
agreed to by Owner.
14.3.7 In regards to the cost of any legal fees incurred by Contractor in
connection with resolving any dispute with the Owner or a subcontractor or
vendor, these costs shall be considered allowable as costs to be reimbursed
under the terms and conditions of Article 7 of the Contract provided Contractor
is successful in the presecution or defense or said dispute but said costs
shall not impact on the overriding concept of the GMP.
ARTICLE 15
___________
TERMINATION OR SUSPENSION
15.1 The Contract may be terminated by the Contractor as provided in Article
14 of the General Conditions; however, the amount to be paid to the Contractor
under Subparagraph 14.1.2 of the General Conditions shall not exceed the amount
the Contractor would be entitled to receive under Paragraph 15.3 below, except
that the Contractor's Fee shall be calculated as if the Work had been fully
completed by the Contractor, inckuding a reasonable estimate of the Cost of the
Work for work not actually completed.
15.2 If a guaranteed Maximum Price is established in Article 5, the
Contract may be terminated by the Owner for cause as provided in Article 14 of
the General Conditions; however, the amount, if any, to be paid to the
Contractor under Subparagraph 14.2.4 of the General Conditions shall not cause
the Guaranteed Maximum Price to be exceeded, nor shall it exceed the amount
the Contractor would be entitlted to receive under Paragraph 15.3 below.
15.3 If no guaranteed Maximum Price is established in Article 5, the Contract
may be terminated by the Owner for cause as provided in Article 14 of the
General Conditions; however, the Owner shall then pay the Contractor an amount
calculated as follows:
15.3.1 Take the Cost of the Work incurred by the Contractor to the date of
termination.
15.3.2 Add the Contractor's Fee computed upon the Cost of the Work to the date
of terminatiuon at the rate stated in Paragraph 5.1 or, if the Contractor's Fee
is stated as a fixed sum in that Paragraph, an amount which bears the same
ratio to that fixed-sum Fee as the Cost of the Work at the time of termination
bears to a reasonable estimate of the probable Cost of the Work upon its
completion.
15.3.3 Subtract the aggregate of previous payments made by the Owner. To the
extent that the Owner elects to take legal assignment of subcontracts and
purchase orders (including rental agreements), the Contractor shall as, a
condition of receiving the payments referred to in this Article 15, execute and
deliver all such papers and take all such steps, including the legal assignment
of such subcontracts and other contractual rights of the Contractor, as the
Owner may require for the purpose of fully vesting in the Owner the rights and
beenfits of the Contractor under subcontracts or purchase orders.
15.4 The Work may be suspended by the Owner as provided in Article 14 of the
General Conditions; in such case, the Guaranteed Maximum Price, if any, shall
be increased as provided in Subparagraph 14.3.2 of the General Conditions
except that the term "cost of performance of the Contract" in that Subparagraph
shall be understood to mean the Cost of the Work and the Term "profit" shall be
understood to mean the Contractor's Fee a described in Paragraphs 5.1 and 6.3
of this Agreement.
ARTICLE 16
__________
ENUMERATION OF CONTRACT DOCUMENTS
16.1 The Contract Documents, except for Modifications issued after execution
of this Agreement, are enumerated as follows:
16.1.1 The Agreement is this executed Standard Form of Agreement Between Owner
and Contractor, AIA Document A111, 1987 Edition
16.1.2 The General Conditions are the General Conditions of the Contract for
Construction, AIA Document a201. 1987 Edition.
<PAGE> 12
16.1.3 The Supplementary and other Conditions of the Contract are those
contained in the Project Manual dated and are as follows:
DOCUMENT TITLE PAGES
See Exhibit A
16.1.4 The Specifications are those contained in the Project Manual dayted as
in Paragraph 16.1.3, and are as follows:
SECTION TITLE PAGES
See Exhibit A
Bid Letter dated October 18, 1996
including special conditions and bid form. (A-1) 8
Contractor bid dated November 4, 1996 (A-2) 4
Construction Schedule (A-4) 2
<PAGE> 13
16.1.5 The Drawings are as follows, and are dated unless a
different date is shown below:
(Either list the Drawings here or refer to an exhibit attached in this
Agreement.)
NUMBER TITLE DATE
See Exhibit B
16.1.6 The addenda, if any, are as follows:
NUMBER DATE PAGES
1 11/7/96 4
2 11/8/96 22
Portions of Addenda relating to bidding requoirements are not part of the
Contract Documents unless the bidding requirements are also in this Article 16.
<PAGE> 14
16.1.7 Other Documents, if any, forming part of the Contract Documents are as
follows:
(List here any additional documents which are intended to form part of the
Contracts Documents. The General Conditions provide that bidding requirements
such as advertisement or invitation to bid, instructions to Bidders, sample
forms and the Contractor's bid are not part of the Contravt Documents unless
enumerated in this Agreement. They shoulkd be listed here only if intended to
be part of hte Contract Documents.)
This Agreement is entered into as of the day and year first written above and
is executed in at leats three original copies of which one is to be delivered
to the Contractor, one to the Architect for use in the administration of the
Contract, and the remainder to the Owner.
OWNER ESSEX PARTNERS INC. CONTRACTOR HEFFNER & WEBER, L.L.C.
______________________________ _______________________________________
(SIGNATURE) /S/ THOMAS W BLANK (SIGNATURE) /S/ MITCHEL WEBER
Thomas W. Blank, Sr. Vice President Mitchel Weber, President
___________________________________ _______________________________________
(Printed name and Title) (Printed name and Title)
AIA CAUTION: You should sign an original AIA document which has this
caution printed in red. An original assures that changes will be obscured as
may occur when documents are reproduced.
<PAGE> 15
HAMPTON INN
SOLON, OHIO Exhibit A
INDEX
BID DOCUMENTS PAGE NO.
_____________ ________
Instructions to Bidders (AIA Document A701) 1-5
General Conditions (AIA Document A201) 1-24
Supplementary Conditions 1-7
INFORMATION PROVIDED FOR BIDDERS
________________________________
Section 00200 - Geotechnical Investigation and
Soil Boring Logs 1-19
TECHNICAL SPECIFICATIONS
_________________________
Division 1 - General Requirements
_________________________________
Section 01000 - Special Conditions 1-4
Section 01710 - Cleaning 1-2
DIVISION 2 - SITE WORK
______________________
Not Used
DIVISION 3 - CONCRETE
_____________________
Section 03300 - Cast-In-Place 1-13
Section 03350 - Gyp-Crete Floor Underlayment 1-2
Section 03410 - Structural Pre-Cast Concrete 1-5
DIVISION 4 - MASONRY
____________________
Section 04200 - Unit Masonry 1-10
Section 04200A - Engineered Masonry 1-5
DIVISION 5 - METALS
____________________
Section 05120 - Structural Steel 1-7
Section 05210 - Steel Joints 1-4
Section 05300 - Metal Deckings 1-4
Section 05400 - Cold formed Metal Framing 1-3
Section 05500 - Metal Fabrications 1-7
Section 05520 - Handrails and Railings 1-7
96050
TABLE OF CONTENTS
<PAGE> 16
DIVISION 6 - CARPENTRY Exhibit A
_______________________
Section 06100 - Rough Carpentry 1-5
Section 06200 - Finish Carpentry 1-4
Section 06410 - Casework 1-4
DIVISION 7 - THERMAL AND MOISTURE PROTECTION
_____________________________________________
Section 07175 - Water Repellent Coatings 1-2
Section 07210 - Building Insulation 1-5
Section 07241 - Exterior Insulation and Finish system -
Class PB 1-4
Section 07270 - Fire Barrier Systems 1-8
Section 07410 - Manufactured Roof and Wall Systems 1-5
Section 07530 - Single-Ply Membrane Roofing 1-5
Section 07620 - Sheet Metal Flashing and Trim 1-4
Section 07900 - Joint Sealers 1-3
DIVISION 8 -DOORS AND WINDOWS
______________________________
Section 08110 - Steel Doors and Frames 1-4
Section 08210 - Wood Doors 1-4
Section 08305 - Access Doors 1-2
Section 08410 - Aluminum Entrances and Storefronts 1-4
Section 08460 - Automatic Entrance Doors 1-2
Section 08520 - Aluminum Windows 1-3
Section 08700 - Finish Hardware 1-10
Section 08800 - Glass and Glazing System 1-5
Section 08960 - Sloped Glazing system 1-7
DIVISION 9 - FINISHES
______________________
Section 09260 - Gypsum Wallboard Systems 1-9
Section 09300 - Tile 1-4
Section 09510 - Suspended Acoustical Ceiling 1-2
Section 09650 - Resilient Flooring 1-4
Section 09680 - Carpeting 1-4
Section 09800 - Special Coatings 1-5
Section 09900 - Painting 1-5
Section 09955 - Wall Covering 1-3
96050
TABLE OF CONTENTS
<PAGE> 17
Exhibit A
DIVISION 10 - SPECIALTIES
_________________________
Section 10522 - Fire Extinguishers, Cabinets and Accessories 1-2
Section 10800 - Toilet and Bath Accessories 1-3
DIVISIONS 11 - 12
_________________
Not Used
DIVISION 13 - SPECIAL CONSTRUCTION
___________________________________
Section 13152 - Swimming Pools 1-5
DIVISION 14 - CONVEYING SYSTEMS
_______________________________
Section 14241 - Hydraulic Passenger Elevators 1-9
Section 14560 - Linen Chutes 1-2
DIVISION 15 - MECHANICAL
________________________
Section 15010 - Basic Mechanical Requirements 1-9
Section 15030 - Electrical Requirements for Mechanical Equipment 1-2
Section 15050 - Basic Mechanical Materials and Methods 1-4
Section 15051 - Excavation, Backfill and Surface Restoration 1-2
Section 15055 - Piping Materials and Methods 1-5
Section 15100 - Valves 1-3
Section 15125 - Piping Expansion Joints 1 Page
Section 15130 - Flexible Pipe Connectors 1 Page
Section 15135 - Gauges and Meters 1 Page
Section 15140 - Pipe Hangers and Supports 1-3
Section 15150 - Equipment Bases and Supports 1 Page
Section 15160 - Equipment Drives 1 Page
Section 15190 - Mechanical Identification 1-2
Section 15260 - Pipe Insulation 1-2
Section 15290 - Duct Insulation 1 Page
Section 15310 - Fire Suppression Piping 1-3
Section 15320 - Fire Pump Assembly 1-3
Section 15325 - Fire Control Equipment 1-2
Section 15330 - Sprinkler Systems 1-3
Section 15340 - Standpipe System and Hose 1-2
Section 15410 - Interior Domester Water Piping 1 Page
Section 15420 - Interior Drainage and Vent Systems 1-2
Section 15430 - Plumbing Specialties 1-3
<PAGE> 18
Exhibit A
Section 15440 - Plumbing Fixtures 1-2
Section 15453 - Plumbing Pumps - Water 1-2
Section 15454 - Plumbing Pumps - Drainage 1 Page
Section 15458 - Domestic Water Heating 1-3
Section 15488 - Interior Fuel Gas Heating 1 Page
Section 15510 - Hydronic Piping Systems 1 Page
Section 15330A - Refrigerant Piping 1-2
Section 15330B - Refrigerant Piping 1-2
Section 15575 - Breeching, Chimneys and Stacks 1 Page
Section 15675 - Air Cooled Condensing Units 1-2
Section 15743 - Air Cooled Condenser 1-2
Section 15781 - Packaged Terminal Air Conditioning Unit 1-2
Section 15788 - Pool Dehumidification Unit (AHI-1) 1-4
Section 15832 - Heat Pump Units 1-2
Section 15834 - Unit Heaters 1-2
Section 15857 - Make-Up Air Unit 1-3
Section 15860 - Fans 1-3
Section 15870 - Roof Ventilators 1 Page
Section 15891 - Ductwork 1-5
Section 15910 - Ductwork Accessories 1-2
Section 15940 - Air Outlets and Inlets 1 Page
Section 15970 - Control Wiring 1 Page
Section 15990 - Air Balancing 1-2
DIVISION 16 - ELECTRICAL
________________________
Section 16010 - Basic Electrical Requirements 1-8
Section 16050 - Basic Electrical materials and Methods 1-4
Section 16051 - Excavation, Backfill and Surface Restoration 1-2
Section 16070 - Electrical Identification 1-2
Section 16080 - Specific Wiring Applications 1-3
Section 16110 - Conduit Systems 1-8
Section 16113 - Communication Systems Conduits and Cabinets 1-2
Section 16120 - Conductors 1-3
Section 16140 - Wiring Devices and Coverplates 1-2
Section 16400 - Building Service - Secondary 1 Page
Section 16426 - Distribution Switchboard (Below 600 Volts) 1-3
Section 16433 - Surge Protective Devices 1-3
Section 16440 - Disconnect Switches 1 Page
<PAGE> 19
Exhibit A
Section 16450 - Grounding and Bonding 1-2
Section 16470 - Panelboard 1-3
Section 16477 - Fuses 1-2
Section 16480 - Motor Controllers 1-2
Section 16495 - Automatic Transfer Switch 1-2
Section 16500 - Lighting Fixtures and Lamps 1-4
Section 16520 - Exterior Area Lighting 1 Page
Section 16535 - Exit and Emergency Lighting System 1 Page
Section 16625 - Emergency Power System 1-5
Section 16670 - Lightning Protection System 1-2
Section 16720 - Fire Alarm System 1-9
<PAGE> 20
ESSEX
PARTNERS INC.
EXHIBIT A-1
October 18, 1996
Heffner and Weber
856 Elkridge Landing Road
Lithicum, MD 21090
Attention: Jeff Milliken
Re: Essex Hospitality Associates IV L.P.
Hampton Inn
Enterprise Parkway
City of Solon, Cuyahoga County, Ohio
Dear Jeff:
Based on our review of your Statement of Qualifications AIA 305 and
recommendations we have received, we are pleased to ask you to bid on the
above-referenced project. Your company will be one of up to three bidders on
this project. A set of construction drawings, specifications and site
drawings, (the "Bid Documents") may be obtained from City Blue Print as set
forth in this letter. Please note that these documents are for bid purposes
only.
The bidder acknowledges that in submitting this bid, he has received, read and
understands the Bid Documents, has visited the site and is familiar with the
local conditions under which the work is to be performed and has correlated all
observations with the requirements of the Bid Documents.
Your work as well as your subcontractors must meet all local, state, and
federal building codes and standards and your bid as submitted reflects the
willingness, ability and costs and expenses to perform at such level.
Let me provide you with information which should assist you in reviewing the
documentation and preparing your bid:
1. Project Owner: Essex Hospitality Associates IV L.P.
100 Corporate Woods, Suite 300
Rochester, NY 14623
Telephone: (716) 272-2300
Fax: (716) 272-2396
2. Project Location: Solon Office Park
Parcel 5B
Enterprise Parkway
City of Solon
County of Cuyahoga
State of Ohio
<PAGE> 21
3. Project Architect: Braun & Steidl
1041 West Market Street
Akron, OH 44313
Telephone: (216) 864-7755
Fax: (216) 864-3691
Contacts: Charles Schreckenberger and
John Wheeler
Structural, Mechanical &
Electrical Engineers: Contact through Project Architect
4. Consulting Engineers:
-Civil Engineers Western Reserve Consultants Inc.
33445 Bainbridge Road
Solon, OH 44139
Telephone: (216) 248-1065
Fax: (216) 248-1565
Contact: Anthony Picone Jr.
-Environmental Engineers EDP Consultants Inc.
9375 Chillicothe Road
Kirtland, OH 44094
Telephone: (216) 256-6500
Fax: (216) 256-6507
Contact: Valerie E. Lewis
-Geotechnical Engineers EDP Consultants Inc.
9375 Chillicothe Road
Kirtland, OH 44094
Telephone: (216) 256-6500
Fax: (216) 256-6507
Contact: Jerry B. Givins, P.E.
5. City Offices: City of Solon
34200 Bainbridge Road
Solon, OH 44139
Telephone: (216) 248-1156
Contact: Donald Lannoch
Dept. of Planning, Development
2
<PAGE> 22
6. Construction Consultant: Essex Partners Inc.
100 Corporate Woods, Suite 300
Rochester, NY 14623
Telephone: (716) 272-2300
Fax: (716) 272-2396
Contact: Thomas W. Blank,
Chief Operating Officer
Hotel Division
7. Start Date: Upon issuance of Building Permit,
approximately November 11, 1996.
Subject to completion of site work by
Solon Office Park LTD.
8. Completion Date: Turnover for FF&E fit-up July 11,
1997. Adjusted based on start date.
Issuance of Certificate of Occupancy
on or before July 31, 1997. Adjusted
base on start date.
9. Bid Format: The dollar amount of your bid should
be scheduled according to the format
attached hereto. There should be a
cost allocation for each line item
unless such work is not included in
this project. No line item should
include your overhead and/or profit,
which should be reflected in your
construction management fee as a
separate line item.
A preliminary CPM Schedule should be
submitted with your bid.
Performance and Completion Bond
required covering and including labor
and materials in an amount equal to
100% of the contract sum.
Builder's Risk and Liability Insurance
will be provided by the Builder.
Project Owner, Construction
Consultant and any Construction
Lender will be added as additional
insured.
<PAGE> 23
No Bidder will be permitted to withdraw
his bid within 30 days after the final due
date. Owner reserves the right to extend
the bid date up to 30 days, to reject any
and all bids and to waive informalities
herein. Any bid not conforming to this
format will be rejected.
10. Special Conditions: See Addendum attached.
11. Bid Date: All bids are to be received by November
1, 1996 at 5:00 P.M. at the offices of
Essex Partners, Inc., 100 Corporate
Woods, Suite 300, Rochester, NY 14623
Attention: Thomas W. Blank,
Chief Operating Officer, Hotel Division
Contract will be awrded expeditiously
thereafter subject to final clarification
and negotiaton and issuance of a Building
Permit.
Facsimile copies will be accepted
followed by a hard copy by overnight mail
the same day.
12. Contract Form: This contract will be awarded on a cost
plus fixed fee with a guaranteed
maximum price (AIA From A111).
There will be a 80/20 split of cost savings
realized below the guarnateed maximum
price. For purposes of this clause, change
orders will not increase the guaranteed
maximum price.
Project Owner reserves the right to supply
any equipment and/or material to the job.
Installation may be by Owner or
Contractor. Full credit shall be given for
any such substitution based on the
appropriate line item value.
4
<PAGE> 24
13. Changes: All Change Orders, Submittals, Shop
Drawings, Subsitutions and Approved
Equals must be submitted to and
approved by the Project Owner and
Construction Consultant.
There will be overload and/or profit
mark-up to any change orders. All
change orders will be supported by
back-up invoices, work orders, and other
documentation.
14. Bid Documents On file at:
Contact: City Blue Print Company
68 Scio Street
Rochester, NY 14604
Telephone: (716) 454-1695
Fax: (716) 232-6452
(Please contact City Blue Print Company
directly to obtain copies of plans and
spaces for your cost.
In the event of discrepancy between this letter and the specifications, this
letter shall prevail.
I trust this information is sufficient for you to complete your bid. If you
have any questions, please feel free to contact the undersigned. In my
absense, please ask for Annette Haley my secretary.
Very truly yours,
Thomas W. Blank
Chief Operating Officer
Hotel Divsion
TWB:ah
enclosures
5
<PAGE> 25
SPECIAL CONDITIONS
__________________
1. Solon Office Park Ltd. has the obligation to perform site work as
follows: removal and recompaction of existing soils in such a manner
as to create a building pad situs having a soil bearing capacity
reasonably comparable to the soil bearing capacity of adjacent sites
in Solon Commons. The limit of removal and reconstruction work will be
the footprint of the hotel structure plus 10 feet around the perimeters
of the footprint. The soil compaction will be monitored and tested by
Professional Services Industry and all reports made available for our
use. This work will commence when suitable weather exists to begin
and complete the work.
2. Contractor willd design and install a fire sprinkler system. Verify
with local code regarding the necessity of a standpipe system in the
hotel and siamese connection outside the hotel and the need for
separate fire and domestic water lines. Dry system will be installed
in attic.
3. Verify location, length of utility runs, size of tap and tap fees to be
paid to various municipal agencies. Include all tap fees and the
building permit fee in your bid.
4. Conduit, boxes and wire for cable television and telephone (including
elevator telephones) including labor and material.
5. All guest room and exterior doors to have Vingcard 2100 lock sets the
door into the back office area to have a combination lock and all
others to have cylinder style lock sets. The inside (vestibule) set
of the front door system to also have 2 way voice communication and
lock deactivation with the front desk.
6. Provide panic hardware conforming with applicable local, regional and
national building codes (exterior and corridor doors), with electric
strikes, power source and remote readers with weather guards at
exterior doors.
7. Carpet installation price to include cutting and binding of the carpet
base to be used in the corridors and rooms. Contractor to provide
carpet takeoffs and seaming plans to owner for both guest rooms and
public space.
8. Contractor to provide wall covering takesoffs to owner for all walls
throughout the hotel receiving vinyl wall covering.
9. Elevator doors and frames to be stainless steel.
10. Contractor to provide conduit wire, circuit breakers, and conductor for
signs on the building (2 locations), entryway to the site, and a
pedestal sign in the front berm area. Final locations to be selected
by the owner. HOA switching should be added as needed to the site
light contractor.
<PAGE> 26
11. Dumpsters will be provided by General Contractor through the opening
date of the hotel.
12. Contractor will install a 20' x 30' granite swimming pool with
accessories and equipment required to operate and maintain the
pool. This to include all state and local drawings and permits.
13. Contractor will accept delivery, provide storage and unload into the
hotel the expendables, soft goods and FF&E. Washers, dryers and ice
machines shall be moved into the hotel to the areas in which they are
to be installed. General Contractor to install bolts into concrete pad
to anticipate installation of washers. Templates and bolts to be
provided by Owner. Contractor to provide required electrical, plumbing,
duct work and drains for the washers, dryers and ice machines.
14. Contractor will distribute, assemble and install appliances and FF&E in
the public area, guest rooms and back office including but not limited
to soft seating, armoire, luggage bench with bumper, headboard,
nightstand, desk, mirror, chairs,tables, sofa, sleeper, light fixtures,
drapery rod, artwork, wall hook, television, mattress and box spring,
bed frame. The cost will be $100.00 per guest room for a total of
$10,000.
14. Allowances:
$75,000 landscape and irrigation allowance
$75,000 exterior signage allowance
$ 7,500 interior signage allowance
The above costs shall be incorpoated into the contractor's bid.
15. The Contractor shall achieve Substantial Completion and Certificate of
Occupancy on or before July 31, 1996. Failure to meet such deadline
shall result in the Contractor and Contractor's surety paying the Owner
liquidated damages in the amount of five hundred and 00/100 dollars
($500.00) for each day thereafter until Substantial Completion and
Cerificate of Occupancy is achieved.
16. Corner guards (color coordinated) are to be supplied and installed
where appropriate throughout the roomss, common space, and back office
space in the hotel.
7
<PAGE> 27
City of Solon
Cuyahoga County, Ohio
Amount Amount
GENERAL CONDITIONS: Automatic Door Equipment
Supervision Glazing
Temporary toilets TOTAL DOORS AND WINDOWS
Temporary phones FINISHES
Temporary office trailer Gypsum Wallboard
Temporary electric Tile
Temporary water Cultured Marble
Clean-up dumpsters Acoustal Ceilings
Construction testing Acoustal Insulation
Equipment rental Resilient Flooring
Site engineering Painting
Insurance Wall Covering - Install
Project service Carpet/Base - Install
Winter Protection TOTAL FINSIHES
Other SPECIALTIES:
TOTAL GENERAL CONDITIONS Miscellaneous Specialties
SITE WORK: Louvers and Vents
Site Preparation Wall and Corner Guards
Earthwork Flagpole
Trenching, Backfilling & Compacting Fire Extinguishers, Cabinets & Access
Termite Protection Toilet and Bath Accessories
Select Foundation, Bedding & Backfill TOTAL SPECIALTIES
Wood Fences and Gates EQUIPMENT:
Asphaltic Concrete Paving Chutes
Portland Cement Concrete Paving TOTAL EQUIPMENT
Piped Utilities FURNISHINGS:
Water System Rugs and Mats
TOTAL SITE WORK TOTAL FURNISHINGS
CONCRETE: CONVEYING SYSTEM:
Cast-In-Place Concrete Hydraulic Passenger Elevators
Precast Concrete Deck TOTAL CONVEYING SYSTEM
TOTAL CONCRETE MECHANICAL:
MASONRY Plumbing
Mortar Fire Protection
Concrete Unit Masonry Heating Ventilation & Air Cond
TOTAL MASONRY Air Distribution
METALS: Controls
Structural Steel TOTAL MECHANICAL
Steel Joists ELECTRICAL:
Metal Decking Electrical - General Provisions
Cold-Formed Metal Framing Service and Distribution
Metal Fabrications Lighting Fixtures
Metal Stairs Emergency Generator
TOTAL METALS Fire Alarm Voice Communication Sys
WOOD AND PLASTIC: Conduit System & Pull Wire for Telep
Rough Carpentry Conduit System & Pull Wire for Telev
<PAGE> 28
EXHIbIT A-Z
2/6/97 11:03 AM
HAMPTON INN Contractor
SOLON, OHIO BID DATE
11/4/96
DESCRIPTION TOTAL SUB DIVISION PROPOSED
ITEMS OF WORK COST TOTAL SUBCONTRACTOR
$ 4,099,000
1. GENERAL CONDITIONS $ 177,840
Supervision $ 70,000
Temp. Toilets $ 1,440
Temp. Phones $ 5,600
Temp. office trailer $ 2,000
Temp. Electric $ 4,800
Temp. Water $ 3,000
Clean up dumpster $ 8,500
Construction Testing $ 3,000
Equipment rental $ 9,000
Site Engineering $ 7,500
Insurance Inc./below
Project Service $ 10,000
Winter Protection $ 35,000
Temporary Water Inc./above
Other $ 18,000
2. SITEWORK 482,401
Site Preparation $ 9,000
Earthwork &cut&fill $ 144,748
Treching backfill&
compacting $ 4,500
Termite Protection
Sel.Found,Bedding&
Backfill $ 3,500
Wood Fences & Gates $ 3,500
Asphalt Concrete
Paving $ 88,500
Cemete Concrete $ 4,000
Piped utilities $ 78,000
Water System Inc. Above
Retaining Wall #1 $ 13,000
Retaining Wall #2 $ 15,000
H008_est.xl
<PAGE> 29
2/6/97 11:03 AM
Walks & pads $ 14,253
Curbs & Guard Rails $ 23,000
Tap/Fees & Bldg Permit $ 81,400
3. CONCRETE $101,050
Foundations/Slabs $ 88,000
Termite Treatment $ 1,050
Fill Seams & Bath Floors $ 12,000
4. MASONRY $552,252
CMU Masonry $ 314,000
Brick Inc./Above
Pre Cast Plack $ 238,252
5. METALS $305,000
Structural Steel $ 155,000
Steel Joist Inc./Below
Metal Decking Inc./Above
Metal Framing $ 150,000
Metal Stairs
6. WOOD & PLASTIC $86,200
Rough Carpentry-Mat $ 3,000
Finish Carpentry Mat $ 3,500
Architectural Woodwork $ 27,000
Rough Carpentry Labor $ 2,700
Finish Carpentry Labor $ 50,000
7. THERMAL & MOISURE $184,540
Weatherproofing $ 500
Building Insulation $ 18,450
Roof Insulation $ 164,000
Fire Stopping Inc. Above
Preformed Metal Roofing Inc./Above
Elastic Sheet Roofing Inc./Above
H008_EST.XLS
<PAGE> 30
2/6/97 11:03 AM
Sheetmetal Flashing Inc./Above
Roof Accessories Inc./Above
Sealants & Caulking $ 1,500
8. DOORS & WINDOWS $176,518
Metal Doors & Frames $ 16,675
Wood Doors $ 33,858
Mirror Doors $ 19,224
Aluminum Windows $ 43,600
Alum. Ent & Store Fronts $ 9,803
Finished Hardware $ 24,784
Electronic Locks $ 28,574
Aut. Door Equipment Inc./Above
Glazing $ 36,349
9. FINISHES $466,500
Stucco/Lath & Plaster $ 45,000
Drywall Texture $ 190,000
Ceramic Tile $ 44,000
Cultured Marble $ 44,000
Accoustical Ceiling $ 12,500
Acoutical Insulation Inc./Above
Resillent Flooring Inc. Below
Painting $ 89,000
Wall Covering Install Inc./Above
Carpet&Base Install $ 42,000
10. SPECIALTIES $16,290
Wall & Corner Guards $ 1,080
Flag Pole $ 2,800
Fire Ext & Cabinets $ 3,020
Toilet & Bath Accessories $ 9,390
11. EQUIPMENT $174,237
Laundry Chutes $ 6,944
H008_EST.xls
<PAGE> 31
2/6/97 11:03 AM
Rugs & Mats $ 2,793
FF & E Installtion $ 7,000
Int.Signage Allowance $ 7,500
Ext. Signage Allowance $ 75,000
Landscape & Irragation Allow. $ 75,000
13. SPECIAL CONSTRUCTION $23,000
Pool $ 23,000
14. CONVEYING SYSTEMS $ 73,780 $73,780
2 ea elevators
15. MECHANICAL $714,297
Plumbing $ 319,792
Fire Protection $ 90,000
HVAC $ 304,505
TOILET PART.
16. ELECTRICAL $385,000
Electrical System $ 385,000
Light Fixtures Inc./Above
Fire Alarm System Inc./Above
Television system Inc./Above
Telephone/Security Sys Inc./Above
________________________
SUBTOTAL $ 3,955,254 $3,918,905
Insurance .0012 4,746
Profit & Bond % 139,000 39000
___________________________
TOTAL: $4,099,000
TOTAL
<PAGE> 1
Exhibit 21 - Subsidiaries
Essex Glenmaura L.P.
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0001000375
<NAME> ESSEX HOSPITALITY ASSOCIATES IV L.P.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 2,516
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 9,474
<DEPRECIATION> 231
<TOTAL-ASSETS> 12,688
<CURRENT-LIABILITIES> 0
<BONDS> 10,814
0
0
<COMMON> 0
<OTHER-SE> 1,224<F2>
<TOTAL-LIABILITY-AND-EQUITY> 12,668
<SALES> 483
<TOTAL-REVENUES> 483
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 886
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 475
<INCOME-PRETAX> (867)
<INCOME-TAX> 0
<INCOME-CONTINUING> (867)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (867)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0<F3>
<FN>
<F1>UNCLASSIFIED BALANCE SHEET USED
<F2>EQUITY IS PARTNERS' CAPITAL
<F3>ENTITY IS A PARTNERSHIP
</FN>
</TABLE>
