<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 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
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to ___________
Commission file number: 0-8901
CASA MUNRAS HOTEL PARTNERS, L.P.
(Name of small business issuer in its charter)
California 95-3235627
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5525 Oakdale Avenue, Suite 300, Woodland Hills, California 91364
(Address of principal executive offices, including zip code)
(818) 888-6500
(Issuer's telephone number, including area code)
<TABLE>
<CAPTION>
Securities registered under Section 12(b) of the Exchange Act: None
<S> <C>
Securities registered under Section 12(g) of the Exchange Act: Limited Partnership Units
(Title of Class)
</TABLE>
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 is 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: $3,862,735
The aggregate market value of the voting securities held by non-affiliates is
not determinable as there is no trading market for the Issuer's limited
partnership units and the securities have only limited transfer rights.
<PAGE> 2
PART I.
Items 1. Description of Business.
Casa Munras Hotel Partners, L.P. (the "Registrant"), a
California limited partnership was organized on March 31, 1978, following the
completion of a public offering of 4,455 limited partnership units (the "Units")
at a public offering price of $1,000 per Unit and a capital contribution to the
Registrant of an aggregate of $45,000 by its two general partners, John F.
Rothman and Ronald A. Young (the "General Partners"). The owners of the Units
are hereinafter referred to as the "Limited Partners," and the Limited Partners
and the General Partners collectively are hereinafter referred to as the
"Partners". The Registrant's principal executive offices are located at 5525
Oakdale Avenue, Suite 300, Woodland Hills, California 91364. Its telephone
number is (818) 888-6500. Prior to August 30, 1994, the Registrant's name was
"Western Host Monterey Partners".
The Registrant owns a hotel that contains restaurant, bar, and
banquet facilities and several leased retail stores in Monterey, California,
known as the Casa Munras Garden Hotel. For additional information about this
property, see Item 2 of this Report. Unless the context indicates otherwise,
references herein to the "Hotel" are to the entire hotel, restaurant, bar,
banquet and retail complex. The Registrant acquired and began operating the
Hotel on May 1, 1978.
The General Partners believe that the operations of the
lodging, restaurant and bar, banquet and retail facilities of the Hotel are
interdependent and therefore do not constitute separate business segments. Of
the total revenues of $3,862,735, $3,305,500 and $3,157,302 generated at the
Hotel for the years ended December 31, 1996, 1995 and 1994, approximately 77%,
76% and 76% represented room sales, 18%, 19% and 19% food and beverage sales and
2%, 3% and 3% lease revenues, respectively. The balance represented telephone
revenues, interest and other income, including income from retail operations.
The business of the Registrant is to hold the Hotel and any
additional hotels, when and if acquired, for long-term investment. The principal
objectives of the Registrant are to generate cash flow for periodic
distributions to its Partners and to realize capital growth and appreciation in
the underlying value of the Registrant's assets, the achievement of neither of
which objectives can be assured.
Concurrently with its acquisition of the Hotel, the Registrant
entered into a 25-year management contract (the "Original Management Contract")
with Western Host, Inc. ("Western Host") for the management and operation of the
hotel portion of the Hotel. At the time the Original Management Contract was
entered into, the General Partners were the sole owners, directors and officers
of Western Host. In December 1986, Western Host sold to Starwood Lodging
Corporation (at that time Hotel Investors Corporation). For information with
respect to the relationships between the General Partners and Starwood Lodging
Corporation, see
2
<PAGE> 3
Item 9 of this report.
Effective January 1, 1993, Western Host subcontracted with
Westland Hotel Corporation ("Westland") to manage the operations of the Casa
Munras and any additional Registrant projects on a month-to-month basis. For its
services under the subcontract, Westland received a submanagement fee equal to
4% of the Hotel's operating revenues. In May 1994, the Registrant and Western
Host entered into an agreement that terminated the Original Management Contract
with Western Host effective as of April 15, 1994 and Western Host released all
claims arising out of such termination. Upon termination of the Original
Management Contract, a new management agreement was entered into by the
Registrant with Westland (the "New Management Contract") under the same terms
and conditions as the Original Management Contract but with an expiration date
in April 2014. For additional information concerning Westland and the
relationship of the General Partners to Westland, see Item 9 of this report.
Pursuant to the New Management Contract, Westland has the
exclusive right and obligation to manage all operations of the Hotel (including
the Hotel's restaurant, bar and banquet facilities unless they are leased by the
Registrant to another operator), to handle all collections and disbursements of
funds and to maintain the books and records of the Hotel. Westland is
responsible for, among other things, making all necessary repairs to the Hotel
(at the Registrant's expense), billing and providing credit services to
customers and guests of the Hotel, obtaining insurance for the Hotel and
administering Hotel working capital and operating funds. The Registrant is
required to make available sufficient working capital to permit Westland to
operate the Hotel, pay all expenses when due and purchase supplies and
inventory. For information with respect to the amounts payable to Westland
pursuant to the New Management Contract, see Item 12 of this Report.
Westland also is responsible for hiring, training and
supervising the staff of the hotel portion of the Hotel. Since January 1, 1993,
the services of a general manager and a restaurant manager have been provided to
the Registrant by Westland. Costs of these employees are paid by Westland and
reimbursed by the Registrant to Westland. All other employees of the Hotel are
employees of the Registrant and not Westland.
Inasmuch as one of the General Partners controlled Westland at
the time the New Management Contract was entered into, the compensation paid to
Westland and the other terms and conditions of such agreement cannot be deemed
to have been negotiated or established at arms' length, and the relationship
between the General Partners and Westland was not at arms' length and may have
resulted in certain conflicts of interest.
3
<PAGE> 4
The following table summarizes room sales, food and beverage
sales, total revenues, hotel occupancy and average room rates at the Hotel for
calendar quarters of the years ended December 31, 1996, 1995 and 1994:
<TABLE>
<CAPTION>
For the Three Months Ended
-------------------------------------------------------------------------------
March 31 June 30 September 30 December 31 Total
-------- ------- ------------ ----------- -----
<S> <C> <C> <C> <C> <C>
Room Sales
1996 $499,073 $837,485 $1,111,146 $536,228 $2,983,932
1995 377,769 620,185 1,009,249 514,412 2,521,615
1994 377,486 589,871 923,032 514,403 2,404,792
Food &
Beverage
Sales
1996 $150,908 $192,122 $206,280 $159,426 $708,736
1995 108,998 170,309 196,286 143,931 619,524
1994 107,856 165,509 195,019 145,374 613,758
Total
Revenues
1996 $682,264 $1,073,777 $1,370,350 $736,342 $3,862,733
1995 524,389 828,853 1,252,326 699,932 3,305,500
1994 513,463 788,321 1,160,242 695,276 3,157,302
Hotel
Occupancy
1996 55% 76% 82% 51% 66%
1995 41% 64% 90% 53% 62%
1994 42% 59% 83% 49% 58%
Average
Room Rate
1996 $66.16 $79.29 $97.04 $74.74 $81.24
1995 67.79 70.60 80.53 69.42 73.52
1994 66.42 72.73 80.12 74.57 74.66
</TABLE>
The Hotel operates 24 hours a day every day of the year. The
Registrant currently employs approximately 70 full time employees and
approximately 5 part-time employees, none of whom is covered by a collective
bargaining agreement. Employees are entitled to paid
4
<PAGE> 5
vacations, participation in health and life insurance programs, and other fringe
benefits comparable to those generally available to hotel employees in the area.
The General Partners believe that employee relations are satisfactory.
The Hotel is subject to licencing and regulation by alcoholic
beverage control, health, sanitation, safety and fire agencies and to the Fair
Labor Standards Act, which governs such matters as minimum wages, overtime and
other working conditions. The Hotel also is subject to Federal and California
environmental regulations. Compliance with these regulations has not had, and is
not expected to have, a material impact on the Registrant's business.
Competition and Seasonality
The Hotel faces competition on the Monterey Peninsula from
approximately 48 hotels with approximately 3,900 rooms of varying quality and
size operated by individuals and corporations, some with greater financial
resources than the Registrant or with more experience than the General Partners
or Westland. The impact of this competition on the operations of the Hotel is
difficult to evaluate, but competition is based on price, service, amenities and
location. However, the General Partners believe that the occupancy levels of the
Hotel are comparable to other similar hotels and motels on the Monterey
Peninsula.
The hotel and motel industry on the Monterey Peninsula
historically has been seasonal and tourist-oriented. However, with the
development of major hotel facilities which can accommodate large numbers of
guests and provide meeting and banquet facilities for conventions and groups,
the construction of the Monterey Conference Center, and extensive year-round
promotional efforts by local business associations, the hotel market has changed
and is no longer strictly seasonal. The summer months continue to produce the
highest occupancy and average room rates at the Hotel, but substantial levels of
business activity are being generated in the fall, part of the winter and the
spring.
The General Partners believe that the Las Vegas hotel market
is the principal competition for the Monterey leisure market, and that such
competition will continue and is likely to increase in the future.
Borrowings
In March 1994, an affiliate of one of the General Partners
advanced $250,000 to the Registrant and the Registrant executed an unsecured
promissory note in favor of such affiliate. Interest accrues on the unpaid
principal balance at the rate of 10% per annum. The note provides that principal
and all accrued and unpaid interest are payable on demand. For the years ended
December 31, 1996 and 1995, $31,421 and $28,444, respectively, of accrued but
unpaid interest were added to principal. The proceeds of the advance were used
by the Registrant to purchase property and equipment in connection with the
renovation of the Hotel.
5
<PAGE> 6
On October 1, 1996, the Registrant's $900,000 line of credit
with a bank expired, and the Registrant converted the balance outstanding under
that facility into long-term borrowings by executing an unsecured promissory
note (the "Promissory Note") payable to the bank in the original principal
amount of $394,500. The Promissory Note is payable over 48 months beginning
November 1, 1996, in monthly installments of $8,219 principal amount plus
accrued interest and with a final payment of the then remaining principal plus
accrued and unpaid interest due on October 1, 2000. The outstanding principal
amount of the Promissory Note bears interest at the bank's prime rate from time
to time plus 1.75%, based upon a 360-day year. As of December 31, 1996, $369,844
in principal was outstanding under the Promissory Note.
The Promissory Note includes covenants requiring the
submission of certain accounting information by specified times, an annual
requirement that the Partnership have a cash flow ratio before distribution to
partners, as defined in the Promissory Note, equal to 1.25 to 1 and a provision
requiring that the Registrant indemnify against certain environmental
liabilities.
Item 2. Properties.
The Hotel is located at the southwest corner of Munras and
Fremont Streets in Monterey, California, on an irregularly shaped parcel of land
(the "Site") of approximately 3.5 acres. Fremont is the principal east-west
business thoroughfare into downtown Monterey from U.S. Highway 1. Highway 1 is
approximately one and one-half miles east of the Hotel and provides access
between San Francisco and Los Angeles. Munras Street is a principal north-south
street from the downtown area, providing access from Highway 1 to the
communities of Pebble Beach and Carmel. The Site is within walking distance of
the downtown area, and is located approximately six blocks from the Monterey
Conference Center. Fisherman's Wharf and Cannery Row are within a few minutes
driving time of the Hotel. The Site is serviced by all public utilities,
including sewer, electricity, gas and water.
While portions of the main Hotel building are more than 150
years old, most of the guest rooms were constructed and placed in operation 30
to 35 years ago. There are 152 guest rooms located in 10 one- and two-story
buildings, most of which are oriented toward a central courtyard, garden area
and swimming pool. In addition, there is a main building containing the lobby
area, the restaurant, bar and banquet facility, several offices and meeting
rooms capable of accommodating groups from 10 to 200. Located on the perimeter
of the Site on Fremont and Munras are a number of business offices and retail
commercial spaces, all of which are leased to tenants. There is adequate on and
off-street parking to serve the Hotel, with access from Fremont Street along
Munras Avenue.
The Hotel is of historic Monterey or Spanish-type
architectural design, and the buildings are wood frame and stucco, concrete or
concrete block construction with wood shake or tile roofs. The guest rooms can
accommodate one to four occupants and contain closet space, dressing area and
bathroom, as well as sleeping areas and informal sitting space. All guest rooms,
restaurant facilities and public areas are fully decorated and completely
furnished and
6
<PAGE> 7
equipped. There is no air conditioning in the Hotel. The entire Site around the
building areas is paved for parking and the grounds are well landscaped and
fully lighted.
In 1995 and 1996, the Hotel undertook a substantial capital
refurbishment program. The Registrant expended $370,109 in 1996 and $314,067 in
1995 for capital additions and improvements to the Hotel; these expenditures
were funded with borrowings and from working capital. The general condition of
all of the buildings and other facilities of the Hotel is good.
It is expected the Partnership will have minimal capital
expenditures, other than the possible new guest rooms, in 1997. These capital
expenditures are expected to be funded from cash provided by operations.
As of the date of this Report, the General Partners are
evaluating the possible construction by the Partnership of 14 additional guest
rooms on a small undeveloped portion of the Hotel property. Construction of the
additional rooms would be financied with additional long-term borrowings and
would be subject to, among other conditions, approval of the Limited Partners.
Item 3. Legal Proceedings.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
7
<PAGE> 8
PART II
Item 5. Market for Common Equity and Related Stockholder Matters.
The approximate number of holders of the Units (the
Registrant's only class of equity securities) as of March 14, 1997, was 642. No
public trading market exists for the Units.
The following cash distributions were paid to the Registrant's
Partners during 1995, 1996 and through March 14, 1997:
Distribution Aggregate Amount
Date of Distribution Per Unit(*) of Distribution(*)
- -------------------- ------------ -----------------
January 31, 1995 $20.00 $ 90,000
July 31, 1995 30.00 135,000
October 31, 1995 50.00 225,000
January 31, 1996 20.00 90,000
April 30, 1996 10.00 45,000
July 31, 1996 20.00 90,000
October 31, 1996 70.00 315,000
January 31, 1997 38.00 171,000
- ------------------------
(*) For the purpose of distributions, the General Partners' $45,000 capital
contribution is considered the equivalent of 45 Units.
8
<PAGE> 9
Item 6. Management's Discussion and Analysis or Plan of Operation.
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Revenues $3,862,735 $3,305,500 $3,157,302 $3,478,747 $3,650,304
Net Income $ 447,254 $ 286,698 $ 289,986 $ 577,456 $ 634,663
Income Per
Unit $ 99.39 $ 63.71 $ 64.44 $ 128.32 $ 141.04
Cash Distri-
butions
Per Unit(*) $ 138.00 $ 100.00 $ 90.00 $ 120.00 $ 140.00
Total Assets
at December
31, $4,039,085 $3,691,851 $3,800,801 $3,667,232 $3,755,665
Long-Term Obli-
gations at
December 31,
(including
current portion) $ 369,844 $ -0- $ -0- $ -0- $ -0-
</TABLE>
- ------------------
(*) Distributions made in January each year are treated as distributions for the
immediately preceding year.
Year ended December 31, 1996 as compared to year ended December 31, 1995
Between 1995 and 1996, occupancy rates at the Hotel increased
to 66% from 62% and average room rates increased to $81.24 from $73.52,
resulting in 1996 room revenues of $2,983,932. The increases in occupancy and
room rates are attributed to the capital improvement program at the Hotel and to
the continued increase in leisure travel in the Monterey area, together with the
reduction in new construction of hotels in the Monterey area.
Food and beverage revenues increased during 1996 by $89,212,
or approximately 14%, to $708,736. The increase is principally attributed to
increased hotel occupancy, as hotel patrons remain the largest source of guests
for the restaurant and lounge.
9
<PAGE> 10
Operating expenses totaled $3,415,481 or 88% of revenues, in
1996 as compared to $3,018,802, or 91% of revenues, in 1995, respectively. The
decrease in operating expenses as a percentage of revenue is principally
attributed to increased revenues as a result of increased occupancy room rates,
thus the resulting increase in the number of guest patrons in the restaurant and
lounge facilities. Many operating expenses are fixed in nature and do not
increase at the same rate as revenues increase.
Year ended December 31, 1995 as compared to year ended December 31, 1994
An increase in occupancy rates, 62% versus 58%, partially
offset by a reduction in average room rate, $73.52 versus $74.66, resulted in an
increase in room revenue to $2,521,615 from $2,404,792 for 1995 as compared to
1994. This increase in occupancy factors was attributed to increased pleasure
travel during the 1995 summer tourist season as compared to the similar period
in 1994.
Food and beverage revenues totaled $619,524 for 1995 as
compared to $613,758 for 1994. The slight increase in these revenues was
attributed to increased hotel occupancy, as most guests for the restaurant and
lounge are hotel patrons.
Operating expenses totaled $3,018,802 and $2,867,316, or
approximately 91% of revenue, in calendar 1995 and 1994, respectively.
Year ended December 31, 1994 as compared to year ended December 31, 1993
A decrease in the occupancy rates, 58% versus 68%, partially
offset by an increase in average room rate, $74.66 versus $71.86, resulted in a
decrease in room revenue to $2,404,792 from $2,671,291 for 1994 as compared to
1993. The decrease in revenues was principally attributable to the recession in
the state of California, and increased competition from the Las Vegas hotel
market for tourist activity as a result of the then recent completion of a
substantial number of new hotel rooms.
Food and beverage revenues declined to $613,758 from $667,742
or 8% in 1994 as compared to 1993. The decline was attributable to the decrease
in occupancy at the hotel, as hotel patrons were the largest source of guests
for the restaurant and lounge.
Operating expenses totaled $2,867,316, or 91% of total
revenue, in 1994 as compared to $2,901,291, or 83% of total revenue, in 1993.
The increase in operating expenses as a percentage of total revenue was
primarily attributable to increased depreciation due to asset additions from the
renovation, increased administrative costs due to workman's compensation retro
premium charges in 1994 and increased marketing costs.
10
<PAGE> 11
Liquidity and Capital Resources
The Registrant's primary source of cash is from the operation
and leasing of the Hotel.
During 1996, the Registrant generated $869,465 in net cash
provided by operating activities. Distributions to Partners totaled $621,000,
equaling approximately 14% of original invested capital. Borrowings under a bank
credit facility totaled $394,500. This facility was converted to a five year
fully amortized term loan in October 1996. Principal reductions of $24,656 were
made on the Promissory Note during the remainder of 1996. Principal payments due
in 1997 under the Promissory Note will total $98,625. For additional information
with respect to the credit facility and the term loan, see the section of Item 1
of this Report captioned "Borrowings", which section is incorporated in this
Item by reference.
Capital expenditures, which were financed with borrowings
under the credit facility, totaled $370,109 in 1996. It is expected the
Partnership will have minimal capital expenditures, other than the possible new
guest rooms described below, in 1997. These capital expenditures are expected to
be funded from cash provided by operations.
As of the date of this Report, the General Partners are
evaluating the possible construction by the Partnership of 14 additional guest
rooms on a small undeveloped portion of the Hotel property. Construction of the
additional rooms would be financied with additional long-term borrowings and
would be subject to, among other conditions, approval of the Limited Partners.
The General Partners intend, to the extent cash from
operations is available and such distributions are permitted under the
Promissory Note, to continue making cash distributions to the Partners at
amounts approximating the Registrant's net income.
Item 7. Financial Statements.
The following are included in this Report in response to this
Item immediately prior to the signature page:
Independent Auditors' Report.
Balance Sheets at December 31, 1996 and 1995.
Statements of Operations for the years ended December 31,
1996, 1995 and 1994.
Statements of Changes in Partners' Equity for the years ended
December 31, 1996, 1995 and 1994.
Statements of Cash Flows for the years ended December 31,
1996, 1995 and 1994.
11
<PAGE> 12
Notes to Financial Statements for the years ended December 31,
1996, 1995 and 1994.
Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
None.
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act.
The Registrant has no directors or executive officers. The
General Partners of the Registrant are Messrs. Rothman and Young. Mr. Rothman,
age 62, and Mr. Young, age 69, have been the General Partners of the Registrant
since its formation, and are named as the General Partners by the Certificate
and Agreement of Limited Partnership of Casa Munras Hotel Partners, L.P. (the
"Partnership Agreement").
Since March 1990, Mr. Rothman has been an independent real
estate investor. Mr. Rothman is also currently a consultant to Westland and the
sole shareholder of The Northstar Group, a corporation leasing and operating a
hotel/casino in Las Vegas, Nevada.
Prior to December 1992, Mr. Young was the president and chief
executive officer of Starwood Lodging Corporation (formerly Hotel Investors
Corporation), a publicly traded hotel management company that is the sole
stockholder of Western Host. Since December 1992, Mr. Young has been the
president and chief executive officer and the sole stockholder of Westland.
Messrs. Young and Rothman are the general partners of
Sacramento Hotel Partners, L.P. ("SHP"), a California limited partnership. In
April 1990, SHP sold its interest in a hotel located in Sacramento, California
and presently holds a note from the purchaser secured by a deed of trust on the
real property sold.
Item 10. Executive Compensation.
The General Partners did not receive any compensation from the
Registrant for serving as the Registrant's general partners during any of 1996,
1995 or 1994.
Set forth below is a summary of all compensation which may be
payable to the General Partners pursuant to the Partnership Agreement. All such
fees and amounts are payable one-half to each of the General Partners.
12
<PAGE> 13
(1) Acquisitions. In the event the Registrant purchases
additional hotels, the General Partners are entitled to an acquisition fee of
$20,000 per hotel.
(2) Operations. The General Partners are entitled to a
transfer fee of up to $50 per transfer of Units.
(3) Disposition of Borrowing. Upon the sale or refinancing of
the Hotel, the General Partners are entitled to 25% of the net cash proceeds
subordinated to (i) a 12% per annum cumulative return on the capital
contributions of the Partners, and (ii) the return of such capital contributions
to the Partners, to the extent such proceeds are distributed to the Partners.
(4) Removal of General Partners. The Partnership Agreement
provides that if either or both of Messrs. Rothman and Young should be removed
as General Partner(s) of the Registrant by vote or written consent of the
holders of a majority of the Units then held by Limited Partners entitled to
vote, the Registrant will have the right, but not the obligation, to terminate a
removed General Partner's interest in the compensation owed to such General
Partner upon the sale or refinancing of the Hotel upon payment to such General
Partner of an amount equal to the value of his interest in such compensation on
the date of his removal, based upon the market value of the assets of the
Registrant on and as if such assets were sold on the date of his removal. If the
removed General Partner and the Registrant cannot mutually agree upon such value
within 30 days following the election by the Registrant to so terminate the
General Partner's interest, such value will be determined by arbitration.
Payment to a removed General Partner of the value of his interest at the option
of the Registrant will be made either (i) in a lump sum within 30 days following
determination of the value thereof, or (ii) in equal installments of principal
and interest at 7% per annum over a period of 60 months.
13
<PAGE> 14
Item 11. Security Ownership of Certain Beneficial Owners and Management.
(a) Security ownership of certain beneficial owners.
Except as set forth below, there is no person known to the
Registrant to be the beneficial owner of more than 5% of the Units. The
following information is based upon Amendment No. 1 to Schedule 13D filed with
the Securities and Exchange Commission dated May 5, 1988, and as updated by the
records of the Registrant.
<TABLE>
<CAPTION>
Number of
Units and
Nature of
Beneficial
Name and Address of Ownership at Percent
Title of Class Beneficial Owner March 14, 1997 of Class
- -------------- ------------------- -------------- --------
<S> <C> <C> <C>
Limited Partner- Liquidity Fund IX 2 (*) .045
ship Units Liquidity Fund XI 7 (*) .157
Liquidity Fund XIII 11 (*) .247
Liquidity Fund XIV 117 (*) 2.626
Liquidity Fund XV 3 (*) .067
Liquidity Income/
Growth Fund 85 48 (*) 1.077
Liquidity Fund High
Yield Institutional
Investors 8 (*) .180
Liquidity Fund Tax-
Exempt Partners 28 (*) .629
Liquidity Fund Tax-
Exempt Partners II 72 (*) 1.616
LF 73 30 (*) .673
LF 74 46 (*) 1.033
Liquidity Financial Grp. L.P. 9 (*) .202
Liquidity Fund General Ptrs. II 1 (*) .022
Liquidity Fund General Ptrs. II
FBO Sean S. Subas 1 (*) .022
LFG Liquidating Interest, L.P. 5 (*) .112
LF 31 47 (*) 1.055
2200 Powell Street
Emeryville, CA 94608
</TABLE>
- -----------------
(*) Each of such funds (the "Funds") owns such Units directly. Each of
such funds has sole voting and disposition power with respect to such
Units, which powers are exercised on behalf of such Fund by its
general partner(s). Liquidity Fund General Partners ("LFGP") is the
sole general partner of Liquidity Fund XI, Liquidity Fund XII,
Liquidity Fund XIII,
14
<PAGE> 15
Liquidity Fund XIV, Liquidity Fund XV and Liquidity Income/Growth Fund
85. The general partners of Liquidity Fund IX are Liquidity Fund
Management, Inc. ("LFMI") and Messrs. Richard G. Wollack, Bryson S.
Randolph and Brent R. Donaldson. The general partners of Liquidity Fund
High Yield Institutional Investors are LFGP and Liquidity Fund
Associates II ("LFA"). The general partners of LFGP are Messrs.
Wollack, Randolph, Donaldson and Sean S. Subas. The officers and
directors of LFMI are Messrs. Wollack, Donaldson and Subas. The general
partner of LFA is LFGP. The general partners of Liquidity Fund
Tax-Exempt Partners and Liquidity Fund Tax-Exempt Partners II are
Liquidity Fund General Partners II ("LFGPII") and Liquidity Fund
Partners ("LFP"). The general partners of LFGPII are Messrs. Wollack,
Donaldson, Subas and Robert S. Condon. The general partner of LFP is
LFGPII.
(b) Security ownership of management.
<TABLE>
<CAPTION>
Number of Units and
Nature of Beneficial
Name of Ownership as of Percent
Beneficial Close of Business on of
Title of Class Owner March 14, 1997 Class
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Limited John F. Rothman 21 Units* .471
Partnership Ronald A. Young 33 Units* .741
Units
</TABLE>
- ------------------
(*) Owned directly.
In addition, each General Partner owns a .5% interest in the
equity, profits and losses of the Registrant by virtue of his $22,500 capital
contribution to the Registrant upon its formation.
Item 12. Certain Relationships and Related Transactions.
As described in Item 9, all of the outstanding stock of
Westland is owned by Mr. Young, and Mr. Rothman is a consultant to Westland.
Messrs. Young and Rothman have agreed that a portion of Westland's net income
(based upon a predetermined formula) will be paid to Mr. Rothman for his
consulting services.
Pursuant to the New Management Contract, Westland is entitled
to receive from the Registrant for Westland's services in managing the Hotel:
(a) a minimum management fee equal to 4% of room revenues and food and beverage
sales ("Hotel Revenues"), payable monthly and adjusted at year-end, and (b) an
incentive management fee, calculated and paid annually, equal to the lesser of
(1) 12% of profits before debt service and depreciation, as defined, and (2)
15
<PAGE> 16
the excess of the Registrant's cash flow over an amount equal to 12% of the
Partners' then-invested capital, as defined. Proceeds of any sale or
refinancing of the Hotel are not considered in computing the incentive
management fee.
During 1996, Westland made available to the Registrant various
services in connection with the acquisition of furniture, fixtures, equipment
and supplies for the Hotel, the procurement of insurance for the Hotel, and
other administrative matters. Such services or goods were purchased by the
Registrant from Westland at its cost. For 1996 and 1995, $572,540 and $468,483,
respectively, were paid or payable to Westland as reimbursement for such
purchases. Westland made available to the Registrant all trade discounts offered
by vendors for early payment.
During 1996, Westland provided bookkeeping services to the
Registrant. The fee paid by the Registrant to Westland for these services is
computed by Westland by taking the total of all direct labor costs of providing
bookkeeping services to the hotels it manages and allocating to the Registrant a
pro rata portion of such costs based on the ratio of the number of rooms in the
Hotel to the number of rooms in all hotels managed by Westland. Westland also is
entitled to reimbursement by the Registrant of certain payroll related costs,
administration expenses and professional fees, when incurred. The bookkeeping
service fee and other reimbursable costs, expenses and fees paid or payable to
Westland for 1996 and 1995 totaled $26,592 for each year.
In the event the Registrant purchases one or more additional
hotels, Westland will be entitled to an initial management fee in the amount of
$20,000 per hotel for services to be rendered in connection with taking over and
reorganizing such hotel. In addition, Westland will be entitled to receive 5% of
the direct costs of (a) any capital improvement or refurbishment program costing
in excess of $75,000 implemented in connection with the acquisition of any
additional hotel, and (b) the construction of any additional rooms real property
improvements, including the construction of additional rooms at such hotel.
See also Item 10 for a description of the compensation that
may be payable to the General Partners under the circumstances described
therein.
16
<PAGE> 17
PART IV
Item 13. Exhibits, List and Reports on Form 8-K.
(a) Exhibits:
Exhibit
Number Description
3.1 Certificate and Agreement of Limited Partnership of Casa
Munras Hotel Partners, L.P. (formerly Western Host Monterey
Partners), dated March 31, 1978 and filed April 19, 1978
(incorporated by reference to Exhibit 1 to the Registrant's
Registration of the Units on Form 10).*
3.2 Amendment to Agreement of Limited Partnership of Casa Munras
Hotel Partners, L.P. (formerly Western Host Monterey Partners)
dated as of August 30, 1994 (incorporated by reference to
Exhibit 3.1 to the Registrant's Quarterly Report on Form
10-QSB for the quarter ended September 30, 1994).
10.1 Unsecured Demand Promissory Note dated March 21, 1994, in the
principal amount of $250,000 executed by Casa Munras Hotel
Partners, L.P. (formerly Western Host Monterey Partners) in
favor of the Maxine Fulton Retirement Trust dtd 4/21/82
(incorporated by reference to Exhibit 10.4 of the Registrant's
Annual Report on Form 10-K for the year ended December 31,
1993).
10.2 Settlement and Release Agreement dated as of April 15, 1994 by
and among John F. Rothman, Ronald A. Young, Hotel Investors
Corporation, Hotel Investors Trust and Western Host, Inc.
(incorporated by reference to Exhibit 10.2 to the Registrant's
Quarterly Report on Form 10-QSB for the quarter ended June 30,
1994).
10.3 Termination of Management Contracts Agreement dated as of
April 15, 1994 by and among Western Host, Inc., John F.
Rothman, Ronald A. Young, Westland Hotel Corporation, Western
Host Fresno Partners, Western Host Stockton Partners, Western
Host Bakersfield Partners, Western Host Properties, Western
Host Monterey Partners, Western Host Pasadena Partners,
Western Host San Francisco Partners, Hotel Investors
Corporation and Hotel Investors Trust (incorporated by
reference to Exhibit 10.3 to the Registrant's Quarterly Report
on Form 10-QSB for the quarter ended June 30, 1994).
17
<PAGE> 18
10.4 Management Contract dated as of April 15, 1994 by and between
Casa Munras Hotel Partners, L.P. (formerly Western Host
Monterey Partners) and Westland Hotel Corporation
(incorporated by reference to Exhibit 10.4 to the Registrant's
Quarterly Report on Form 10-QSB for the quarter ended June 30,
1994).
10.5 Multiple Disbursement Note dated as of September 29, 1995 by
and between Casa Munras Hotel Partners, L.P. (formerly known
as Western Host Monterey Partners) and City National Bank
(incorporated by reference to Exhibit 10.4 to the Registrant's
Quarterly Report on Form 10-QSB for the quarter ended
September 30, 1995).
10.6 Promissory Note dated as of October 1, 1996, executed by Casa
Munras Hotel Partners in favor of City National Bank.
10.7 Supplemental Terms Letter dated October 1, 1996, executed by
Casa Munras Hotel Partners, L.P. and City National Bank.
(b) Reports on Form 8-K
No reports on Form 8-K have been filed during the last quarter
of the period covered by this Report.
* Copies of Amendments to the Certificate and Agreement of Limited
Partnership of Casa Munras Hotel Partners, L.P. executed to reflect the
admission to the Registrant of substituted Limited Partners will be
furnished on request.
18
<PAGE> 19
SIGNATURES
In accordance with to the requirements of Section 13 or 15(d)
of the Exchange Act, the Registrant caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
CASA MUNRAS HOTEL PARTNERS, L.P.
By: John F. Rothman Date: March 27, 1997
--------------------------------
John F. Rothman
General Partner
By: Ronald A. Young Date: March 27, 1997
--------------------------------
Ronald A. Young
General Partner
<PAGE> 20
INDEPENDENT AUDITORS' REPORT
To the Partners
Casa Munras Hotel Partners, L.P.:
We have audited the accompanying balance sheets of Casa Munras Hotel Partners,
L.P. as of December 31, 1996 and 1995, and the related statements of operations,
changes in partners' equity, and cash flows for each of the three years in the
period ended December 31, 1996. These financial statements are the
responsibility of the Partnership'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, such financial statements present fairly, in all material
respects, the financial position of the Partnership at December 31, 1996 and
1995, and the results of its operations and its cash flows for each of the three
years in the period ended December 31, 1996 in conformity with generally
accepted accounting principles.
DELOITTE & TOUCHE LLP
March 11, 1997
<PAGE> 21
CASA MUNRAS HOTEL PARTNERS, L.P.
(A Limited Partnership)
BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
1996 1995
- -------------------------------------------------------------------------------------
ASSETS
------
<S> <C> <C>
CURRENT ASSETS:
Cash $569,371 $213,250
Accounts receivable 50,233 104,739
Food and beverage inventories 20,798 18,215
Prepaid expenses 38,458 21,351
---------- ----------
Total current assets 678,860 357,555
---------- ----------
LAND, PROPERTY AND EQUIPMENT - at cost:
Building and improvements 4,691,279 4,562,255
Hotel furnishings and equipment 1,403,594 1,172,949
Restaurant furnishings and equipment 33,733 23,293
Less accumulated depreciation (3,508,381) (3,164,201)
---------- ----------
2,620,225 2,594,296
Land 700,000 700,000
---------- ----------
Land, property and equipment - net 3,320,225 3,294,296
---------- ----------
LIQUOR LICENSE 40,000 40,000
---------- ----------
TOTAL $4,039,085 $3,691,851
========== ==========
LIABILITIES AND PARTNERS' EQUITY
--------------------------------
CURRENT LIABILITIES:
Accounts payable - trade $49,379 $41,345
Accounts payable - related parties 16,235 98,917
Accrued incentive management fees - related parties 121,929 15,613
Accrued salaries and wages 59,008 51,998
Accrued room and sales tax 29,244 24,707
Distributions payable 171,000 90,000
Short-term borrowing - 4,500
Current portion of long-term debt 98,625 -
Note payable to affiliate 331,497 300,076
---------- ----------
Total current liabilities 876,917 627,156
LONG-TERM DEBT 271,219 -
---------- ----------
Total liabilities 1,148,136 627,156
---------- ----------
COMMITMENTS (Note 5)
PARTNERS' EQUITY:
General Partners (45 units issued and outstanding) 28,911 30,648
Limited Partners (4,455 units issued and outstanding) 2,862,038 3,034,047
---------- ----------
Total partners' equity 2,890,949 3,064,695
---------- ----------
TOTAL $4,039,085 $3,691,851
========== ==========
</TABLE>
See accompanying notes to financial statements.
2
<PAGE> 22
CASA MUNRAS HOTEL PARTNERS, L.P.
(A Limited Partnership)
STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
1996 1995 1994
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUES:
Room $2,983,932 $2,521,615 $2,404,792
Food and beverage 708,736 619,524 613,758
Lease 87,509 84,022 83,387
Telephone 52,324 56,770 42,269
Other 30,234 23,569 13,096
--------- --------- ---------
Total 3,862,735 3,305,500 3,157,302
--------- --------- ---------
OPERATING EXPENSES:
Rooms 857,605 744,945 752,364
Food and beverage 631,409 531,258 537,692
Depreciation and amortization 344,180 345,254 317,837
Administrative and general 323,730 349,517 272,774
Repairs and maintenance 308,432 190,234 178,000
Management fees 273,902 225,452 215,899
Marketing 262,688 238,810 214,811
Energy cost 158,422 170,478 170,437
Interest 66,317 28,542 21,632
Property taxes 62,936 63,235 61,234
Insurance 52,419 48,506 53,231
Partnership administration and professional fees 51,396 58,496 55,389
Telephone 22,045 24,075 16,016
--------- --------- ---------
Total (includes reimbursed costs and payments
for services to related parties of $619,324,
$426,680 and $491,948 during 1996, 1995
and 1994, respectively) 3,415,481 3,018,802 2,867,316
--------- --------- ---------
NET INCOME $447,254 $286,698 $289,986
======== ======== ========
ALLOCATION OF NET INCOME:
General Partners $4,473 $2,867 $2,900
Limited Partners ($99.39 per Unit in 1996, $63.71
per Unit in 1995 and $64.44 per Unit in 1994,
based upon 4,455 Limited Partnership Units) 442,781 283,831 287,086
--------- --------- ---------
Total $447,254 $286,698 $289,986
======== ======== ========
CASH DISTRIBUTION PER LIMITED PARTNERSHIP
UNIT (based upon 4,455 Units outstanding):
Ordinary income $99.39 $63.71 $64.44
Return of capital 38.61 36.29 25.56
--------- --------- ---------
$138.00 $100.00 $90.00
======== ======== ========
</TABLE>
See accompanying notes to financial statements.
3
<PAGE> 23
CASA MUNRAS HOTEL PARTNERS, L.P.
(A Limited Partnership)
STATEMENTS OF CHANGES IN PARTNERS' EQUITY
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
GENERAL LIMITED
PARTNERS' PARTNERS'
EQUITY EQUITY TOTAL
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
BALANCE, JANUARY 1, 1994 $33,431 $3,309,580 $3,343,011
NET INCOME 2,900 287,086 289,986
DISTRIBUTIONS TO PARTNERS (4,050) (400,950) (405,000)
------- ---------- ----------
BALANCE, DECEMBER 31, 1994 32,281 3,195,716 3,227,997
NET INCOME 2,867 283,831 286,698
DISTRIBUTIONS TO PARTNERS (4,500) (445,500) (450,000)
------- ---------- ----------
BALANCE, DECEMBER 31, 1995 30,648 3,034,047 3,064,695
NET INCOME 4,473 442,781 447,254
DISTRIBUTIONS TO PARTNERS (6,210) (614,790) (621,000)
------- ---------- ----------
BALANCE, DECEMBER 31, 1996 $28,911 $2,862,038 $2,890,949
======= ========== ==========
</TABLE>
See accompanying notes to financial statements.
4
<PAGE> 24
CASA MUNRAS HOTEL PARTNERS, L.P.
(A Limited Partnership)
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
1996 1995 1994
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income $447,254 $286,698 $289,986
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 344,180 345,254 317,837
Change in assets and liabilities:
Accounts receivable 54,506 (15,291) (13,623)
Food and beverage inventories (2,583) (1,875) 2,802
Prepaid expenses (17,107) 24,772 (23,900)
Accounts payable and accrued expenses 19,581 (11,323) (3,039)
Accounts payable and accrued expenses -
related parties 23,634 32,731 (65,010)
-------- -------- --------
Net cash provided by operating activities 869,465 660,966 505,053
-------- -------- --------
INVESTING ACTIVITIES:
Acquisition of property and equipment (370,109) (314,067) (505,021)
-------- -------- --------
FINANCING ACTIVITIES:
Borrowings from affiliate 31,421 28,444 271,632
Short and long-term borrowing 390,000 4,500 -
Payment of long-term debt (24,656) - -
Loan commitment fees - (4,500) (10,000)
Distributions to Partners (540,000) (450,000) (360,000)
-------- -------- --------
Cash used for financing activities (143,235) (421,556) (98,368)
-------- -------- --------
NET INCREASE (DECREASE) IN CASH 356,121 (74,657) (98,336)
CASH AT BEGINNING OF YEAR 213,250 287,907 386,243
-------- -------- --------
CASH AT END OF YEAR $569,371 $213,250 $287,907
======== ======== ========
SUPPLEMENTAL DISCLOSURE OF
CASH FLOW INFORMATION -
Cash paid during the year for interest $34,895 $ - $ -
======== ======== ========
</TABLE>
See accompanying notes to financial statements.
5
<PAGE> 25
CASA MUNRAS HOTEL PARTNERS, L.P.
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
- --------------------------------------------------------------------------------
1. GENERAL INFORMATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
General Information:
General - Western Host Monterey Partners was formed on March 31, 1978 for
the purpose of acquiring, holding for investment and operating motor hotels
and related facilities. On May 1, 1978, the Partnership acquired the Casa
Munras Garden Hotel ("the Casa Munras") located in Monterey, California.
The Casa Munras has 152 guest rooms, a restaurant, bar and banquet
facilities, and several retail stores. Effective in August 1994, Western
Host Monterey Partners changed its name to Casa Munras Hotel Partners, L.P.
("the Partnership").
The General Partners of the Partnership, Ronald A. Young and John F.
Rothman, each purchased a 0.5% interest in the Partnership. The remaining
99% interest is owned collectively by the Limited Partners. The General
Partners are entitled to receive a $20,000 acquisition fee for each motor
hotel and related facilities subsequently acquired by the Partnership.
Allocations - Net profits, losses and cash flows from operations are to be
allocated among the Partners in proportion to their respective Partnership
interests. The net profits from the sale of all or substantially all of the
assets of the Casa Munras, or any future properties to be acquired by the
Partnership, and the cash flow resulting therefrom, are to be allocated in
accordance with the predetermined formula outlined in the Partnership
Agreement.
Summary of Significant Accounting Policies:
Inventories - Food and Beverage inventories are stated at the lower of cost
(first-in, first-out method) or market.
Fair Value of Financial Instruments and Concentrations of Credit Risk - The
following disclosure of estimated fair value was determined by available
market information and appropriate valuation methodologies. However,
considerable judgment is necessary to interpret market data and develop the
related estimates of fair value. Accordingly, the estimates presented
herein are not necessarily indicative of the amounts that could be realized
upon disposition of the financial instruments. The use of different market
assumptions and/or estimation methodologies may have a material effect on
the estimated fair value amounts.
6
<PAGE> 26
Cash, accounts receivable, food and beverage inventories, prepaid expenses,
accounts payable, accrued expenses and distributions payable carrying cost
which reasonably approximates their fair value because of the short
maturities of these instruments.
Other assets are carried at cost which, in management's opinion, is less
than fair value.
The carrying value of short-term debt and the note payable to affiliate
approximates fair value at December 31, 1996, as the related interest rates
are either variable or in line with market rates.
Property and Depreciation - Buildings and improvements are being
depreciated over useful lives ranging from 15 to 39 years using the
straight-line method. Hotel furnishings and equipment and restaurant
furnishings and equipment are being depreciated using primarily accelerated
methods over useful lives ranging from 5 to 7 years.
Income Taxes - In accordance with the provisions of the Internal Revenue
Code, the Partnership is not subject to the payment of income taxes, and no
provision, therefore, is required to be made herein. At December 31, 1996,
the Partnership's net assets and net income for financial reporting
purposes approximated the net assets and net income for Federal tax
reporting purposes.
Revenues - Revenues are recognized as earned. Earned is generally defined
as the date upon which a guest occupies a room and/or utilizes the hotel's
services. Ongoing credit evaluations are performed and potential credit
losses are expensed at the time the account receivable is estimated to be
uncollectible. Historically, credit losses have not been material to the
hotel's results of operations.
Use of Estimates - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates.
Impairment of Long-Lived Assets - In March 1995, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards ("SFAS")
No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of". This statement requires that
long-lived assets to be held and used by an entity be reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Measurement of an
impairment loss for long-lived assets that an entity expects to hold and
use should be based on the fair value of the asset. The Partnership has
adopted SFAS No. 121 during the year ending December 31, 1996. Based on an
evaluation of existing long-lived assets, the Partnership has determined
that no impairment has occurred for the year ended December 31, 1996.
7
<PAGE> 27
2. NOTE PAYABLE TO AFFILIATE
On March 21, 1994, an affiliate of one of the General Partners advanced
$250,000 and issued an unsecured 10% demand note to the Partnership. Under
the terms of the demand note, accrued monthly interest is added to the then
outstanding principal balance upon which cumulative interest is accrued for
the subsequent month. For the years ended December 31, 1996, 1995 and 1994,
$31,421, $28,444 and $21,632, respectively, of accrued and unpaid interest
has been added to principal.
3. SHORT AND LONG-TERM DEBT
As of December 31, 1995, the Partnership had available a $900,000 Multiple
Disbursement Note from a bank which expired in October 1996. As of December
31, 1995, $4,500 was outstanding under the Multiple Disbursement Note. On
October 1, 1996 the Partnership converted the borrowings with the bank
under the Multiple Disbursement Note to long-term borrowings under an
unsecured Promissory Note (the "Promissory Note") in the amount of
$394,500. The Promissory Note is payable over 48 months with monthly
principal payments of $8,219 plus interest beginning November 1, 1996. The
Promissory Note bears interest at the banks prime interest rate plus 1.75%,
based upon a 360 day year, with a final payment due in October 1, 2000
equal to the remaining principal owed but unpaid interest.
The Promissory Note includes covenants requiring the submission of certain
accounting information by specified times, an annual requirement that the
Partnership have a cash flow ratio before distribution to partners, as
defined in the note, equal to 1.25 to 1 and provision of an environmental
indemnification by the Partnership to the bank.
Principal payments required for the years ending December 31, are as
follows:
1997 $98,625
1998 98,625
1999 98,625
2000 73,969
---------
Total $ 369,844
=========
4. LEASE REVENUE
The retail stores are leased to other business establishments. These leases
range from one to two years and provide annual rents of approximately
$87,509.
8
<PAGE> 28
5. MANAGEMENT AND RELATED PARTIES
The Partnership had a 25-year management contract (the "Contract") with
Western Host, Inc. ("Western Host") to manage the operations of the Casa
Munras and any additional projects.
All of the outstanding stock of Western Host is owned by Starwood Lodging
Corporation ("Starwood"), formerly Hotel Investors Corporation ("HIC"). One
of the General Partners of the Partnership was the president and a director
of HIC, and is currently a stockholder of Starwood. The other General
Partner was formerly a stockholder of HIC.
Effective January 1, 1993, Western Host subcontracted with Westland Hotel
Corporation ("Westland") to manage the operations of the Casa Munras and
any additional projects. The subcontract between Western Host and Westland
was for a period of one month and was automatically renewed monthly unless
terminated with thirty days written notice. In May 1994, the Partnership
entered into a contract that terminated the Contract for the Hotel with
Western Host effective as of April 15, 1994 and Western Host released all
claims arising out of such termination. Upon termination of the Contract, a
new contract was entered into by the Partnership with Westland, under
substantially the same terms and conditions as the Contract but with an
expiration date in April 2014.
Under both contracts, the management company is paid a minimum management
fee equal to 4% of revenues, as defined, and an incentive management fee
equal to the lesser of 12% of profits before debt service and depreciation,
or the excess of cash flow over an amount equal to 12% of the Partners'
then invested capital, as defined. Minimum management fees for 1996, 1995
and 1994 were $151,973, $129,839 and $124,557, respectively. Incentive
management fees for 1996, 1995 and 1994 were $121,929, $95,613 and $91,342,
respectively.
Ronald A. Young, a General Partner, is the president and sole shareholder
of Westland, and John F. Rothman, the other General Partner, is a
consultant to Westland.
The Partnership has reimbursed or accrued as payable to Westland (based on
actual costs incurred) for certain costs paid on behalf of the Partnership.
These costs include bookkeeping services, reimbursement of on-site
management payroll and payroll benefits, insurance and workmen's
compensation premiums, various hotel operating supplies and furnishings and
other administrative expenses. The total of such costs reimbursed in 1996,
1995 and 1994 were $599,133, $495,075 and $645,064, respectively.
Accounts payable and accrued expenses as of December 31, 1996, 1995 and
1994 include $138,164, $114,530 and $81,799, respectively, in amounts due
Westland.
The Westland management agreement provides that the partnership shall set
aside an amount equal to $100 per annum for each guest room as a reserve
for replacements. This amount is to be adjusted based upon actual
expenditures. In 1996, 1995 and 1994, such reserves were
9
<PAGE> 29
not required, as the Partnership's expenditures for replacements exceeded
the reserve called for in the contract.
6. DISTRIBUTION TO PARTNERS
The following table summarized the distributions accrued and paid to
Partners for 1996, 1995 and 1994:
<TABLE>
<CAPTION>
Per Unit Total
-------- -----
<S> <C> <C>
Distributions during 1994:
Distributions accrued in 1993, paid in 1994 $ 10.00 $ 45,000
--------- ---------
Distributions accrued and paid in 1994:
July 31, 1994 30.00 135,000
October 31, 1994 40.00 180,000
--------- ---------
Total accrued and paid in 1994 70.00 315,000
--------- ---------
Total paid in 1994 $ 80.00 $ 360,000
========= =========
Total accrued and paid in 1994 $ 70.00 $ 315,000
Distributions accrued in 1994, paid in 1995 20.00 90,000
--------- ---------
Total distributions for 1994 $ 90.00 $ 405,000
========= =========
Distributions during 1995:
Distributions accrued in 1994, paid in 1995 $ 20.00 $ 90,000
--------- ---------
Distributions accrued and paid in 1995:
July 31, 1995 30.00 135,000
October 31, 1995 50.00 225,000
--------- ---------
Total paid in 1995 $ 100.00 $ 450,000
========= =========
Total accrued and paid in 1995 80.00 360,000
Distributions accrued in 1995, paid in 1996 20.00 90,000
--------- ---------
Total distributions for 1995 $ 100.00 $ 450,000
========= =========
Distributions during 1996:
Distributions accrued in 1995, paid in 1996 $ 20.00 $ 90,000
--------- ---------
Distributions accrued and paid in 1996:
April 30, 1996 10.00 45,000
July 31, 1996 20.00 90,000
October 31, 1996 70.00 315,000
---------- ---------
Total paid in 1996 $ 120.00 $ 540,000
========== =========
</TABLE>
10
<PAGE> 30
<TABLE>
<S> <C> <C>
Total accrued and paid in 1996 100.00 450,000
Distributions accrued in 1996, paid in 1997 38.00 171,000
---------- -----------
Total distributions for 1996 $ 138.00 $ 621,000
========== ===========
</TABLE>
11
<PAGE> 1
Exhibit 10.6
CITY NATIONAL BANK
PROMISSORY NOTE
Principal $394,500.00
Loan Date 10-01-1996
Maturity 10-01-2000
Loan No. 24241
Call
Collateral
Account 03657386
Officer KAY
Initials
- --------------------------------------------------------------------------------
Borrower: Casa Munras Hotel Partners, L.P., A
California Limited Partnership
5525 Oakdale Avenue, #300
Woodland Hills, CA 91364
Lender: City National Bank, a National Banking Association
San Fernando Valley Commercial Banking Center #048000
16133 Ventura Boulevard
Encino, CA 91436
- --------------------------------------------------------------------------------
Principal Amount: $394,500.00
Initial Rate: 9.750%
Date of Note: October 1, 1996
PROMISE TO PAY. CASA MUNRAS HOTEL PARTNERS, L.P., A CALIFORNIA LIMITED
PARTNERSHIP ("Borrower") promises to pay to City National Bank, a National
Banking Association ("Lender"), or order, in lawful money of the United States
of America, the principal amount of Three Hundred Ninety Four Thousand Five
Hundred & 00/100 Dollars ($394,500), together with interest on the unpaid
principal balance from October 1, 1996, until paid in full.
PAYMENT. Subject to any payment changes resulting from changes in the Index,
Borrower will pay this loan in 47 principal payments of $8,218.75 each and one
final principal and interest payment of $8,285.53. Borrower's first principal
payment is due November 1, 1996, and all subsequent principal payments are due
on the same day of each month after that. In addition, Borrower will pay regular
monthly payments of all accrued unpaid interest due as of each payment date.
Borrower's first interest payment is due November 1, 1996, and all subsequent
interest payments are due on the same day of each month after that. Borrower's
final payment due October 1, 2000, will be for all principal and accrued
interest not yet paid. Interest on this Note is computed on a 365/360 simple
interest basis; that is, by applying the ratio of the annual interest rate over
a year of 360 days, multiplied by the outstanding principal balance, multiplied
by the actual number of days the principal balance is outstanding. Borrower will
pay Lender at Lender's address shown above or at such other place as Lender may
designate in writing. Unless otherwise agreed or required by applicable law,
payments will be applies first to accrued unpaid
<PAGE> 2
Exhibit 10.6
interest, then to principal, and any remaining amount to any unpaid collection
costs and late charges.
VARIABLE INTEREST RATE. The interest rate on this Note is subject to change from
time to time based on changes in an index which is the City National Bank Prime
Rate (the "Index"). Prime Rate shall mean the rate most recently announced by
Lender at its principal office in Beverly Hills, California, as its "Prime
Rate". Any change in the Prime Rate shall become effective on the same business
day on which the Prime Rate shall change, without prior notice to Borrower.
Lender will tell Borrower the current Index rate upon Borrower's request.
Borrower understands that Lender may make loans based on other rates as well.
The interest rate change will not occur more often than each day. The Index
currently is 8.250% per annum. The interest rate to be applied to the unpaid
principal balance of this Note will be at a rate of 1.500 percentage points over
the Index, resulting in an initial rate of 9.750% per annum. NOTICE: Under no
circumstances will the interest rate on this Note be more than the maximum rate
allowed by applicable law.
PREPAYMENT; MINIMUM INTEREST CHARGE. In any event, even upon full
prepayment of this Note, Borrower understands that Lender is entitled to a
minimum interest charge of $100.00. Other than Borrower's obligation to pay any
minimum interest charge, Borrower may pay without penalty all or a portion of
the amount owed earlier than it is due. Early payments will not, unless agreed
to by Lender in writing, relieve Borrower of Borrower's obligation to continue
to make payments under the payment schedule. Rather, they will reduce the
principal balance due and may result in Borrower making fewer payments.
DEFAULT. Borrower will be in default if any of the following happens: (a)
Borrower fails to make any payment when due. (b) Borrower breaks any promise
Borrower has made to Lender, or Borrower fails to comply with or to perform when
due any other term, obligation, covenant, or condition contained in this Note or
any agreement related to this Note, or in any other agreement or loan Borrower
has with Lender. (c) Any representation or statement made or furnished to Lender
by Borrower or on Borrower's behalf is false or misleading in any material
respect either now or at the time made or furnished. (d) Any partner dies or any
of the partners or Borrower becomes insolvent, a receiver is appointed for any
part of Borrower's property, Borrower makes an assignment for the benefit of
creditors, or any proceeding is commenced either by Borrower or against Borrower
under any bankruptcy or insolvency laws. (e) Any creditor tries to take any of
Borrower's property on or in which Lender has a lien or security interest. This
includes a garnishment of any of Borrower's accounts with Lender. (f) Any of the
events described in this default section occurs with respect to any general
partner of Borrower or any guarantor of this Note. (g) A material adverse change
occurs in Borrower's financial condition, or Lender believes the prospect of
payment or performance of the Indebtedness is impaired. (h) Lender in good faith
deems itself insecure.
LENDER'S RIGHTS. Upon default, Lender may declare the entire unpaid principal
balance on this Note and all accrued unpaid interest immediately due, without
notice, and then Borrower will pay that amount. Upon Borrower's failure to pay
all amounts declared due pursuant to this section, including failure to pay upon
final maturity, Lender, at its option, may also, if permitted under applicable
law, increase the variable interest rate on this Note of 6.500 percentage points
over the Index. Lender may hire or pay someone else to help collect this Note if
borrower does
<PAGE> 3
Exhibit 10.6
not pay. Borrower also will pay Lender that amount. This includes, subject to
any limits under applicable law, Lender's attorneys' fees and Lender's legal
expenses whether or not there is a lawsuit, including attorneys' fees and legal
expenses for bankruptcy proceedings (including efforts to modify or vacate any
automatic stay or injunction), appeals, and any anticipated post-judgement
collection services. Borrower also will pay any court costs, in addition to all
other sums provided by law. This Note has been delivered to Lender and accepted
by Lender in the State of California. If there is a lawsuit, Borrower agrees
upon Lender's request to submit to the jurisdiction of the courts of Los Angeles
County, the State of California. This Note shall be governed by and construed in
accordance with the laws of the State of California.
DISHONORED ITEM FEE. Borrower will pay a fee to Lender of $10.00 if Borrower
makes a payment on Borrower's loan and the check or preauthorized charge with
which Borrower pays is later dishonored.
RIGHT OF SETOFF. Borrower grants to Lender a contractual possessory security
interest in, and hereby assigns, conveys, delivers, pledges, and transfers to
Lender all Borrower's right, title and interest in and to, Borrower's accounts
with Lender (whether checking, savings, or some other account), including
without limitation all accounts held jointly with someone else and all accounts
Borrower may open in the future, excluding however all IRA and Keogh accounts,
and all trust accounts for which the grant of a security interest would be
prohibited by law. Borrower authorizes Lender, to the extent permitted by
applicable law, to charge or setoff all sums owing on this Note against any and
all such accounts.
GENERAL PROVISIONS. Lender may delay or forgo enforcing any of its rights or
remedies under this Note without losing them. Borrower and any other person who
signs, guarantees or endorses this Note, to the extent allowed by law, waive any
applicable statute of limitations, presentment, demand for payment, protest and
notice of dishonor. Upon any change in the terms of this Note, and unless
otherwise expressly stated in writing, no party who signs this Note, whether as
maker, guarantor, accommodation maker or endorser, shall be released from
liability. All such parties agree that Lender may renew or extend (repeatedly
and for any length of time) this loan, or release any party, partner, or
guarantor or collateral; or impair, fail to realize upon or perfect Lender's
security interest in the collateral; and take any other action deemed necessary
by Lender without the consent of or notice to anyone. All such parties also
agree that Lender may modify this loan without the consent of or notice to
anyone other than the party with whom the modification is made.
PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF
THIS NOTE, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS. BORROWER AGREES TO
THE TERMS OF THE NOTE AND ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THE NOTE.
BORROWER:
CASA MUNRAS HOTEL PARTNERS, L.P., A CALIFORNIA LIMITED PARTNERSHIP
By: John F. Rothman By: Ronald A. Young
-------------------------------- --------------------------------
JOHN F. ROTHMAN, General Partner RONALD A. YOUNG, General Partner
<PAGE> 1
Exhibit 10.7
SUPPLEMENTAL TERMS LETTER
October 1, 1996
CASA MUNRAS HOTEL PARTNERS, L.P.
5525 Oakdale Avenue, #300
Woodland Hills, CA 91364
Attn.: John F. Rothman, General Partner
Ronald A. Young, General Partner
RE: PROMISSORY NOTE DATED OCTOBER 1, 1996, IN THE ORIGINAL
PRINCIPAL SUM OF $394,500.00 ("NOTE") EXECUTED BY CASA
MUNRAS HOTEL PARTNERS, L.P., A CALIFORNIA LIMITED
PARTNERSHIP ("BORROWER") IN FAVOR OF CITY NATIONAL BANK, A
NATIONAL BANKING ASSOCIATION ("CNB")
Dear John & Ronald:
This is to confirm that CNB will extend the credit facility more
completely described in the enclosed Note, subject to the additional terms and
conditions set forth herein. Capitalized terms not defined in this letter have
the meanings given them in the Note. This letter is hereby incorporated into the
Note (this letter and the Note, collectively, the "Note").
A. ADDITIONAL EVENTS OF DEFAULT
The following shall constitute additional Events of Default under the
Note:
1. Failure of Borrower to furnish CNB, within the times specified, the
following statements:
1.1 Within ninety (90) days after the end of each quarterly accounting
period of each fiscal year, a financial statement consisting of
not less than a balance sheet, and income statement, prepared in
accordance with generally accepted accounting principles
consistently applied, which financial statement may be internally
prepared;
1.2 Within one hundred twenty (120) days after the close of each
fiscal year, a copy of the annual audit report for such year for
Borrower and the Subsidiaries including therein a balance sheet,
income statement, reconciliation of net worth and statement of
cash flows, with notes thereto, the balance sheet, income
statement and statement of cash flows to be audited by a certified
public accountant acceptable to CNB, and certified by such
accountants to have been prepared in accordance with generally
accepted accounting principles consistently applied and
accompanied by Borrower's certification as to whether any event
has occurred which constitutes an Event of Default, and if so,
stating the facts with respect thereto; and
<PAGE> 2
Exhibit 10.7
John R. Rothman, General Partner
Ronald A. Young, General Partner
Casa Munras Hotel Partners, L.P.
October 1, 1996
Page 2
1.3 Such additional information, reports and/or statements as CNB may,
from time to time, reasonably request;
2. Failure of Borrower to maintain the following:
2.1 A ratio of Cash Flow from Operations before Partner's
distributions, to Debt Service of not less than 1.25 to 1 for each
fiscal year.
B. DEFINITIONS.
For purposes of the Note, the following terms have the following
meanings:
"CASH FLOW FROM OPERATIONS" shall be determined on a consolidated basis
for Borrower and the Subsidiaries and shall mean the sum of (a) net income after
taxes earned over the twelve month period ending on the date of determination,
plus (b) amortization of intangible assets, plus (c) interest expense, plus (d)
depreciation expensed during the twelve month period ending on the date of
determination.
"DEBT SERVICE" shall mean (a) the aggregate amount of Current Maturity
of Long Term Debt plus (b) all interest incurred on borrowed money during the
twelve month period ending on the date of determination. "Current Maturity of
Long Term Debt" shall mean that portion of Borrower's consolidated long term
liabilities, determined in accordance with generally accepted accounting
principles consistently applied, which shall, by the terms thereof, become due
and payable within one (1) year following the date of the balance sheet upon
which such calculations are based.
"SUBSIDIARY" shall mean any corporation, the majority of whose voting
shares are at any time owned, directly or indirectly by Borrower and/or by one
or more Subsidiaries.
C. ADDITIONAL TERMS AND CONDITIONS.
The following additional terms and conditions shall also apply to the
Note:
1. ENVIRONMENTAL INDEMNIFICATION. Due to the environmentally sensitive
nature of the industry in which Borrower is principally engaged and upon which
CNB will rely as its primary source of repayment, and in consideration of CNB
extending credit to Borrower, Borrower has agreed to indemnify CNB against any
claims that may arise as a result of Borrower's business activities that are
environmental in nature and for which CNB may be named as a liable party.
Borrower agrees that it shall indemnify and hold harmless CNB, its
parent company, subsidiaries and all of their respective directors, officers,
employees, agents, successors, attorneys, and assigns from and against any loss,
damage, cost, expense, or liability directly or
<PAGE> 3
Exhibit 10.7
John R. Rothman, General Partner
Ronald A. Young, General Partner
Casa Munras Hotel Partners, L.P.
October 1, 1996
Page 3
indirectly arising out of or attributable to the use, generation, manufacture,
production, storage, release, threatened release, discharge, disposal, or
presence of a hazardous substance on, under, or about Borrower's property or
operations or property leased to Borrower, including but not limited to
attorneys' fees (including the reasonable estimate of the allocated cost of
in-house counsel and staff). For these purposes, the term "hazardous substances"
means any substance which is or becomes designated as "hazardous" or "toxic"
under any Federal, state, or local law. This indemnity shall survive repayment
of Borrower's obligations to CNB.
Except for documents and instruments specifically referenced herein
or in the Note, this letter and the Note constitute the entire agreement of the
parties hereto and supersedes any prior or contemporaneous oral or written
agreements, understandings, representations, warranties and negotiations, if
any, which are merged into this letter and the Note. If you agree to accept the
terms of this letter and the Note, please sign the enclosed acknowledgment copy
of this letter, as well as the enclosed Note, and return them to me on or before
October 18, 1996.
Sincerely,
CITY NATIONAL BANK, a national banking association
By: Brad Sims
----------------------------------------
Brad Sims, Senior Vice President/Manager
By: Judith Kay
----------------------------------------
Judith Kay, Vice President
Accepted and Agreed this 24th day of October, 1996.
CASA MUNRAS HOTEL PARTNERS, L.P.,
a California limited partnership
By: John F. Rothman
----------------------------------------
John F. Rothman, General Partner
By: Ronald A. Young
----------------------------------------
Ronald A. Young, General Partner
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000311158
<NAME> CASA MUNRAS HOTEL PARTNERS, L.P.
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 569,371
<SECURITIES> 0
<RECEIVABLES> 50,233
<ALLOWANCES> 0
<INVENTORY> 20,798
<CURRENT-ASSETS> 678,860
<PP&E> 3,320,225
<DEPRECIATION> (3,508,381)
<TOTAL-ASSETS> 4,039,085
<CURRENT-LIABILITIES> 876,917
<BONDS> 271,219
0
0
<COMMON> 0
<OTHER-SE> 2,890,949
<TOTAL-LIABILITY-AND-EQUITY> 4,039,085
<SALES> 3,862,735
<TOTAL-REVENUES> 3,862,735
<CGS> 0
<TOTAL-COSTS> 3,415,481
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 66,317
<INCOME-PRETAX> 447,254
<INCOME-TAX> 0
<INCOME-CONTINUING> 447,254
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 447,254
<EPS-PRIMARY> 100.39
<EPS-DILUTED> 0
</TABLE>
