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
For the Fiscal Year Ended December 31, 1998
Commission file number 0-14540
FAMOUS HOST LODGING V, L.P.
(Exact name of registrant as specified in its charter)
California 94-2933595
(State or other jurisdiction of (I.R.S. Employer Iden-
incorporation 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 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 l. BUSINESS
General Development of Business
Famous Host Lodging V, L.P. (the "Partnership") is a limited partnership which
was organized under the Uniform Limited Partnership Act of the State of
California on January 17, 1984.
An amendment to the Certificate of Limited Partnership was executed on February
13, 1991 which changed the Partnership's name from Super 8 Lodging V, Ltd.
The Managing General Partner of the Partnership is Grotewohl Management
Services, Inc., a California corporation organized and fifty percent owned by
Philip B. Grotewohl. The Associate General Partner of the Partnership is Robert
J. Dana. The Managing General Partner and the Associate General Partner are
sometimes hereinafter referred to collectively as the "General Partners." The
Associate General Partner does not have general responsibility in connection
with the management of the business and affairs of the Partnership.
Through two public offerings of units of limited partnership interest in the
Partnership (the "Units"), the Partnership sold 9,022 Units at a price of $1,000
per Unit.
Substantially all of the net proceeds of the public offerings were expended for
or committed to the acquisition and/or development of two lodging/restaurant
properties, located in Barstow, California and San Francisco, California,
respectively. In 1989 the Partnership sold its interest and development rights
in its San Francisco property to another developer rather than completing the
purchase and development of the property itself. The Partnership has received
the consent of its limited partners (the "Limited Partners") to the sale of the
Barstow property. See Item 4 hereof. However, as part of the arbitration
proceeding commenced against the Partnership by its landlord (see Item 3
hereof), the Partnership has been unable to obtain the consent of the landlord
to the transfer of the land lease, which is a condition to the consummation of
the sale transaction. The Partnership and the buyer for the property have
informally agreed to the extension of the purchase agreement to the later of
April 30, 1999 or 30 days following the receipt of the decision in the
arbitration. Furthermore, the Partnership has been unable to reach agreement
with Holiday Inn as to the early termination of the franchise agreement. If the
arbitration is decided in favor of the Partnership, or if the decision is in
favor of the landlord but for limited damages, and if the Partnership is able to
reach an agreement with Holiday Inn, it is likely, although not certain, that
the sale would proceed on the terms approved by the Limited Partners. Otherwise,
it is possible that the sale might not occur, in which event the Partnership
would likely solicit purchase bids for the property from other parties.
In all events, if the property is sold then at such time as the property is sold
the Partnership would be dissolved under California law and, upon completion of
its winding-up activities, the Partnership would be terminated.
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Narrative Description of Business
(a) Franchise Agreements
Through February 4, 1991, the Partnership operated its Barstow hotel as a
franchisee of Super 8 Motels, Inc. The Partnership now operates its Barstow
hotel and restaurant as a franchise of Holiday Inns, Inc. under the name
"Holiday Inn." The property began operations under such name on February 27,
1991.
Holiday Inns offer accommodations in the mid-range of the lodging industry in
terms of facilities and prices. Holiday Inns compete with hotels with brand
names such as Ramada, Quality Inn, Courtyard by Marriott and certain upscale
Best Westerns.
(b) Operation of the Hotel and Restaurant
Brown and Grotewohl, a California general partnership which is an affiliate of
the Managing General Partner (the "Manager"), manages and operates the
Partnership's hotel and restaurant. The Manager's management responsibilities
include, but are not limited to, the supervision and direction of the
Partnership's employees who operate the hotel and restaurant, 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 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 the hotel and restaurant, including all collections and all disbursements
to be paid out of funds generated by hotel operations or otherwise supplied by
the Partnership.
As of December 31, 1998, the Partnership employed a total of 70 persons, either
full or part-time at the Barstow hotel and restaurant, including 13 desk clerks,
25 housekeeping and laundry personnel, four maintenance personnel, one general
manager, 12 cooks and dishwashers, 11 servers and bus persons, three bartenders
and one restaurant manager. In addition, and as of the same date, the
Partnership employed 10 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 hotel supervisory personnel, an attorney, secretarial personnel, and
purchasing personnel, including David Grotewohl, son of Philip Grotewohl, whom
the Partnership employs as Director of Operations and as an attorney, and, until
April 30, 1998, Mark Grotewohl, whom the Partnership employed as marketing and
sales director.
(c) Competition
As discussed in greater detail below, the Partnership faces competition from
hotels and motels of varying quality and size, including other mid-range hotels
and motels which are part of nationwide chains and which have access to
nationwide reservation systems.
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Item 2. PROPERTIES
Barstow
On May 10, 1984, the Partnership entered into a long-term lease of 3.05 acres of
unimproved land located on East Main Street in Barstow, California. The
leasehold is located within a 15-acre parcel which was developed as a lodging,
restaurant, retail and theater complex known as "Barstow Station Too!". The
Barstow hotel is the only hotel or motel included in the complex. The original
term of the lease is for 50 years with lessee's option to renew for three
additional 10-year periods.
The Barstow hotel, which consists of 148 guestrooms, was placed in service on
December 31, 1985, at which date 96 guestrooms were available for occupancy. The
remaining 52 guestrooms became available for occupancy on March 15, 1986.
On June 15, 1987 the Partnership commenced operation of a family restaurant and
cocktail lounge immediately adjacent to the Barstow hotel. The Partnership
leases the restaurant facility from Fred Rosenberg, the lessor of the hotel
site.
On May 30, 1990, the Partnership entered into a written agreement with the
lessor for the amendment of the hotel and restaurant facility leases. The
restaurant facility lease term was extended from January 1, 1991 to December 31,
2010; however, the Partnership has the option of terminating the lease after
January 1, 2001 if the Partnership should terminate its license to operate the
hotel as a franchise of Holiday Inns, Inc. Additional rent for the hotel site
and restaurant facility was changed so as to be the amount by which 9% of the
combined annual gross sales from the hotel and restaurant facility exceeds the
combined annual minimum rent ($275,556 as of December 31, 1997; $280,116 as of
December 31, 1998) under the hotel site and restaurant facility leases.
The leases provide that the improvements constructed by the Partnership on the
leased premises will remain the property of the Partnership during the lease
term but that upon expiration of the leases, title to any such improvements will
pass to the lessor.
In 1998, the Partnership incurred a total of $294,417 in rent expense for its
Barstow hotel site and restaurant facility. See Item 3 hereof. In addition, the
Partnership pays all property taxes and assessments for each leaseshold site.
The Barstow hotel achieved the following average occupancy rates and average
room rates during 1998, 1997 and 1996.
Annual Averages
1998 1997 1996
-------------------------------------------
Average Occupancy 67.9% 68.6% 71.1%
Rate
Average Room Rate $70.90 $66.30 $64.63
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The following lodging facilities provide direct and indirect competition to the
Partnership's Barstow hotel:
APPROXIMATE
NUMBER DISTANCE
FACILITY OF ROOMS FROM THE HOTEL
----------------------------------------------------------------
Quality Inn 100 Adjacent
Days Inn 113 0.25 miles
Comfort Inn 62 0.50 miles
Vagabond Inn 67 0.50 miles
Best Western 79 0.50 miles
Holiday Inn Express 65 3.00 miles
The Barstow hotel's major sources of patronage are generated by local military
bases, with civilian Federal employees, military personnel and Federal
government contractors generating approximately 24% of the hotel's room revenue.
The Barstow area also attracts traveling salespeople and other commercial
travelers.
For a discussion of the revenue received by the Partnership from the restaurant
and lounge see Item 7 hereof.
Item 3. LEGAL PROCEEDINGS
Fred Rosenberg, d.b.a. Barstow Station, Too!, the Partnership's landlord (the
"Lessor" ) has served upon the Partnership a Demand for Arbitration, dated
September 24, 1998. In the demand, the Lessor has asked for (i) a declaration
that the Partnership is in violation of the lease in that the Partnership's
restaurant is not open for lunch (the Lessor alleging that this practice is not
customary for businesses of like character in Barstow and that the lease
requires the Partnership to operate the restaurant in such alleged customary
fashion) and that the meeting and banquet rooms are not being operated for
lunch; and (ii) damages in an amount to be proved but believed to be at least
$250,000. On October 23, 1998 the Partnership transmitted its answer to the
demand and the Partnership and the Managing General Partner transmitted a
counterclaim praying for a dismissal of the Lessor's demand, compensatory
damages for the Lessor's breach of the implied covenant of good faith and fair
dealing contained in the lease, a declaration that no violation of the lease has
occurred, and damages equal to reasonable attorneys' fees and costs. The
counterclaim alleges that the Lessor breached his implied covenant of good faith
and fair dealing by leasing nearby property to the Sizzler Restaurant and Taco
Bell, and that the changes in operating policies were dictated by changes
economic circumstances since the lease was executed more than 14 years ago and
by the Lessor's actions in leasing nearby property to direct competitors.
The arbitration proceeding is scheduled to commence on April 12, 1999 in San
Bernardino County, California.
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Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During November 1998 the Partnership submitted to the Limited Partners a consent
solicitation statement soliciting the consent of the Limited Partners to (i) the
sale of the Partnership's Barstow hotel and related assets at an aggregate
purchase price of $4,100,000, and (ii) the dissolution and termination of the
Partnership. The Limited Partners consented to such sale by majority vote. No
meeting was held in connection with the solicitation of consents. The result of
the solicitation was as follows: In favor, 7,245; opposed, 526; and not voting,
1,251. A determination as to whether or not the Partnership's hotel and relate
personal property will be sold on the terms set forth in such solicitation
statement will not be made until resolution of the arbitration proceeding
brought by the Lessor and resolution of the issues surrounding the early
termination of the Partnership's franchise. See Item 1 and Item 3 above.
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 in the Units has
developed or is expected to develop.
Holders
As of December 31, 1998 a total of 1,794 investors held Units in the
Partnership.
Distributions
Cash distributions are made from Cash Available for Distribution, defined in the
Partnership's Amended and Restated 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 property and the Partnership. Of the Cash Available for
Distribution in any year, the General Partners will receive 10% thereof, of
which 9% will constitute a fee for managing the Partnership and 1% will be
attributable to their interest in the profits of the Partnership.
Notwithstanding the preceding, the General Partners will not receive any
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 a 14% cumulative return on their adjusted capital
contributions.
6
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The Partnership's distributions of Cash Available for Distribution during the
two most recent fiscal years were as follows:
Total Amount
Date Distribution Per Unit
----------------------------------------
02/15/97 $83,002 $9.20
05/15/97 $83,002 $9.20
08/15/97 $83,002 $9.20
11/15/97 $83,002 $9.20
02/15/98 $83,002 $9.20
No distributions of Cash Available for Distribution were made to the
General Partners.
Cash distributions are also made from Sale or Refinancing Proceeds,
defined in the Partnership Agreement as the cash proceeds from a sale or
refinancing of a Partnership property remaining after retirement of mortgage
debt, all expenses related to the transaction, and any fees payable to the
General Partners. Of the Sale or Refinancing Proceeds available for distribution
in any year, the General Partners will receive 15% thereof, of which 14% will
constitute a subordinated incentive fee and 1% will be attributable to their
interest in the Partnership. Notwithstanding the preceding, the General Partners
will not receive distributions of Sale or Refinancing Proceeds until each
Limited Partner has received from cumulative distributions of Sale or
Refinancing Proceeds an amount equal to 100% of his capital contributions and
has received additional distributions from all sources equal to 10% per annum
cumulative on his adjusted capital contributions.
Item 6. SELECTED FINANCIAL DATA
Following are selected financial data for the Partnership for the fiscal years
ended December 31, 1998, 1997, 1996, 1995 and 1994.
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FAMOUS HOST LODGING V, L. P.
Item 6. Selected Financial Data
Years Ended December 31:
----------------------------------------------------------
1998 1997 1996 1995 1994
---------- ---------- ---------- ---------- ----------
Guest room income $2,599,166 $2,458,115 $2,489,982 $2,466,338 $2,526,730
Restaurant income 422,079 $690,622 $655,746 $636,141 $701,900
Interest income 6,879 $6,938 $9,131 $11,825 $13,899
Net income (loss) 160,383 ($45,074) $14,787 $78,676 $188,470
Per Partnership Unit:
Cash distributions $9.20 $36.80 $36.80 $36.80 $34.40
Net income (loss) $17.60 $(4.95) $1.62 $8.63 $20.68
December 31:
----------------------------------------------------------
1998 1997 1996 1995 1994
---------- ---------- ---------- ---------- ----------
Total assets $2,476,898 $2,430,463 $2,815,123 $3,127,918 $3,411,671
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 December 31, 1998
were approximately $55 per Unit, and cumulative distributions through December
31, 1998 were approximately $647 per Unit. Investors who did not purchase their
Units directly from the Partnership must consult with their own advisors in this
regard.
8
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Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION
Liquidity and Capital Resources
The Partnership's primary source of liquidity is its cash flow from operations.
The Partnership had as of December 31, 1998 current assets of $457,929, current
liabilities of $145,818 and, therefore, an operating reserve of $312,111. The
Partnership Agreement requires reserves equal to 5% of the adjusted capital
accounts, which are approximately $5,536,000. Current reserves are above this
$276,800 required reserve.
During the fiscal year ended covered by this report, the Partnership expended
$114,523 for renovations and replacements, of which $50,906 was capitalized. The
expenditures included $7,221 for chairs and sleep sofas, $11,541 for pool
refurbishing, $17,188 for guestroom carpet, $29,076 for telephone equipment,
$7,478 for lamp and ballast upgrades, $18,915 for roof repairs and $6,660 for
replacement air-conditioning equipment.
During the fiscal year ended December 31, 1997, the Partnership expended
$103,300 for renovations and replacements, of which $50,387 was capitalized. The
expenditures included $25,714 for desk chairs, chairs and sleep sofas, $19,721
for parking lot repairs, $12,341 for guestroom carpet, $6,200 for security
equipment, $7,478 for lamp and ballast upgrades, $5,700 for roof repairs and
$7,132 for restaurant signage.
The Managing General Partner believes that the Partnership's ability to generate
sufficient cash to satisfy its normal cash needs is adequate. However, if the
arbitrators were to grant a substantial award to the Lessor (see Item 3 hereof)
it is possible that the Partnership would not have sufficient cash to pay such
award. Accordingly, whether or not Partnership will have adequate liquidity is
dependent upon the results of the arbitration, as to which no predictions can be
made.
As discussed in Items 1, 3 and 4 hereof, the Partnership has received the
approval of the Limited Partners to the sale of its hotel for a cash purchase
price of $4,100,000. However, when or even if the hotel will be sold is
contingent upon the results of the arbitration proceeding as well as the results
of the negotiations with Holiday Inn respecting the early termination of the
Partnership's franchise. In the event that the hotel is sold, upon closing of
the sale transaction the Partnership would be dissolved. Thereafter, the
Partnership would wind-up its activities, and upon conclusion of the winding-up
process would be terminated. If the hotel is not sold, the Partnership would
continue to own and operate the hotel, assuming its liquidity with respect
thereto is adequate.
9
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Results of Operations
Combined Financial Results
The following tables summarize the Partnership's operating results for the
fiscal years ended December 31, 1996, 1997 and 1998 on a combined basis.
Individual hotel and restaurant results follow in separate subsections. The
income and expense numbers in the following table are shown on an accrual basis
and other payments on a cash basis. Total expenditures and debt service include
the operating expenses of the motel, together with the cost of capital
improvements.
Average Average
Hotel Hotel
Occupancy Room
Fiscal Year Ended: Rate Rate
------------------------------------------------------
December 31, 1996 71.1% $64.63
December 31, 1997 68.6% $66.30
December 31, 1998 67.9% $70.90
Total Partnership
Total Expenditures Cash Flow
Fiscal Year Ended: Revenues and Debt Service (1)
-------------------------------------------------------------------------
December 31, 1996 $3,257,416 $2,961,860 $295,556
December 31, 1997 $3,250,726 $3,063,793 $186,933
December 31, 1998 $3,124,497 $2,769,218 $355,279
(1) (1) While Partnership Cash Flow as it is used here is not an amount
found in the financial statements, the Managing General Partner
believes it is the best indicator of the annual change in the
amount, if any, available for distribution to the Limited Partners
because it tracks the definition of the term "Cash Flow" as it is
used in the Partnership Agreement. These calculations are reconciled
to the financial statements in the following table.
Following is a reconciliation of Total Expenditures and Debt Service as used
above to Total Expenses as shown ion the Statement of Operations (in the audited
financial statements):
1998 1997 1996
------------------------------------
Total Expenditures and Debt Service $2,769,218 $3,063,793 $2,961,860
Net Additions to Fixed Assets (50,906) (50,387) (29,643)
Depreciation and Amortization 245,802 281,791 299,764
Other Items 0 603 10,648
------------------------------------
Total Expenses $2,964,114 $3,295,800 $3,242,629
====================================
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A reconciliation of Partnership Cash Flow (from the chart above) to Net Income
(Loss) as shown on the Statements of Operations (in the audited financial
statements) is as follows:
1998 1997 1996
------------------------------------
Partnership Cash Flow $355,279 $186,933 $295,556
Net Additions to Fixed Assets 50,906 50,387 29,643
Depreciation and Amortization (245,802) (281,791) (299,764)
Other Items 0 (603) (10,648)
------------------------------------
Net Income $160,383 ($45,074) $14,787
====================================
The following is a reconciliation of the Partnership Cash Flow (shown above) to
the aggregate total of Cash Flow from Hotel Operations (shown in the succeeding
subsection) and the Total Restaurant Net Loss (shown in the second succeeding
subsection).
1998 1997 1996
---------------------------------
Cash Flow from Hotel Operations $500,723 $408,473 $467,476
Total Restaurant Net Loss (152,503) (231,552) (182,081)
---------------------------------
Aggregate Cash Flow from Property Operations $348,220 $176,921 285,395
Interest on Cash Reserves 6,879 6,938 9,131
Other Income (net of Other Expenses) not
allocated to the property 180 3,074 1,030
---------------------------------
Partnership Cash Flow $355,279 $186,933 $295,556
=================================
Hotel Operations
The following table summarizes the operating results of the hotel for the fiscal
years ended December 31, 1998, 1997, and 1996. Total expenditures include the
operating expenses of the hotel, together with the cost of capital improvements
and those Partnership expenses properly allocable to such hotel.
Cash Flow
from
Total Total Hotel
Fiscal Year Ended: Revenues Expenditures Operations
------------------------------------------------------------------------
December 31, 1996 $2,591,465 $2,123,989 $467,476
December 31, 1997 $2,553,167 $2,144,694 $408,473
December 31, 1998 $2,694,539 $2,193,816 $500,723
The Partnership's hotel achieved a $141,372 or 5.5% increase in total revenues
during the fiscal year covered by this report as compared to the previous fiscal
year. The decrease in average occupancy rate from 68.6% in 1997 to 67.9% in 1998
was offset by an increase in the average daily rate from $66.30 in 1997 to
$70.90 in 1998. The occupancy generated by the military/government market
segment declined while occupancy from the corporate and leisure market segments
increased.
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The Partnership's hotel experienced a $38,298 or 1.5% decrease in total revenues
during the fiscal year ended December 31, 1997 as compared to the previous
fiscal year. The decrease in average occupancy rate from 71.1% in 1996 to 68.6%
in 1997 was partially offset by an increase in the average daily rate from
$64.63 in 1996 to $66.30 in 1997. The occupancy generated by the group market
segments declined while occupancy by the other market segments stayed about the
same. The average room rate for all market segments increased due to rate
increases.
The Barstow hotel's total expenditures increased $49,122 or 2.3% during the
fiscal year covered by this report as compared to the previous fiscal year. This
included increases of $7,371 for additional billboards, $17,680 for central
overhead allocation, $16,868 for housekeeping wages, $60,862 for legal fees and
$11,223 for renovations and replacements. These increases were partially offset
by reductions of $15,648 in security services, $7,068 in telephone charges and
$11,754 in maintenance wages.
The Barstow hotel's total expenditures increased $20,705 or 1.0% during the
fiscal year ended December 31, 1997 as compared to the previous fiscal year.
This included increases of $7,855 for additional billboards, $9,139 for central
overhead allocation, $8,776 for travel agent commissions, $8,145 for legal fees
and $43,879 for renovations and replacements. These increases were partially
offset by reductions of $34,243 in security services.
Restaurant Operations
The following table summarizes the operating results of the restaurant for the
fiscal years ended December 31, 1998, 1997, and 1996:
1998 1997 1996
---- ---- ----
Food Sales $341,153 100.0% $533,750 100.0% $506,255 100.0%
Cost of Food Sales (139,857) -41.0% (229,820) -43.1% (203,022) -40.1%
--------- --------- ---------
Gross Profit from
Food Sales $201,296 59.0% $303,930 56.9% 303,233 59.9%
Beverage Sales 80,926 100.0% 156,871 100.0% 149,490 100.0%
Cost of Beverages Sold (24,720) -30.5% (50,488) -32.2% (50,866) -34.0%
--------- --------- ---------
Gross Profit from
Beverage Sales $56,206 69.5% $106,383 67.8% 98,624 66.0%
--------- --------- ---------
Combined Gross Profit $257,502 61.0% $410,313 59.4% 401,857 61.3%
Restaurant Operating
Expenses (410,005) -97.1% (641,865) -92.9% (583,938) -89.0%
--------- --------- ---------
Total Restaurant Net Loss ($152,503) -36.1% ($231,552) -33.5% $(182,081) -27.8%
========= ========= =========
The Partnership's restaurant at the Barstow Holiday Inn achieved a $79,049 or
34.1% decrease in its net loss during the fiscal year covered by this report as
compared to the previous fiscal year. Effective February 23, 1998, the
restaurant hours were reduced to seven hours per day. Losses are about $50,000
greater than planned as full time restaurant management was retained pending
resolution of a lawsuit between the landlord and the Partnership. The landlord
contends that the reduced hours are a violation of the restaurant lease. See
Item 4 above.
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The Partnership's restaurant at the Barstow Holiday Inn experienced a $49,471 or
27.2% increase in its net loss during the fiscal year ended December 31, 1997 as
compared to the previous fiscal year. There was an effort to increase restaurant
sales, but the costs rose faster than revenue.
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 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Inapplicable.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Financial Statements and Notes to Financial Statements attached hereto at
pages F-1 through F-14.
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ANNUAL REPORT ON FORM 10-K
ITEM 8
FINANCIAL STATEMENTS
FAMOUS HOST LODGING V, L. P.
SACRAMENTO, CALIFORNIA
DECEMBER 31, 1998
F-1
<PAGE>
Item 8: Financial Statements
FAMOUS HOST LODGING V, L. P.
INDEX OF FINANCIAL STATEMENTS
Pages
Report of Independent Certified Public Accountants F-3
Balance Sheets, December 31, 1998 and 1997 F-4
Statements of Operations for the years ended
December 31, 1998, 1997 and 1996 F-5
Statements of Partners' Equity for the years ended
December 31, 1998, 1997 and 1996 F-6
Statements of Cash Flows for the years ended F-7 to
December 31, 1998, 1997 and 1996 F-8
Notes to Financial Statements F-9 to
F-14
Note: All schedules have been omitted since the required information is not
present or not present in amounts sufficient to require submission of the
schedules 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
Famous Host Lodging V, L. P.
We have audited the accompanying balance sheets of Famous Host Lodging V, L. P.,
a California limited partnership, as of December 31, 1998 and 1997, and the
related statements of operations, partners' equity, and cash flows for each of
the years in the three year period ended December 31, 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 Famous Host Lodging V, L. P. as
of December 31, 1998 and 1997, and the results of its operations and its cash
flows for each of the years in the three year period ended December 31, 1998, in
conformity with generally accepted accounting principles.
As discussed in Notes 10 and 11 in the financial statements, the Partnership has
entered into an agreement to sell the Partnership's properties. If the property
is sold then at such time the Partnership will be dissolved.
The accompanying financial statements have been prepared assuming the
Partnership will continue as a going concern until such time as the property is
sold. As discussed in Note 11 to the financial statements, the Partnership is
involved in arbitration proceedings in connection with the land lease. The
uncertainty of the outcome of these proceedings raises sustantial doubt as to
the Partnership's ability to continue as a going concern. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
VOCKER KRISTOFFERSON AND CO.
February 4, 1999
San Mateo, California
F-3
<PAGE>
FAMOUS HOST LODGING V, L. P.
(A California Limited Partnership)
BALANCE SHEETS
December 31, 1998 and 1997
ASSETS
1998 1997
---------- ----------
Current Assets:
Cash and temporary investments
(Notes 1, 3, 9 and 10) $ 370,184 $ 146,113
Accounts receivable 20,431 32,624
Other receivables (Note 10) 36,286 -
Prepaid expenses 31,028 37,862
---------- ----------
Total Current Assets 457,929 216,599
---------- ----------
Property and Equipment (Notes 2 and 4):
Building 4,077,604 4,077,604
Furniture and equipment 1,342,104 1,294,151
---------- ----------
5,419,708 5,371,755
Accumulated depreciation and amortization (3,433,032) (3,190,183)
---------- ----------
Property and Equipment, Net 1,986,676 2,181,572
---------- ----------
Other Assets 32,294 32,294
---------- -----------
Total Assets $2,476,899 $2,430,465
========== ==========
LIABILITIES AND PARTNERS' EQUITY
Current Liabilities:
Accounts payable and accrued liabilities $ 136,999 $ 165,909
Due to related parties 8,819 10,856
---------- ----------
Total Liabilities 145,818 176,765
---------- ----------
Contingent Liabilities and Lease Commitments
(Notes 5, 6 and 11) - -
Partners' Equity:
Limited Partners; 10,000 units authorized,
9,022 units issued and outstanding 2,326,092 2,250,315
General Partners 4,989 3,385
---------- ----------
Total Partners' Equity 2,331,081 2,253,700
---------- ----------
Total Liabilities and Partners' Equity $2,476,899 $2,430,465
========== ==========
See accompanying notes to financial statements.
F-4
<PAGE>
FAMOUS HOST LODGING V, L. P.
(A California Limited Partnership)
STATEMENTS OF OPERATIONS
Years Ended December 31:
----------------------------------
1998 1997 1996
---------- ---------- ----------
Income:
Guest room $2,599,166 $2,458,115 $2,489,982
Restaurant 422,079 690,622 655,746
Telephone and vending 38,513 55,707 65,512
Interest 6,879 6,938 9,131
Other 57,860 39,344 37,045
---------- ---------- ----------
Total Income 3,124,497 3,250,726 3,257,416
---------- ---------- ----------
Expenses:
Hotel operations (exclusive of depreciation
shown separately below) (Notes 5, 6 and 7) 1,858,635 1,886,822 1,900,900
Restaurant operations (exclusive
of depreciation shown separately below)
(Note 5, 6, and 7) 553,878 887,991 800,817
General and administrative (Note 5) 99,601 77,356 78,787
Depreciation and amortization (Note 2) 245,802 281,791 299,764
Legal settlement and related legal fees 21,368 - -
Legal fees related to pending sale 29,401 - -
Property management fees (Note 5) 155,429 161,840 162,361
---------- ---------- ----------
Total Expenses 2,964,114 3,295,800 3,242,629
---------- ---------- ----------
Net Income (Loss) $ 160,383 $ (45,074) $ 14,787
========== ========== ==========
Net Income (Loss) Allocable to
Limited Partners $158,779 $(44,623) $14,639
======== ======== =======
Net Income (Loss) Allocable to
General Partners $1,604 $(451) $148
====== ===== ====
Net Income (Loss) Per Partnership
Unit (Note 1) $17.60 $(4.95) $1.62
====== ===== =====
Distributions to Limited Partners Per
Partnership Unit (Note 1) $9.20 $36.80 $36.80
===== ====== ======
See accompanying notes to financial statements.
F-5
<PAGE>
FAMOUS HOST LODGING V, L. P.
(A California Limited Partnership)
STATEMENTS OF PARTNERS' EQUITY
Years Ended December 31:
----------------------------------
1998 1997 1996
---------- ---------- ----------
Limited Partners:
Balance, beginning of year $2,250,315 $2,626,948 $2,944,319
Net income (Loss) 158,779 (44,623) 14,639
Less: Cash distribution to limited partners (83,002) (332,010) (332,010)
---------- ---------- ----------
Balance, End of Year 2,326,092 2,250,315 2,626,948
---------- ---------- ----------
General Partners:
Balance, beginning of year 3,385 3,836 3,688
Net income (Loss) 1,604 (451) 148
---------- ---------- ----------
Balance, End of Year 4,989 3,385 3,836
---------- ---------- ----------
Total Partners' Equity $2,331,081 $2,253,700 $2,630,784
========== ========== ==========
See accompanying notes to financial statements.
F-6
<PAGE>
FAMOUS HOST LODGING V, L. P.
(A California Limited Partnership)
STATEMENTS OF CASH FLOWS
Years Ended December 31:
----------------------------------
1998 1997 1996
---------- ---------- ----------
Cash Flows From Operating Activities:
Received from hotel and restaurant
operations $3,129,811 $3,237,065 $3,255,807
Expended for hotel and restaurant
operations and general and
administrative expenses (2,778,711) (2,963,719) (2,942,661)
Interest received 6,879 8,651 8,216
---------- ---------- ----------
Net Cash Provided by Operating Activities 357,979 281,997 321,362
---------- ---------- ----------
Cash Flows From Investing Activities:
Proceeds from sale of property and
equipment - 230 500
Purchases of property and equipment (50,906) (50,387) (29,643)
---------- ---------- ----------
Net Cash Used by Investing Activities (50,906) (50,157) (29,143)
---------- ---------- ----------
Cash Flows From Financing Activities:
Distributions paid to limited partners (83,002) (332,010) (332,010)
---------- ---------- ----------
Net Cash Used by Financing Activities (83,002) (332,010) (332,010)
---------- ---------- ----------
Net Increase (Decrease) in Cash
and Temporary Investments 224,071 (100,170) (39,791)
Cash and Temporary Investments:
Beginning of year 146,113 246,283 286,074
---------- ---------- ----------
End of Year $ 370,184 $ 146,113 $ 246,283
========== ========= ==========
See accompanying notes to financial statements.
F-7
<PAGE>
FAMOUS HOST LODGING V, L. P.
(A California Limited Partnership)
STATEMENTS OF CASH FLOWS (Continued)
Years Ended December 31:
----------------------------------
1998 1997 1996
---------- ---------- ----------
Reconciliation of Net Income (Loss) to Net
Cash Provided by Operating Activities:
Net income (loss) $ 160,383 $ (45,074) $ 14,787
---------- ---------- ----------
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 245,802 281,791 299,764
(Gain) loss on disposition of property
and equipment - 59,047 (500)
(Increase) decrease in accounts
receivable 12,193 (8,093) 6,607
Increase in other receivables (36,286) - -
(Increase) decrease in prepaid expenses 6,834 1,900 (3,724)
Increase (decrease) in accounts payable
and accrued liabilities (28,910) (18,108) 4,106
Increase (decrease) in due to
related parties (2,037) 10,534 322
---------- ---------- ----------
Total Adjustments 197,596 327,071 306,575
---------- ---------- ----------
Net Cash Provided By
Operating Activities $ 357,979 $ 281,997 $ 321,362
========== ========== ==========
See accompanying notes to financial statements.
F-8
<PAGE>
FAMOUS HOST LODGING V, L. P.
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - THE PARTNERSHIP
Famous Host Lodging V, L.P. is a limited partnership organized under California
law on January 17, 1984, to acquire and/or develop and operate hotel properties
in the State of California. The term of the Partnership expires December 31,
2023, and may be dissolved earlier under certain circumstances (see Note 12). On
February 13, 1991 the Partnership Agreement was amended to change the name of
the Partnership from "Super 8 Lodging V, Ltd." to "Famous Host Lodging V, L.P."
The hotel in Barstow, California was opened in December 1985. In 1987 the
Partnership commenced operation of a family restaurant and cocktail lounge
immediately adjacent to the hotel. The Partnership grants credit to customers,
substantially all of which are local businesses.
The managing general partner is Grotewohl Management Services, Inc., the fifty
percent stockholder and officer of which is Philip B. Grotewohl. In addition,
there is one individual associate general partner.
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 9,022 units outstanding. All partnership
units are owned by the Limited Partners.
The partnership agreement requires that the Partnership maintain working capital
reserves for normal repairs, replacements, working capital and contingencies in
an amount of at least 5% of gross proceeds of the public offering of units as
adjusted for distributions of sales proceeds ($276,799 at December 31, 1998). As
of December 31, 1998, the Partnership had working capital of $312,111.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Items of Partnership income or loss 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
----------------------- ---------------------- ------------
Building and components 150% declining balance 10-25 years
and straight-line
Furniture and equipment 200% declining balance 4-7 years
and straight-line
Costs incurred in connection with maintenance and repair are charged to expense.
Major renewals and betterments that materially prolong the lives of assets are
capitalized.
F-9
<PAGE>
FAMOUS HOST LODGING V, L.P.
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS (Continued)
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
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 December 31, 1998 and 1997 consist of the
following:
1998 1997
--------- ---------
Cash in bank $ 44,385 $ 71,809
Money market accounts 325,799 74,304
--------- ---------
Total Cash and Temporary Investments $ 370,184 $ 146,113
========= =========
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 five months or less to be cash
equivalents for purposes of the statement of cash flows.
NOTE 4 - PROPERTY AND EQUIPMENT
The following is a summary of the accumulated depreciation and amortization of
property and equipment:
1998 1997
---------- ----------
Building $2,345,614 $2,196,453
Furniture and equipment 1,087,418 993,730
---------- ----------
$3,433,032 $3,190,183
========== ==========
The following is a summary of the federal income tax basis as of December 31,
1998:
Building $4,470,012
Furniture and equipment 1,289,698
----------
5,269,710
Less accumulated depreciation 4,076,523
----------
$1,193,187
==========
F-10
<PAGE>
FAMOUS HOST LODGING V, L.P.
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS (Continued)
NOTE 5 - RELATED PARTY TRANSACTIONS
Property Management Fees
The General Partners, or their affiliates, handle the management of the hotel
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 $155,429 in 1998, $161,840 in 1997 and $162,361 in 1996.
Subordinated Distributions to General Partners
During the Partnership's operational stage, the General Partners are to receive
an aggregate of 10% of Partnership distributions from cash available for
distribution, of which 9% will constitute a fee for managing the Partnership and
1% will be on account of their interest in the income and losses of the
Partnership. These distributions are subordinated, however, to payment to each
Limited Partner during such year of distributions from cash available for
distribution equal to a 14% per annum non-cumulative return on his adjusted
capital contribution. Through December 31, 1998, the Limited Partners have not
received a 14% non-cumulative return in any year, therefore no distributions
have been made or have accrued to the General Partners.
Subordinated Incentive Distributions
Under the terms of the partnership agreement, the General Partners are to
receive an aggregate of 15% of Partnership distributions of net proceeds from
the sale or refinancing of Partnership properties. The aggregate distribution of
15% is composed of a 14% subordinated incentive fee as additional compensation
for services rendered by the General Partners and the 1% on account of their
interest in the income and losses of the Partnership. These distributions are
subordinated, however, to 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 10% per annum
cumulative return on their adjusted capital contributions. At December 31, 1998,
the Limited Partners had not received the 10% per annum cumulative return, and
accordingly, no such proceeds have been distributed to the General Partners.
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 Partners and their affiliates. These
expenses, which are allocated based on usage, are telephone, data processing,
rent of the administrative office, and administrative salaries. Management
believes that the methods used to allocate shared administrative expenses are
reasonable. The administrative expenses allocated to the Partnership were
approximately $247,000 in 1998, $230,000 in 1997 and $225,000 in 1996 and are
included in general and administrative expenses and hotel and restaurant
operations 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 fifty percent stockholder of Grotewohl
Management Services, Inc. (see Note 1), the General Partner.
F-11
<PAGE>
FAMOUS HOST LODGING V, L.P.
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS (Continued)
NOTE 5 - LEASE COMMITMENTS
The Partnership leases 3.05 acres of land in Barstow, California for a term of
50 years beginning in 1984. The Partnership has the right to extend the lease
for three consecutive periods of ten years each. The base rent payments are
subject to annual upward or downward adjustments based on changes in the
Consumer Price Index. (See also note 11.)
The Partnership also leases the site adjacent to its Barstow hotel that contains
a restaurant and lounge. The lease provides for a 20-year term ending December
31, 2010 with an option to terminate this lease after termination of the Holiday
Inn license agreement. The option cannot be exercised before the tenth year of
the renewal term and requires six months written notice.
Both leases contain provisions requiring the lessee to pay all property taxes
and assessments. The leases provide for payment of the excess of percentage rent
over the base rent. The percentage rent is 9% of the combined gross hotel room
revenues and gross restaurant and lounge sales.
Rental expense under these leases incurred by the Partnership amounted to
$294,417 in 1998, $299,375 in 1997 and $299,569 in 1996. Such amounts are
included in hotel and restaurant operations expense in the accompanying
statements of operations.
Future lease commitments at December 31, 1998, using the current minimum monthly
amounts, are as follows:
Years Ended Hotel Land Restaurant
December 31: Lease Lease Total
------------ ---------- ---------- ----------
1999 $ 166,536 $ 118,404 $ 284,940
2000 166,536 118,404 284,940
2001 166,536 118,404 284,940
2002 166,536 118,404 284,940
2003 166,536 118,404 284,940
2003-2034 5,245,884 947,232 6,193,116
---------- ----------- ----------
Total minimum future lease payments $6,078,564 $1,539,252 $7,617,816
========== ========== ==========
F-12
<PAGE>
FAMOUS HOST LODGING V, L.P.
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS (Continued)
NOTE 6 - HOTEL AND RESTAURANT OPERATING EXPENSES
The following table summarizes the major components of hotel and restaurant
operating expenses for the following years:
1998 1997 1996
---------- ---------- ----------
Hotel operating expenses:
Salaries and related expenses $ 476,895 $ 473,267 $ 464,624
Rent 249,347 235,753 238,538
Franchise, advertising and reservation fees 185,342 175,932 179,762
Utilities 142,254 151,979 155,573
Allocated costs, mainly indirect salaries 197,696 186,004 184,064
Renovations and replacements 63,617 52,913 40,926
Maintenance expenses 107,682 106,149 125,157
Property taxes 64,014 63,790 65,322
Property insurance 41,564 43,021 41,984
Other operating expenses 330,224 398,014 404,950
---------- ---------- -----------
Total hotel operating expenses $1,858,635 $1,886,822 $1,900,900
========== ========== ==========
Restaurant operating expenses:
Salaries and related expenses $ 227,896 $ 393,229 $ 343,962
Cost of food and beverage 164,578 287,070 253,888
Rent 46,886 65,302 63,068
Utilities 43,575 49,693 48,678
Property taxes 10,315 10,504 11,551
Property insurance 8,863 8,595 9,525
Other operating expenses 51,765 73,598 70,145
---------- ---------- ----------
Total restaurant operating expenses $ 553,878 $ 887,991 $ 800,817
========== ========== ==========
NOTE 7 - COMMITMENTS
Franchise Fees
In February 1991, the Partnership obtained a ten-year franchise agreement with
Holiday Inns, Inc. to operate its Barstow hotel and restaurant under the name
"Holiday Inn." The Partnership pays monthly franchise fees of 4% of gross room
revenues of the hotel and makes monthly contributions of 1 1/2% and 1% of guest
room revenues to a marketing fund and reservation fund, respectively.
NOTE 8 - FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amount of cash and temporary investments approximates fair value
because of the short-term maturity of those investments.
F-13
<PAGE>
FAMOUS HOST LODGING V, L.P.
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS (Continued)
NOTE 9 - CONCENTRATION OF CREDIT RISK
The Partnership maintains its cash accounts in five 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
uninsured cash balances (not reduced by outstanding checks) as of December 31,
1998 follows:
Total cash in all California banks $394,769
Portion insured by FDIC (100,000)
--------
Uninsured cash balance $294,769
========
NOTE 10 - 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 (see Note 11). The Partnership has been unable to reach an
agreement with the franchisor as to the early termination of the franchise
agreement. 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 $2,100,000. 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 dissolved.
In connection with the anticipated sale of the motel assets, the Partnership has
incurred reimbursable costs in the amount of $36,286 which are included as other
receivables in the accompanying balance sheet.
NOTE 11 - LEGAL PROCEEDINGS
On September 24, 1998 the Lessor of the Barstow Land lease (see note 5) served
upon the Partnership a demand for arbitration. In the demand, the Lessor has
asked for damages of at least $250,000 due to alleged violations of certain
lease requirements in connection with the hours of operations and the use of
meeting and banquet rooms. On October 23, 1998 the Partnership served the Lessor
with a counterclaim asking for a dismissal of the Lessor's demand and
compensatory damages for the Lessor's breach of his implied covenant of good
faith and fair dealing with regard to leasing of nearby properties. At this
stage in the proceedings, management cannot estimate the outcome of the
arbitration.
F-14
<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
Dennis A. Brown and Grotewohl Management Services, Inc. were the original
managing general partners of the Partnership, and Robert J. Dana was the
original associate general partner of the Partnership. Upon the death of Mr.
Brown on February 25, 1988, Grotewohl Management Services, Inc. and Mr. Dana
elected to continue the Partnership as the Managing General Partner and
Associate General Partner, respectively.
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 50% shareholder, sole director and principal executive officer of
the General Partner is Mr. Grotewohl.
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 Motels limited partnerships
Mr. Robert J. Dana, age 70, was active in the securities industry through the
1980's. He is presently retired.
Item 11. EXECUTIVE COMPENSATION
Although Mr. Brown ceased to be a general partner of the Partnership
upon his death, a trust established for Mr. Brown's heirs shares in certain of
the 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 Brown trust and the Managing General Partner, is managing the Partnership's
hotel and restaurant. The fee for this service is 5% of the gross hotel and
restaurant revenue. During the fiscal year ended December 31, 1998, the
Partnership paid property management fees in the amount of $155,429 to the
Manager.
14
<PAGE>
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 General Partners. (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 a 14% per annum cumulative return on their adjusted capital contributions.
No such distributions were paid or accrued for the account of the General
Partners during the fiscal year covered by this report.
General Partners' Interest in Net Proceeds of Sales and Refinancing of
Partnership Properties
The proceeds from the sale or refinancing of properties are to be distributed
first to the Limited Partners until they have received cumulative payments from
the sale or refinancing of properties equal to 100% of their original capital
contributions and cumulative payments from all sources equal to a 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.
Allocation of Compensation
Compensation to the General Partners and their affiliates is allocated as
follows:
(1) Mr. Dana receives annual amounts equal to 30% of total compensation to the
General Partners and their affiliates as a group reduced by all
Partnership-related business expenses of the General Partners and its
affiliates.
(2) All compensation to the General Partners which is not allocated to Mr. Dana
is divided equally between Grotewohl Management Services, Inc. and its
affiliates and the Brown trust.
15
<PAGE>
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Security Ownership of Certain Beneficial Owners
AMOUNT AND
TITLE NATURE OF
OF NAME AND ADDRESS OF BENEFICIAL BENEFICIAL PERCENT
CLASS OWNER OWNERSHIP OF CLASS
-------------------------------------------------------------------------
Units Everest Lodging Investors, LLC 261 Units 2.89%
Units Everest Madison Investors, LLC 298 Units 3.30%
------- -------
Total 559 Units 6.19%
=======
Security Ownership of Management
The General Partners are not the beneficial owners 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
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, dissolution, 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.
16
<PAGE>
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Administrative Expenses Shared by the Partnership and its Affiliates
There are certain administrative expenses allocated between the Partnership and
other partnerships managed by the General Partners and their 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 $247,000 in 1998 and
are included in general and administrative expenses and hotel 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, the chairman of the Managing General Partner.
17
<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, 1998 and 1997
Statements of Operations for the Years Ended December 31, 1998, 1997 and
1996 Statements of Partners' Equity for the Years Ended December 31,
1998, 1997 and 1996 Statements of Cash Flow for the Years Ended December
31, 1998, 1997 and 1996 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 Exhibit 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.
10.1 Ground Lease respecting the Barstow Hotel filed as Exhibit 10.1 to
post-effective amendment no. 1 to the registration statement on Form S-1
of the Partnership (File No.2-88942) is incorporated herein by reference.
10.2 Motel Management Agreement between the Partnership and Super 8
Management Corporation filed as Exhibit 10.3 to the registration
statement on Form S-1 of the Partnership (File No. 33-3842) is
incorporated herein by reference.
10.3 Ground Lease respecting the Barstow Restaurant filed as Exhibit 10.9
to the annual report on Form 10-K of the Partnership for the fiscal year
ended December 31, 1989 is incorporated herein by reference.
10.4 Amendment to Ground Leases filed as Exhibit 10.11 to the annual
report on Form 10-K of the Partnership for the fiscal year ended December
31, 1990 is incorporated herein by reference.
10.5 Franchise Agreement between Partnership and Holiday Inns, Inc. filed
as Exhibit 10.6 to the annual report on Form 10-K of the Partnership for
the fiscal year ended December 31, 1994 is incorporated herein by
reference.
18
<PAGE>
Exhibits 10.6 and 10.7 are hereby incorporated herein by reference from
the Schedule 14A filed by the registrant on November 3, 1998.
10.6 Purchase and Sale Agreement dated April 30, 1998 10.7 Agreement
dated April 21, 1998 and Exclusive Sales Agency
contract dated May 8, 1998.
Exhibits 10.8 and 10.9 are hereby incorporated herein by reference from
the Rule 13E-3 Transaction Statement filed by registrant on November 16,
1998.
10.8 First Amendment dated May 15, 1998 to Agreement dated April 21,
1998. 10.9 Second Amendment dated October 29, 1998 to Agreement dated
April 21, 1998
(b) Reports on Form 8-K
Inapplicable
19
<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) FAMOUS HOST LODGING V, L.P.
By (Signature and Title) /s/ Philip B. Grotewohl
---------------------------------
Philip B. Grotewohl,
Chairman of Grotewohl Management Services, Inc.,
General Partner
Date April 12, 1999
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 director of Grotewohl Management Services,
Inc., General Partner
Date April 12, 1999
20
<PAGE>
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<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 370,184
<SECURITIES> 0
<RECEIVABLES> 56,286
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0
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