<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, 1998
[ ] 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 95-3235634
- ------------------------------- ------------------
(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)
Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act:
Limited Partnership Units
-------------------------
(Title of Class)
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: $4,273,340
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 John F. Rothman and Ronald A. Young (the "Initial
General Partners"). On June 8, 1998, the Initial General Partners of the
Partnership were replaced by Casa Munras GP, LLC, a California limited liability
company (the "General Partner"), upon approval by the Limited Partners. The
General Partner is equally owned by the Initial General Partners. The change in
the General Partner resulted from the placement of a new First Mortgage (the
"First Mortgage") on the Hotel (see "Borrowings" described below). The owners of
the Units are hereinafter referred to as the "Limited Partners," and the Limited
Partners and the General Partner 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.
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 Partner believes 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
$4,273,340 and $3,991,382 generated at the Hotel for the years ended December
31, 1998 and 1997, approximately 80% represented room sales, 15% and 16% food
and beverage sales and 2% 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.
The Registrant has a management contract ("Contract") with Westland Hotel
Corporation ("Westland") to manage the operations of the Casa Munras which
expires in April of 2014. For additional information concerning Westland and the
relationship of the General Partner to Westland, see Item 9 and Item 12 of this
report.
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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 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 Initial General Partners controlled Westland at the
time the 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 arm's length, and the relationship between the
Initial General Partners and Westland was not at arm's length and may have
resulted in certain conflicts of interest. However, the Partnership feels that
the relationship is reasonably equivalent to that of an arm's length
relationship.
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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, 1998 and 1997:
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
--------------------------------------------------------------------------------------
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31 TOTAL
-------- ------- ------------ ----------- -----
<S> <C> <C> <C> <C> <C>
Room Sales
1998 $544,843 $925,229 $1,302,842 $655,115 $3,428,029
1997 535,847 835,189 1,174,146 649,665 3,194,847
1996 499,073 837,485 1,111,146 536,228 2,983,932
Food &
Beverage
Sales
1998 $126,492 $180,816 $180,250 $170,554 $658,112
1997 121,843 175,898 173,823 158,764 630,328
1996 150,908 192,122 206,280 159,426 708,736
Total
Revenues
1998 $709,885 $1,146,221 $1,542,912 $874,322 $4,273,340
1997 695,679 1,049,660 1,392,537 853,506 3,991,382
1996 682,264 1,073,777 1,370,350 736,344 3,862,735
Hotel
Occupancy
1998 50% 75% 83% 52% 65%
1997 51% 72% 85% 59% 67%
1996 55% 76% 82% 51% 66%
Average
Room Rate
1998 $ 79.82 $ 88.37 $ 103.38 $ 81.82 $ 90.43
1997 77.22 84.12 98.49 79.24 86.38
1996 66.16 79.29 97.04 74.74 81.24
</TABLE>
The Hotel operates 24 hours a day every day of the year. The Registrant
currently employs approximately 85 full-time employees and approximately 13
part-time employees, none of whom is covered by a collective bargaining
agreement. Employees are entitled to paid
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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 Partner believes that employee relations are satisfactory.
The Hotel is subject to licensing 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 Partner 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 Partner believes 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 Partner believes 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 June 1998, principal and accrued interest of $384,130 on the unsecured
promissory note due to an affiliate of the Initial General Partners was repaid.
In June 1998, principal and accrued interest of $231,979 on the unsecured
promissory note payable to a bank was repaid.
On April 6, 1998, one of the Initial General Partners advanced $200,000 and
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issued an unsecured 10% demand note to the Partnership; the funds were used to
finish construction of the additional guest rooms. In June 1998, principal and
accrued interest of $204,290 was repaid.
On May 6, 1998, the Registrant entered into an unsecured 10% promissory
note payable to a bank in the original principal amount of $250,000. The
principal amount plus unpaid interest was due on July 1, 1998. In June 1998,
principal and accrued interest of $252,014 was repaid.
On June 12, 1998, the Registrant obtained the First Mortgage on the Hotel
in the amount of $7,000,000. The First Mortgage requires monthly principal and
interest payments of $52,643, with interest fixed at 7.7% per annum (the
"Initial Interest Rate") until July 1, 2008, when the First Mortgage is
scheduled to mature. On July 1, 2008, subject to certain conditions, the
principal may be amortizable for two additional years. During this period, the
Initial Interest Rate will change to the lesser of the maximum rate permitted by
law or the greater of 2% above the Initial Interest Rate or 2% plus Treasury
Rate, as defined in the First Mortgage. Monthly impound payments are required
under the First Mortgage for property taxes, insurance, replacements and for any
incentive management fees due Westland under the Contract. For information
concerning Westland and the Contract, see Items 9 and 12 of this report.
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.
The Initial General Partners sought and obtained approval of the limited
partners for construction by the Partnership of 14 additional guest rooms on a
small undeveloped portion of the Hotel property. Construction of the additional
rooms was completed in June 1998. There are 166 guest rooms located in 11 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
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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
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 1997, the Hotel undertook a substantial capital refurbishment program
which was completed in 1998. The Registrant expended $1,096,553 and $327,019 in
1998 and 1997 (including $1,005,282 and $143,435, respectively, for construction
of 14 new guest rooms), which 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 capital expenditures in 1999
totaling approximately $700,000. The capital improvements will continue to
upgrade the Registrant's Hotel facility. These capital expenditures are expected
to be funded from cash reserves remaining from the First Mortgage obtained in
June 1998 and cash provided by operations.
The Partnership has obtained property and liability insurance coverage for
the Hotel Facility which it believes is adequate. The Partnership has not
obtained earthquake insurance coverage due to the cost of the premiums.
Item 3. Legal Proceedings.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
A solicitation of consent of the Limited Partners was made on May 15, 1998.
The solicitation sought the Limited Partners approval of Amendment No. 21 to the
Partnership Agreement which was required by the lender. The amendment included
the following:
1. removal of the Initial General Partners as the General Partners of the
Partnership and the appointment of an "entity" in the form of a
Limited Liability Company (owned by Rothman and Young) as the
replacement General Partner;
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2. adoption of language in the Partnership Agreement prohibiting the
Partnership from investing in any property other than the Casa Munras
Hotel;
3. assignment of the interest in the Partnership held by the Initial
General Partners to the Limited Liability Company being appointed as
the new General Partner of the Partnership; and,
4. updating certain tax provisions of the Partnership Agreement as
follows:
a. that capital accounts will be maintained in accordance with the
revised Internal Revenue Service Regulations;
b. qualified income offset and minimum gain chargeback provisions;
and,
c. provision for allocation of excess non-recourse liabilities.
The Limited Partners voted 2264 for, 27 against/withheld and there were 2164
abstentions.
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 31, 1999, was 586. No public trading market
exists for the Units.
The following cash distributions were paid to the Registrant's Partners
during 1997, 1998 and through March 31, 1999:
<TABLE>
<CAPTION>
DISTRIBUTION AGGREGATE AMOUNT
DATE OF DISTRIBUTION PER UNIT(*) OF DISTRIBUTION(*)
- -------------------- ------------ ------------------
<S> <C> <C>
January 31, 1997 $ 38.00 $ 171,000
April 30, 1997 10.00 45,000
July 31, 1997 20.00 90,000
October 31, 1997 70.00 315,000
January 31, 1998 20.00 90,000
June 19, 1998 1,039.00 4,675,500
</TABLE>
- ----------
(*) For the purpose of distributions, the Initial General Partners' $45,000
capital contribution is considered the equivalent of 45 Units.
In addition, a special distribution totaling $215,664 of refinance proceeds from
the First Mortgage was paid to the General Partner on June 30, 1998. For
information with respect to the special distribution paid to the General
Partner, see Items 6 and 10.
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Item 6. Management's Discussion and Analysis or Plan of Operation.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------------------
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Revenues $4,273,340 $3,991,382 $3,862,735 $3,305,500 $3,157,302
Net Income 339,169 $ 595,573 $ 447,254 $ 286,698 $ 289,986
Income Per
Unit $ 75.37 $ 132.35 $ 99.39 $ 63.71 $ 64.44
Distributions
Declared Per Unit $ 1,039.00 $ 120.00 $ 138.00 $ 100.00 $ 90.00
Total Assets
at December 31, $5,721,774 $3,990,305 $4,039,085 $3,691,851 $3,990,801
Long-Term Obli-
gations at
December 31,
(including
current portion) $6,952,889 $ 271,219 $ 369,844 $ -0- $ -0-
</TABLE>
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Year ended December 31, 1998 as compared to year ended December 31, 1997
A decrease in hotel occupancy from 67% to 65% offset by an increase in the
average room rate at the Hotel from $86.38 to $90.43 for 1997 as compared to
1998, respectively plus the addition of 14 new guest rooms available after June
21, 1998, resulted in an increase in room revenue from $3,194,847 to $3,428,029.
The increase in number of rooms rented and in average room rates in 1998 and a
full years impact of the 1997 capital improvement program are the principal
reason room revenue increased in 1998 as compared to 1997.
Food and beverage revenues increased $27,784 or 4% to $658,112 over 1997
comparable revenue. The increase in food and beverage revenues is attributed to
greater numbers of hotel guest patrons in the restaurant and lounge due to
additional rooms rented resulting from the new rooms added in 1998 as compared
to 1997.
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Expenses totaled $3,934,171 or 92% of revenue, in 1998 as compared to
$3,395,809 or 85% of revenues in 1997. The increase in the expense as a
percentage of revenue is principally attributed to the increased interest
expense as a result of the new First Mortgage totaling $297,197 or 7%.
Year ended December 31, 1997 as compared to year ended December 31, 1996
An increase in the occupancy rate at the Hotel from 66% to 67% and an
increase in the average room rate at the Hotel from $81.24 to $86.38 for 1997 as
compared to 1996, respectively, resulted in an increase of room revenues of
$210,915 to $3,194,847. 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 revenue totaled $630,328 in 1997, a $78,408, or
approximate 11% decrease over 1996 comparable revenue. The decrease is
principally attributed to reduced tour group business, which business generated
significant food and beverage revenue, in 1997 as compared to 1996.
Expenses totaled $3,395,809 or 85% of revenues, in 1997 as compared to
$3,415,481, or 88% of revenues, in 1996. The decrease in expenses as a
percentage of revenue is principally attributed to increased revenues as a
result of increased occupancy and average room rates, as compared to 1996. Many
operating expenses are fixed in nature and do not increase at the same rate as
revenues increase. In addition, repairs and maintenance were down $65,345 or
approximately 21% to $243,087 in 1997 as compared to 1996. The decrease is
primarily a result of the expanded capital improvement program to existing rooms
in 1996 for which there were increased expenses.
Liquidity and Capital Resources
The Registrant's primary source of cash is from the operation and leasing
of the Hotel. During 1998, the Registrant generated $746,512 in net cash
provided by operating activities.
In June 1998, the Partnership obtained a First Mortgage payable for
$7,000,000 at 7.7% interest, secured by the Hotel, with a ten year term; subject
to certain conditions, the principal may be amortizable for two additional
years. Monthly principal and interest payments totaling $52,643 were due
beginning August 1, 1998. The terms and conditions of the loan also require that
certain amounts be deposited monthly and held in escrow for property taxes,
insurance, repairs and possible incentive management fees due Westland under the
Contract. For additional information with respect to the First Mortgage, see the
section of Item 1 of this Report captioned "Borrowings".
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From the proceeds of the First Mortgage of $7,000,000, the Registrant
repaid the notes payable to affiliates of $588,420 and the notes due to the bank
of $480,125 and paid a distribution to the General and Limited Partners totaling
$4,891,164, with the balance of $1,040,291 being used to fund the construction
of the 14 additional guest rooms and other working capital purposes. The
distribution paid from refinancing proceeds includes a special distribution of
$215,664 paid to the General Partners as their 25% share of the refinancing
proceeds in excess of the return to the General and Limited Partners of their
original investment plus a 12% per year return from the Partnership's inception
(partial years pro-rated) less previous distributions from the Partnership's
inception paid to date.
Capital expenditures, totaled $1,096,553 in 1998, of which $1,005,282 were
expended for the 14 additional guest rooms completed in June 1998. It is
expected the Partnership will have capital expenditures in 1999 totaling
approximately $700,000. The capital improvements will continue to upgrade the
Registrant's Hotel facility. These capital expenditures are expected to be
funded from cash reserves remaining from the First Mortgage obtained in June
1998 and from cash provided by operations.
The General Partner intends, to the extent cash from operations is
available and such distributions are permitted under the First Mortgage, to
continue making cash distributions to the Partners at amounts approximating the
Registrant's net income.
Year 2000 Compliance
The inability of computers, software and other equipment utilizing
microprocessors to recognize and properly process data fields containing a 2
digit year is commonly referred to as the Year 2000 Compliance issue. As the
year 2000 approaches, such systems may be unable to accurately process certain
date-based information.
The Partnership has communicated with others with whom it does significant
business to determine their Year 2000 Compliance readiness and the extent to
which the Partnership is vulnerable to any third party Year 2000 issues.
However, there can be no guarantee that the systems of other companies on which
the Partnership's systems rely will be timely converted, or that a failure to
convert by another company, or a conversion that is incompatible with the
Partnership's systems, would not have a material adverse effect on the
Partnership.
The total cost to the Partnership of these Year 2000 Compliance activities
has not been and is not anticipated to be material to its financial position or
results of operations in any given year.
Item 7. Financial Statements.
The following are included in this Report in response to this Item
immediately subsequent to the signature page:
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Independent Auditors' Report.
Balance Sheets at December 31, 1998 and 1997.
Statements of Operations for the years ended December 31, 1998 and 1997.
Statements of Changes in Partners' (Deficit) Equity for the years ended
December 31, 1998 and 1997.
Statements of Cash Flows for the years ended December 31, 1998 and 1997.
Notes to Financial Statements for the years ended December 31, 1998 and
1997.
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 Partner
is Casa Munras GP, LLC, a California limited liability company, which replaced
the Initial General Partners. The General Partner of the Registrant is equally
owned by Messrs. Rothman and Young. Mr. Rothman, age 64, and Mr. Young, age 71,
were the Initial General Partners of the Registrant since its formation, and
were 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. Since December 1992, Mr. Young has been the president and
chief executive officer and the sole stockholder of Westland.
Item 10. Executive Compensation.
The General Partner does not receive any compensation from the Registrant
for serving as the Registrant's general partner.
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Set forth below is a summary of all compensation which may be payable to
the General Partner pursuant to the Partnership Agreement.
(1) Acquisitions. In the event the Registrant purchases additional hotels,
the General Partner is entitled to an acquisition fee of $20,000 per hotel.
(2) Operations. The General Partner is 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 Partner is 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 the General Partner. The Partnership Agreement provides
that if the General Partner of the Registrant should be removed 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 the 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
its interest in such compensation on the date of its removal, based upon the
market value of the assets of the Registrant on and as if such assets were sold
on the date of its 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 the removed General Partner of the
value of its 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.
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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. 20 filed with the State of California dated July 1,
1997, 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 16, 1999 OF CLASS
- -------------- ------------------- -------------- --------
<S> <C> <C> <C>
Limited Partner- Liquidity Fund XI 7 (*) .157
ship Units 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")
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is the sole general partner of Liquidity Fund XI, Liquidity Fund XII,
Liquidity Fund XIII, 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 16, 1999 CLASS
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Limited John F. Rothman 35 Units* .786
Partnership Ronald A. Young 46 Units* 1.033
Units
</TABLE>
- ----------
(*) Owned directly.
In addition, the General Partner owns a 1% interest in the equity, profits
and losses of the Registrant by virtue of the $22,500 capital contribution to
the Registrant by the Initial General Partners 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 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
15
<PAGE> 16
(1) 12% of profits before debt service and depreciation, as defined, and (2) 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 1998 and 1997, 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 1998 and 1997, $858,079 and $607,662,
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 1998 and 1997, 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 1998 and 1997 totaled $28,932 and $26,592, respectively.
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 or 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 Partner under the circumstances described therein.
16
<PAGE> 17
PART IV
Item 13. Exhibits, List and Reports on Form 8-K.
(a) Exhibits:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
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).
3.3 Amendment No. 21 to Certificate and Agreement of Limited Partnership
of Casa Munras Hotel Partners, L.P., dated June 8, 1998.
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 dated 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
</TABLE>
17
<PAGE> 18
<TABLE>
<S> <C>
Exhibit 10.3 to the Registrant's Quarterly Report on Form 10-QSB for
the quarter ended June 30, 1994).
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).
10.6 Promissory Note dated as of October 1, 1996, executed by Casa Munras
Hotel Partners in favor of City National Bank (incorporated by
reference to Exhibit 10.6 of the Registrant's Annual Report on Form
10-KSB for the year ended December 31, 1996).
10.7 Supplemental Terms Letter dated October 1, 1996, executed by Casa
Munras Hotel Partners, L.P. and City National Bank (incorporated by
reference to Exhibit 10.7 of the Registrant's Annual Report on Form
10- KSB for the year ended December 31, 1996).
10.9 Fixed Rate Note dated June 12, 1998, executed by Casa Munras Hotel
Partners, L.P. and Amresco Capital, L.P. (incorporated by reference to
10.9 of the Registrant's Quarterly Report on Form 10-QSB for the
quarterly period ended June 30, 1998).
10.10 Unsecured Demand Note dated April 6, 1998, in the principal amount of
$200,000, executed by Casa Munras Hotel Partners, L.P. in favor of
Ronald A. Young.
10.11 Promissory Note dated as of May 6, 1998, in the principal amount of
$250,000, executed by Casa Munras Hotel Partners in favor of City
National Bank.
</TABLE>
(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.
CASA MUNRAS GP, LLC
General Partner
By: /s/ John F. Rothman Date: March 30, 1999
-------------------------------------
John F. Rothman, Managing Member
<PAGE> 20
INDEPENDENT AUDITORS' REPORT
To the Partners of
Casa Munras Hotel Partners, L.P.:
We have audited the accompanying balance sheets of Casa Munras Hotel Partners,
L.P., a Limited Partnership (the "Partnership"), as of December 31, 1998 and
1997, and the related statements of operations, changes in partners' (deficit)
equity, and cash flows for the years then ended. 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, 1998 and
1997, and the results of its operations and its cash flows for the years then
ended in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
March 19, 1999
<PAGE> 21
CASA MUNRAS HOTEL PARTNERS, L.P.
(A Limited Partnership)
BALANCE SHEETS
DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash $ 1,077,900 $ 367,327
Accounts receivable 42,219 55,151
Food and beverage inventories 17,834 15,908
Prepaid expenses 69,931 33,566
----------- -----------
Total current assets 1,207,884 471,952
----------- -----------
LAND, PROPERTY AND EQUIPMENT - at cost:
Building and improvements 5,802,211 4,793,731
Hotel furnishings and equipment 1,697,701 1,480,980
Restaurant furnishings and equipment 52,266 37,479
Construction in progress -- 143,435
Less accumulated depreciation (4,212,919) (3,849,939)
----------- -----------
3,339,259 2,605,686
Land 700,000 700,000
----------- -----------
Land, property and equipment - net 4,039,259 3,305,686
----------- -----------
OTHER ASSETS:
Liquor license 40,000 40,000
Loan commitment fees - net 222,689 172,667
Escrow impound accounts 211,942 --
----------- -----------
Total other assets 474,631 212,667
----------- -----------
TOTAL $ 5,721,774 $ 3,990,305
=========== ===========
LIABILITIES AND PARTNERS' (DEFICIT) EQUITY
CURRENT LIABILITIES:
Accounts payable - trade $ 66,260 $ 44,061
Accounts payable - related parties 55,707 34,712
Accrued incentive management fees -
related parties 151,812 144,190
Accrued salaries and wages 58,667 55,003
Accrued room tax 32,671 30,476
Accrued other 9,241 7,912
Distributions payable -- 90,000
Current portion of long-term debt 99,823 98,625
Note payable to affiliate -- 366,210
----------- -----------
Total current liabilities 474,181 871,189
LONG-TERM DEBT 6,853,066 172,594
----------- -----------
Total liabilities 7,327,247 1,043,783
----------- -----------
PARTNERS' (DEFICIT) EQUITY:
General Partners (45 units issued and
outstanding) (229,560) 29,467
Limited Partners (4,455 units issued
and outstanding) (1,375,913) 2,917,055
----------- -----------
Total partners' (deficit) equity (1,605,473) 2,946,522
----------- -----------
TOTAL $ 5,721,774 $ 3,990,305
=========== ===========
</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, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
---------- ----------
REVENUES:
<S> <C> <C>
Room $3,428,029 $3,194,847
Food and beverage 658,112 630,328
Lease 91,991 87,072
Telephone 46,711 43,112
Other 48,497 36,023
---------- ----------
Total 4,273,340 3,991,382
---------- ----------
EXPENSES:
Rooms 973,070 890,228
Food and beverage 600,527 575,019
Administrative and general 387,139 352,925
Depreciation and amortization 374,698 341,558
Interest 335,829 67,403
Management fees 319,379 301,133
Marketing 304,599 265,033
Repairs and maintenance 259,641 243,087
Energy cost 169,041 153,543
Partnership administration and professional fees 88,395 67,858
Property taxes 67,736 65,084
Insurance 31,610 48,298
Telephone 22,507 24,640
---------- ----------
Total (includes reimbursed costs and payments
for services to related parties of $957,153 and
$773,608 during 1998 and 1997, respectively) 3,934,171 3,395,809
---------- ----------
NET INCOME $ 339,169 $ 595,573
========== ==========
ALLOCATION OF NET INCOME:
General Partners $ 3,392 $ 5,956
Limited Partners ($75.37 per Unit in 1998 and
$132.35 per Unit in 1997, based upon
4,455 Limited Partnership Units) 335,777 589,617
---------- ----------
Total $ 339,169 $ 595,573
========== ==========
DISTRIBUTIONS DECLARED PER LIMITED PARTNERSHIP
UNIT (based upon 4,500 Total
Units outstanding):
Ordinary income $ 75.37 $ 120.00
Return of capital 963.63 --
---------- ----------
$ 1,039.00 $ 120.00
========== ==========
</TABLE>
See accompanying notes to financial statements.
3
<PAGE> 23
CASA MUNRAS HOTEL PARTNERS, L.P.
(A Limited Partnership)
STATEMENTS OF CHANGES IN PARTNERS' (DEFICIT) EQUITY
YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
GENERAL LIMITED
PARTNERS PARTNERS TOTAL
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
EQUITY, JANUARY 1, 1997 $ 28,911 $ 2,862,038 $ 2,890,949
NET INCOME 5,956 589,617 595,573
DISTRIBUTIONS TO PARTNERS (5,400) (534,600) (540,000)
--------- ----------- -----------
EQUITY, DECEMBER 31, 1997 29,467 2,917,055 2,946,522
NET INCOME 3,392 335,777 339,169
DISTRIBUTIONS TO PARTNERS (262,419) (4,628,745) (4,891,164)
--------- ----------- -----------
DEFICIT, DECEMBER 31, 1998 $(229,560) $(1,375,913) $(1,605,473)
========= =========== ===========
</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, 1998 AND 1997
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
1998 1997
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 339,169 $ 595,573
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 374,698 341,558
Change in assets and liabilities:
Accounts receivable 12,932 (4,918)
Food and beverage inventories (1,926) 4,890
Prepaid expenses (36,365) 4,892
Accounts payable and accrued expenses 29,387 (179)
Accounts payable and accrued expenses -
related parties 28,617 40,738
----------- -----------
Net cash provided by operating activities 746,512 982,554
----------- -----------
INVESTING ACTIVITIES:
Acquisition of property and equipment (1,096,553) (327,019)
----------- -----------
FINANCING ACTIVITIES:
Borrowings from affiliates 222,210 34,713
Payments on notes from affiliates (588,420) --
Borrowings on note payable 250,000 --
Payment on note payable (250,000) --
Long-term borrowings 7,000,000 --
Payment of long-term debt (318,330) (98,625)
Loan commitment fees (61,740) (172,667)
Impound escrow accounts (211,942) --
Distributions paid to Partners (4,981,164) (621,000)
----------- -----------
Cash provided by (used for) financing activities 1,060,614 (857,579)
----------- -----------
NET INCREASE (DECREASE) IN CASH 710,573 (202,044)
CASH AT BEGINNING OF YEAR 367,327 569,371
----------- -----------
CASH AT END OF YEAR $ 1,077,900 $ 367,327
=========== ===========
SUPPLEMENTAL DISCLOSURE OF
CASH FLOW INFORMATION -
Cash paid during the year for interest $ 335,829 $ 32,690
=========== ===========
Cash paid during the year for taxes $ 800 $ 800
=========== ===========
</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, 1998 AND 1997
- --------------------------------------------------------------------------------
1. GENERAL INFORMATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
General Information:
General - Casa Munras Hotel Partners, L.P. (the "Partnership") 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 166 guest rooms, a
restaurant, bar and banquet facilities, and several retail stores.
The Initial General Partners of the Partnership were Ronald A. Young and
John F. Rothman (the "Initial General Partners") who each purchased a 0.5%
interest in the Partnership. On June 8, 1998, the Initial General Partners
of the Partnership were replaced by Casa Munras GP, LLC, a California
limited liability company (the "General Partner") upon approval by the
Limited Partners. The General Partner is equally owned by the Initial
General Partners. The change in the General Partner resulted from the
placement of a new First Mortgage (the "First Mortgage") on the Hotel (see
Note 4). The remaining 99% interest is owned collectively by the Limited
Partners. The General Partner is 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:
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 long-term debt approximates fair value at December 31,
1998, as the related interest rate is in line with market rates.
Inventories - Food and Beverage inventories are stated at the lower of cost
(first-in, first-out method) or market.
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 five to seven years.
Loan Commitment Fee - The loan commitment fee is net of accumulated
amortization of $11,718 in 1998. The loan commitment fee on the First
Mortgage is amortized over the ten year term of the loan using the
straight-line method which approximates the effective interest rate method
(see Note 4).
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, 1998,
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 - Based on an evaluation of existing
long-lived assets performed in accordance with Financial Accounting
Standards Board issued Statement of Financial Accounting Standards No. 121
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of", the Partnership has determined that no impairment
has occurred for the years ended December 31, 1998 and 1997.
7
<PAGE> 27
2. NOTES PAYABLE TO AFFILIATES
In June 1998, principal and accrued interest of $384,130 on the unsecured
promissory note due to an affiliate of the Initial General Partners was
repaid.
On April 6, 1998, one of the Initial General Partners advanced $200,000 and
issued an unsecured 10% demand note to the Partnership; the funds were used
to finish construction of the additional guest rooms. In June 1998,
principal and accrued interest of $204,290 was repaid.
3. NOTE PAYABLE
On May 6, 1998, the Registrant entered into an unsecured 10% promissory note
payable to a bank in the original principal amount of $250,000. The
principal amount plus unpaid interest was due on July 1, 1998. In June 1998,
principal and accrued interest of $252,014 was repaid.
4. LONG-TERM DEBT
Long-term debt as of December 31 consisted of the following:
<TABLE>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
First Mortgage payable --
monthly principal and interest (7.7%)
payments of $52,643 through June 2008;
beginning July 2008, interest rate equals
the lesser of the maximum rate permitted
by law or the greater of 2% above the
initial interest rate or 2% plus the
treasury rate, as defined in the
Agreement; due July 2010; impounds
required for property taxes, insurance,
replacements and incentive management fees
due Westland under the Contract (see note
5), payable monthly; certain additional
restrictions apply regarding payment of
Partnership distributions $6,952,889 $ --
Unsecured Promissory Note -
Paid off in June, 1998 -- 271,219
---------- --------
6,952,889 271,219
Less current portion 99,823 98,625
---------- --------
Long-term debt $6,853,066 $172,594
========== ========
</TABLE>
8
<PAGE> 28
Principal payments required for the years ending December 31, are as
follows:
<TABLE>
<S> <C>
1999 $ 99,823
2000 107,786
2001 116,385
2002 125,670
2003 135,696
Thereafter 6,367,529
----------
Total $6,952,889
==========
</TABLE>
Substantially all of the assets of the Partnership are pledged as security
for the above debt.
5. 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
$91,900.
6. MANAGEMENT AND RELATED PARTIES
The Partnership has a management contract (the "Contract") with Westland
Hotel Corporation ("Westland") to manage the operations of the Casa Munras
and any additional projects. The Contract has an expiration date in 2014.
Westland receives 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 1998 and 1997 were $167,567 and
$156,943, respectively. Incentive management fees for 1998 and 1997 were
$151,812 and $144,190, respectively.
Ronald A. Young, an Initial General Partner, is the president and sole
shareholder of Westland, and John F. Rothman, the other Initial 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 worker's compensation
premiums, various hotel operating supplies and furnishings and other
administrative expenses. The total of such costs reimbursed in 1998 and 1997
were $887,011 and $634,254, respectively.
9
<PAGE> 29
Accounts payable and accrued expenses as of December 31, 1998 and 1997
include $207,519 and $178,902, 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 1998 and 1997 such reserves were not required, as the Partnership's
expenditures for replacements exceeded the reserve called for in the
contract.
7. DISTRIBUTIONS TO PARTNERS
The following table summarized the distributions accrued and paid to
Partners for 1998 and 1997:
<TABLE>
<CAPTION>
PER UNIT TOTAL
---------- ----------
<S> <C> <C>
Distributions during 1997:
Distributions accrued in 1996, paid in 1997 $ 38.00 $ 171,000
---------- ----------
Distributions accrued and paid in 1997:
April 30, 1997 10.00 45,000
July 31, 1997 20.00 90,000
October 31, 1997 70.00 315,000
---------- ----------
Total paid in 1997 $ 138.00 $ 621,000
========== ==========
Total accrued and paid in 1997 100.00 450,000
Distributions accrued in 1997, paid in 1998 20.00 90,000
---------- ----------
Total distributions for 1997 $ 120.00 $ 540,000
========== ==========
Distributions during 1998:
Distributions accrued in 1997, paid in 1998 $ 20.00 $ 90,000
Distributions accrued and paid in 1998:
June 19, 1998 $ 1,039.00 $4,675,500
---------- ----------
Total paid in 1998 $ 1,059.00 $4.765,500
========== ==========
</TABLE>
In addition, a Special Distribution totaling $215,664 of refinance proceeds
from the First Mortgage was paid to the General Partner on June 30, 1998
(the "Special Distribution"). The Special Distribution is the General
Partner's 25% share of the refinancing proceeds in excess of the return to
the General and Limited Partners of their original investment plus a 12% per
year return from the Partnership's inception (partial years prorated) less
previous distributions from the Partnership's inception paid to date.
10
<PAGE> 30
8. YEAR 2000 COMPLIANCE (Unaudited)
The inability of computers, software and other equipment utilizing
microprocessors to recognize and properly process data fields containing a 2
digit year is commonly referred to as the Year 2000 Compliance issue. As the
year 2000 approaches, such systems may be unable to accurately process
certain date-based information.
The Partnership has communicated with others with whom it does significant
business to determine their Year 2000 Compliance readiness and the extent to
which the Partnership is vulnerable to any third party Year 2000 issues.
However, there can be no guarantee that the systems of other companies on
which the Partnership's systems rely will be timely converted, or that a
failure to convert by another company, or a conversion that is incompatible
with the Partnership's systems, would not have a material adverse effect on
the Partnership.
The total cost to the Partnership of these Year 2000 Compliance activities
has not been and is not anticipated to be material to its financial position
or results of operations in any given year.
11
<PAGE> 1
EXHIBIT 3.3
AMENDMENT NO.21 TO CERTIFICATE AND AGREEMENT
OF LIMITED PARTNERSHIP OF
CASA MUNRAS HOTEL PARTNERS. L.P.
Reference is made to that certain Certificate and Agreement of
Limited Partnership (the "Agreement") of Casa Munras Hotel Partners, L.P., a
California Limited Partnership (formerly known as Western Host Monterey
Partners) (the "Partnership") recorded on April 19, 1978, as Instrument No.
78-412330 of the Official Records of Los Angeles County and recorded on May 1,
1978 on Reel 1238, Pages 762 through 831 of the Official Records of Monterey
County, as heretofore amended. The General Partners are executing this Amendment
No. 21 on behalf of themselves and as attorneys-in-fact for all Limited.
Partners.
Whereas, a majority of the Units of Participation (as defined
in the Agreement) held by the Limited Partners have approved a proposal
(the "Proposal") to (i) satisfy certain conditions imposed by AMRESCO
Capital, L.P. (the "Lender") in connection with a secured
limited-recourse loan of up to $7 million by the Partnership, (ii) to
remove the individual General Partners of the Partnership and replace
them with Casa Munras GP, LLC; and (iii) adopt certain tax related
amendments to the Agreement.
NOW, THEREFORE, the Agreement shall be amended as follows:
Part I - SPV Amendments
A. Article III is amended in its entirety to read as follows:
ARTICLE III
NATURE OF BUSINESS
The Partnership's business and purpose shall consist solely of
the acquisition, ownership, operation and management of the real estate project
known as Casa Munras Garden Hotel, located in Monterey, Monterey County,
California (the "Property") and such activities as are necessary, incidental or
appropriate in connection therewith.
B. The following paragraph (h) is added to ARTICLE IX:
(h) Power and Duties. Notwithstanding any other provision of
this Agreement
1
<PAGE> 2
EXHIBIT 3.3
and so long as any obligation secured by the Mortgage (as defined below) remains
outstanding and not discharged in full, the General Partner shall have no
authority to (except, (a) if such action would not result in a violation of, or
default under, the Mortgage, with the vote or written consent of the General
Partner and the holders of a majority of the Units of Participation then held by
the Limited Partners entitled to vote, or (b) otherwise, with the unanimous vote
or written consent of the General Partner and the holders of the Units of
Participation):
borrow money or incur indebtedness on behalf
of the Partnership other than normal trade
accounts payable and lease obligations in
the normal course of business, or grant
consensual liens on the Partnership's
property; except, however, that the General
Partner is hereby authorized to secure
financing for the Partnership pursuant to
the terms of the Deed of Trust, Assignment
of Leases and Rents, Security Agreement, and
Fixture Filing (if any), with AMRESCO
CAPITAL, L.P., a Delaware limited
partnership (the "Mortgage") and other
indebtedness expressly permitted therein or
in the documents related to the Mortgage,
and to grant a mortgage, lien or liens on
the Partnership's Property to secure such
Mortgage;
(ii) dissolve or liquidate the Partnership;
sell or lease, or otherwise dispose of all
or substantially all of the assets of the
Partnership;
file a voluntary petition or otherwise
initiate proceedings to have the Partnership
adjudicated bankrupt or insolvent, or
consent to the institution of bankruptcy or
insolvency proceedings against the
Partnership, or file a petition seeking or
consenting to reorganization or relief of
the Partnership as debtor under any
applicable federal or state law relating to
bankruptcy, insolvency, or other relief for
debtors with respect to the Partnership; or
seek or consent to the appointment of any
trustee, receiver, conservator, assignee,
sequestrator, custodian, liquidator (or
other similar official) of the Partnership
or of all or any substantial part of the
properties and assets of the Partnership, or
make any general assignment for the benefit
of creditors of the Partnership, or admit in
writing the inability of the Partnership to
pay its debts generally as they become due
or
2
<PAGE> 3
EXHIBIT 3.3
declare or effect a moratorium on the
Partnership debt or take any action in
furtherance of any action;
amend, modify or alter Article III,
paragraph (h) of Article IX, Article XIII,
paragraph (d) of Article XXI or paragraphs
(h) and (i) of Article XXII;
merge or consolidate with any other entity.
So long as any obligation secured by the Mortgage remains outstanding and not
discharged in full, the Partnership shall have a limited liability company
general partner having articles of organization containing the restrictions and
terms set forth in Articles One, Two and Three of the Operating Agreement of
Casa Munras GP, LLC, as of the date hereof, and the Partnership shall have no
other general partners.
C. Article XIII is amended in its entirety to read as follows:
ARTICLE XIII
DEATH OF LIMITED PARTNERS
The bankruptcy, death, dissolution, liquidation, termination or adjudication of
incompetency of a Limited Partner shall not cause the termination or dissolution
of the Partnership and the business of the Partnership shall continue. Upon any
such occurrence, the trustee, receiver, executor, administrator, committee,
guardian or conservator of such Limited Partner shall have all the rights of
such Limited Partner for the purpose of settling or managing its estate or
property, subject to satisfying conditions precedent to the admission of such
assignee as a substitute Limited Partner. The transfer by such trustee,
receiver, executor, administrator, committee, guardian or conservator of any
Partnership Interest shall be subject to all of the restrictions, hereunder to
which such transfer would have been subject if such transfer had been made by
such bankrupt, deceased, dissolved, liquidated, terminated or incompetent
Limited Partner.
D. The title of Article XXI is changed to "Covenants" and the following
paragraph (d) is added thereto:
(d) The Partnership shall:
MAINTAIN BOOKS AND RECORDS AND BANK ACCOUNTS SEPARATE FROM THOSE OF ANY
OTHER PERSON;
3
<PAGE> 4
EXHIBIT 3.3
MAINTAIN ITS ASSETS IN SUCH A MANNER THAT IT IS NOT COSTLY OR DIFFICULT
TO SEGREGATE, IDENTIFY OR ASCERTAIN SUCH ASSETS;
HOLD REGULAR PARTNERSHIP MEETINGS, AS APPROPRIATE, TO CONDUCT THE
BUSINESS OF THE PARTNERSHIP, AND OBSERVE ALL OTHER PARTNERSHIP
FORMALITIES;
HOLD ITSELF OUT TO CREDITORS AND THE PUBLIC AS A LEGAL ENTITY SEPARATE
AND DISTINCT FROM ANY OTHER ENTITY;
PREPARE SEPARATE TAX RETURNS AND FINANCIAL STATEMENTS, OR IF PART OF A
CONSOLIDATED GROUP, THEN IT WILL BE SHOWN AS A SEPARATE MEMBER OF SUCH
GROUP;
ALLOCATE AND CHARGE FAIRLY AND REASONABLY ANY COMMON EMPLOYEE OR
OVERHEAD SHARED WITH AFFILIATES AND MAINTAIN A SUFFICIENT NUMBER OF
EMPLOYEES IN LIGHT OF ITS CONTEMPLATED BUSINESS OPERATIONS;
TRANSACT ALL BUSINESS WITH AFFILIATES ON AN ARM'S-LENGTH BASIS AND
PURSUANT TO ENFORCEABLE AGREEMENTS;
CONDUCT BUSINESS IN ITS OWN NAME, AND USE SEPARATE STATIONERY, INVOICES
AND CHECKS;
(1) not commingle its assets or funds with those
of any other person;
(j) not assume, guarantee or pay the debts or
obligations of any other person;
(a) pay its own liabilities out of its own
funds;
(1) not acquire obligations or securities of its
partners or members;
(m) not pledge its assets for the benefit of any
other entity or make any loans or advances
to any entity;
(n) correct any known misunderstanding regarding
its separate identity;
(o) maintain adequate capital in light of its
contemplated business
4
<PAGE> 5
EXHIBIT 3.3
operations; and
(p) maintain all required qualifications to do
business in the state in which the Property
is located.
E. The following paragraphs (h) and (i) are added to ARTICLE XXII:
(h) Ownership of Partnership Property: Notwithstanding any other
provision of this Agreement and so long as any obligation secured by the
Mortgage remains outstanding and not discharged in full, all property owned by
the Partnership shall be owned by the Partnership as an entity and, insofar as
permitted by applicable law, no Partner shall have any ownership interest in any
Partnership property in its individual name or right, and each Partner's
Partnerships Interest shall be personal property for all purposes.
(i) Conflicting Provisions: In the event any of the provisions of
Article III, paragraph (h) of Article IX, Article XIII, paragraph (d) of Article
XXI, paragraph (h) of Article XXII or this paragraph (i) of Article XXII of this
Agreement shall conflict with any of the other provisions of this Agreement, the
terms of Article III, paragraph (h) of Article IX, Article XIII, paragraph (d)
of Article XXI, paragraph (h) of Article XXII or this paragraph (i) of Article
XXII, as the case may be, shall control.
Part II - Amendment Allowing Assignment of General Partner Interest to Other
General Partners
Article XIV is amended in its entirety to read as follows:
ARTICLE XIV
ASSIGNMENT OF GENERAL PARTNER'S INTEREST
The General Partners shall not assign, pledge, encumber, sell or otherwise
dispose of their interests as General Partners in the Partnership, except to
other or successor General Partners.
Part III - Tax Related Amendments
The following paragraphs (d), (e), (f), (g) and (h) are added to Article VII:
(d) The defined terms in this Article VII shall have the following
meanings:
5
<PAGE> 6
EXHIBIT 3.3
A. "Adjusted Capital Deficit" means, with respect to
any Partner, the deficit balance, if any, in such Partner's capital
account as of the end of the relevant fiscal year, after giving effect
to the following adjustments:
(i) Credit to such capital account any amounts which
such Partner is obligated to restore pursuant to any
provision of this Agreement or is deemed to be
obligated to restore pursuant to the penultimate
sentences of Regulations Sections l.7O4-2(g)(1) and
1.704-2(i)(5); and
(ii) Debit to such capital account the items
described in Sections 1.704-1(b)(2)(ii)(d)(5), and
1.704-1(b)(2)(ii)(d)(6) of the Regulations.
The foregoing definition of Adjusted Capital Deficit is intended to
comply with the provisions of Section 1.704-1(b)(2)(ii)(d) of the
Regulations and shall be interpreted consistently therewith.
B. "Code" means the Internal Revenue Code of 1986, as
amended from time to time (or any corresponding provisions of
succeeding law).
C. "Excess Nonrecourse Liabilities" has the meaning
set forth in Section 1.752-3 of the Regulations.
D. "Nonrecourse Deductions" has the meaning set forth
in Section 1.704-2(b)(1) of the Regulations.
E. "Nonrecourse Liability" has the meaning set forth
in Section 1.704-2(b)(3) of the Regulations.
F. "Partner Nonrecourse Debt" has the meaning set
forth in Section 1.704-2(b)(4) of the Regulations.
G. "Partner Nonrecourse Debt Minimum Gain" means an
amount, with respect to each Partner Nonrecourse Debt, equal to the
Partnership Minimum Gain that would result if such Partner Nonrecourse
Debt were treated as a Nonrecourse Liability, determined in accordance
with Section 1.704-2(i)(3) of the Regulations.
H. "Partner Nonrecourse Deductions" has the meaning
set forth in Sections 1.704-2(i)(1) and L704-2(i)(2) of the
Regulations.
6
<PAGE> 7
EXHIBIT 3.3
I. "Partnership Minimum Gain" has the meaning set
forth in Sections 1.704-2(b)(2) and 1.704-2(d) of the Regulations.
J. "Regulations" means the Income Tax Regulations,
including Temporary Regulations, promulgated under the Code, as such
regulations may be amended from time to time (including corresponding
provisions of succeeding regulations).
(e) Capital Account Maintenance.
Capital accounts of the Partners shall at all times
be determined and maintained in accordance with the principles set forth in
Section 1.704-1(b)(2)(iv) of the Regulations.
(f) Minimum Gain.
A. Minimum Gain Chargeback. Except as otherwise
provided in Section 1.704-2(f) of the Regulations, notwithstanding any
other provision hereof, if there is a net decrease in Partnership
Minimum Gain during any fiscal year, each Partner shall be specially
allocated items of Partnership income and gain for such fiscal year
(and, if necessary, subsequent fiscal years) in an amount equal to such
Partner's share of the net decrease in Partnership Minimum Gain,
determined in accordance with Regulations Section 1.704-2(g).
Allocations pursuant to the previous sentence shall be made in
proportion to the respective amounts required to be allocated to each
Partner and pursuant thereto. The items to be so allocated shall be
determined in accordance with Sections 1.704-2(f)(6) and 1.704(j)(2) of
the Regulations. This Paragraph 4A is intended to comply with the
minimum gain chargeback requirement in Section 1.704-2(f) of the
Regulations and shall be interpreted consistently therewith.
B. Partner Minimum Gain Chargeback. Except as
otherwise provided in Section 1.704-2(i)(4) of the Regulations,
notwithstanding any other provision hereof, if there is a net decrease
in Partner Nonrecourse Debt Minimum Gain attributable to a Partner
Nonrecourse Debt during any Partnership fiscal year, each Partner who
has a share of the Partner Nonrecourse Debt Minimum Gain attributable
to such Partner Nonrecourse Debt, determined in accordance with Section
1.704-2(i)(5) of the Regulations, shall be specially allocated items of
Partnership income and gain for such fiscal year (and, if necessary,
subsequent fiscal years) in an amount equal to such Partner's share of
the net decrease in Partner
7
<PAGE> 8
EXHIBIT 3.3
Nonrecourse Debt Minimum Gain attributable to such Partner Nonrecourse
Debt, determined in accordance with Regulations Section 1.704(2)(i)(4).
Allocations pursuant to the previous sentence shall be made in
proportion to the respective amounts required to be allocated to each
Partner and pursuant thereto. The items to be so allocated shall be
determined in accordance with Sections 1.704-2(i)(4) and 1.704-2(j)(2)
of the Regulations. This Paragraph 4B is intended to comply with the
minimum gain chargeback requirement in Section 1.704-2(i)(4) of the
Regulations and shall be interpreted consistently therewith.
(g) Qualified Income Offset.
In the event any Partner unexpectedly receives any
adjustments, allocations or distributions described in Sections
1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5) or 1.704-1(b)(2)(ii)(d)(6) of
the Regulations, items of Partnership income and gain shall be specially
allocated to each such Partner in an amount and manner sufficient to eliminate,
to the extent required by the Regulations, the Adjusted Capital Account Deficit
of such Partner as quickly as possible. This Paragraph 5 is intended to comply
with the qualified income offset provisions of Section 1.704-1(b) of the
Regulations and shall be interpreted consistently therewith.
(h) Allocation of Excess Nonrecourse Liabilities.
Pursuant to Section 1.752-3 of the Regulations, it is
agreed that any Excess Nonrecourse Liabilities incurred by this Limited
Partnership on or after the effective date of this Amendment (as set forth in
Paragraph 7 hereof) shall be allocated among the Partners in the same manner as
Sales Profits are allocated under Article VII(c).
8
<PAGE> 9
EXHIBIT 3.3
This Amendment to Certificate and Agreement of Limited Partnership
shall be effective as of June 8, 1998.
IN WITNESS WHEREOF the undersigned have executed this Amendment
effective as of the date set forth above.
GENERAL PARTNERS:
/s/ John F. Rothman
----------------------------------------
John F. Rothman
/s/ Ronald A. Young
----------------------------------------
Ronald A. Young
LIMITED PARTNERS:
By: /s/ John R. Rothman
------------------------------------
John R. Rothman, as
Attorney-In-Fact for the
persons who are Limited Partners
By: /s/ Ronald A. Young
------------------------------------
Ronald A. Young, as
Attorney-In-Fact for the
persons who are Limited Partners
9
<PAGE> 10
EXHIBIT 3.3
Casa Munras GP, LLC hereby accepts the General Partner interests of
John F. Rothman and Ronald A. Young in Casa Munras Hotel Partners, L.P. (the
"Partnership") and agrees to be bound by the Certificate and Agreement of
Limited Partnership, as amended by Amendments 1 through 21, of the Certificate
and Agreement of Limited Partnership of the Partnership.
SUBSTITUTE GENERAL PARTNER
CASA MUNRAS GP, LLC
By: /s/ John F. Rothman
-------------------------
John F. Rothman
Managing Member
10
<PAGE> 11
EXHIBIT 3.3
ASSIGNMENT OF GENERAL PARTNER INTEREST
The undersigned owns a General Partner interest in Casa Munras Hotel
Partners, L.P. (the "Partnership"), representing (i) the rights of a general
partner of the Partnership, including, without limitation, the right to receive
certain acquisition fees and a portion of the net profits of the Partnership and
(ii) a 0.5% interest in the capital of the Partnership representing a 0.5%
partnership interest in the net profits and losses of the Partnership (together
with all payments and distributions therefrom), subject to the terms of the
Certificate and Agreement of Limited Partnership dated March 31, 1978, as
amended, of the Partnership (the "Transferred Interest"). The undersigned does
hereby assign the Transferred Interest to Casa Munras GP, LLC, with this
assignment to be effective on the close of business on June 8, 1998.
Dated: June 8, 1998
/s/ John R. Rothman
-----------------------------------
John F. Rothman
ACCEPTANCE BY TRANSFEREE
The undersigned accepts the transfer referred to above and agrees to
become a substitute General Partner of Casa Munras Hotel Partners, L.P. (the
"Partnership") with respect to the Transferred Interest and further agrees to be
bound by the Certificate and Agreement of Limited Partnership, as amended, of
the Partnership, as if a party signing the same.
Dated: June 8, 1998
CASA MUNRAS GP, LLC
By: /s/ John F. Rothman
------------------------------------
John F. Rothman, Managing Member
11
<PAGE> 12
EXHIBIT 3.3
ASSIGNMENT OF GENERAL PARTNER INTEREST
The undersigned owns a General Partner interest in Casa Munras Hotel
Partners, L.P. (the "Partnership"), representing (i) the rights of a general
partner of the Partnership, including, without limitation, the right to receive
certain acquisition fees and a portion of the net profits of the Partnership and
(ii) a 0.5% interest in the capital of the Partnership representing a 0.5%
partnership interest in the net profits and losses of the Partnership (together
with all payments and distributions therefrom), subject to the terms of the
Certificate and Agreement of Limited Partnership dated March 31, 1978, as
amended, of the Partnership (the "Transferred Interest"). The undersigned does
hereby assign the Transferred Interest to Casa Munras GP, LLC, with this
assignment to be effective on the close of business on June 8, 1998.
Dated: June 8, 1998
/s/ Ronald A. Young
------------------------------------
Ronald A. Young
ACCEPTANCE BY TRANSFEREE
The undersigned accepts the transfer referred to above and agrees to
become a substitute General Partner of Casa Munras Hotel Partners, L.P. (the
"Partnership") with respect to the Transferred Interest and further agrees to be
bound by the Certificate and Agreement of Limited Partnership, as amended, of
the Partnership, as if a party signing the same.
Dated: June 8, 1998
CASA MUNRAS GP, LLC
By: /s/ John F. Rothman
------------------------------------
John F. Rothman, Managing Member
12
<PAGE> 1
EXHIBIT 10.10
UNSECURED DEMAND NOTE
$200,000.00 WOODLAND HILLS, CALIFORNIA
APRIL 6, 1998
FOR VALUE RECEIVED, the undersigned, Monterey Hotel Partners,
L.P., a California Limited Partnership, promises to pay to Ronald A. Young, at
651 San Gorgonia Street, San Diego, California 92106, on demand, the principal
amount of Two Hundred Thousand Dollars ($200,000) which amount shall be payable
in lawful money of the United States of America, and the undersigned further
promises to pay interest in like money.
The undersigned further promises to pay interest on the unpaid
principal balance form the date hereof until paid, at Tem Percent (10%) per
annum, commencing April 6, 1998. Interest shall be due and payable upon payment
of the principal amount and shall be calculated on a basis of a year of 365 or
366 days as appropriate. Interest shall bear like interest as the principal.
The undersigned promises to pay costs of collection and
attorneys' fees in reasonable amount if default is made in the payment of this
Note. The right to plead any and all statutes of limitation as a defense to any
demand hereunder is hereby waived to the full extent permitted by law. This Note
shall be governed by and construed in accordance with the laws of the State of
California.
MONTEREY HOTEL PARTNERS, L.P.
a California Limited Partnership
By: /s/ John F. Rothman
------------------------------------
John R. Rothman, General Partner
<PAGE> 1
EXHIBIT 10.11
CITY NATIONAL BANK
PROMISSORY NOTE
- --------------------------------------------------------------------------------
PRINCIPAL $250,000.00
LOAN DATE 05-06-1998
MATURITY 07-01-1998
LOAN NO. 30224
BORROWER: CASA MUNRAS HOTEL PARTNERS, L.P.,
A CALIFORNIA LIMITED PARTNERSHIP
5525 OAKDALE AVE., #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: $250,000.00 INITIAL RATE: 10.000%
DATE OF NOTE: MAY 6, 1998
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 TWO HUNDRED FIFTY THOUSAND & 00/100 DOLLARS
($250,000.00), TOGETHER WITH INTEREST ON THE UNPAID PRINCIPAL BALANCE FROM MAY
6, 1998, UNTIL PAID IN FULL.
PAYMENT. BORROWER WILL PAY THIS LOAN IN ONE PRINCIPAL PAYMENT OF $250,000.00
PLUS INTEREST ON JULY 1, 1998. THIS PAYMENT DUE JULY 1, 1998, WILL BE FOR ALL
PRINCIPAL AND ACCRUED INTEREST NOT YET PAID. IN ADDITION, BORROWER WILL PAY
REGULAR MONTHLY PAYMENTS OF ALL ACCRUED UNPAID INTEREST DUE AS OF EACH PAYMENT
DATE, BEGINNING JUNE 1, 1998, WITH ALL SUBSEQUENT INTEREST PAYMENTS TO BE DUE ON
THE SAME DAY OF EACH MONTH AFTER THAT. The annual interest rate for this Note is
computed on a 365/360 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 applied first to accrued unpaid
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 8.500%. 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 10.000%. 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. Borrower agrees that all loan fees and
other prepaid finance charges are earned fully as of the date of the loan and
will not be subject to refund upon early payment (whether voluntary or as a
result of default), except as otherwise required by law. 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.
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
<PAGE> 2
EXHIBIT 10.11
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 to 6.500 percentage points
over the Index. Lender may hire or pay someone else to help collect this Note if
Borrower does 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-judgment 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: /s/ JOHN F. ROTHMAN BY: /s/ RONALD A. YOUNG
-------------------------------- --------------------------------
JOHN F. ROTHMAN, General Partner RONALD A. YOUNG, General Partner
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0
0
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