SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
( X ) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended September 30, 1998
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______________to ___________
Commission file number 0-11512
SUPER 8 ECONOMY LODGING IV, LTD.
(Exact name of registrant as specified in its charter)
California 94-2827163
(State or other jurisdiction of (I.R.S. Employer Iden-
incorporation or organization) tification No.)
2030 J Street, Sacramento, California 95814
(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. [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 Economy Lodging IV, Ltd. (the "Partnership") is a limited
partnership which was organized under the Uniform Limited Partnership Act of the
State of California on February 5, 1982.
The Managing General Partner of the Partnership is Grotewohl Management
Services, Inc., a California corporation organized and 50% owned by Philip B.
Grotewohl. The Associate General Partner is Robert J. Dana. The Associate
General Partner does not have general responsibility in connection with the
management of the business and affairs of the Partnership. The Managing General
Partner and the Associate General Partner are sometimes referred to collectively
as the "General Partners."
Through two public offerings of units of limited partnership interest
in the Partnership ("Units"), the Partnership sold 10,000 Units at a price of
$1,000 each.
The net proceeds of the offerings were expended for the acquisition and
development of properties located in Pleasanton, California and Santa Ana,
California. Motel operations commenced on October 4, 1983 at the Pleasanton
property and on February 19, 1985 at the Santa Ana property. On April 30, 1992
the Partnership sold the Santa Ana motel. The Partnership's Pleasanton motel is
operated pursuant to franchises acquired from Super 8 Motels, Inc. under the
name "Super 8 Motel."
There is hereby incorporated by reference herein the information
regarding the Partnership's motel property contained in Part I, Item 2 of this
report under the caption "Properties."
Narrative Description of Business
The Partnership's business is to operate its motel property and to
engage in any and all general business activities related or incidental thereto.
The Partnership's motel is operated pursuant to a franchise originally acquired
from Super 8 Motels, Inc. through Super 8 Management Corporation as a
subfranchisor, under the name "Super 8 Motel."
Super 8 Motels, Inc. is a South Dakota corporation which was organized
in 1972. Its first franchised motel commenced operation in 1974 and, as of
October 16, 1998, it had a total of 1,740 franchised motels having an aggregate
of 105,222 guest rooms in operation. On April 30, 1993, Super 8 Motels, Inc.
became a wholly-owned subsidiary of Hospitality Franchise Systems, Inc ("HFS").
In addition to Super 8 Motels, HFS is also the franchisor of hospitality
properties under the Howard Johnson, Ramada, Voyager Lodge, Knights Inn,
Travelodge and Days Inn tradenames.
2
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Motels franchised by Super 8 Motels, Inc. are budget motels in that
they offer room rates near the lower end of the room rate scale in each area in
which they are located. Such lower rates are made possible by the elimination of
certain features present in many higher-priced facilities, such as meeting rooms
and large lobbies; by not operating restaurants or cocktail lounges in
connection with the motels; and by utilizing uniform construction methods
(adapted only slightly to fit specific locales) which have been developed by
Super 8 Motels, Inc. and a standardized design which facilitates maintenance and
minimizes overhead expense.
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 furniture and furnishings
than motels franchised under the tradenames Motel 6, Regal 8 and E-Z 8. Rates in
the Super 8 Motels tend to exceed those offered by the chains mentioned above.
By terms of the franchise agreement with Super 8 Motels, Inc., the
Partnership pays monthly franchise fees equal to 4% of its gross room revenues
and contributes an additional 1% of its gross room revenues to a fund
administered by Super 8 Motels, Inc. to finance the national advertising
program. Neither the Partnership nor the Managing General Partner has any equity
or other interest in Super 8 Motels, Inc.
Brown & Grotewohl (the "Manager"), a California general partnership
which is an affiliate of the Managing General Partner, manages and operates the
Partnership's motel. The Manager's management responsibilities include, but are
not limited to, the supervision and direction of the Partnership's employees who
operate the motel, the establishment of room rates, and the 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 accounting activities are performed by
the motel staff and a centralized accounting staff, all of which work under the
direction of the Managing General Partner or the Manager. Together, these staffs
perform all bookkeeping duties in connection with the motel, including all
collections and all disbursements to be paid out of funds generated by such
operations or otherwise supplied by the Partnership.
As of December 1, 1998, the Partnership employed a total of 15 persons,
either full- or part-time, at its motel, including five desk clerks, eight
housekeeping and laundry personnel, one maintenance personnel and one manager.
In addition, and as of the same date, the Partnership employed eleven 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 services, sales and marketing, motel supervisory, secretarial and
purchasing personnel, including David Grotewohl, son of Philip Grotewohl, whom
the Partnership employs on as Director of Operations and as an attorney, and,
until April 30, 1998, Mark Grotewohl, whom the Partnership employed as marketing
and sales director.
The Pleasanton motel, which consists of 102 guest rooms, commenced
operations on October 4, 1983. The average occupancy rates and average room
rates for the period from October 1, 1995 through September 30, 1998 are as
follows:
1995-1996 1996-1997 1997-1998
------------------------------------------------
Annual Average Occupancy 76.6% 79.9% 69.8%
Annual Average Room Rate $56.44 $62.51 $69.06
3
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Patrons of the Partnership's Pleasanton motel are primarily commercial
or business travelers, and leisure business. The Pleasanton motel has no single
customer the loss of which would, in the opinion of the Managing General
Partner, have a material adverse effect on the motel's operations.
The following lodging facilities provide direct and indirect
competition to the Partnership's Pleasanton motel:
APPROXIMATE
DISTANCE FROM
NUMBER OF PARTNERSHIP'S
FACILITY ROOMS MOTEL
-------------------------------------------------------------------
Sheraton Four Points 216 300 Yards
Candlewood Suites 126 300 Yards
Marriott Courtyard 145 0.75 Mile
Best Western Dublin Park 230 1.0 Mile
Sierra Suites 113 1.0 Mile
Summerfield Suites 128 1.0 Mile
Wyndom Hotel 171 1.5 Miles
Hilton Hotel 300 2.0 Miles
Crowne Plaza 248 2.0 Miles
Comfort Inn 60 5.0 Miles
Extended Stay America 122 5.0 Miles
Hampton Inn 80 5.0 Miles
Springtown Inn 127 9.0 Miles
Motel Six 102 9.0 Miles
Holiday Inn 124 10.0 Miles
During November 1998 the Partnership submitted to the limited partners
of the Partnership (the "Limited Partners") a consent solicitation statement
soliciting the consent of the Limited Partners to the sale of the Partnership's
motel and related assets at a purchase price of $7,600,000. The Limited Partners
have consented to such sale by majority vote. As of December 17, 1998, the buyer
had not yet obtained the necessary financing to complete the sale. If the
financing is obtained in a timely fashion, the Managing General Partner
anticipates that the motel will be sold and the Partnership liquidated during
the second fiscal quarter of 1999. If so, the Partnership would be terminated
shortly thereafter. If not, the Managing General Partner would entertain offers
to purchase the motel and related assets and would submit one or more of such
offers to the Limited Partners for approval, in the discretion of the Managing
General Partner. Pending any sale of the motel, the Partnership will continue to
operate the motel as usual.
Item 2. PROPERTIES
On October 4, 1982, the Partnership acquired from Hopyard Associates,
a general partnership, a parcel of 2.037 acres of unimproved real property
located in Pleasanton, California.
The property is located immediately adjacent to Interstate Highway 580,
on the southeast quadrant of the Hopyard Road overpass approximately one mile
east of Interstate Highway 680 and approximately 40 miles east of San Francisco.
Construction of the 102-room motel commenced on October 18, 1982 and
was completed on October 4, 1983, at which point motel operations commenced.
4
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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 1, 1998 a total of 1,849 investors ("Limited Partners")
held Units in the Partnership.
Distributions
Cash Available for Distribution is defined as the cash funds provided
from operations without deduction for depreciation, but after deducting cash
funds used to pay or provide for payment of debt service, capital improvements
and replacements and the operating expenses of the property, also less adequate
cash reserves for obligations of the Partnership for which there is no
provision.
Cash Available for Distribution shall be distributed quarterly in the
following manner:
(1) 90% to the Limited Partners
(2) 9% to the General Partners as a fee for managing the Partnership
(3) 1% to the General Partners on account of their Partnership interest.
Notwithstanding the foregoing, the General Partners shall receive no
distributions of Cash Available for Distribution until the Limited Partners have
received a cumulative 10% per annum return on their "Adjusted Capital
Contributions" (i.e., their original capital contributions, adjusted for
previous returns of capital or sale or refinancing proceeds). Inasmuch as the
Limited Partners have not received a cumulative 10% per annum return, the
General Partners have not received any share of the Cash Available for
Distribution since inception of the Partnership.
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 will
be distributed 15% to the General Partners and 85% to the Limited Partners.
5
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The following distributions (all from Cash Available for Distribution)
were made during the two most recent fiscal years:
Amount Amount
Distributed Distributed
Date Per Unit to General Partners
--------------------------------------------------------------
11/15/96 $18.75 - 0 -
02/15/97 $18.75 - 0 -
05/15/97 $18.75 - 0 -
08/15/97 $20.00 - 0 -
11/15/97 $25.00 - 0 -
02/15/98 $25.00 - 0 -
05/15/98 $25.00 - 0 -
08/15/98 $25.00 - 0 -
Item 6. SELECTED FINANCIAL DATA
Following are selected financial data of the Partnership for the fiscal
years ended September 30, 1998, 1997, 1996, 1995 and 1994.
6
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SUPER 8 ECONOMY LODGING IV, LTD
Item 6. Selected Financial Data
Years Ended September 30:
----------------------------------------------------------
1998 1997 1996 1995 1994
---------- ---------- ---------- ---------- ----------
Total income $1,860,993 $1,941,108 $1,686,738 $1,510,802 $1,415,308
Motel room income $1,794,889 $1,860,287 $1,613,817 $1,448,486 $1,354,227
Interest income $34,673 $36,351 $28,879 $22,379 $19,181
Net income $716,967 $857,944 $665,100 $513,436 $419,009
Per Partnership Unit:
Cash
distributions (1): $100.00 $76.25 $59.30 $54.60 $48.65
Net income $70.98 $84.94 $65.84 $50.83 $41.48
September 30:
----------------------------------------------------------
1998 1997 1996 1995 1994
---------- ---------- ---------- ---------- ----------
Total assets $2,675,265 $2,951,592 $2,841,572 $2,769,469 $2,786,858
Long-term debt - - - - -
(1) On an annual basis, to the extent cash distributions exceed net income,
Limited Partners receive a return of capital rather than a return on capital.
However, an annual analysis will be misleading if the Limited Partners do not
receive their investment back upon liquidation of the Partnership. For investors
who purchased their Units directly from the Partnership, the original investment
was $1,000 per Unit, cumulative allocations of income through September 30, 1998
were approximately $50 per Unit, and cumulative distributions through September
30, 1998 were approximately $655 per Unit. Investors who did not purchase their
Units directly from the Partnership must consult with their own advisers in this
regard.
7
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Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Liquidity
The Partnership's current assets of $914,097 exceed its current
liabilities of $132,726 by $781,371. This amount exceeds the Managing General
Partner's cash reserve target of $455,000. In the opinion of the Managing
General Partner, the Partnership's Pleasanton motel provides adequate liquidity
to satisfy the Partnership's financial obligations.
The Partnership's primary source of liquidity is its gross revenues
from operations. As noted below, the Partnership has a positive cash flow from
motel operations. In addition, the Partnership's equity in its Pleasanton motel,
which is presently unencumbered, would provide a potential source of liquidity
through financing in the event the Partnership's liquidity were impaired. There
can be no assurance, however, that the Partnership could borrow against such
equity on favorable terms should additional liquidity be required.
Capital Resources
The Partnership owns and operates one motel property, a 102-room
lodging facility located in Pleasanton, California.
The Partnership currently has no material commitments for capital
expenditures. Its motel property is in full operation, and no further property
acquisitions or extraordinary capital improvements are contemplated. If the
motel is not sold and the Partnership is not terminated, except as described
below, the Managing General Partner is aware of no material trends or changes
with respect to the mix or relative cost of the Partnership's capital resources.
Working capital is expected to be generated by revenues from operations.
During the fiscal year covered by this report, the Partnership spent
$62,445 ($51,186 of which was capitalized) on the refurbishment of its motel and
its furnishings. The capitalized items included $13,435 for guest room carpet,
$17,290 for game chairs, $6,828 for seven replacement air-conditioning units,
$10,762 for replacement televisions and $2,872 for guest room lamps. The items
not capitalized included $4,320 for pool repairs and $2,600 for landscaping.
During the fiscal year ended September 30, 1997, the Partnership spent
$54,213 ($32,756 of which was capitalized) on the refurbishment of its motel and
its furnishings. The capitalized items included $14,165 for guest room carpet
and vinyl, $9,742 for game chairs and a sofa, $4,748 for five replacement
air-conditioning units, $2,632 for replacement televisions and $1,470 for guest
room lamps. The items not capitalized included $5,261 for bedspreads, $4,313 for
parking lot resealing and $4,300 for furniture repairs.
If the motel is not sold the Managing General Partner anticipates the
expenditure of an undetermined amount during the next fiscal year on further
refurbishment of the Partnership's motel, such amount to be paid from operating
cash flow or, if operating cash flow is inadequate, from reserves.
8
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Results of Operation
Partnerships Overall Financial Results
The following is a comparison of combined results for the twelve-month
periods ending September 30, 1996, 1997 and 1998. Comparative revenue and
expense data is included in the financial statements found in Item 8.
The Partnership experienced a $140,977 or 16.4% decrease in net income
for the fiscal year covered by this report as compared to the previous fiscal
year. Total revenue decreased $80,115 or 4.1% and total expenses increased
$60,862 or 5.6%. The Partnership's financial results are discussed in more
detail below.
The Partnership achieved a 29.0% increase in net income for the fiscal
year ended September 30, 1997 as compared to the previous fiscal year. This
result was achieved by an increase in total income $254,370 (or 15.1%) while
limiting the increase in total expenses to $61,526 (or 6.0%). The revenue
increase was due primarily to increased guest room occupancy to an annual
average of 79.9% from 76.6% and by an increase in the average room rate to
$62.51 from $56.44.
Pleasanton, California Motel
The following is a comparison of operating results at the Partnership's
Pleasanton motel for the fiscal years 1996, 1997 and 1998. The income and
expense numbers in the following table are shown on an accrual basis and other
payments on a cash basis. Total expenditures and debt service include the
operating expenses of the motel, together with the cost of capital improvements.
AVERAGE AVERAGE
OCCUPANCY ROOM
PERIOD ENDED RATE RATE
----------------------------------------------------------
September 30, 1996 76.6% $56.44
September 30, 1997 79.9% $62.51
September 30, 1998 69.8% $69.06
PARTNERSHIP
TOTAL TOTAL CASH
PERIOD ENDED REVENUES EXPENDITURES FLOW (1)
------------------------------------------------------------------
September 30, 1996 $1,686,738 $928,896 $757,842
September 30, 1997 $1,941,108 $1,003,191 $937,917
September 30, 1998 $1,860,993 $1,082,482 $778,511
(1) While Partnership Cash Flow as it is used here is not an amount found
in the financial statements, the Managing General Partner believes that it is
the best indicator of the annual change in the amount available, if any, for
distribution to the Limited Partners because it tracks the definition of the
term "Cash Flow" as it is used in the Partnership Agreement. This calculation
is reconciled to the financial statements in the following table. Limited
Partners should not interpret Partnership Cash Flow as an alternative to net
income or as a measure of performance.
9
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Following is a reconciliation of Total expenditures and debt Service
as used above to Total expenses as shown on the Statement of Operations (in the
audited financial statements):
1998 1997 1996
----------------------------------------
Total Expenditures and Debt Service $1,082,482 $1,003,191 $928,896
Additions to Fixed Assets (51,186) (32,756) (21,791)
Depreciation and Amortization 111,868 113,229 114,714
Other Items 862 (500) (181)
----------------------------------------
Total Expenses $1,144,026 $1,083,164 $1,021,638
========================================
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:
1995-1996 1996-1997 1997-1998
----------------------------------------
Partnership Cash Flow $757,842 $937,917 $778,511
Net Additions to Fixed Assets 21,971 32,756 51,186
Depreciation and Amortization (114,714) (113,229) (111,868)
Other Items - 500 (863)
----------------------------------------
Net Income $665,099 $857,944 $716,966
========================================
During the fiscal year covered by this report, the Partnership's
Pleasanton motel experienced an $80,115 or 4.1% decrease in total revenue. Guest
room revenues decreased $65,398 or 3.5%. A decrease in the annual average
occupancy from 79.9% during the previous fiscal year to 69.8% during this fiscal
year was partially offset by an increase in the annual average room rate from
$62.51 during the previous fiscal year to $69.06 during the fiscal year covered
by this report. Decreased room nights generated by leisure and discount market
segments were partially offset by increased room nights from the corporate
market segment.
During the fiscal year ended September 30, 1997, the Partnership's
Pleasanton motel achieved a significant improvement in both its average room
rate and its average occupancy rate. The motel experienced decreased patronage
from the discount and corporate market segments which was offset by increased
occupied rooms from the leisure market segment.
During the fiscal year covered by this report as compared to the
previous fiscal year, the Partnership's Pleasanton motel experienced a $79,291
(or 7.9%) increase in expenditures. General and administrative expenses
increased $55,199 due primarily to increased legal fees associated with the
legal proceedings discussed in last year's annual report which were settled in
February 1998, the negotiations and the drafting of the sale contract discussed
in Item 1, and the preparation of the consent solicitation statement also
discussed in Item 1. Motel operating wages increased $16,203 primarily due to
staffing changes and the minimum wage increase in March 1998.
During the fiscal year ended September 30, 1997 as compared to the
previous fiscal year, the Partnership's Pleasanton motel experienced a $74,295
(or 8.0%) increase in total expenditures due to rising occupancy rates. The
motel experienced increases of $9,963 in front desk wages and salaries, and
$8,078 in resident manager's salary due primarily to cost inflation and
competition for employees in the area. The motel experienced $12,254 in
increased management fees expenses and $9,859 in increased franchise fees due to
the increased room revenue. The Partnership spent $7,250 for appraisal services
during the fiscal year.
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Future Trends
On May 15, 1998, the Partnership and four other limited partnerships
managed by the Managing General Partner entered into a contract to sell all of
their motel assets. Escrow for the sale opened in June 1998. By majority vote
the limited partners of the Partnership and the four other partnerships have
approved the sale pursuant to such contract. The sale of the Partnership's motel
assets and the motel assets of the other limited partnerships are subject to
certain contingencies. Because of these contingencies the Partnership has not
yet reclassified its motel assets as held for sale. If the sale occurs on the
terms approved by the Limited Partners, it is anticipated that the Partnership
would report a gain per books in the amount of approximately $5,600,000.
Accordingly, there has been no adjustment to the carrying value of the
Partnership's motel assets. If the sale is consummated the Partnership would be
liquidated.
The Managing General Partner expects the Partnership's occupancy rate
(and hence its revenues and profits) to benefit, in the long range, from
economic growth. The Managing General Partner anticipates lower occupancy rates
and perhaps lower room rates in the event of an economic downturn.
The Managing General Partner anticipates that, during the long range,
any increase in operating costs and expenses due to inflation will be met by an
upward adjustment in room rates. In the short range, however, competitive
conditions in the Partnership's market area may make such adjustments difficult
or impossible. The Managing General Partner is unable to predict when improved
competitive conditions would make such adjustments possible.
Other Financial information
In 1996 the computers used by the Partnership at the Managing General
Partner's offices in Sacramento were updated. In the process of updating its
hardware and software, the Managing General Partner eliminated any potential
Year 2000 problem with respect to such computers. Similarly, the Managing
General Partner does not anticipate any material Year 2000 problem with the
computers at the motel. The Managing General Partner has not investigated and
does not know whether any Year 2000 problem may arise from its third party
vendors. Because the motel is a "budget" motel, the Partnership's most
significant vendors are its utility providers and banks. To the extent banking
services, utility services and other goods and services are unavailable as a
result of Year 2000 problems with the computer systems of such vendors or
otherwise, the ability of the Partnership to conduct business at its motel would
be compromised. No contingency plans have been developed in this regard.
Item 7. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Inapplicable
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Financial Statements and Notes to Financial Statements at pages F-1
through F-13.
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ANNUAL REPORT ON FORM 10-K
ITEM 8
FINANCIAL STATEMENTS
SUPER 8 ECONOMY LODGING IV, LTD.
SACRAMENTO, CALIFORNIA
SEPTEMBER 30, 1998
F-1
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Item 8: Financial Statements
SUPER 8 ECONOMY LODGING IV, LTD.
INDEX OF FINANCIAL STATEMENTS
Pages
Financial Statements:
Report of Certified Public Accountants F-3
Balance Sheets, September 30, 1998 and 1997 F-4
Statements of Operations for the years ended
September 30, 1998, 1997 and 1996 F-5
Statements of Partners' Equity for the years ended
September 30, 1998, 1997 and 1996 F-6
Statements of Cash Flows for the years ended F-7 to
September 30, 1998, 1997 and 1996 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 Economy Lodging IV, Ltd.
We have audited the accompanying balance sheets of Super 8 Economy Lodging IV,
Ltd., a California limited partnership, as of September 30, 1998 and 1997 and
the related statements of operations, partners' equity and cash flows for each
of the three years in the period ended September 30, 1998. 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 Economy Lodging IV,
Ltd. as of September 30, 1998 and 1997 and the results of its operations and its
cash flows for each of the three years in the period ended September 30, 1998,
in conformity with generally accepted accounting principles.
VOCKER KRISTOFFERSON AND CO.
December 2, 1998
San Mateo, California
F-3
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SUPER 8 ECONOMY LODGING IV, LTD.
(A California Limited Partnership)
BALANCE SHEETS
September 30, 1998 and 1997
ASSETS
1998 1997
---------- ----------
Current Assets:
Cash and temporary investments (Notes 1 and 3) $ 854,771 $1,079,735
Accounts receivable 29,271 54,290
Other receivables (Note 8) 15,855 -
Prepaid expenses 14,200 13,463
---------- ----------
Total Current Assets 914,097 1,147,488
---------- ----------
Property and Equipment (Notes 2 and 6):
Land 799,311 799,311
Buildings 2,246,419 2,246,419
Furniture and equipment 551,089 519,267
---------- ----------
3,596,819 3,564,997
Accumulated depreciation (1,918,235) (1,824,868)
---------- ----------
Property and Equipment, Net 1,678,584 1,740,129
---------- ----------
Other Assets (Note 2):
Deposit of federal income taxes 82,584 63,975
---------- ----------
Total Assets $2,675,265 $2,951,592
========== ==========
LIABILITIES AND PARTNERS' EQUITY
Current Liabilities:
Accounts payable and accrued liabilities $ 119,408 $ 117,779
Due to related parties (Note 4) 13,318 8,241
---------- ----------
Total Liabilities 132,726 126,020
---------- ----------
Partners' Equity:
Limited Partners; 10,000 units authorized,
issued and outstanding 2,537,497 2,827,700
General Partners 5,042 (2,128)
---------- ----------
Total Partners' Equity 2,542,539 2,825,572
---------- ----------
Total Liabilities and Partners' Equity $2,675,265 $2,951,592
========== ==========
The accompanying notes are an integral part of these financial statements.
F-4
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SUPER 8 ECONOMY LODGING IV, LTD.
(A California Limited Partnership)
STATEMENTS OF OPERATIONS
Years Ended September 30:
----------------------------------
1998 1997 1996
---------- ---------- ----------
Income:
Motel room $1,794,889 $1,860,287 $1,613,817
Telephone and vending 30,579 42,012 41,244
Interest 34,673 36,351 28,879
Other 852 2,458 2,798
---------- ---------- ----------
Total Income 1,860,993 1,941,108 1,686,738
---------- ---------- ----------
Expenses:
Motel operations (exclusive of depreciation
shown separately below) (Notes 4 and 5) 841,152 830,267 789,729
General and administrative (exclusive of
depreciation shown separately below (Note 4) 47,349 44,522 34,302
Legal settlement and related legal fees 33,685 - -
Legal fees related to pending sale (Note 8) 18,687 - -
Depreciation and amortization (Note 2) 111,868 113,229 114,714
Property management fees (Note 4) 91,285 95,146 82,893
---------- ---------- ----------
Total Expenses 1,144,026 1,083,164 1,021,638
---------- ---------- ----------
Net Income $ 716,967 $ 857,944 $ 665,100
========== ========== ==========
Net Income Allocable to Limited Partners $709,797 $849,365 $658,449
======== ======== ========
Net Income Allocable to General Partners $7,170 $ 8,579 $ 6,651
======== ======== ========
Net Income Per Partnership Unit (Note 1) $70.98 $ 84.94 $ 65.84
======== ======== ========
Distributions to Limited Partners
Per Partnership Unit (Note 1) $100.00 $ 76.25 $ 59.30
======== ======== ========
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
SUPER 8 ECONOMY LODGING IV, LTD.
(A California Limited Partnership)
STATEMENTS OF PARTNERS' EQUITY
Years Ended September 30:
----------------------------------
1998 1997 1996
---------- ---------- ----------
Limited Partners:
Balance at beginning of year $2,827,700 $2,740,835 $2,675,386
Net income 709,797 849,365 658,449
Distributions to Limited Partners (1,000,000) (762,500) (593,000)
---------- ---------- ----------
Balance at End of Year 2,537,497 2,827,700 2,740,835
---------- ---------- ----------
General Partners:
Balance at beginning of year $ (2,128) $ (10,707) $ (17,358)
Net income 7,170 8,579 6,651
---------- ---------- ----------
Balance at End of Year 5,042 (2,128) (10,707)
---------- ---------- ----------
Total Partners' Equity $2,542,539 $2,825,572 $2,730,128
========== ========== ==========
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
SUPER 8 ECONOMY LODGING IV, LTD.
(A California Limited Partnership)
STATEMENTS OF CASH FLOWS
Years Ended September 30:
----------------------------------
1998 1997 1996
---------- ---------- ----------
Cash Flows From Operating Activities:
Received from motel operations $1,832,983 $1,874,958 $1,658,578
Expended for motel operations and
general and administrative expenses (1,043,935) (972,367) (917,820)
Interest received 37,174 33,423 28,940
---------- ---------- ----------
Net Cash Provided by Operating Activities 826,222 936,014 769,698
---------- ---------- ----------
Cash Flows From Investing Activities:
Purchases of property and equipment (51,186) (32,756) (33,120)
Proceeds from sale of equipment - 500 -
---------- ---------- ----------
Net Cash Used by Investing Activities (51,186) (32,256) (33,120)
---------- ---------- ----------
Cash Flows From Financing Activities:
Distributions paid to limited partners (1,000,000) (762,500) (593,000)
---------- ---------- ----------
Net Cash Used by Financing Activities (1,000,000) (762,500) (593,000)
---------- ---------- ----------
Net Increase (Decrease) in Cash and
Temporary Investments (224,964) 141,258 143,578
Cash and Temporary Investments:
Beginning of year 1,079,735 938,477 794,899
---------- ---------- ----------
End of Year $ 854,771 $1,079,735 $ 938,477
========== ========== ==========
The accompanying notes are an integral part of these financial statements.
F-7
<PAGE>
SUPER 8 ECONOMY LODGING IV, LTD.
(A California Limited Partnership)
STATEMENTS OF CASH FLOWS (Continued)
Years Ended September 30:
----------------------------------
1998 1997 1996
---------- ---------- ----------
Reconciliation of Net Income to Net Cash
Provided by Operating Activities:
Net income $ 716,967 $ 857,944 $ 665,100
---------- ---------- ----------
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization 111,868 113,229 114,714
Loss (gain) on disposition of property
and equipment 863 (500) -
(Increase) decrease in
accounts receivable 25,019 (32,727) 780
Increase in other receivables (15,856) - -
Increase in prepaid expenses (737) (674) (855)
Increase in deposit of federal
income taxes (18,609) (15,834) (10,044)
Increase (decrease) in accounts payable
and accrued liabilities (12,611) 10,800 (2,996)
Increase in due to related parties 19,318 3,776 2,999
---------- ---------- ----------
Total Adjustments 109,255 78,070 104,598
---------- ---------- ----------
Net Cash Provided by
Operating Activities $ 826,222 $ 936,014 $ 769,698
========== ========== ==========
The accompanying notes are an integral part of these financial statements.
F-8
<PAGE>
SUPER 8 ECONOMY LODGING IV, LTD.
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - THE PARTNERSHIP
Super 8 Economy Lodging IV, Ltd., is a limited partnership organized under
California law on February 5, 1982, to acquire and operate motel properties in
Pleasanton and Santa Ana, California. The Pleasanton motel was opened in
October, 1983, and the Santa Ana motel was opened in February, 1985. The
Partnership grants credit to customers, substantially all of which are local
businesses in Pleasanton. The Santa Ana property was sold in April, 1992.
The Managing General Partner of the Partnership is Grotewohl Management
Services, Inc., the sole shareholder and officer of which is Philip B.
Grotewohl. The Associate General Partner of the Partnership is Robert J. Dana.
The net income or net loss of the Partnership is allocated 1% to the General
Partners and 99% to the Limited Partners. Net income (loss) and distributions
per partnership unit are based upon 10,000 units outstanding. All partnership
units are owned by the Limited Partners.
The Partnership agreement requires that the Partnership maintain reserves for
normal repairs, replacements, working capital and contingencies in an amount of
at least 5% of adjusted capital contributions. As of September 30, 1998, the
Partnership had a combined balance in cash and temporary investments of
$854,771, which was $399,771 in excess of the $455,000 required amount.
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, except for a deposit of federal income taxes which is required of
partnerships with fiscal year ends other than a calendar year. The amount of the
deposit is based upon the taxable income of the partnership in the prior year.
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 150% declining balance
and straight-line 10-25 years
Furniture and equipment 200% and 150% declining
balance and straight-line 3-7 years
F-9
<PAGE>
SUPER 8 ECONOMY LODGING IV, LTD.
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS (Continued)
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Costs incurred in connection with maintenance and repair are charged to expense.
Major renewals and betterments that materially prolong the life of assets are
capitalized.
Long-lived assets are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount may not be recoverable. If the
sum of the expected future undiscounted cash flows is less than the carrying
amount of the asset, a loss is recognized for the difference between the fair
value and the carrying value of the asset.
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.
NOTE 3 - CASH AND TEMPORARY INVESTMENTS
Cash and temporary investments as of September 30, 1998 and 1997 consist of the
following:
1998 1997
---------- ----------
Cash in bank, non-interest bearing $ 35,445 $ 74,738
Money market accounts 519,326 704,997
Certificates of deposit 300,000 300,000
---------- ----------
Total Cash and Temporary Investments $ 854,771 $1,079,735
========== ==========
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 six months or less to be cash equivalents
for purposes of the statement of cash flows.
F-10
<PAGE>
SUPER 8 ECONOMY LODGING IV, LTD.
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS (Continued)
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 the motel and
contributes an additional 1% of the 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 ($89,772 in 1998,
$93,014 in 1997 and $80,691 in 1996) are included in motel operations expense in
the accompanying statements of operations. The Partnership operates its motel
property 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 $35,909, $37,206 and $32,276 in 1998, 1997 and 1996,
respectively.
Property Management Fees
The General Partner, or its affiliates, handles the management of the motel
property 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 $91,285, $95,146 and $82,893 in 1998, 1997 and 1996,
respectively.
Subordinated Partnership Management Fees
During the Partnership's operational stage, the General Partners are to receive
9% of cash available for distribution for Partnership management services, along
with an additional 1% of cash available for distribution on account of their
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 September 30, 1998 the Limited Partners had not
received the 10% cumulative return, and as no Partnership management fees are
presently payable they 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 sales or a refinancing. As
of September 30, 1998 the cumulative amount of these fees was $627,826.
F-11
<PAGE>
SUPER 8 ECONOMY LODGING IV, LTD.
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS (Continued)
NOTE 4 - RELATED PARTY TRANSACTIONS (Continued)
Subordinated Incentive Distributions
Under the terms of the Partnership agreement, the General Partners are to
receive 15% of distributions of net proceeds from the sale or refinancing of
Partnership property 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. Administrative
Expenses Shared by the Partnership and its Affiliates There are certain
administrative expenses which are allocated between the Partnership and
affiliated Super 8 partnerships. These expenses, which are allocated based on
usage, are telephone, data processing, rent of the administrative office,
administrative salaries and duplication expenses. Management believes that the
methods used to allocate shared administrative expenses are reasonable. The
expenses allocated to the Partnership were approximately $123,000 in 1998,
$113,000 in 1997 and $113,000 in 1996 and are included in motel and restaurant
operations and general and administrative expenses in the accompanying
statements of operations. Included in administrative salaries are allocated
amounts paid to two employees who are related to Philip B. Grotewohl, the sole
shareholder of Grotewohl Management Services, Inc., a General Partner of the
Partnerships. One of these employees terminated his employment prior to May
1998.
NOTE 5 - MOTEL OPERATING EXPENSES
The following table summarizes the major components of motel operating expenses
for the years ended September 30, 1998, 1997 and 1996:
1998 1997 1996
--------- --------- ---------
Salaries and related costs $ 338,225 $322,022 $ 308,314
Franchise and advertising fees 89,772 93,015 80,691
Utilities 68,249 68,243 66,664
Allocated costs, mainly indirect salaries 100,577 90,713 92,355
Maintenance expenses 47,140 64,434 48,215
Repairs and minor renovations 11,259 21,457 23,158
Property taxes 46,470 46,739 45,681
Property insurance 23,692 22,781 21,691
Other operating expenses 115,768 100,863 102,960
--------- --------- ---------
Total Motel Operating Expenses $ 841,152 $ 830,267 $ 789,729
========= ========= =========
NOTE 6 - PROPERTY AND EQUIPMENT
The following is a summary of the accumulated depreciation of property and
equipment per books:
1998 1997
---------- ----------
Buildings $1,465,799 $1,381,389
Furniture and equipment 452,436 443,479
---------- ----------
Accumulated depreciation $1,918,235 $1,824,868
========== ==========
F-12
<PAGE>
SUPER 8 ECONOMY LODGING IV, LTD.
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS (Continued)
NOTE 6 - PROPERTY AND EQUIPMENT (Continued)
The following is a summary of the federal income tax basis as of September 30,
1998:
Land $ 799,311
Buildings 2,096,419
Furniture and equipment 551,089
----------
3,446,819
Accumulated depreciation 2,492,765
----------
$ 954,054
==========
NOTE 7 - CONCENTRATION OF CREDIT RISK
The Partnership maintains its cash accounts in seven commercial banks located in
California. Accounts at each bank are guaranteed by the Federal Deposit
Insurance Corporation (FDIC) up to $100,000 per bank. A summary of the total
insured and uninsured cash balances (not reduced by outstanding checks) as of
September 30, 1998 follows:
Total cash in all California banks $ 889,820
Portion insured by FDIC (700,000)
----------
Uninsured cash balances $ 189,820
==========
NOTE 8 - PENDING SALE OF MOTEL ASSETS
On May 15, 1998 the Partnership and four other limited partnerships managed by
the general partner entered into a contract to sell all their motel assets.
Escrow for the sales opened June 1998. By majority vote the limited partners of
the Partnership have approved the sale of the Partnership's motel assets
pursuant to such contract, and the limited partners of the four other limited
partnerships have also approved by majority vote the sale of their respective
limited partnership's motel assets. The sale of the Partnership's motel assets
and the motel assets of the other limited partnerships are subject to certain
contingencies. Because of these contingencies the Partnership has not yet
reclassified its motel assets as held for sale. If the sale occurs on the terms
approved by the limited partners, it is anticipated that the Partnership would
report a gain per books in the amount of approximately $5,600,000. Accordingly,
there has been no adjustment to the carrying value of the Partnership's motel
assets. If the sale is consummated the Partnership would be liquidated.
In connection with the anticipated sale of the motel assets, the Partnership has
incurred reimbursable costs in the amount of $15,855 which are included as other
receivables in the accompanying balance sheet.
NOTE 9 - FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amount of cash and temporary investments, accounts receivable,
other receivables, accounts payable and accrued liabilities, and due to related
parties in the balance sheet approximates fair value.
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 Managing General Partners of the Partnership were Dennis
A. Brown and Grotewohl Management Services, Inc., a 50% shareholder of which is
Philip B. Grotewohl. The original Associate General Partners were BWC
Incorporated and Robert J. Dana.
Upon Mr. Brown's death on February 25, 1988, Mr. Grotewohl, as
president of Grotewohl Management Services, Inc., and Mr. Dana elected to
continue the Partnership. BWC Incorporated was dissolved in 1989.
Grotewohl Management Services, Inc. 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.
Mr. Grotewohl, age 80, 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 Motel limited partnerships.
Mr. Dana, age 70, was a registered representative of Brown, Brosche
Securities, Inc. between 1982 and 1988. Between 1976 and 1982 he served as a
registered representative of several stock and investment brokers. Mr. Dana
has also served as marketing consultant for various real estate limited
partnership and other direct participation investment programs.
Item 11. EXECUTIVE COMPENSATION
The following discussion contains certain information regarding
aggregate direct or indirect compensation paid or accrued by the Partnership
during the fiscal year ended September 30, 1998 to the General Partners and the
Estate of Dennis A. Brown, and/or their affiliates. Although Mr. Brown ceased to
be a general partner of the Partnership upon his death, his estate shares in
certain compensation otherwise payable to the General Partners and their
affiliates.
Property Management Fees
The Manager, a California general partnership which is owned equally by
the Estate of Dennis A. Brown and the Managing General Partner, is managing the
Partnership's motel. The fee for this service is 5% of the gross proceeds from
the operation of the 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.
During the fiscal year covered by this report the Partnership accrued
such fees in the amount of $91,285, all of which were paid.
12
<PAGE>
Franchise Fees and Advertising Fees
The Partnership operates its motel as a franchisee of Super 8 Motels,
Inc., through a sub-franchise obtained from Super 8 Management Corporation. In
March 1988 the shareholders of Super 8 Management Corporation transferred their
interests in the sub-franchise agreement to the Manager. The Partnership, as
franchisee, pays to the franchisor monthly franchise fees equal to 4% of its
gross room revenue and contributes 1% of its gross room revenue to an
advertising fund administered by the franchisor to finance institutional
advertising. The Manager is entitled to one-half of the 4% franchise fee.
The total of franchise fees accrued during the fiscal year covered by
this report was $71,817, of which $35,909 accrued to the Manager. All of the
above sums have been paid.
General Partners' 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 Managing
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 Partners as Partnership management fees; and (3)
1% thereof is paid to the General Partners in accordance with their interest in
the income and losses of the Partnership.
Notwithstanding the foregoing, however, distributions of Cash Available
for Distribution to the General Partners which would otherwise be paid to the
General Partners 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. During the
fiscal year covered by this report, $1,000,000 in distributions of Cash
Available for Distribution were paid to the Limited Partners. A total of
$627,826 representing the General Partners' Interest in Cash Available for
Distribution has been deferred and remains unpaid since commencement of the
Partnership. The Limited Partners must receive $9,055,855 (calculated through
September 30, 1998) and $910,000 each year thereafter in additional
distributions before any of the accrued amounts will be paid to the General
Partners. Accordingly, the General Partners consider the payment of these
deferred amounts to be unlikely.
General Partner's Interest in Sale or Refinancing Proceeds
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 will
be distributed 15% to the General Partners and 85% to the Limited Partners.
No such distributions were paid or accrued for the account of the
General Partners during the fiscal year covered by this report.
13
<PAGE>
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
Estate of Dennis A. Brown, the Managing General Partner and the Associate
General Partner.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Security Ownership of Certain Beneficial Owners
AMOUNT AND
TITLE NATURE OF
OF BENEFICIAL PERCENT
CLASS NAME OF BENEFICIAL OWNER OWNERSHIP OF CLASS
---------- ---------------------------------- ----------------- -----------
Units Everest Lodging Investor, LLC 182 Units 1.82%
Units Everest Madison Investors, LLC 497 Units 4.97%
--------
TOTAL 679 Units 6.79%
========
Security Ownership of Management
The General Partners do not beneficially own 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 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 Partners, 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.
14
<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 affiliated Super 8 partnerships. 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 $123,000 in the fiscal year ended September
30, 1998 and are included in general and administrative expenses and motel and
restaurant operations expenses in the Partnership's financial statements.
Included in administrative salaries are allocated amounts paid to two employees
who are related to Philip B. Grotewohl, a 50% shareholder of the Managing
General Partner.
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, September 30, 1998 and 1997
Statement of Operations for the Years Ended September 30,
1998, 1997 and 1996
Statements of Partners' Equity for the Years Ended September 30,
1998, 1997 and 1996
Statements of Cash Flows for the Years Ended September 30,
1998, 1997 and 1996
Notes to Financial Statements
2. Financial Statement Schedules Included in Part IV of the Report
None
3. Exhibits
3. and 4. The Partnership Agreement is incorporated herein as an exhibit
from the annual report on Form 10-K for the fiscal year ended
September 30, 1994
(b) Reports on Form 8-K:
None
15
<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 ECONOMY LODGING IV, LTD.
By (Signature and Title) /s/ Philip B. Grotewohl
--------------------------------
Philip B. Grotewohl,
Chairman of Grotewohl Management
Services, Inc.,
Managing General Partner
Date: December 22, 1998
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., Managing General
Partner
Date: December 22, 1998
16
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> SEP-30-1998
<CASH> 854,771
<SECURITIES> 0
<RECEIVABLES> 45,126
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 914,097
<PP&E> 3,596,819
<DEPRECIATION> 1,918,235
<TOTAL-ASSETS> 2,675,265
<CURRENT-LIABILITIES> 132,726
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 2,542,539
<TOTAL-LIABILITY-AND-EQUITY> 2,675,265
<SALES> 1,825,468
<TOTAL-REVENUES> 1,860,993
<CGS> 841,152
<TOTAL-COSTS> 841,152
<OTHER-EXPENSES> 302,874
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 716,967
<INCOME-TAX> 0
<INCOME-CONTINUING> 716,967
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 716,967
<EPS-PRIMARY> 70.98
<EPS-DILUTED> 70.98
</TABLE>
