SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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
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Commission file number 0-10134
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SUPER 8 MOTELS III, LTD.
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(Exact name of registrant as specified in its charter)
California 94-2664921
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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
-------------------------------------
(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
General Development of Business
- -------------------------------
Super 8 Motels III, Ltd. (the "Partnership") is a limited
partnership which was organized under the Uniform Limited
Partnership Act of the State of California on June 2, 1980.
The General Partner of the Partnership is Grotewohl Management
Services, Inc., a California corporation which is wholly-owned
by Philip B. Grotewohl.
Through two public offerings of units of limited partnership
interest in the Partnership (the "Units"), the Partnership sold
5,941 Units at a price of $1,000 per Unit.
The net proceeds of the offerings have been expended for the
acquisition in fee and development of properties located in San
Bernardino, California and Bakersfield, California. Motel
operations commenced on March 6, 1982 at the San Bernardino
property, and on September 20, 1982 at the Bakersfield property.
Narrative Description of Business
- ---------------------------------
(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 (the "Manager"), 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
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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.
(b) Operation of the Motels
- ----------------------------
The Manager manages and operates the Partnership's motels. The
Manager's 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
Manager 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 Manager. 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 32
persons, either full or part-time at its two motel properties,
including nine desk clerks, 19 housekeeping and laundry
personnel, two maintenance personnel and two 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.
(c) Property Acquisition and Development
- -----------------------------------------
The net proceeds of the offering of the Units, and financing in
the amount of $870,000 secured by a deed of trust on the
Bakersfield motel, was expended in connection with the
acquisition and development of two properties located in San
Bernardino and Bakersfield, 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.
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(d) Competition
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As discussed in greater detail below, in each area in which its
motel properties are located the Partnership faces intense
competition from 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, Red Roof Inns and E-Z 8.
Item 2. PROPERTIES
(a) San Bernardino, California
--------------------------
The San Bernardino motel, which consists of 81 guest rooms on
approximately 1.87 acres of land, commenced operations on March
6, 1982. The average monthly occupancy rates and average
monthly room rates during the three most recent years are as
follows:
Average Occupancy Rate
1995 1994 1993
----- ----- -----
January 57.9% 52.3% 59.1%
February 63.1% 63.0% 77.9%
March 69.1% 70.7% 71.8%
April 55.8% 57.0% 65.1%
May 63.0% 62.0% 72.6%
June 57.0% 65.4% 66.4%
July 53.1% 55.8% 62.4%
August 57.6% 63.8% 75.0%
September 59.3% 60.2% 57.8%
October 46.7% 56.2% 61.6%
November 39.9% 50.4% 66.5%
December 41.8% 52.8% 62.4%
Annual Average 55.3% 59.1% 66.5%
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Average Room Rate
1995 1994 1993
------ ------ ------
January $40.04 $38.22 $36.10
February $39.52 $39.13 $37.02
March $39.73 $41.86 $36.07
April $41.11 $41.89 $37.14
May $40.60 $41.36 $38.41
June $40.51 $43.08 $40.17
July $40.82 $42.73 $38.00
August $40.16 $42.14 $40.86
September $39.60 $41.41 $39.60
October $40.99 $43.09 $40.67
November $40.60 $41.11 $39.34
December $40.14 $35.73 $37.59
Annual Average $40.29 $41.07 $38.41
While prior to 1993 the San Bernardino motel received
approximately 5% to 7% of its guest room revenue from Norton Air
Force Base, the corresponding amounts for 1993 and for 1994 were
3% and 0.7%, respectively. The reduction was attributable to
the final closing of Norton Air Force Base in March, 1994.
Currently, the Partnership's San Bernardino motel provides
accommodations to no one customer, the loss of which could
materially affect the Partnership's operations.
The following lodging facilities provide direct and indirect
competition to the Partnership's San Bernardino motel:
APPROXIMATE
NUMBER DISTANCE
FACILITY OF ROOMS FROM MOTEL
- ------------------ ---------- --------------------------
Comfort Inn 50 Adjacent
Hilton Inn 200 Across street
La Quinta Motel 154 200 yards
Travelodge 90 200 yards
EZ-8 Motel 117 0.13 miles
(b) Bakersfield, California
------------------------
The Bakersfield motel, which consists of 90 guest rooms on
approximately 2.32 acres of land, commenced operations on
September 20, 1982. The average monthly occupancy rate and
average monthly room rate for the three most recent years are
as follows:
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Average Occupancy Rate
1995 1994 1993
----- ----- -----
January 87.4% 86.6% 81.0%
February 82.2% 90.4% 91.5%
March 86.4% 93.9% 97.7%
April 91.0% 95.1% 97.4%
May 89.6% 92.7% 93.3%
June 92.2% 97.1% 98.8%
July 89.3% 85.3% 93.9%
August 90.0% 88.1% 95.9%
September 84.6% 88.3% 92.7%
October 85.1% 93.4% 98.4%
November 78.4% 89.6% 89.4%
December 70.6% 79.1% 76.7%
Annual Average 85.6% 89.9% 92.2%
Average Room Rate
1995 1994 1993
------ ------ ------
January $30.06 $31.46 $31.47
February $30.24 $31.60 $32.17
March $30.72 $31.46 $32.22
April $30.63 $31.79 $32.44
May $31.63 $30.65 $32.13
June $31.73 $31.14 $32.70
July $31.89 $31.13 $33.62
August $31.51 $31.52 $33.55
September $30.78 $30.60 $32.35
October $31.64 $29.12 $32.13
November $30.06 $28.92 $31.87
December $28.86 $29.20 $30.99
Annual Average $30.87 $30.73 $32.34
From October 1, 1982 to January 31, 1993, an agreement was in
effect granting the Partnership the first opportunity to provide
rooms to employees of Santa Fe Railroad at a room rate of
$20.00. Though expired according to its terms, the contract
continues to be observed by both parties, except that the agreed
rate is now $23.00 per room night. Revenue attributable to this
agreement constituted approximately 32%, 20%, and 14% of the
motel's total guest revenues during 1995, 1994 and 1993,
respectively.
On December 31, 1992, the Partnership entered into a written
agreement with the National Railroad Passenger Corporation
(Amtrak) for the provision of lodging services to its employees
at a room rate of $25.75, which included a transportation credit
of $1.75 per room night payable to the Partnership for providing
transportation from the train terminal. Due to competitive bids,
the rate was lowered to $24.00 per room night effective October
1, 1994. Amtrak provided approximately 26%, 19% and 17% of the
motel's guest room revenue in 1995, 1994 and 1993, respectively.
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Except as set forth above, the Bakersfield motel provides
accommodations to no one customer, the loss of which could
materially affect the Partnership's operations.
The following lodging facilities provide direct or indirect
competition to the Partnership's Bakersfield
motel: APPROXIMATE
NUMBER DISTANCE
FACILITY OF ROOMS FROM MOTEL
- ------------------------- ------------------ ----------------
California Inn 74 Adjacent
Motel 6 160 0.50 miles
EZ-8 Motel 100 0.50 miles
Travelodge Plaza 61 0.75 miles
Comfort Inn South 80 0.75 miles
Four Points Inn 199 1.00 mile
Best Western- Kern River 200 1.00 mile
La Quinta Inn 150 1.00 mile
Days Inn 120 1.00 mile
Roderunner 49 1.50 miles
Economy Motels of America 140 1.50 miles
Rio Mirada 209 2.00 miles
Comfort Inn 60 2.00 miles
Econo Lodge 100 2.00 miles
Holiday Inn Express 100 6.00 miles
Item 3. LEGAL PROCEEDINGS
Inapplicable.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Inapplicable.
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
Market Information
- ------------------
The Units are not freely transferable and no public market for
the Units has developed or is expected to develop.
Holders
- -------
As of December 31, 1995 a total of 1,074 individuals (the
"Limited Partners") held Units in the Partnership.
Distributions
- --------------
Cash distributions are made on a quarterly basis from Cash
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Available for Distribution, defined in the Partnership's
Certificate and Agreement of Limited Partnership (the
"Partnership Agreement") as Cash Flow, less adequate cash
reserves for obligations of the Partnership for which there is
no provision. Cash Flow means cash funds provided from
operations of the Partnership, without deduction for
depreciation, but after deducting cash funds used to pay or
provide for the payment of debt service, capital improvements
and replacements and the operating expenses of the Partnership's
property. Of the Cash Available for Distribution in any year,
the General Partner will receive 10% thereof, of which 9% will
constitute a subordinated fee for managing the Partnership and
1% will be attributable to its interest in the profits of the
Partnership. The balance will be distributed to the Limited
Partners. Notwithstanding the preceding, the General Partner
will not receive distributions of Cash Available for
Distribution in any year in which the Limited Partners do not
receive distributions of Cash Available for Distribution in an
amount at least equal to 10% per annum cumulative on their
adjusted capital contributions.
In addition, the Partnership will promptly distribute net
proceeds of the sale and refinancing of its motel properties to
the General Partner and the Limited Partners, to the extent such
proceeds are not reinvested in the acquisition of additional
properties. Of the sale or refinancing proceeds available for
distribution in any year, the General Partner will receive 15%
thereof, and the balance will be distributed to the Limited
Partners. Notwithstanding the preceding, the General Partner
will not receive distributions of Sale or Refinancing Proceeds
until each Limited Partner has received from all sources
distributions equal to 100% of his capital contributions plus
10% per annum cumulative on his adjusted capital contributions.
The Partnership has made no distributions during the two most
recent fiscal years.
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Item 6. Selected Financial Data
Year Ended December 31, 1995
1995 1994 1993 1992 1991 1990
---------- ---------- ---------- ---------- ---------- ----------
Guest Room
Income $1,526,742 $1,625,581 $1,734,535 $1,622,825 $1,687,071 $1,790,810
Net Income
(Loss) $68,750 $33,851 $49,083 $(31,203) $97,596 $182,389
Per Partnership Unit:
Cash dis-
tributions $ - $ - $ - $25.00 $25.00 $50.00
Net income
(loss) $11.46 $5.64 $8.18 $(5.20) $16.26 $30.39
Year Ended December 31, 1995
1995 1994 1993 1992 1991 1990
---------- ---------- ---------- ---------- ---------- ----------
Total
Assets $3,411,456 $3,632,719 $3,793,456 $3,852,557 $4,045,669 $4,142,738
Long-Term
Debt $75,493 $390,484 $595,214 $724,636 $741,069 $755,944
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Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Liquidity
- ---------
The General Partner believes that the Partnership's liquidity,
defined as its ability to generate cash to satisfy its cash
needs, is adequate. The Partnership's primary source of
liquidity is its cash flow from operations. As of December 31,
1995 the Partnership had current assets of $369,966 and current
liabilities of $162,995, providing an operating reserve of
$206,971. This reserve is below the $297,050 reserve target
required by the Partnership Agreement inasmuch as the
Partnership made supplemental principal payments on its mortgage
debt to reduce net interest expense. The General Partner
authorized the pay-down as cash flow from operations has been
increasing over the last three years. The decrease in total
cash during 1995 was also due to the $225,000 in extraordinary
loan repayments.
This loan, in the original principal amount of $855,000 at a
10% per annum fixed interest rate, has a maturity date of
September 1997 when, according to the loan's original terms,
$648,230 would have been due. As a result of the payments
reflected in the following table, if no further supplemental
principal payments are made, a balloon payment will be
approximately $36,000 in September 1997.
1995 1994 1993
Standard monthly payments 89,800 89,800 89,800
Supplemental principal payments 225,000 150,000 100,000
------- ------- -------
Total Debt Service 314,800 239,800 189,800
While the General Partner is considering the possibility of
refinancing this loan, it presently plans to continue making any
supplemental principal payments from operating cash flows and,
if necessary, from the relatively large reserve fund to
liquidate this loan. The General Partner has suspended the
quarterly distributions to the Limited Partners in order to
accumulate the funds necessary for the extra principal payments
In addition to the debt reduction discussed above, the
liquidity of the Partnership is enhanced by the fact that the
San Bernardino motel is presently unencumbered. Although the
General Partner knows of no trend likely to create a material
deficiency in the Partnership's liquidity, if the need arises,
cash could be generated through leveraging the property.
During 1996, the General Partner anticipates making certain
capital expenditures, as noted below under the caption "Capital
Resources," although the amount of such expenditures will not be
such as to compromise the Partnership's liquidity. Other than
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as described below and above the General Partner foresees no
significant trends, demands, commitments, events or
uncertainties which are likely to affect the Partnership's
liquidity, on either a long-term or short-term basis.
Capital Resources
- -----------------
The Partnership has no material commitments for capital
expenditures. However, the General Partner anticipates that
during 1996 the Partnership will spend an as yet undetermined
amount for the refurbishment of its motels and their
furnishings. In particular, the Bakersfield parking lot needs
resurfacing and the motel needs painting.
During the fiscal year covered by this report, the Partnership
expended $81,620 for renovations and replacements, of which
$45,880 was capitalized. The capitalized items included $20,759
for guest room carpet, $4,314 for replacement of televisions,
$15,191 for Amtrak shuttle vehicles and $3,789 for a replacement
ice machine. The uncapitalized items include $8,351 for
bedspreads, $7,325 for guest room chairs, $5,827 for mattress
sets, $5,081 for replacement lamps and lamp shades, and $4,000
for major boiler repairs.
Other than as described above under "Liquidity," the General
Partner knows of no material trends likely to affect or to
require a change in the mix of its capital resources.
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 operating results of the
Partnership for the fiscal years ended December 31, 1995, 1994
and 1993 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.
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Average Average
Occupancy Room
Fiscal Year Ended: Rate Rate
-------- --------
December 31, 1993 80.0% $34.73
December 31, 1994 75.3% $34.57
December 31, 1995 71.3% $34.33
Total
Expenditures Partnership
Total and Cash Flow
Fiscal Year Ended: Revenues Debt Service (1)
---------- ------------ -------------
December 31, 1993 $1,790,383 $1,751,180 $39,203
December 31, 1994 $1,671,022 $1,715,903 $(44,881)
December 31, 1995 $1,571,111 $1,671,151 $(100,040)
(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.
Reconciliation of Partnership Cash Flow (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
---------- --------- ---------
Partnership Cash Flow $(100,040) $(44,881) $39,203
Principal Payments on Financial
Obligations 285,133 185,326 117,153
Additions to Fixed Assets 45,880 64,261 43,634
Depreciation and Amortization (164,599) (172,398) (151,886)
Other Items 2,376 1,543 979
-------- -------- --------
Net Income $68,750 $33,851 $49,083
======== ======== ========
Following is a reconciliation of the Partnership Cash Flow
(shown above) to the aggregate total of Cash Flow from Property
Operations for the Partnership's two motels which are segregated
In the tables below under the captions "San Bernardino Motel"
and "Bakersfield Motel".
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1995 1994 1993
--------- --------- ---------
San Bernardino Motel $41,110 $24,211 $23,099
Bakersfield Motel (159,959) (78,601) 5,861
------- ------- -------
Aggregate Cash Flow from Property
Operations (118,849) (54,390) 28,960
Interest on Cash Reserves 10,071 8,727 10,013
Other Partnership Income, (net of
Other Expenses) not allocated to
the properties 8,738 782 230
------- ------- -------
Partnership Cash Flow $(100,040) $(44,881) $39,203
======= ======= =======
The Partnership experienced a $99,911 (or 6.0%) decrease in
total revenues during the fiscal year covered by this report as
compared to the previous fiscal year. The decline in revenue is
due to reduced average occupancy at both motels and slightly
reduced or stagnant average room rates at the San Bernardino
motel. Amplified discussion can be found in the individual
property subsections that follow.
The Partnership experienced a $119,361 (6.7%) decline in total
revenues during the fiscal year ended December 31, 1994 as
compared to the previous fiscal year. The decline in revenue is
due to reduced average occupancy at both motels and reduced
average room rates at the Bakersfield motel.
The Partnership achieved a $44,752 reduction in combined
expenditures and debt service during the fiscal year covered by
this report as compared to the previous fiscal year. Debt
service increased by $75,000. The increase in debt service was
offset by a $100,095 reduction in motel operating expenses, due
primarily to the reduced average occupancy.
The Partnership had a $35,277 decrease in combined expenditures
and debt service during the fiscal year ended December 31, 1994
as compared to the previous fiscal year. After consideration of
the extraordinary loan payments, the $85,277 decrease in
expenditures was due to a cost-cutting program installed by the
General Partner.
San Bernardino Motel
- --------------------
Average Average
Occupancy Room
Fiscal Year Ended: Rate Rate
--------- --------
December 31, 1993 66.5% $38.41
December 31, 1994 59.1% $41.07
December 31, 1995 55.3% $40.29
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Total Cash Flow
Expenditures from
Total and Property
Fiscal Year Ended: Revenues Debt Service Operations
-------- ------------ ----------
December 31, 1993 $775,431 $752,332 $23,099
December 31, 1994 $741,564 $717,353 $24,211
December 31, 1995 $678,561 $637,451 $41,110
The San Bernardino motel experienced a $63,003 (8.5%) decrease
in total revenue during the fiscal year covered by this report
as compared to the previous fiscal year. Guest room revenue
from the corporate and leisure market segments decreased
approximately $10,000. The number of guest room nights
generated from these two market segments remained substantially
unchanged while the average room rate received for the corporate
market segment increased slightly and the average room rate
received from the leisure market declined more substantially.
Average occupancy from the discounted room and group traveler
market segments declined sharply resulting in a decrease of
approximately $50,000 in guest room revenue.
The San Bernardino motel experienced a $33,867 (4.4%) decline
in total revenues during the fiscal year ended December 31, 1994
as compared to the previous fiscal year. The motel experienced
an 11.1% decline in average occupancy, which has been partially
offset by a 6.9% increase in average room rate. Rooms from the
corporate market segment experienced a $63,000 reduction during
the fiscal year, due to increased competition for that market
segment. This loss was partially offset by some additional
leisure business.
The San Bernardino motel achieved a $79,902 (11.1%) reduction
in total expenses and debt service during the fiscal year
covered by this report as compared to the previous fiscal year.
The motel achieved an $8,663 reduction in bad debts, an $8,102
reduction in housekeeping wages, an $18,229 reduction in
maintenance wages and a $41,727 reduction in renovation and
replacements. As discussed in the next paragraph, the previous
year was subject to an unusually high level of replacement and
renovation expense.
The San Bernardino motel achieved a $34,979 (4.6%) reduction in
total expenses and debt service during the fiscal year ended
December 31, 1994 as compared to the previous fiscal year.
Staffing changes resulted in the following reductions: front
desk wages were reduced $16,189 and housekeeping wages were
reduced $25,670. Other significant savings from of the General
Partner's cost-cutting program included $10,635 in print
advertising and $6,090 in complimentary breakfast. Renovation
and replacement expenditures increased from $33,038 to $79,227,
and included $9,303 for televisions, $17,098 for parking lot
repairs, $26,052 in replacement guest room carpets, $4,002 in
guest room chairs, $4,562 in painting and $3,748 for 20% of the
operations manager's vehicle.
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Bakersfield Motel
- -----------------
Average Average
Occupancy Room
Fiscal Year Ended: Rate Rate
--------- --------
December 31, 1993 92.2% $32.34
December 31, 1994 89.9% $30.73
December 31, 1995 85.6% $30.87
Total Cash Flow
Expenditures from
Total and Property
Fiscal Year Ended: Revenues Debt Service Operations
---------- -------------- ------------
December 31, 1993 $1,004,710 $998,849 $5,861
December 31, 1994 $919,367 $997,968 $(78,601)
December 31, 1995 $882,261 $1,042,220 $(159,959)
The Bakersfield motel experienced a $37,106 (4.0%) decrease in
total revenues during the fiscal year covered by this report as
compared to the previous fiscal year. Decreased revenue
generated from the corporate, group, discount and trucker market
segments was substantially, but not completely, offset by
increased revenue from the leisure market segment and the
railroad accounts.
The Partnership's Bakersfield motel experienced an $85,343
(8.5%) decline in total revenues during the fiscal year ended
December 31, 1994 as compared to the previous fiscal year. Both
average occupancy and average room rates declined due to
increased competitive pressures. The Partnership, in order to
meet a competitor's offer and retain Amtrak business, agreed to
a $1.75 per night rate reduction effective October 1, 1994. The
corporate segment declined $152,333. This decline was partially
offset by small increases in the leisure and trucker market
segments. The reduction in the corporate guests was due
primarily to increased competition for that market segment in
the Bakersfield area. The room previously occupied by corporate
guests became available for other types of travelers.
The Partnership's Bakersfield motel experienced a $44,252
(4.4%) increase in total expenses and debt service during the
fiscal year covered by this report. Excluding the $75,000
comparative increase in debt service, the motel achieved a
$30,748 reduction in other expenditures. Included in this
reduction were savings of $10,242 in front desk wages, $10,120
in maintenance wages, $8,780 in housekeeping wages, $6,635 in
resident manager expense and $5,653 in workers' compensation
insurance. These reduced expenditures were partially offset by
increased costs associated with transporting railroad employees
from the train station to the motel. The cost savings was due
to adjustments to staffing levels and to a lessor extent to
reduced average occupancy.
- 15 -
<PAGE>
The Bakersfield motel achieved a $49,120 decrease in total
expenditures (excluding changes in debt service discussed
previously) during the fiscal year ended December 31, 1994 as
compared to the previous fiscal year. This savings was
committed to additional principal payments on the motel's
mortgage: the partnership made $150,000 in extra principal
payments during 1994 compared to $100,000 of such payments
during 1993. Staffing changes resulted in increased front desk
wages of $10,172 and maintenance wages of $8,106, while
housekeeping wages were reduced $9,855 and the resident
manager's salary cost was reduced $4,552. Savings from the
General Partner's cost-cutting program included $6,508 for guest
supplies and $6,709 for complimentary breakfast. Renovation and
replacement expenditures were $35,940 as compared to $35,224
during the previous fiscal year. Replacements included $11,280
in guest room carpets, $4,629 for televisions, $9,250 for
railroad shuttle vehicles, $3,990 for repairs of fiberglass tubs
and $3,400 for painting.
Future Trends
- -------------
The General Partner believes that competitive conditions in the
San Bernardino and Bakersfield markets are such as to prevent
the Partnership from reflecting inflation in increased room
rates at its motels. Accordingly, an increase in the inflation
rate could have a deleterious effect on Partnership operations.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Financial Statements and Notes to Financial Statements
attached hereto at pages F-1 through F-12.
- 16 -
<PAGE>
ANNUAL REPORT ON FORM 10-K
ITEM 8
FINANCIAL STATEMENTS
SUPER 8 MOTELS III, LTD.
SACRAMENTO, CALIFORNIA
DECEMBER 31, 1995
F-1
<PAGE>
Item 8: Financial Statements
SUPER 8 MOTELS III, 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, F-7 to
1994 and 1993 F-8
Notes to Financial Statements F-9 to
F-12
Note: All other 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 III, Ltd.
We have audited the accompanying balance sheets of Super 8 Motels III, 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 three years in the period ended December 31, 1995. These financial state-
ments are the responsibility of the Partnership's management. Our responsibil-
ity is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing stan-
dards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of mater-
ial misstatement. An audit includes examining, on a test basis, evidence sup-
porting 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 pre-
sentation. 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 III, Ltd. as of
December 31, 1995 and 1994, and the results of its operations and its cash
flows for each of the three years in the 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 III, LTD.
(A California Limited Partnership)
BALANCE SHEETS
December 31, 1995 and 1994
ASSETS
1995 1994
Current Assets: ---------- ----------
Cash and temporary investments (Notes 1 and 3) $ 285,554 $ 370,107
Accounts receivable 72,824 85,882
Prepaid expenses 11,588 10,722
--------- ---------
Total Current Assets 369,966 466,711
Property and Equipment (Note 2):
Land 1,670,129 1,670,129
Capital improvements 26,175 26,175
Buildings 3,276,870 3,276,870
Furniture and equipment 742,531 779,563
--------- ---------
5,715,705 5,752,737
Accumulated depreciation and amortization (2,674,215) (2,586,729)
--------- ---------
Property and Equipment, Net 3,041,490 3,166,008
--------- ---------
Total Assets $3,411,456 $3,632,719
========= =========
LIABILITIES AND PARTNERS' EQUITY
Current Liabilities:
Current portion of note payable (Note 5) $ 77,963 $ 48,106
Accounts payable and accrued liabilities 85,032 81,999
Due to related parties - 7,912
--------- ---------
Total Current Liabilities 162,995 138,017
Long-term Liabilities, Net of Current Portion:
Note payable (Note 5) 75,493 390,484
--------- ---------
Total Liabilities 238,488 528,501
--------- ---------
Partners' Equity:
General Partner 19,194 18,506
Limited Partners 3,153,774 3,085,712
--------- ---------
Total Partners' Equity 3,172,968 3,104,218
--------- ---------
Total Liabilities and Partners' Equity $3,411,456 $3,632,719
========= =========
See accompanying notes to financial statements.
F-4
<PAGE>
SUPER 8 MOTELS III, LTD.
(A California Limited Partnership)
STATEMENTS OF OPERATIONS
Years Ended December 31:
1995 1994 1993
Income: ----------- ----------- -----------
Guest room $1,526,742 $1,625,581 $1,734,535
Telephone and vending 32,654 33,352 33,762
Interest 10,071 8,727 10,013
Other 1,644 3,363 12,073
--------- --------- ---------
Total Income 1,571,111 1,671,023 1,790,383
Expenses:
Motel operations (Notes 4,
5 and 6) 1,174,475 1,274,570 1,373,744
General and administrative
(Note 4) 57,956 54,428 55,406
Depreciation and amortization
(Note 2) 164,599 172,398 151,886
Interest 27,290 52,932 71,668
Property management fees
(Note 4) 78,041 82,844 88,596
--------- --------- ---------
Total Expenses 1,502,361 1,637,172 1,741,300
--------- --------- ---------
Net Income $68,750 $33,851 $49,083
========= ========= =========
Net Income Allocable to General
Partner $688 $339 $491
==== ==== ====
Net Income Allocable to Limited
Partners $68,062 $33,512 $48,592
======= ======= =======
Net Income Per Partnership Unit
(Note 1) $11.46 $5.64 $8.18
====== ===== =====
Distributions to Limited Partners
Per Partnership Unit (Note 1) $ - $ - $ -
====== ====== ======
See accompanying notes to financial statements.
F-5
<PAGE>
SUPER 8 MOTELS III, LTD.
(A California Limited Partnership)
STATEMENTS OF PARTNERS' EQUITY
Years Ended December 31:
1995 1994 1993
General Partner: ----------- ------------ ------------
Balance, beginning of year $ 18,506 $ 18,167 $ 17,676
Net income 688 339 491
--------- --------- ---------
Balance, End of Year 19,194 18,506 18,167
Limited Partners:
Balance, beginning of year 3,085,712 3,052,200 3,003,608
Net income 68,062 33,512 48,592
Less: Cash distributions to
limited partners - - -
--------- --------- ---------
Balance, End of Year 3,153,774 3,085,712 3,052,200
--------- --------- ---------
Total Partners' Equity $3,172,968 $3,104,218 $3,070,367
========= ========= =========
See accompanying notes to financial statements.
F-6
<PAGE>
SUPER 8 MOTELS III, 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 $1,575,015 $1,678,452 $1,751,071
Expended for motel operations and
general and administrative expenses (1,313,408) (1,419,657) (1,508,008)
Interest received 9,154 8,649 9,989
Interest paid (29,666) (54,476) (72,645)
--------- --------- ---------
Net Cash Provided by Operating
Activities 241,095 212,968 180,407
Cash Flows From Investing Activities:
Proceeds from sale of equipment 5,366 3,550 -
Purchases of property and equipment (45,880) (64,261) (43,634)
--------- --------- ---------
Net Cash Used by Investing Activities (40,514) (60,711) (43,634)
Cash Flows From Financing Activities:
Payments on notes payable (285,134) (185,326) (117,153)
--------- --------- ---------
Net Cash Used by Financing Activities (285,134) (185,326) (117,153)
Net Increase (Decrease) in Cash and
Temporary Investments (84,533) (33,069) 19,620
Cash and Temporary Investments:
Beginning of year 370,107 403,176 383,556
--------- --------- ---------
End of Year $285,554 $370,107 $403,176
========= ========= =========
See accompanying notes to financial statements.
F-7
<PAGE>
SUPER 8 MOTELS III, 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 $ 68,750 $ 33,851 $ 49,083
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 164,599 172,398 151,886
Loss on disposition of property and equipment 433 1,860 -
(Increase) decrease in accounts receivable 13,058 16,078 (29,323)
(Increase) decrease in prepaid expenses (866) (1,957) (208)
Increase (decrease) in accounts payable and
accrued liabilities 3,033 (8,246) 8,338
Increase (decrease) in due to related
parties (7,912) (1,016) 631
------- ------- -------
Total Adjustments 172,345 179,117 131,324
------- ------- -------
Net Cash Provided by Operating
Activities $241,095 $212,968 $180,407
======= ======= =======
See accompanying notes to financial statements.
F-8
<PAGE>
SUPER 8 MOTELS III, LTD.
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - THE PARTNERSHIP
Super 8 Motels III, Ltd.is a limited partnership organized under California law
on June 2, 1980 to acquire and operate motel properties in San Bernardino and
Bakersfield, California. The San Bernardino motel was opened in March, 1982,
and the Bakersfield motel was opened in September, 1982. The Partnership
grants credit to customers, substantially all of which are local businesses in
San Bernardino or Bakersfield.
The general partner is Grotewohl Management Services, Inc., the sole stock-
holder 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 on 5,941 units outstanding. All Partnership units
are owned by the Limited Partners.
The Partnership agreement requires that the Partnership maintain working cap-
ital reserves for normal repairs, replacements, working capital and contin-
gencies in an amount of at least 5% of adjusted capital contributions
($297,050 at December 31, 1995). As of December 31, 1995 the Partnership had
working capital of $206,971. During the year ended December 31, 1995,
$90,079 ($297,050 less $206,971) of the reserves, plus additional amounts, were
used to make loan repayments on the mortgage payable.
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
Capital improvements 150-200% declining balance 10-20 years
Buildings Straight-line and 10-25 years
150% declining balance
Furniture and equipment 200% declining balance 4-7 years
Costs incurred in connection with maintenance and repair are charged to ex-
pense. 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 re-
sults could differ from those estimates.
F-9
<PAGE>
SUPER 8 MOTELS III, 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 $ 45,031 $ 61,590
Money market accounts 140,523 208,517
Certificates of deposit and commercial paper 100,000 100,000
------- --------
Total Cash and Temporary Investments $285,554 $370,107
Temporary investments are recorded at cost, which approximates market value.
The Partnership considers temporary investments and all highly liquid market-
able 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 advert-
ising fund administered by the franchisor. In return, the franchisor provides
the right to use the name "Super 8," a national institutional advertising pro-
gram, an advance room reservation system, and inspection services. These costs
($76,337, $81,077 and $86,316 for the years ended December 31, 1995, 1994 and
1993, respectively) are included in motel operations expense in the accompany-
ing 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 Manage-
ment Services, Inc. (see Note 1) is a 50% owner. Under the sub-franchise agree-
ment, Brown & Grotewohl earned 40% of the above franchise fees, which amounted
to $30,535, $32,431 and $34,526 for the years ended December 31, 1995, 1994 and
1993, respectively.
Property Management Fees
The General Partner, or its affiliates, handles the management of the motel pro-
perties of the Partnership. The fee for this service is 5% of the gross
revenues from Partnership operations, as defined in the Partnership agreement,
and amounted to $78,041, $82,844 and $88,596 for the years ended December 31,
1995, 1994 and 1993, respectively.
Subordinated Partnership Management Fees
During the Partnership's operational stage, the General Partner is to receive
9% of cash available for distributions for Partnership management services,
along with an additional 1% of cash available for distributions on account of
its interest in the profit and losses subordinated, however, to receipt by the
Limited Partners of a 10% per annum cumulative pre-tax return on their adjusted
capital contributions. At December 31, 1995, the Limited Partners had not rec-
F-10
<PAGE>
SUPER 8 MOTELS III, LTD.
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS (Continued)
NOTE 4 - RELATED PARTY TRANSACTIONS (Continued)
eived the 10% cumulative return, and accordingly, no Partnership management
fees are presently payable and therefore are not reflected in these financial
statements. Management believes it is not likely that these fees will become
payable in the future. 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
a refinancing. As of December 31, 1995, the cumulative amount of these fees
was $421,787.
F-10
<PAGE>
NOTE 4 - RELATED PARTY TRANSACTIONS (Continued)
Subordinated Incentive Distributions
Under the terms of the Partnership agreement, the General Partner is to re-
ceive 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, there had been no such sales or refinancings.
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 adminis-
trative expenses allocated to the Partnership were approximately $223,000,
$207,000 and $219,000 during the years ended December 31, 1995, 1994 and 1993,
respectively, and are included in general and administrative and motel operat-
ing expenses in the accompanying statements of operations. Included in admin-
istrative salaries are allocated amounts paid to three employees who are re-
lated to Philip B. Grotewohl, the sole stockholder of Grotewohl Management
Services, Inc., the general partner.
NOTE 5 - NOTE PAYABLE
The note payable consists of a note due to a bank and is collateralized by a
first deed of trust on real property in Bakersfield, California. During 1995,
the note, which was held in trust by Wells Fargo Bank for Mr. Bruce J. Bailey,
was split into two notes, one due to Wells Fargo and the other due to Mr.
Bailey. The combined balances of the new notes were equal to the prior balance
of the original Wells Fargo note.
The note payable due to Wells Fargo is payable in equal monthly installments of
$4,989, including interest at 10% per annum, through April, 1997, at which time
a final payment equal to the remaining balance of $3,033 is due.
The note payable due to Mr. Bailey is payable in equal monthly payments of
$2,494, including interest at 10% per annum, through September, 1997, at which
time a final payment equal to the remaining balance of $36,104 is due.
F-11
<PAGE>
SUPER 8 MOTELS III, LTD.
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS (Continued)
NOTE 5 - NOTE PAYABLE (Continued)
Note payable maturities are as follows:
Years Ending
December 31: Amount
------------ ------
1996 77,963
1997 75,493
-------
Total $153,456
=======
NOTE 6 - MOTEL OPERATING EXPENSES
The following table summarizes the major components of motel operating costs
for the following years:
1995 1994 1993
Salaries and related costs $ 441,334 $ 514,133 $ 552,246
Utilities 121,969 130,871 126,004
Allocated costs, mainly
indirect salaries 181,607 169,656 180,492
Renovations and replacements 35,740 50,906 24,628
Other operating expenses 393,825 409,004 490,374
--------- --------- ---------
Total motel operating expenses $1,174,475 $1,274,570 $1,373,744
========= ========= =========
F-12
<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, as the managing general
partners, and Borel Associates (a partnership of which Robert J.
Dana was a partner), as the associate general partner. Upon Mr.
Brown's death on February 25, 1988, Mr. Grotewohl and Borel
Associates elected to continue the Partnership. During March
1988, Mr. Grotewohl appointed Grotewohl Management Services,
Inc., a California corporation, his successor as General
Partner. Upon the liquidation of Borel Associates in April 1990,
Grotewohl Management Services, Inc., as the sole remaining
General Partner, elected to continue 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, is 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 share in
certain of the compensation otherwise payable to the General
Partner and its affiliates. Similarly, although Borel
Associates ceased to have any interest in the Partnership upon
its dissolution, Mr. Dana continues to share in such
compensation.
The following is a description of the fees paid or payable to
the General Partner, the Brown trust and Mr. Dana.
Property Management Fees
- ------------------------
The Manager is managing and will manage all motel properties of
the Partnership. The fee for this service is 5% of the gross
proceeds from the operations of each motel. This compensation
is in addition to the cost of compensating the Partnership's
employees and the cost of goods and services acquired for the
Partnership from independent contractors.
- 17 -
<PAGE>
The Partnership accrued and paid such fees to the Manager in
the amount of $78,041 during the year ended December 31, 1995.
Franchise Fees and Advertising Fees
- -----------------------------------
The Partnership operates its motels as a franchisee of Super 8
Motels, Inc., pursuant to sub-franchises from the Manager. 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
Manager. In addition to the franchise fee, the Partnership pays
1% of its gross room revenues to the franchisor as an
advertising fee. No part of this fee is paid to the Manager.
The total of franchise fees accrued during the year ended
December 31, 1995 to Super 8 Motels, Inc. was $61,070, of which
$30,535 accrued to the Manager. The total advertising fees paid
to Super 8 Motels, Inc. was $15,267. All the above amounts have
been paid.
General Partner's Interest in Cash Available for Distribution
- -------------------------------------------------------------
At quarterly intervals, the total amount of the Partnership's
Cash Available for Distribution is determined at the discretion
of the General Partner. (See Item 5 above.) Distributions
therefrom are made as follows: (1) 90% of such distributions are
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 in accordance with its
interest in the income and losses of the Partnership.
Notwithstanding the foregoing, however, distributions of Cash
Available for Distribution which would otherwise be paid to the
General Partner are deferred and paid only after payment to the
Limited Partners of distributions of Cash Available for
Distribution in an amount equal to 10% per annum cumulative on
their adjusted capital contributions.
No such cash distributions were paid by the Partnership to the
General Partner, the Brown Trust, Robert J. Dana, or their
affiliates during the fiscal year ended December 31, 1995. A
total of $421,787 has been accrued to such persons since
commencement of the Partnership, but is not set forth as a
liability in the Partnership's financial statements due to the
uncertainty of payment. In order for this amount to be payable
the Limited Partners must receive $4,596,486 in prior years'
preference distributions and $594,100 in each future year before
any payments can be made to management.
- 18 -
<PAGE>
General Partner's Interest in Net Proceeds of Sales, Financing
and Refinancing of Partnership Properties
- ---------------------------------------------------------------
The proceeds from the sale or refinancing of properties not
reinvested are to be distributed first to the Limited Partners
until they have received cumulative payments from all
distribution sources equal to 100% of their original capital
contribution and a cumulative 10% per annum return on their
adjusted capital contributions. When the foregoing requirement
has been satisfied, any remaining funds from the sale or
refinancing of properties is to be distributed 15% to the
General Partner and 85% to the Limited Partners.
No such distributions were paid or accrued for the account of
the General Partner, the Brown trust, Robert J. Dana or their
affiliates during the fiscal year covered by this report.
Allocation of General Partners' Interest
- ----------------------------------------
Compensation to the General Partners and their affiliates
in the form of franchise fees and property management fees is
allocated 1/3 each to the Brown trust, the General Partner and
Robert J. Dana.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
Security Ownership of Certain Beneficial Owners
- -----------------------------------------------
No person is known by the Partnership to be the beneficial
owner of more than 5% of the Units.
Security Ownership of Management
- --------------------------------
The General Partner is not the beneficial owner of any Units.
Changes in Control
- ------------------
With the consent of all other General Partners and Limited
Partners holding more than 50% of the Units, a General Partner
may designate a successor or additional general partner, in each
case with such participation in such General Partner's interest
as such General Partner and successor or additional general
partner may agree upon, provided that the interests of the
Limited Partners are not affected thereby.
A General Partner may withdraw from the Partnership at any
time upon 60 days' prior written notice to the Limited Partners
and any other General Partners, or may transfer his interest to
an entity controlled by him; provided, however, that in either
such event, if it is determined that the Partnership business is
- 19 -
<PAGE>
to be continued rather than dissolved and liquidated upon the
happening thereof, the withdrawal or transfer will be effective
only after receipt by the Partnership of an opinion of counsel
to the effect that such withdrawal or transfer will not cause
the Partnership to be classified as an association taxable as a
corporation rather than as a partnership for federal income tax
purposes.
The Limited Partners shall take no part in the management
of the Partnership's business; however, a majority in interest
of the Limited Partners, without the concurrence of the General
Partner, shall have the right to amend the Partnership
Agreement, dissolve the Partnership, remove a General Partner or
any successor general partner, elect a new general partner or
general partners upon the removal, retirement, death, insanity,
insolvency or bankruptcy of a General Partner, and approve or
disapprove the sale, exchange or pledge in a single transaction
of all or substantially all of the properties acquired by the
Partnership.
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 $223,000 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 employee who are
related to Philip B. Grotewohl, the sole shareholder of the
General Partner.
- 20 -
<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 filed as Exhibits 3.1
and 4.1 to the annual report on Form 10-K for the fiscal year
ended December 31, 1994 is incorporated herein by reference.
3.2 & 4.2 The Amendment to Partnership Agreement, included
as Exhibit 3.2 & 4.2 to the annual report on Form 10-K for the
fiscal year ended December 31, 1989 is incorporated herein by
reference.
Exhibits 10.1 through 10.4, filed as Exhibits 10.1 through
10.4, respectively, to the annual report on Form 10-K for the
fiscal year ended December 31, 1989 are hereby incorporated
herein by reference.
10.1 Santa Fe Railway Agreement with the Partnership's
Bakersfield Motel.
10.2 Amtrak Contract with the Partnership's Bakersfield
Motel.
10.3 Franchise Agreement for the Bakersfield Property.
10.4 Franchise Agreement for the San Bernardino Property.
10.5 Amtrak Contract Amendment filed as Exhibit 10.5 to the
annual report on Form 10-K for the fiscal year ended December
31, 1994 is incorporated herein by reference.
(b) Reports on Form 8-K
Inapplicable.
- 21 -
<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 III, 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, this 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, Inc., General Partner
Date March 28, 1996
- 22 -
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