SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
( X ) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the Fiscal Year Ended December 31, 1995
Commission file number 0-8913
SUPER 8 MOTELS, LTD.
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(Exact name of registrant as specified in its charter)
California 94-2514354
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(State or other jurisdiction of (I.R.S. Employer Iden-
incorporation or organization) tification No.)
2030 J Street, Sacramento, California 95814
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (916)442-9183
Securities registered pursuant to Section 12 (b) of the Act: None
Securities registered pursuant to Section 12 (g) of the Act:
UNITS OF LIMITED PARTNERSHIP INTEREST
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(Title of Class)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15 (d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or such shorter period that the registrant has been required to
file such reports) and (2) has been subject to the filing
requirements for the past 90 days. Yes X No __
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not 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-K or any
amendment to this Form 10-K.(X)
State the aggregate market value of the voting stock held by non-affiliates
of the registrant.
Inapplicable
DOCUMENTS INCORPORATED BY REFERENCE
None
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PART I
Item 1. BUSINESS
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General Development of Business
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Super 8 Motels, Ltd. (the "Partnership") is a limited partnership which
was organized under the California Uniform Limited Partnership Act on August 25,
1978. The general partner of the Partnership is Grotewohl Management Services,
Inc. (the "General Partner"), a California corporation which is wholly-owned by
Philip B. Grotewohl.
In an offering which terminated on January 8, 1979, 5,000 units of
limited partnership interest in the Partnership (the "Units") were offered and
sold at a purchase price of $1,000 per Unit.
The proceeds of the offering have been expended for the acquisition (by
lease) and development of three properties located in South San Francisco,
Modesto and Sacramento County, California, all of which are currently
operational motel properties. These motels are managed and operated by the
Partnership under the name "Super 8 Motel."
There is hereby incorporated by reference herein the information
regarding the Partnership's motel properties contained in Item 2 of this
report.
Narrative Description of Business
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(a) Franchise Agreements
The Partnership operates each of its motel properties as a franchisee of
Super 8 Motels, Inc. through sub-franchises obtained from Super 8 Management
Corporation. In March 1988, Brown & Grotewohl, a California general partnership
which is an affiliate of the General Partner, became sub-franchisor in the
stead of Super 8 Management Corporation. As of December 31, 1995, Super 8
Motels, Inc. had franchised a total of 1,366 motels having an aggregate of
83,748 guest rooms in operation.
The objective of the Super 8 Motel chain is to maintain a competitive
position in the motel industry by offering to the public comfortable, no-frills
accommodations at a budget price. Each Super 8 Motel provides its guests with
attractively decorated rooms, free color television, direct dial telephone and
other basic amenities, but eliminates or modifies other items to provide
substantial cost reduction without seriously affecting comfort or convenience.
Some of these savings are accomplished by reductions in room size, elimination
of expensive lobbies, and by substantial economies in building construction.
By the terms of each franchise agreement with Super 8 Motels, Inc., the
Partnership pays monthly franchise fees equal to 4% of its gross room revenues
(half of which is paid to the sub-franchisor) and contributes an additional 1%
of its gross room revenues to a fund administered by Super 8 Motels, Inc. to
finance the national reservation and promotions program.
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(b) Operation of the Motels
The General Partner manages and operates the Partnership's motels. The
General Partner's management responsibilities include, but are not limited to,
supervision and direction of the Partnership's employees having direct
responsibility for the operation of each motel, establishment of room rates and
direction of the promotional activities of the Partnership's employees. In
addition, the General Partner directs the purchase of replacement equipment and
supplies, maintenance activity and the engagement or selection of all vendors,
suppliers and independent contractors. The Partnership's financial activities
are performed by the individual motel staffs and a centralized accounting staff,
all of which work under the direction of the General Partner. Together, these
staffs perform all bookkeeping duties in connection with each motel, including
all collections and all disbursements to be paid out of funds generated by motel
operations or otherwise supplied by the Partnership.
As of December 31, 1995, the Partnership employed a total of 54 persons,
either full or part-time at its three motel properties, including 14 desk
clerks, 32 housekeeping and laundry personnel, three maintenance personnel,
two van drivers, and three motel managers.
In addition, and as of the same date, the Partnership employed 12
persons in administrative positions at its central office in Sacramento,
California, all of whom worked for the Partnership on a part-time basis. They
included accounting, investor service, sales and marketing and motel supervisory
personnel, an attorney, secretarial personnel, and purchasing personnel. The
attorney, who is also the Director of Operations, is David P. Grotewohl, son of
Philip B. Grotewohl. Also employed by the Partnership on a part-time basis is
Julie Grotewohl, daughter of Philip Grotewohl, as Director of Sales, and Mark
Grotewohl, son of Philip Grotewohl, as Director of Marketing. Mark Grotewohl is
the property manager of the Sacramento motel on a part-time basis.
(c) Property Acquisition and Development
The net proceeds of the offering of the Units, and financing in the
amount of $850,000 secured by deeds of trust on each of the three Partnership
motels, was expended in connection with the acquisition (by lease) and
development of three properties located in South San Francisco, Modesto and
Sacramento County, California, respectively.
It is the present intention of the General Partner that the proceeds of
any sale or refinancing be distributed to the Limited Partners rather than
reinvested.
(d) Competition
As discussed in greater detail below, each area in which its motel
properties are located the Partnership faces intense competition from in motels
of varying quality and size, including other budget motels which are part of
nationwide chains and which have access to nationwide reservation systems.
Super 8 Motels offer accommodations at the upper end, in terms of
facilities and prices, of the budget segment of the lodging industry. Generally,
Super 8 Motels offer larger rooms and higher quality furnishings at higher rates
than motels franchised under the trade-names Motel 6, Western 6, Econolodge and
Red Roof Inn.
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Item 2. PROPERTIES
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The net proceeds of the offering of Units have been expended for the
acquisition (by lease) and development of three properties located in
Sacramento County, South San Francisco and Modesto, California. The aggregate
acquisition and development cost of the properties was funded with such proceeds
and financing in the amount of $850,000 secured by deeds of trust to each of the
motels. This original loan was subsequently repaid on April 8,1988 with the
proceeds of the San Francisco Federal Savings & Loan Association (SFFSLA) loan
described in Note 6 of the Financial Statements. The SFFSLA loan bears interest
at the rate of 3% over the Federal Home Loan Bank Board 11th District Cost of
Funds with a minimum interest rate of 8.5% and requires monthly payments of
principal and interest in the amount of $9,061. The SFFSLA loan, which is
secured by a deed of trust encumbering the South San Francisco motel, matures
May 1, 2003, at which time a "balloon" payment of approximately $740,000 will
be due and payable.
(a) Sacramento County
Description of Motel. The Partnership is the lessee of approximately
241,000 square feet of land located at the northeast corner of Madison Avenue
and Hillsdale Boulevard, and adjacent to Interstate Highway 80, in Sacramento
County, California. The site is located to the east of the City of Sacramento.
The Partnership has constructed a 128-room motel on the site. Construction of
the motel was completed and the motel commenced operations in April 1980.
The property site consists of two leased parcels. The leases provide for
payment by the Partnership of all taxes, utilities and costs of maintenance in
addition to the monthly rent, and will expire on June 30, 2013. Pursuant to the
lease agreements, the Partnership has five consecutive 10-year renewal options.
The leases provide for adjustments to the monthly rent every two years according
to changes in the Consumer Price Index for all Urban Consumers for the San
Francisco-Oakland Area (the "CPI"). The total monthly rent was adjusted to
$9,277 ($111,325 annually) as of July 1, 1994.
The leases provide that the improvements constructed by the Partnership
on the leased premises will remain the property of the Partnership during the
lease term but that upon expiration of the leases, title to any such
improvements will pass to the lessor. The Partnership has subleased several
unused portions of the motel site as described below. As a result of the
development discussed below, the General Partner regards the Sacramento site as
completely developed.
Madison Avenue Properties Sublease. On February 25, 1983 the
Partnership entered into a sublease with Madison Avenue Properties (an
unaffiliated developer which is a general partnership of which Jim White,
Norbert J. Havlick, William J. Hughes, Jr. and Merle D. Gilliland are the
partners) of an undeveloped portion of the motel site comprising approximately
38,000 square feet. Construction of a restaurant and cocktail lounge facility
on the property was completed and the facility opened for business in April
1984.
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The sublease to Madison Avenue Properties extends through March 31,
2003, and has five consecutive 10-year renewal options (but does not require the
Partnership to extend the term of its master leases for the property.) The cost
of improvements and all maintenance, taxes and utilities are the responsibility
of the sublessee. The Partnership and the fee owner of the property have agreed
to subordinate their interests therein to encumbrances securing permanent
financing for the restaurant and cocktail lounge facility.
The annual rent payable to the Partnership is equal to the greater of
1.5% of gross receipts generated by the restaurant and cocktail lounge facility,
or a fixed annual rent. The fixed annual rent is adjusted every two years
according to changes in the CPI. On April 1, 1994 the fixed annual rent was
increased to $34,385.
The total rent earned by the Partnership during the last three years is
as follows:
Year Rent
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1993 $35,688
1994 $34,012
1995 $34,385
KMH Trinity Properties Sublease. During December 1986, the Partnership
entered into a sublease with KMH Trinity Properties ("KMH") of another
undeveloped portion of the motel site consisting of approximately 33,000
square feet. KMH is an unaffiliated limited partnership of which Kenneth L.
Mackey and William J. Hughes, Jr. are the general partners.
The sublease to KMH is for a term expiring on June 30, 2013, with five
consecutive 10-year renewal options exercisable by KMH. Because the initial
terms of the Partnership's leases of the overall motel property end on June 30,
2013, the Partnership has agreed in the sublease to exercise up to two of its
10-year renewal options in the event that KMH elects to extend the basic term of
its sublease with the Partnership.
The sublease provides for a minimum annual rent which is adjusted every
two years for changes in the CPI. On December 1, 1994 the minimum annual rent
was adjusted to $29,672.
Pursuant to the sublease, KMH has developed and is operating a retail
shopping center on the subleased land. KMH is required to pay, in addition to
the minimum rent described above, 25% of all rent received each year from
tenants of the shopping center in excess of a sum which is equal to $1.05
multiplied by the rentable square footage of the shopping center (9,930 square
feet). The shopping center opened in September 1987. The total annual rent
(including the minimum rent) earned by the Partnership during the last three
years is as follows:
Year Rent
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1993 $31,951
1994 $30,309
1995 $29,672
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Sterling Equity Investments Sublease. During November 1987, the
Partnership entered into a sublease with Sterling Equity Investments
("Sterling") of an undeveloped portion of the motel site consisting of
approximately 27,000 square feet. Sterling is an unaffiliated general
partnership of which Kenneth L. Mackey and William J. Hughes, Jr. are the
partners.
The sublease is for a term expiring on June 30, 2013, with five
consecutive 10-year renewal options exercisable by Sterling. Because the initial
terms of the Partnership's leases of the property end on June 30, 2013, the
Partnership has agreed in the sublease to exercise up to two of its 10-year
renewal options in the event that Sterling elects to extend the basic term of
its sublease with the Partnership.
The sublease provides for a minimum annual rent which is adjusted every
two years for changes in the CPI. On November 12, 1995, the minimum annual rent
was adjusted to $19,676.
Pursuant to the sublease Sterling has developed and is operating a
retail shopping center on the subleased land. Sterling is required to pay, in
addition to the minimum rent described above, 25% of all rent received in each
year from tenants of the shopping center in excess of a sum which is equal to
$1.10 multiplied by the rentable square footage of the shopping center (9,069
square feet). The shopping center opened in July 1988. The total annual rent
(including the minimum rent) earned by the Partnership during the last three
years is as follows:
Year Rent
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1993 $17,789
1994 $18,912
1995 $19,001
Motel Operations. The Sacramento motel achieved the following average
occupancy rates and average room rates for the years 1995, 1994 and 1993:
Average Occupancy Rate
1995 1994 1993
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January 44.2% 52.0% 48.7%
February 53.9% 63.5% 70.8%
March 57.4% 71.4% 60.8%
April 61.8% 61.0% 68.6%
May 57.3% 63.7% 72.4%
June 72.9% 79.1% 63.3%
July 56.8% 59.1% 73.9%
August 70.2% 74.1% 83.9%
September 54.2% 58.4% 69.5%
October 47.9% 61.3% 59.5%
November 36.2% 56.4% 50.1%
December 32.7% 43.2% 41.3%
Annual Average 53.8% 61.9% 63.5%
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Average Room Rate
1995 1994 1993
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January $38.88 $34.24 $38.31
February $38.21 $35.08 $36.36
March $38.63 $33.65 $37.68
April $40.29 $36.80 $37.78
May $42.26 $39.28 $40.69
June $41.74 $36.48 $38.89
July $43.58 $38.73 $37.46
August $40.28 $39.18 $35.02
September $41.39 $40.63 $36.09
October $41.90 $38.21 $36.62
November $44.22 $37.01 $36.53
December $42.61 $37.21 $37.53
Annual Average $41.06 $37.21 $37.38
The following lodging facilities provide direct and indirect
competition to the Partnership's Sacramento County motel:
APPROXIMATE
NUMBER DISTANCE FROM
FACILITY OF ROOMS THE MOTEL
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Motel 6 82 Across Street
Holiday Inn 350 0.25 mile
La Quinta Motel 130 0.50 mile
Oxford Suites 131 5.00 miles
The Sacramento County motel's patronage consists primarily of leisure,
military and corporate sources. The motel has significant weekend patronage
from sports teams and vacation travelers. In 1995 the nearby McClellan Air Force
base accounted for approximately 14% of the room revenue and approximately 19%
of the occupied rooms. McClellan Air Force Base has become a candidate for
closure. Based on current conditions in the Sacramento area lodging market,
such closure would have a significant negative impact on the Partnership's
business. Further, the base has added 30 rooms of on-base transient housing
during 1994 which caused McClellan Air Force base's share of occupancy to
decline from 30% in 1994 to 19% in 1995.
(b) South San Francisco
Description of Motel. The Partnership is the lessee of two parcels of
approximately 81,330 square feet of land located at the corner of Mitchell and
West Harris Avenues in the City of South San Francisco, approximately two miles
north of the San Francisco International Airport. One of the two parcels leased
was actually a sublease until the Partnership's landlord purchased the subleased
area in 1984 from an unrelated party. In 1984 the original lease was modified
to reflect the changed ownership, and had substantially the same terms and
conditions as the original lease. The Partnership has constructed a 117-room
motel on the site. Construction of the motel was completed and motel operations
commenced on December 5, 1979.
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The leases provide for payment by the Partnership of all taxes,
utilities and costs of maintenance and expire, according to their terms, on
December 31, 2007. Each lease provides for five consecutive five-year renewal
options exercisable by the Partnership. The monthly rent for each parcel is
adjusted at five-year intervals according to changes in the CPI. As of
December 15, 1993 the rent was adjusted to $7,547 per month ($90,564 per year).
Improvements constructed by the Partnership on the subleased premises
will remain the property of the Partnership during the sublease term. However,
upon the expiration of the subleases, title to any such improvements will pass
to the lessor.
Motel Operation. The South San Francisco motel achieved the following
average occupancy rates and average room rates for the years 1995, 1994 and
1993:
Average Occupancy Rate
1995 1994 1993
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January 59.1% 54.0% 45.6%
February 56.6% 53.1% 49.8%
March 61.6% 65.8% 53.2%
April 53.0% 46.0% 51.5%
May 68.9% 61.3% 66.7%
June 77.9% 69.7% 65.0%
July 82.9% 75.5% 74.2%
August 88.0% 75.4% 83.6%
September 86.0% 74.7% 73.4%
October 75.7% 73.6% 74.5%
November 67.2% 61.4% 52.8%
December 54.9% 53.4% 46.1%
Annual Average 69.4% 63.8% 61.5%
Average Room Rate
1995 1994 1993
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January $46.22 $45.28 $47.36
February $46.20 $45.51 $45.86
March $46.43 $46.09 $47.33
April $50.00 $48.33 $50.20
May $49.42 $47.40 $51.04
June $48.67 $49.61 $51.47
July $51.24 $50.20 $53.08
August $53.57 $51.33 $53.54
September $52.56 $49.83 $51.05
October $48.67 $47.64 $47.24
November $48.16 $47.04 $46.19
December $48.28 $46.89 $46.04
Annual Average $49.43 $48.13 $49.64
The following lodging facilities provide direct and indirect competition
to the Partnership's South San Francisco motel:
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APPROXIMATE
NUMBER DISTANCE FROM
FACILITY OF ROOMS THE MOTEL
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Ramada Inn 250 Across Street
Econo Lodge 51 Adjacent
La Quinta Motor Inn 174 0.25 mile
TraveLodge 200 0.50 mile
Grosvenor Inn 210 0.50 mile
Comfort Suites 165 1.00 mile
Days Inn 200 2.00 mile
The major sources of patronage at the motel are leisure travelers and
business travelers. No single account supplies as much as 5% of the motel's
patronage.
(c) Modesto
Description of Motel. The Partnership is the lessee of 2.188 acres of
land in the City of Modesto on Orangeburg Avenue near Evergreen Road, located
immediately east of U.S. Highway 99, upon which it has constructed an 80-room
motel. Construction of the motel was completed and operations commenced during
April 1980.
The lease term commenced on September 15, 1978 and will expire on
September 13, 2029. The lease may be extended at the Partnership's option for
three additional 10-year periods. The monthly rent is adjusted at three-year
intervals according to changes in the CPI. The rent was adjusted effective
September 15, 1993 to $5,553 per month ($66,637 per year).
During the term of the lease, the Partnership is responsible for the
payment of all taxes, utilities and costs of maintenance. The lease provides
that the improvements on the premises are the property of the Partnership until
the termination of the lease, at which time they will become the property of the
lessor.
Motel Operation. The Modesto motel achieved the following average
occupancy rates and average room rates for the years 1995, 1994 and 1993:
Average Occupancy Rate
1995 1994 1993
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January 58.1% 59.9% 53.1%
February 78.8% 68.4% 67.3%
March 77.6% 71.4% 69.0%
April 70.0% 70.5% 70.4%
May 74.6% 66.0% 70.7%
June 78.3% 80.1% 83.2%
July 80.6% 78.0% 90.2%
August 86.8% 78.8% 82.7%
September 82.1% 71.2% 80.4%
October 73.2% 68.4% 72.5%
November 62.0% 68.0% 62.8%
December 56.1% 70.8% 52.7%
Annual Average 73.2% 71.0% 71.2%
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Average Room Rate
1995 1994 1993
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January $40.55 $39.78 $42.46
February $39.34 $39.91 $41.75
March $40.46 $39.98 $40.95
April $41.20 $40.29 $40.26
May $41.55 $41.65 $40.04
June $42.38 $41.95 $40.57
July $42.17 $41.80 $38.94
August $41.49 $42.46 $40.12
September $40.86 $42.45 $39.22
October $40.71 $41.09 $40.41
November $40.63 $40.34 $40.69
December $40.93 $39.88 $40.53
Annual Average $41.06 $41.02 $40.39
The following lodging facilities provide direct and indirect competition
to the Partnership's Modesto motel:
APPROXIMATE
NUMBER DISTANCE FROM
FACILITY OF ROOMS THE MOTEL
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Ramada Inn 115 0.10 mile
Holiday Inn 188 0.25 mile
Mallard's Best Western 120 0.50 mile
Red Lion 285 2.00 miles
The major sources of patronage at the Modesto motel are business
travelers, leisure travelers and many sports teams attending athletic events in
the area. No single account generates as much as 5% of the motel's total
patronage.
Item 3. LEGAL PROCEEDINGS
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Inapplicable
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
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Inapplicable
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
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Market Information
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The Units are not freely transferable and no public market in the Units
has developed or is expected to develop.
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Holders
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As of December 31, 1995, 809 investors (the "Limited Partners") held Units
in the Partnership.
Distributions
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In the discretion of the General Partner distributions are made from
"Operational Cash Flow," defined in the Partnership's Certificate and Agreement
of Limited Partnership, as amended (the "Partnership Agreement") as total cash
receipts from Partnership operations less cash operating disbursements. Except
for payment to the General Partner of a property management fee (see Item 11
hereof), distributions of Operational Cash Flow are generally allocated
between and paid to the General Partner and Limited Partners as follows:
(1) Ninety percent to the Limited Partners;
(2) Ten percent to the General Partner.
Notwithstanding the foregoing, however, the General Partner's
distributions from Operational Cash Flow are deferred and paid to the General
Partner only after payment to the Limited Partners of distributions from
Operational Cash Flow equal to 10% of their capital contributions, calculated on
a cumulative annual basis (the "Preferred Return"), and payment to the General
Partner of deferred and current property management fees. (See Item 11 hereof.)
Distributions of Operational Cash Flow to the Limited Partners satisfied the
Preferred Return after the distribution made for the quarter ending December 31,
1985 and in each subsequent year, together with payment of all current and
accrued property management fees. (See Item 11 hereof.) Accordingly, for any
year in which the Limited Partners receive the Preferred Return calculated on a
cumulative annual basis and after payment of any current property management
fees (see Item 11 hereof), the General Partner will be entitled to its share of
distributions from Operational Cash Flow for such year.
The following distributions to the Limited Partners were made during the
years 1994 and 1995:
Total Amount
Date Distribution Per Unit
---------- -------------- ----------
2/15/94 $125,000 $25.00
5/15/94 $125,000 $25.00
8/15/94 $125,000 $25.00
11/15/94 $125,000 $25.00
2/15/95 $125,000 $25.00
5/15/95 $125,000 $25.00
8/15/95 $125,000 $25.00
11/15/95 $125,000 $25.00
See Item 11 for the amount of distributions to the General
Partner.
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Item 6. SELECTED FINANCIAL DATA
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SUPER 8 MOTELS, LTD.
Following are selected financial data for the Partnership for its last
five fiscal years ended December 31, 1995, 1994, 1993, 1992 and 1991.
Years Ended December 31:
----------------------------------------------------------
1995 1994 1993 1992 1991
---------- ---------- ---------- ---------- ----------
Guest room income $3,373,790 $3,236,373 $3,252,522 $3,392,719 $3,185,165
Net Income $530,783 $471,069 $227,464 $324,269 $262,035
Per Partnership Unit:
Cash distributions $100.00 $100.00 $100.00 $100.00 $102.50
Net income $105.01 $93.27 $45.04 $64.21 $52.41
December 31:
----------------------------------------------------------
1995 1994 1993 1992 1991
---------- ---------- ---------- ---------- ----------
Total Assets $2,618,110 $2,628,782 $2,671,473 $2,987,613 $3,211,708
Long-Term Debt $960,709 $986,557 $1,010,318 $1,032,150 $1,057,650
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Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
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OF OPERATION
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Liquidity and Capital Resources
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The General Partner believes that the Partnership's liquidity, defined
as its ability to generate sufficient cash to meet its cash needs, is adequate.
The Partnership's current assets of $748,521 exceed its current liabilities of
$177,397 by $571,124. These net current assets provide a reserve in excess of
the General Partner's target of $250,000. The Partnership's primary source of
internal liquidity is revenues from motel operations, which, since commencement
of motel operations, have been sufficient to satisfy the Partnership's cash
needs, including repayment of debt interest and principal, capital improvements
and distributions to the Limited Partners and General Partner. The
Partnership's Statements of Cash Flows reflects an increase in cash and
temporary investments during the fiscal year covered by this report.
The Partnership's properties are currently unencumbered except for the
loan described in Item 2 above, the principal balance of which was $986,571 at
December 31, 1995. Although no assurance can be had in this regard, the General
Partner believes that the Partnership's equity in its properties provides a
potential source of external liquidity (through financing) in the event the
Partnership's internal liquidity is impaired.
Since commencement of motel operations, the Partnership has, either by
purchase or lease, expended cash for the improvement and refurbishment of its
motels. All such expenditures have been funded with the Partnership's revenue
from motel operations.
The Partnership expended 6.8% of room revenue on renovation and
replacements during the fiscal year covered by this report. The $229,206
expended (of which $128,748 was capitalized) included $16,797 in guest room tub
repairs, $12,925 in replacement guest room chairs, $9,142 in replacement
bedspreads, $8,256 for replacement air conditioning units, $8,007 in replacement
lamps and lampshades, $5,788 for guest room wallpaper and $5,553 for building
repairs. The items capitalized included $33,364 for roof replacements in
Sacramento and Modesto, $39,781 in guest room carpet, $12,039 to rekey the South
San Francisco property, $28,730 for shuttle vehicles at the South San Francisco
property, $4,940 for an ice machine at the Sacramento property, $2,797 for a
replacement dryer in Modesto and $2,191 for a new computer in Modesto.
The Partnership expended 4.6% of room revenue on renovation and
replacements during the fiscal year ended December 31, 1994. The $150,181
expended (of which $90,107 was capitalized) included $47,682 for guest room
carpets, $19,162 for an airport shuttle van for the South San Francisco property
and $17,148 for new television sets for the Sacramento and Modesto properties.
Uncapitalized replacement and renovation items included $6,314 for new sign
faces at the Modesto property, $8,020 for fiberglass tub repairs at South San
Francisco and Sacramento, $8,339 for door reconstruction at Sacramento and
$7,285 for new bedspreads.
The General Partner anticipates future expenditures for refurbishment of
the Partnership's motels to amount to approximately 3% of room revenues as some
deferred items have been completed.
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The Partnership currently has no material commitments for capital
expenditures. Its three motel properties are in full operation and no further
property acquisitions or extraordinary capital expenditures are planned. The
General Partner is aware of no material trends or changes with respect to the
mix or relative cost of the Partnership's capital resources. Adequate working
capital is expected to be generated by motel operations.
New Accounting Standards
- ------------------------
SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to be Disposed Of," requires the Partnership to disclose
information about potential impairment to the value of long-lived assets. The
Partnership is not required to adopt and does not currently plan to adopt SFAS
No. 121 until its fiscal year ending December 31, 1996. The Partnership does not
anticipate that any disclosures about impairment of long-lived assets under SFAS
No. 121 will be necessary.
Results of Operations
- ---------------------
Combined Financial Results
- --------------------------
The following tables summarize the Partnership's operating results for
the fiscal years ended December 31, 1993, 1994 and 1995 on a combined basis.
The results of the individual properties follow in separate subsections. The
income and expense numbers in the following table are shown on an accrual basis
and other payments on a cash basis. Total expenditures include the operating
expenses of the motels, together with the cost of capital improvements and those
Partnership expenses properly allocable to such motels.
Average Average
Occupancy Room
Fiscal Year Ended: Rate Rate
----------- --------
December 31, 1993 64.7% $42.39
December 31, 1994 64.8% $42.11
December 31, 1995 64.2% $44.32
Total
Expenditures Partnership
Total and Cash Flow
Fiscal Year Ended: Revenues Debt Service (1)
---------- ------------ -----------
December 31, 1993 $3,326,790 $2,862,133 $464,657
December 31, 1994 $3,318,533 $2,686,966 $631,567
December 31, 1995 $3,476,890 $2,836,242 $640,648
(1) While Partnership Cash Flow as it is used here is not an amount
found in the financial statements, this amount is the best indicator of the
annual change in the amount, if any, available for distribution to the Limited
Partners. This calculation is reconciled to the financial statement in the
following table.
- 13 -
<PAGE>
Reconciliation of Cash Flow from Operations included in the chart above
to Net Income as shown on the Statements of Operations (in the financial
statements) is as follows:
1995 1994 1993
-------- -------- --------
Cash Flow from Operations $640,648 $631,567 $464,657
Principal Payments on Financial Obligations 23,747 21,832 21,160
Additions to Fixed Assets 128,748 90,107 27,091
Depreciation and Amortization (261,488) (275,859) (285,596)
Other Items (872) 3,422 151
-------- -------- --------
Net Income $530,783 $471,069 $227,463
======== ======== ========
Following is a reconciliation of the Partnership Cash Flow (shown above)
to the aggregate total of Cash Flow from Operations for the Partnership's three
motels which are segregated in the tables following this reconciliation.
1995 1994 1993
-------- -------- --------
South San Francisco Motel $372,917 $281,648 $226,334
Sacramento Motel 195,669 288,450 266,240
Modesto Motel 108,118 108,860 18,470
-------- -------- --------
Aggregate Cash Flow from Property Operations 676,704 678,958 511,044
Partnership Management Fees (55,556) (55,556) (55,556)
Interest on Cash Reserves 17,226 8,413 8,688
Other Income (net of Other Expenses) not
allocated to the individual properties 2,274 (248) 481
-------- -------- --------
Partnership Cash Flow $640,648 $631,567 $464,657
======== ======== ========
The Partnership's total revenue increased $158,357 or 4.8% during the
period covered by this report as compared to the previous fiscal year. As
discussed below, the improved revenues were generated primarily by improved
average occupancies at the South San Francisco motel.
The Partnership's total revenues were essentially unchanged during the
fiscal year ended December 31, 1994 as compared to the previous fiscal year.
Guest room revenues declined by $16,149 or 0.5% from the previous year. As
discussed below, the decline in guest room revenue at the Sacramento property
was partially offset by increased revenue at the South San Francisco and Modesto
properties.
The Partnership's total expenditures increased $98,643 or 3.5% during
the period covered by this report as compared to the previous fiscal year. This
increase was primarily in the motel operating expenses category, which increased
$108,310 or 5.0%. While some of the increased costs are associated with the net
increase in occupancy, the Partnership expended $79,025 more for renovations and
replacements in 1995 then in the previous fiscal year.
- 14 -
<PAGE>
The Partnership achieved a 6.1% decrease in total expenses and debt
service payments during the fiscal year ended December 31, 1994 as compared with
the previous year. The $175,167 decline in expenditures was achieved by cost
control measures instituted by the General Partner. The lower expenditure level
is after the $76,000 increase in expenditures for renovations and replacements,
which is discussed in the preceding section entitled "Liquidity and Capital
Resources."
South San Francisco Motel
- -------------------------
Average Average
Occupancy Room
Fiscal Year Ended: Rate Rate
----------- --------
December 31, 1993 61.5% $49.64
December 31, 1994 63.8% $48.13
December 31, 1995 69.4% $49.43
Total Cash Flow
Expenditures from
Total and Property
Fiscal Year Ended: Revenues Debt Service Operations
---------- ------------ ----------
December 31, 1993 $1,327,851 $1,101,517 $226,334
December 31, 1994 $1,337,463 $1,055,815 $281,648
December 31, 1995 $1,501,439 $1,128,522 $372,917
The Partnership's South San Francisco motel achieved a $163,976 or 12.3%
increase in total revenue during the fiscal year covered by this report as
compared to the previous fiscal year. Guest room revenue increased $154,861 or
11.8% due primarily to the increase in occupancy. The motel achieved
significant increases in the leisure and corporate market segments while it
experienced a slight downturn in the number of discount rooms sold. The
improvement in the average daily rate is related to the decrease in discount
business.
The Partnership's South San Francisco motel achieved a 0.7% increase in
its total revenue for the fiscal year ended December 31, 1994 as compared to the
previous fiscal year. The 3.7% increase in average occupancy was partially
offset by the 3.0% decrease in average room rates. The increase in average
occupancy was in the corporate market segment; there was a decrease in the
leisure market segment that was absorbed by additional corporate business. The
decline in average room rate is associated with this change in guest profile, as
the average rate for the business guest is generally less than that for the
leisure market segment.
The Partnership's South San Francisco motel experienced a 6.9% increase
in total expenditures and debt service during the fiscal year covered by this
report as compared to the previous fiscal year due primarily to the increase in
average occupancy. Increased housekeeping wages of $9,845, increased utility
costs of $7,801, increased costs of guest services of $6,045, increased taxes
and insurance of $5,937 and increased franchise and management fees of $16,110
were substantially offset by reductions of $19,737 in maintenance wages, $7,295
in workers' compensation costs and $6,958 in bad debts. The renovations and
replacements as discussed previously increased $36,460.
- 15 -
<PAGE>
The Partnership's South San Francisco motel achieved a 4.1% reduction in
total expenditures during the fiscal year ended December 31, 1994 as compared to
the previous fiscal year. Front desk wages declined $6,097, resident manager
salaries declined $6,167, housekeeping wages declined $9,855, van driver wages
declined $7,104 and sales salaries declined $6,453. The labor savings were due
to staffing adjustments. Print advertising was reduced $9,901 and complimentary
breakfast declined $8,620 under the General Partner's cost-cutting program.
Offsetting these reductions was a scheduled increase in ground rent for
inflation which increased that expense by $14,543. Amounts expensed for
renovation and replacement increased from $27,208 to $52,830, and includes the
increase was primarily for a new airport shuttle van for $19,162, new guest room
carpets for $14,715, replacement bedspreads for $2,891 and a new clothes dryer
for $2,367.
Sacramento Motel
- ----------------
Average Average
Occupancy Room
Fiscal Year Ended: Rate Rate
----------- --------
December 31, 1993 63.5% $37.38
December 31, 1994 61.9% $37.21
December 31, 1995 53.8% $41.06
Total Cash Flow
Expenditures from
Total and Property
Fiscal Year Ended: Revenues Debt Service Operations
---------- ------------ ----------
December 31, 1993 $1,132,761 $866,521 $266,240
December 31, 1994 $1,099,720 $811,270 $288,450
December 31, 1995 $1,061,119 $865,450 $195,669
The Partnership's Sacramento motel experienced a 3.5% decrease in total
revenues during the fiscal year covered by this report as compared to the
previous fiscal year. The motel experienced a 13% decline in its average
occupancy which was substantially offset by a 10.4% increase in the average room
rate. As further discussed in the next paragraph, revenue from the McClellan
Air Force Base decreased from 20% of total room revenue to approximately 14% of
total room revenue. Since the military rooms are sold at a discount relative to
the other market segments, the decrease in discounted military room yields an
increase in the average room rate. Future business from the McCllelan Air Force
Base is uncertain as the base will take some time to actually close, the
termination functions should provide additional room nights for transient
personnel and the final alternate use of the facility is not yet determined.
The Partnership's Sacramento motel experienced a 2.9% decrease in total
revenues during the fiscal year ended December 31, 1994 as compared to the
previous fiscal year. The motel experienced slight declines in both its average
room rate and its occupancy rate. The business generated by the McClellan Air
Force Base declined from 26% of revenue during 1993 to 20% of revenue during
1994. The room revenue from the corporate market segment declined by
approximately 23%. The leisure and discount market segments generated
sufficient new room sales to replace most of the lost room-nights. Rate
discounting to maintain market share resulted in an average room rate that was
less than the rate achieved during the previous fiscal year.
- 16 -
<PAGE>
The Partnership's Sacramento motel experienced a 6.7% increase in
expenditures during the fiscal year covered by this report as compared to the
previous fiscal year. Total expenditure increases of $7,751 for print
advertising, $19,512 for security services, $5,540 for front desk wages and
$22,128 for various replacements and renovations were partially offset by a
$10,005 reduction in housekeeping wages, $6,560 in reduced phone repair costs
and by $5,010 in reduced workers' compensation insurance costs.
The Partnership's Sacramento motel achieved a 6.4% reduction in total
expenditures during the fiscal year ended December 31, 1994 as compared to the
previous fiscal year. Staffing adjustments resulted in the following savings:
front desk wages reduced $7,346, resident manager's salary reduced $18,639,
housekeeping wages reduced $27,710, and maintenance wages reduced $13,887.
Other elements of the General Partner's cost cutting program that resulted in
significant savings were $9,519 in lower print advertising costs, $5,008 in
reduced guest supply expense and $6,388 in reduced complimentary breakfast
costs. Partially offsetting the cost savings were increased security service
costs of $5,125 and telephone system maintenance and charges of $10,931. The
expenditures for renovation and replacement increased from $27,958 to $58,689.
The renovations and replacements included $22,315 for guest room carpets, $9,200
for new television sets, $8,389 for guest room doors replacements and new
hardware, $7,095 for repairs to fiberglass tubs, and $2,384 for new bedspreads.
Modesto Motel
- -------------
Average Average
Occupancy Room
Fiscal Year Ended: Rate Rate
----------- --------
December 31, 1993 71.2% $40.39
December 31, 1994 71.0% $41.02
December 31, 1995 73.2% $41.06
Total Cash Flow
Expenditures from
Total and Property
Fiscal Year Ended: Revenues Debt Service Operations
---------- ------------ ----------
December 31, 1993 $856,983 $838,513 $18,470
December 31, 1994 $868,476 $759,616 $108,860
December 31, 1995 $896,780 $788,662 $108,118
The Partnership's Modesto motel achieved a 3.3% increase in total
revenue during the fiscal year covered by this report as compared to the
previous fiscal year. The increase, which was primarily in guest room revenue,
was due to the improved average occupancy rates at the motel. The room nights
provided by the leisure travel market segment increased at a rate faster than
the rate at which the corporate market segment declined.
The Partnership's Modesto motel achieved a 1.3% increase in total
revenues for the fiscal year ended December 31, 1994 as compared to the previous
fiscal year. The decline in average occupancy (which was offset by an increase
in average room rate) was due to reduced low-rate business. The motel has been
able to achieve higher room rates in the corporate and leisure market segments,
which are approximately 86% of the motel's room revenue.
- 17 -
<PAGE>
The Partnership's Modesto motel experienced a 3.8% increase in total
expenditures during the fiscal year covered by this report as compared to the
previous fiscal year. Increased expenditures of $7,672 for landscaping, $7,502
for water and sewer costs and $5,273 for print advertising were substantially
offset by $10,144 in reduced maintenance wages and $8,957 in reduced
property taxes. As discussed previously, renovation and replacement
expenditures were $20,436 higher than the previous fiscal year.
The Partnership's Modesto motel achieved a 9.4% reduction in total
expenditures during the fiscal year ended December 31, 1994 as compared to the
previous fiscal year. Staffing adjustments resulted in the following savings:
front desk wages were reduced $8,699, housekeeping wages were reduced $16,639
and maintenance wages were reduced $5,582. Other elements of the General
Partner's cost-cutting program that resulted in significant savings included
$7,110 in roadside billboard advertising, $9,663 in print advertising and
$7,190 in complimentary breakfast expense. Water line and valve replacements by
the City of Modesto have resulted in reduced water and sewer charges of $5,186
as water leaks were eliminated. Renovation and replacement expenditures
increased from $18,682 to $38,662. These expenditures included $7,949 for new
television sets, $10,653 in replacement guest room carpets, $6,314 for two
replacement sign faces and $2,009 for new bedspreads.
Future Trends
- -------------
The General Partner anticipates that the South San Francisco and Modesto
motels will continue to improve slightly over the results for the fiscal years
ended December 31, 1994 and 1995. The future of the Sacramento motel is
uncertain due to the closing of the McClellan Air Force Base. The General
Partner anticipates that any increases in operating costs and expenses realized
during the upcoming fiscal year as a result of inflation will, to the extent
possible, be met by upward adjustment of room rates.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- ----------------------------------------------------
See Financial Statements and Notes to Financial Statements at pages F-1
through F-12 attached hereto.
- 18 -
<PAGE>
ANNUAL REPORT ON FORM 10-K
ITEM 8
FINANCIAL STATEMENTS
SUPER 8 MOTELS, LTD.
SACRAMENTO, CALIFORNIA
DECEMBER 31, 1995
F-1
<PAGE>
Item 8: Financial Statements
SUPER 8 MOTELS, LTD.
INDEX OF FINANCIAL STATEMENTS
Pages
-----
Report of Independent Certified Public Accountants F-3
Balance Sheets, December 31, 1995 and 1994 F-4
Statements of Operations for the years
ended December 31, 1995, 1994 and 1993 F-5
Statements of Partners' Equity for the years
ended December 31, 1995, 1994 and 1993 F-6
Statements of Cash Flows for the years
ended December 31, 1995, 1994 and 1993 F-7 and
F-8
Notes to Financial Statements F-9 to
F-13
Note: All schedules have been omitted since the required information is not
present or not present in amounts sufficient to require submission of the
schedule or because the information required is included in the financial
statements or notes thereto.
F-2
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Partners
Super 8 Motels, Ltd.
We have audited the accompanying balance sheets of Super 8 Motels, Ltd., a
California limited partnership, as of December 31, 1995 and 1994, and the
related statements of operations, partners' equity and cash flows for each of
the years in the three year period ended December 31, 1995. 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 audits to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Super 8 Motels, Ltd. as of
December 31, 1995 and 1994, and the results of its operations and its cash flows
for each of the years in the three year period ended December 31, 1995 in
conformity with generally accepted accounting principles.
VOCKER KRISTOFFERSON AND CO.
February 16, 1996
San Mateo, California
F-3
<PAGE>
SUPER 8 MOTELS, LTD.
(A California Limited Partnership)
BALANCE SHEETS
December 31, 1995 and 1994
ASSETS
1995 1994
---------- ----------
Current Assets:
Cash and temporary investments (Note 3) $ 631,200 $ 502,138
Accounts receivable 94,659 89,647
Prepaid expenses 22,662 21,343
---------- ----------
Total Current Assets 748,521 613,128
---------- ----------
Property and Equipment (Note 2):
Buildings 5,223,252 5,189,887
Furniture and equipment 1,061,233 1,007,199
---------- ----------
6,284,485 6,197,086
Accumulated depreciation (4,438,559) (4,208,270)
---------- ----------
Property and Equipment, Net 1,845,926 1,988,816
---------- ----------
Other Assets 23,663 26,838
---------- ----------
Total Assets $2,618,110 $2,628,782
========== ==========
LIABILITIES AND PARTNERS' EQUITY
Current Liabilities:
Current portion of note payable (Note 6) $ 25,862 $ 23,761
Accounts payable and accrued liabilities 151,535 153,319
Due to related parties - 15,924
---------- ----------
Total Current Liabilities 177,397 193,004
Long-term Liabilities, Net of Current Portion:
Note payable (Note 6) 960,709 986,557
---------- ----------
Total Liabilities 1,138,106 1,179,561
---------- ----------
Lease Commitments (Note 5)
Partners' Equity:
General Partner 58,480 53,172
Limited Partners 1,421,524 1,396,049
---------- ----------
Total Partners' Equity 1,480,004 1,449,221
---------- ----------
Total Liabilities and Partners' Equity $2,618,110 $2,628,782
========== ==========
See accompanying notes to financial statements.
F-4
<PAGE>
SUPER 8 MOTELS, LTD.
(A California Limited Partnership)
STATEMENTS OF OPERATIONS
Years Ended December 31:
----------------------------------
1995 1994 1993
---------- ---------- ----------
Income:
Guest room $3,373,790 $3,236,373 $3,252,522
Telephone and vending 75,815 60,987 58,150
Interest 17,226 8,413 8,688
Other 10,059 12,760 7,430
---------- ---------- ----------
Total Income 3,476,890 3,318,533 3,326,790
---------- ---------- ----------
Expenses:
Motel operations (Notes 4, 5 and 8) 2,293,289 2,184,979 2,426,272
General and administrative (Note 4) 77,993 79,311 77,721
Depreciation and amortization (Note 2) 261,488 275,859 285,596
Interest 84,812 86,741 88,542
Property management fees (Note 4) 172,969 165,018 165,640
Partnership management fees (Note 4) 55,556 55,556 55,556
---------- ---------- ----------
Total Expenses 2,946,107 2,847,464 3,099,327
---------- ---------- ----------
Net Income $ 530,783 $ 471,069 $ 227,463
========== ========== ==========
Net Income Allocable to General Partner $5,308 $4,711 $2,275
====== ====== ======
Net Income Allocable to Limited Partners $525,475 $466,358 $225,188
======== ======== ========
Net Income Per Partnership Unit (Note 1) $105.10 $93.27 $45.04
======= ====== ======
Distributions to Limited Partners Per
Partnership Unit (Note 1) $100.00 $100.00 $100.00
======= ======= =======
See accompanying notes to financial statements.
F-5
<PAGE>
SUPER 8 MOTELS, LTD.
(A California Limited Partnership)
STATEMENTS OF PARTNERS' EQUITY
Years Ended December 31:
----------------------------------
1995 1994 1993
---------- ---------- ----------
General Partner:
Balance, beginning of year $ 53,172 $ 48,461 $ 46,186
Net income 5,308 4,711 2,275
---------- ---------- ----------
Balance, End of Year 58,480 53,172 48,461
---------- ---------- ----------
Limited Partners:
Balance, beginning of year 1,396,049 1,429,691 1,704,503
Net income 525,475 466,358 225,188
Less: Cash distributions to
limited partners (500,000) (500,000) (500,000)
---------- ---------- ----------
Balance, End of Year 1,421,524 1,396,049 1,429,691
---------- ---------- ----------
Total Partners' Equity $1,480,004 $1,449,221 $1,478,152
========== ========== ==========
See accompanying notes to financial statements.
F-6
<PAGE>
SUPER 8 MOTELS, LTD.
(A California Limited Partnership)
STATEMENTS OF CASH FLOWS
Years Ended December 31:
----------------------------------
1995 1994 1993
---------- ---------- ----------
Cash Flows From Operating Activities:
Received from motel operations $3,455,302 $3,300,513 $3,294,023
Expended for motel operations and
general and administrative expenses (2,617,626) (2,479,227) (2,743,245)
Interest received 16,576 8,336 8,701
Interest paid (84,980) (86,896) (88,692)
---------- ---------- ----------
Net Cash Provided by
Operating Activities 769,272 742,726 470,787
---------- ---------- ----------
Cash Flows From Investing Activities:
Purchases of property and equipment (128,748) (90,107) (27,091)
Proceeds from sales of property
and equipment 12,285 10,600 -
---------- ---------- ----------
Net Cash Used by
Investing Activities (116,463) (79,507) (27,091)
---------- ---------- ----------
Cash Flows From Financing Activities:
Payments on notes payable (23,747) (21,832) (21,160)
Distributions paid to limited partners (500,000) (500,000) (500,000)
---------- ---------- ----------
Net Cash Used by
Financing Activities (523,747) (521,832) (521,160)
---------- ---------- ----------
Net Increase (Decrease) in Cash and
Temporary Investments 129,062 141,387 (77,464)
Cash and Temporary Investments:
Beginning of year 502,138 360,751 438,215
---------- ---------- ----------
End of Year $ 631,200 $ 502,138 $ 360,751
========== ========== ==========
See accompanying notes to financial statements.
F-7
<PAGE>
SUPER 8 MOTELS, LTD.
(A California Limited Partnership)
STATEMENTS OF CASH FLOWS (Continued)
Years Ended December 31:
----------------------------------
1995 1994 1993
---------- ---------- ----------
Reconciliation of Net Income to Net Cash
Provided by Operating Activities:
Net income $ 530,783 $ 471,069 $ 227,463
---------- ---------- ----------
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 261,488 275,859 285,596
Loss (gain) on disposition of property
and equipment 1,040 (3,268) -
Increase in accounts receivable (5,012) (9,684) (24,066)
(Increase) decrease in prepaid expenses (1,319) 126 50
Decrease in other assets - 551 4,187
Increase (decrease) in accounts
payable and accrued liabilities (1,784) 5,746 (20,992)
Increase (decrease) in due to
related parties (15,924) 2,327 (1,451)
---------- ---------- ----------
Total Adjustments 238,489 271,657 243,324
---------- ---------- ----------
Net Cash Provided By
Operating Activities $ 769,272 $ 742,726 $ 470,787
========== ========== ==========
See accompanying notes to financial statements.
F-8
<PAGE>
SUPER 8 MOTELS, LTD.
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - THE PARTNERSHIP
Super 8 Motels, Ltd.is a limited partnership organized under California
law on August 25, 1978, to acquire and operate motel properties in South San
Francisco, Sacramento and Modesto, California. The Partnership grants credit to
customers, substantially all of which are local businesses in South San
Francisco, Sacramento or Modesto.
The general partner is Grotewohl Management Services, Inc., the sole
stockholder and officer of which is Philip B. Grotewohl.
The net income or net loss of the Partnership is allocated 1% to the
General Partner and 99% to the Limited Partners. Net income and distributions
per partnership unit are based upon 5,000 units outstanding. All partnership
units are owned by the Limited Partners.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Items of Partnership income are passed through to the individual
partners for income tax purposes, along with any income tax credits. Therefore,
no federal or California income taxes are provided for in the financial
statements of the Partnership.
Property and equipment are recorded at cost. Depreciation and
amortization are computed using the following estimated useful lives and
methods:
Description Methods Useful Lives
-------------- ------------------------- --------------
Buildings 200% and 150% declining 7-31.5 years
balance and straight-line
Furniture and equipment Straight-line and 200% 3-7 years
declining balance
Property held under Straight-line and 200% 5-7 years
capital leases declining balance
Costs incurred in connection with maintenance and repair are charged to
expense. Major renewals and betterments that materially prolong the lives of
assets are capitalized.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect certain reported amounts and disclosures. Accordingly,
actual results could differ from those estimates.
F-9
<PAGE>
SUPER 8 MOTELS, LTD.
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS (Continued)
NOTE 3 - CASH AND TEMPORARY INVESTMENTS
Cash and temporary investments as of December 31, 1995 and 1994 consists
of the following:
1995 1994
---------- ----------
Cash in bank $ 80,878 $ 80,070
Money market accounts 450,322 322,068
Certificate of deposit 100,000 100,000
---------- ----------
Total Cash and Temporary Investments $ 631,200 $ 502,138
========== ==========
Temporary investments are recorded at cost, which approximates market
value. The Partnership considers temporary investments and all highly liquid
marketable securities with original maturities of three months or less to be
cash equivalents for purposes of the statement of cash flows.
NOTE 4 - RELATED PARTY TRANSACTIONS
Franchise Fees
Super 8 Motels, Inc., now a wholly-owned subsidiary of Hospitality
Franchise Systems, Inc., is franchisor of all Super 8 Motels. The Partnership
pays to the franchisor monthly fees equal to 4% of the gross room revenues of
each motel and contributes an additional 1% of its gross room revenues to an
advertising fund administered by the franchisor. In return, the franchisor
provides the right to use the name "Super 8", a national institutional
advertising program, an advance room reservation system, and inspection
services. These costs, $168,690 in 1995, $161,554 in 1994, and $162,385 in 1993
are included in motel operations expense in the accompanying statements of
operations. The Partnership operates its motel properties as a franchisee of
Super 8 Motels, Inc., through a sub-franchise agreement with Brown & Grotewohl,
a California general partnership, of which Grotewohl Management Services, Inc.
(see Note 1) is a 50% owner. Under the sub-franchise agreement, Brown &
Grotewohl earned 40% of the above franchise fees, which amounted to $67,476,
$64,621, and $64,954 in 1995, 1994 and 1993, respectively.
Property Management Fees
The General Partner, or its affiliates, handles the management of the
motel properties of the Partnership. The fee for this service is 5% of the gross
revenues from Partnership operations, as defined in the Partnership agreement,
not including income from the sale, exchange or refinancing of such properties.
This fee is payable only out of the Operational Cash Flow of the Partnership,
defined as the total cash receipts from Partnership operations during a given
period of time less cash operating disbursements during the same period. It is
subordinated to prior receipt by the Limited Partners of a cumulative 10% per
annum pre-tax return on their adjusted capital contributions for each year of
the Partnership's existence. During the years ended December 31, 1995, 1994, and
1993 the General Partner received property management fees of $172,969, $165,019
and $165,639, respectively.
F-10
<PAGE>
SUPER 8 MOTELS, LTD.
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS (Continued)
NOTE 4 - RELATED PARTY TRANSACTIONS (Continued)
Subordinated Partnership Management Fees
During the Partnership's operational stage, the General Partner is to
receive a fee for partnership management services equal to one-ninth of the
amounts which have been distributed to the Limited Partners subordinated,
however, to receipt by the Limited Partners of a cumulative 10% per annum
pre-tax return on their adjusted capital contributions and to payment of the
property management fees referred to above. This fee is payable only from cash
funds provided from operations of the Partnership, and may not be paid from the
proceeds of sale or refinancing. During the years December 31, 1995, 1994 and
1993, the General Partner received partnership management fees of $55,556,
$55,556 and $55,556, respectively.
Subordinated Incentive Distributions
Under the terms of the Partnership agreement, the General Partner is to
receive 15% of distributions of net proceeds from the sale or refinancing of
Partnership properties remaining after distribution to the Limited Partners of
any portion thereof required to cause distributions to the Limited Partners from
all sources to be equal to their capital contributions plus a cumulative 10% per
annum pre-tax return on their adjusted capital contributions. Through December
31, 1995, no such proceeds had been distributed.
Administrative Expenses Shared by the Partnership and Its Affiliates
There are certain administrative expenses allocated between the
Partnership and other partnerships managed by the General Partner and its
affiliates. These expenses, which are allocated based on usage, are telephone,
data processing, rent of the administrative office and administrative salaries.
The administrative expenses allocated to the Partnership were approximately
$334,000 in 1995, $311,000 in 1994 and $329,000 in 1993 and are included in
general and administrative expenses and motel operations expenses in the
accompanying statements of operations. Included in administrative salaries are
allocated amounts paid to three employees who are related to Philip B.
Grotewohl, the sole stockholder of Grotewohl Management Services, Inc., the
General Partner.
NOTE 5 - LEASE COMMITMENTS
The Partnership has long-term lease commitments on land in Modesto,
Sacramento, and South San Francisco, California for original terms of 50, 35,
and 29 years, respectively. The Partnership has the right to extend the Modesto
lease for three consecutive periods of ten years each, the Sacramento lease for
five consecutive periods of ten years each, and the South San Francisco lease
for five consecutive periods of five years each. The base monthly rent is
subject to adjustment at three, two and five year intervals, respectively, to
reflect changes in the Consumer Price Index. The Partnership pays all property
taxes, assessments and utilities.
F-11
<PAGE>
SUPER 8 MOTELS, LTD.
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS (Continued)
NOTE 5 - LEASE COMMITMENTS (Continued)
The Partnership has entered into three sub-lease agreements which cover
unimproved portions of the Sacramento property and expire on various dates from
March, 2003 through June, 2013, with the sublessees' options to renew the
sub-leases of all three parcels of land for five consecutive periods of ten
years each.
Rental expense under long-term lease commitments incurred by the
Partnership amounted to $268,526 in 1995, $267,057 in 1994 and $245,732 in 1993,
less $83,058, $83,233 and $85,428 in sub-lease rentals in 1995, 1994, and 1993,
respectively. Such amounts are included in motel operations expense in the
accompanying statements of operations.
The future lease commitments at December 31, 1995 using the minimum
monthly amounts, are as follows:
Years Ending South San
December 31: Modesto Sacramento Francisco Total
------------ ---------- ---------- ---------- ----------
1996 $ 66,637 $ 111,325 $ 90,564 $ 268,526
1997 66,637 111,325 90,564 268,526
1998 66,637 111,325 90,564 268,526
1999 66,637 111,325 90,564 268,526
2000 66,637 111,325 90,564 268,526
Thereafter 1,910,263 1,391,564 633,948 3,935,775
Less subleases - (1,112,877) - (1,112,877)
---------- ---------- ---------- ----------
Total $2,243,448 $ 835,312 $1,086,768 $4,165,528
========== ========== ========== ==========
NOTE 6 - NOTE PAYABLE
The note payable is due to a savings institution, with monthly interest
and principal payments of $9,061. The interest rate is adjusted monthly and the
payment is adjusted annually. The interest rate was equal to 8.5% as of December
31, 1995 and is the lesser of 3% over the cost of funds index of the Federal
Home Loan Bank of San Francisco or 14.5% but not less than 8.5%. A balloon pay-
ment of approximately $740,000 for the balance of the principal is due in May
2003. The note is collateralized by a first deed of trust on the leasehold
interests in real property in South San Francisco.
Note payable maturities are as follows:
Years Ending December 31:
-------------------------
1996 $ 25,862
1997 28,148
1998 30,636
1999 33,344
2000 36,291
2001-2003 832,290
--------
Total $986,571
========
F-12
<PAGE>
SUPER 8 MOTELS, LTD.
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS (Continued)
NOTE 7 - MOTEL OPERATING EXPENSES
The following table summarizes the major components of motel operating
expenses for the following years:
1995 1994 1993
---------- ---------- ----------
Salaries and related costs $ 764,251 $ 800,819 $ 936,646
Rent 185,468 183,825 160,413
Utilities 168,641 154,010 156,334
Allocated costs, mainly indirect salaries 272,411 254,483 270,738
Replacement and renovations 100,459 60,073 46,756
Other operating expenses 802,059 731,769 855,385
---------- ---------- ----------
Total motel operating expenses $2,293,289 $2,184,979 $2,426,272
========== ========== ==========
F-13
<PAGE>
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
- ------------------------------------------------------------------------
FINANCIAL DISCLOSURE
- --------------------
Inapplicable.
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
- ------------------------------------------------------------
The original general partners of the Partnership were Dennis A. Brown
and Philip B. Grotewohl. Upon Mr. Brown's death on February 25, 1988, Mr.
Grotewohl elected to continue the Partnership as the sole remaining general
partner. During March 1988, Mr. Grotewohl appointed Grotewohl Management
Services, Inc., a California corporation, his successor as General Partner of
the Partnership.
The General Partner was organized in 1981 to serve as a general partner
of limited partnerships to be formed for the purpose of investing in Super 8
Motels. The sole shareholder, director and officer of the General Partner is
Mr. Grotewohl.
Mr. Grotewohl, age 77, was an attorney-at-law and was engaged in the
private practice of law in San Mateo County, California, between 1967 and 1978.
Since 1978, Mr. Grotewohl's principal occupation has been as a promoter and
general partner of Super 8 Motels limited partnerships.
Item 11. EXECUTIVE COMPENSATION
- --------------------------------
Although Mr. Brown ceased to be a general partner of the Partnership
upon his death, a trust of Mr. Brown's shares in certain of the compensation
otherwise payable to the General Partner and its affiliates. This revenue is
now paid to a successor trust.
Following is a description of compensation paid or payable to the
General Partner and the Brown trust.
Property Management Fees
- ------------------------
The fee for this service is 5% of the gross revenues from motel
operations, not including income from the sale, exchange or refinancing of such
properties. This fee is payable only out of Operational Cash Flow with payment
subordinated to the receipt by the Limited Partners of the Preferred Return as
discussed in Item 5 above. A total of $172,969 in property management fees
accrued and was paid during the fiscal year covered by this report.
- 19 -
<PAGE>
Franchise Fees and Advertising Fees
- -----------------------------------
The Partnership operates its motels as a franchisee of Super 8 Motels,
Inc., pursuant to sub-franchises from an affiliate of the General Partner. In
connection with the operation of each of its motels, the Partnership, as
franchisee, pays 4% of its gross room revenues to the franchisor. One-half of
the franchise fee is paid to the affiliate of the General Partner. The total
franchise fee accrued during the fiscal year covered by this report was $134,952
of which $67,476 accrued to the affiliate of the General Partner. All of the
above sums have been paid.
General Partner's Interest in Operational Cash Flow
- ---------------------------------------------------
Except for payment to the General Partner of property management fees,
as discussed above, distributions of Operational Cash Flow are made as follows:
(1) 90% thereof is paid to the Limited Partners; (2) 9% thereof is paid to the
General Partner as Partnership management fees; and (3) 1% thereof is paid to
the General Partner as its interest in the income and losses of the Partnership.
However, payment of Operational Cash Flow to the General Partner is subordinated
as discussed in Item 5 above. The General Partner received distributions from
Operational Cash Flow during the fiscal year covered by this report in the
amount of $55,556 from distributions attributable to 1995.
General Partner's Interest in Net Proceeds of Sales and Financing of Partnership
- --------------------------------------------------------------------------------
Properties
- ----------
Net proceeds of the sale of any of the Partnership's motel properties
and of any financing or refinancing (to the extent that the proceeds of any such
financing or refinancing are not to be reinvested in the acquisition of
additional properties) will be promptly distributed to the partners. Such
distributions will be paid as follows: (1) until the Limited Partners have
received distributions from all sources equal to 100% of their capital
contributions plus 10% per annum cumulative on their adjusted capital
contributions, all of such proceeds will be distributed to the Limited Partners;
(2) thereafter, 15% of the balance of such proceeds will be distributed to the
General Partner as cash incentive distributions and the remaining 85% thereof
will be distributed to the Limited Partners. No such distributions were made
during the fiscal year covered by this report.
- 20 -
<PAGE>
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
- ------------------------------------------------------------------------
Security Ownership of Certain Beneficial Owners
- -----------------------------------------------
AMOUNT AND
TITLE NATURE OF
OF NAME AND ADDRESS OF BENEFICIAL BENEFICIAL PERCENT
CLASS OWNER OWNERSHIP OF CLASS
--------- ------------------------------------- ----------- ----------
Units Liquidity Fund 73, L.P. 143 Units 2.86%
Units Liquidity Fund 74, L.P. 127 Units 2.54%
Units Liquidity Fund 75, L.P. 66 Units 1.32%
Units Liquidity Fund IX, L.P. 5 Units .10%
Units Liquidity Fund Tax Exempt Partners 116 Units 2.32%
Units Liquidity Fund Tax Exempt Partners II 153 Units 3.06%
Units Liquidity Fund XI 13 Units .26%
Units Liquidity Fund XIII 2 Units .04%
Units Liquidity Fund XIV 5 Units .10%
Units Liquidity Income/Growth Fund 1985 29 Units .58%
Units Liquidity Fund 65 L.P. 17 Units .34%
-----------
Total 676 Units 13.52%
===========
Security Ownership of Management
- --------------------------------
The General Partner is not the beneficial owner of any Units.
Changes in Control
- ------------------
The General Partner has the right to appoint and substitute successor
general partners and to sell, transfer, or assign its rights to receive fees or
other income to such successor general partners so long as (i) an opinion of
counsel is obtained that the Partnership, with the new general partners, ought
to be taxed as a partnership for purposes of federal income taxation and not as
an association taxable as a corporation, and (ii) the approval of a majority in
interest of the Limited Partners is obtained; provided such approval shall not
be required in connection with such appointment and substitution of, and the
sale, transfer, or assignment to, a corporation, if either (A) the majority of
such corporation's voting securities are owned by the General Partner or (B) the
General Partner is the chief executive officer of the corporation. Neither the
Partnership nor the Limited Partners shall have any right to proceeds paid to
the General Partner in connection with any such sale, transfer, or assignment.
Upon the vote of a majority-in-interest of the Limited Partners, after written
notice to the General Partner, the General Partner may be expelled from the
Partnership and new general partners elected.
- 21 -
<PAGE>
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- --------------------------------------------------------
Administrative Expenses Shared by the Partnership and its Affiliates
- --------------------------------------------------------------------
There are certain administrative expenses allocated between the
Partnership and other partnerships managed by the General Partner and its
affiliates. These expenses, which are allocated based on usage, are telephone,
data processing, rent of administrative offices and administrative salaries.
The administrative expenses allocated to the Partnership were approximately
$334,000 in 1995 are included in general and administrative expenses and motel
operations expenses in the Partnership's financial statements. Included in
administrative salaries are allocated amounts paid to three employees who are
related to Philip B. Grotewohl, the sole shareholder of the General Partner.
- 22 -
<PAGE>
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
- -------------------------------------------------------------------------
(a) Documents filed as part of this report
--------------------------------------
1. Financial Statements Included in Part II of this Report
Report of Independent Certified Public Accountants
Balance Sheets, December 31, 1995 and 1994
Statements of Operations for the Years Ended December 31, 1995, 1994
and 1993
Statements of Partners' Equity for the Years Ended December 31, 1995,
1994 and 1993
Statements of Cash Flow for the Years Ended December 31, 1995, 1994 and
1993
Notes to Financial Statements
2. Financial Statement Schedules Included in this Report
None
3. Exhibits
3.1 and 4.1 The Partnership Agreement is incorporated herein as an
exhibit from the annual report on Form 10-K for the fiscal year ended
December 31, 1982.
3.2 & 4.2 Amendment to Partnership Agreement is hereby incorporated
herein by reference from the annual report on Form 10-K for the fiscal
year ended December 31, 1988.
(10) Material Contracts
Exhibits 10.1 through 10.7 are hereby incorporated herein by reference
from the annual report on Form 10-K for the fiscal year ended December 31,
1982.
10.1 Ground lease and sublease, South San Francisco
10.2 Ground Lease - Modesto
10.3 Ground Leases - Sacramento County
10.4 Franchise Agreement - South San Francisco
10.5 Franchise Agreement - Modesto
10.6 Franchise Agreement - Sacramento County
10.7 Sacramento County Restaurant Development Sublease
Exhibits 10.8 through 10.10 are hereby incorporated herein by reference
from the annual report on Form 10-K for the fiscal year ended December
31, 1988.
10.8 Amended Parking Lease - South San Francisco
10.9 Lease to KMH Trinity Properties - Sacramento County
10.10 Lease to Sterling Equity Investments
(b) Reports on Form 8-K
-------------------
Inapplicable
- 23 -
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
(Registrant) SUPER 8 MOTELS, LTD.
- ---------------------------------
By (Signature and Title) /s/ Philip B. Grotewohl
---------------------------
Philip B. Grotewohl,
President of Grotewohl Management Services, Inc.,
General Partner
Date March 28, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934,
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
By (Signature and Title) /s/ Philip B. Grotewohl
---------------------------
Philip B. Grotewohl,
Chief executive officer, chief financial
officer, chief accounting officer and sole
director of Grotewohl Management Services,
General Partner
Date March 28, 1996
- 24 -
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 631,200
<SECURITIES> 0
<RECEIVABLES> 94,659
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 748,521
<PP&E> 6,284,485
<DEPRECIATION> 4,438,559
<TOTAL-ASSETS> 2,618,110
<CURRENT-LIABILITIES> 177,397
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 1,480,004
<TOTAL-LIABILITY-AND-EQUITY> 2,618,110
<SALES> 3,449,605
<TOTAL-REVENUES> 3,476,890
<CGS> 2,293,289
<TOTAL-COSTS> 2,293,289
<OTHER-EXPENSES> 568,006
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 84,812
<INCOME-PRETAX> 530,783
<INCOME-TAX> 0
<INCOME-CONTINUING> 530,783
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 530,783
<EPS-PRIMARY> 105.10
<EPS-DILUTED> 105.10
</TABLE>
