UNITED STATES
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 December 31, 1995, 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 0-16491
GROWTH HOTEL INVESTORS II
(a California Limited Partnership)
(Exact name of Registrant as specified in its charter)
CALIFORNIA 94 -2997382
-------------------- ------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
One Insignia Financial Plaza
P.O. Box 1089
Greenville, South Carolina 29602
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (864) 239-1000
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Limited Partnership
Units
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 for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
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 the 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. [ ]
No established trading market for the Limited Partnership Units exists
and therefore a current market value for such Units cannot be readily
determined.
(Cover page continued
on next page)
Cover Page 2 of 2
DOCUMENTS INCORPORATED HEREIN BY REFERENCE:
(1) Prospectus of the Registrant dated October 10, 1986, and thereafter
supplemented, incorporated in Parts I and IV.
(2) Items 2-4 and 8 of the Schedule 14D-9 of the Registrant, as filed with the
Securities and Exchange Commission on February 29, 1996, as amended by Amendment
No. 1 thereto filed with the Securities and Exchange Commission on March 7, 1996
and as further amended by Amendment No. 2 thereto filed with the Securities and
Exchange Commission on March 14, 1996 incorporated in Parts I and II.
GROWTH HOTEL INVESTORS II,
a California Limited Partnership
PART I
Item 1. Business.
Growth Hotel Investors II, a California Limited Partnership (the
"Registrant" or the "Partnership"), was organized in 1984 under the California
Uniform Limited Partnership Act. The managing general partner of the Registrant
is Montgomery Realty Company-85 ("MRC-85" or the "Managing General Partner"), a
California general partnership of which NPI Realty Management Corp. ("NPI
Realty"), a Florida corporation, is the managing general partner, and Fox Realty
Investors ("FRI"), a California general partnership, is the co-general partner.
The associate general partner of the Registrant is GHI Associates, a California
limited partnership, of which FRI is the general partner and Prudential-Bache
Properties, Inc. is the limited partner. On November 15, 1995, Montgomery Realty
Corporation, a California corporation, withdrew as a general partner of MRC-85
and NPI Realty was admitted as a general partner. In February 1996, NPI Realty
became the managing general partner of MRC-85. Prior to February 1996, FRI was
the managing general partner. NPI Realty and the managing general partner of FRI
are-wholly- owned subsidiaries of National Property Investors, Inc., a Delaware
corporation ("NPI, Inc."). See, "Change in Control".
The Registrant's Registration Statement on Form S-11 (No. 33-4566)
filed pursuant to the Securities Act of 1933, as amended (the "Act"), was
declared effective by the Securities and Exchange Commission (the "Commission")
on October 10, 1986. The Registrant marketed its securities pursuant to its
Prospectus dated October 10, 1986 and thereafter supplemented (hereinafter the
"Prospectus"). The Prospectus was filed with the Commission pursuant to Rule
424(b) of the Act.
The principal business of the Registrant is to acquire primarily
through joint ventures, hold for investment, and ultimately sell hotels. The
Registrant is a "closed" limited partnership real estate syndicate of the
unspecified asset type. For a further description of the Registrant's business,
see the sections entitled "Risk Factors" and "Investment Objectives and
Policies" in the Prospectus.
Beginning in October 1986, the Registrant offered $75,000,000 in
Limited Partnership Assignee Units ("Units" or "Limited Partnership Assignee
Units"). The offering closed in October 1987 with a total funding of
$58,982,000. The net proceeds of this offering were used to purchase primarily
through joint ventures, twenty-four hotels, including eighteen acquired through
a joint venture, Growth Hotel Investors Combined Fund No. 1, a California
Limited Partnership ("Combined Fund"), with Growth Hotel Investors, a California
Limited Partnership ("GHI") affiliated with the Registrant's managing general
partner, and one wholly owned property. See Item 2 below for a description of
the Registrant's properties. The acquisition activities of the Registrant were
completed on December 29, 1989, and since that time the principal activity of
the Registrant has been managing its portfolio. The Registrant's property
portfolio is geographically diversified, with hotels acquired located in twelve
states. In October 1989 GHI - Eden Prairie Associates, a 70 percent owned joint
venture which owned the Hampton Inn - Eden Prairie, was dissolved and the
Registrant assumed the joint venture partner's interest in the property. In
1995, the Registrant acquired its joint venture partner's interest in the joint
ventures which owned each of Hampton Inn-Kansas City and Hampton Inn-Dublin. In
addition, the Registrant acquired all of the economic rights of its joint
venture partner in the joint venture which owns the Hampton Inn-St. Louis hotel.
See "Property Matters."
The Registrant is involved in only one industry segment, as described
above. The Registrant does not engage in any foreign operations or derive
revenues from foreign sources.
Both the income and the expenses of operating the properties in which
the Registrant has an ownership interest are subject to factors outside of the
Registrant's control, such as oversupply of similar properties resulting from
overbuilding, increases in unemployment or population shifts or changes in
patterns of needs of users. In addition, there are risks inherent in owning and
operating hotels and other lodging facilities. Owning and operating hotels and
other lodging facilities involves a high degree of risk because such properties
are management and labor intensive and especially susceptible to the impact of
economic and other conditions outside the control of the Registrant.
Expenses, such as local real estate taxes and management expenses, are
subject to change and cannot always be reflected in room rate increases due to
market conditions. The profitability and marketability of developed real
property may be adversely affected by changes in general and local economic
conditions and in prevailing interest rates, and favorable changes in such
factors will not necessarily enhance the profitability or marketability of such
property. Even under the most favorable market conditions there is no guarantee
that any property owned by the Registrant can be sold or, if sold, that such
sale can be made upon favorable terms.
There have been, and it is possible there may be other, Federal, state
and local legislation and regulations enacted relating to the protection of the
environment. The Managing General Partner is unable to predict the extent, if
any, to which such new legislation or regulations might occur and the degree to
which such existing or new legislation or regulations might adversely affect the
properties owned by the Registrant.
The Registrant monitors its properties for evidence of pollutants,
toxins and other dangerous substances, including the presence of asbestos. In
certain cases environmental testing has been performed, which resulted in no
material adverse conditions or liabilities. In no case has the Registrant
received notice that it is a potentially responsible party with respect to an
environmental clean up site.
The Registrant and the hotel management companies maintain property and
liability insurance on the properties. The Registrant believes such coverage to
be adequate.
The Registrant is affected by and subject to the general competitive
conditions of the lodging industry. In addition, each of the Registrant's
properties competes in an area which normally contains numerous other
properties. In 1995, markets in many areas remained depressed due in part to
overbuilding and a general reduction in travel which continues to depress
lodging rental rates. However, the moderately priced, limited service segment of
the lodging industry, which the Registrant's properties are part of, has
strengthened due to travelers economizing, allowing occupancy and rates, in
general, to increase. An oversupply of lodging properties, including those held
by banks, savings institutions, the Federal Deposit Insurance Corporation and
the Resolution Trust Corporation may affect the ability of the Registrant to
sell its properties and their sales prices.
Property Matters
Hampton Inn - St. Louis
On December 7, 1995, the Registrant acquired, effective for the 1996
calendar year, all of the economic rights of its joint venture partner in GHI II
Big River Associates, a California partnership, the joint venture which owns the
Hampton Inn - St. Louis hotel, for $375,000. In addition, the Registrant was
granted an option to acquire for $10.00 all of its joint venture partner's
ownership interest in the joint venture at such time as the joint venture
partner is no longer a guarantor or otherwise liable for the loan secured by the
Hampton Inn - St. Louis.
Hampton Inn - Dublin
On October 1, 1995, the Registrant satisfied the first mortgage
encumbering its Hampton Inn - Dublin property in the amount of approximately
$3,250,000. The note was due to mature in April 1996. In addition, in October
1995 the Registrant acquired its joint venture partner's interest in the joint
venture which owned the Hampton Inn - Dublin hotel property for $75,000. The
Registrant's joint venture partner had a 30% interest in the joint venture. The
carrying value of the property was increased by $123,000, which reflects the
purchase of $75,000 and the $48,000 receivable from the joint venture partner on
October 1, 1995.
Hampton Inn - Kansas City
On December 1, 1995, the Registrant satisfied the mortgage encumbering
its Hampton Inn - Kansas City property in the amount of $2,718,000. The mortgage
was due to mature in January 1996. On May 1, 1995, the Registrant acquired its
joint venture partner's interest in the joint venture which owned the Hampton
Inn - Kansas City hotel property for $300,000. The Registrant's joint venture
partner had a 25% interest in the joint venture. The carrying value of the
property was increased by $293,000, which reflects the purchase price of
$300,000, offset by the $7,000 payable to the joint venture partner on May 1,
1995.
Hampton Inn - North Dallas
In January 1994, the variable interest rate on the Registrant's Hampton
Inn - North Dallas Addison, Texas property was reduced from 11.25% to a fixed
rate of 7.63% for the remainder of the loan.
Hampton Inn - Colorado Springs
In May 1994, the Registrant paid approximately $150,000 in full
satisfaction, at a discount of $98,000, of the contingent purchase money note on
the Hampton Inn - Colorado Springs property.
Employees
The Registrant does not have any employees. Day to day management
functions at all of the Registrant's properties are performed by third party
management companies pursuant to management agreements with such third parties.
Change in Control
The Registrant's affairs were managed by Metric Management, Inc.
("MMI") or its predecessor from March 1988 to December 1993. On December 16,
1993, the services agreement with MMI was modified and, as a result thereof, the
Registrant's general partner assumed responsibility for the cash management of
the Registrant as of December 23, 1993 and for investor relations services as of
April 1, 1994.
On December 6, 1993, NPI Equity Investments II, Inc., a Florida
corporation ("NPI Equity II"), became the managing partner of FRI. As a result,
NPI Equity II became responsible for the operation and management of the
business and affairs of the Registrant and the other investment partnerships
sponsored by FRI. NPI Equity II is a wholly-owned subsidiary of NPI, Inc. The
individuals who had served previously as partners of FRI contributed their
general partnership interests in FRI to a newly formed limited partnership,
Portfolio Realty Associates, L.P. ("PRA"), in exchange for limited partnership
interests in PRA. In the foregoing capacity, such partners continue to hold
indirectly certain economic interests in the Registrant and such other
investment partnerships, but ceased to be responsible for the operation and
management of the Registrant and such other partnerships.
On October 12, 1994, NPI, Inc. sold one-third of the stock of
NPI, Inc. to an affiliate of Apollo Real Estate Advisors, L.P. ("Apollo"). On
August 17, 1995, the stockholders of NPI, Inc. entered into an agreement to sell
all of the issued and outstanding common stock of NPI, Inc. to IFGP Corporation,
an affiliate of Insignia Financial Group, Inc. ("Insignia"). The transaction
was consummated on January 19, 1996. All of the funds used by Insignia and its
affiliates in consummating such transaction were drawn under a revolving credit
facility established for the benefit of Insignia with First Union National Bank
of South Carolina as Administrative Agent and Lehman Commercial Paper, Inc. as
Syndication Agent. Upon the Closing, the officers and directors of NPI, Inc.,
NPI Equity II and NPI Realty resigned and Insignia caused new officers and
directors of each of those entities to be elected. See Item 10, "Directors and
Executive Officers of the Registrant."
Each of NPI Realty and FRI are general partners of MRC-85. Pursuant to
a Letter Agreement dated November 15, 1995, NPI Realty was admitted, and
Montgomery Realty Corporation withdrew, as a general partner of MRC-85. NPI
Realty is a wholly-owned subsidiary of NPI, Inc. Pursuant to the Second Amended
and Restated Partnership Agreement of MRC-85, made and entered into effective
as of November 15, 1995, FRI, at the time a general partner of MRC-85, was then
the managing general partner of MRC-85. Pursuant to the Third Amended and
Restated General Partnership Agreement of MRC-85, dated as of February 15, 1996,
NPI Realty became the managing general partner of MRC-85, and thereby the
indirect managing general partner of the Registrant.
Subsequent Event
On February 15, 1996, Devon Associates, a New York general partnership,
commenced a tender offer (the "Offer") for up to 21,000 of the outstanding Units
at a purchase price of $750.00 per Unit. Due to the participation in the tender
offer by affiliates of NPI Realty, and the Managing General Partner's related,
existing and potential conflicts of interest, the Registrant, in its Schedule
14D-9 filed with Securities and Exchange Commission and sent to limited
partners, expressed no opinion and made no recommendation as to whether limited
partners should tender their Units pursuant to the Offer. The expiration of the
tender offers described above is midnight, New York time, on March 25, 1996. See
Items 2-4 of the Schedule 14D-9 of the Registrant, as filed with the Commission
on February 29, 1996, as amended by Amendment No. 1 thereto, as filed with the
Commission on March 7, 1996 and as further amended by amendment No. 2 thereto,
as filed with the Commission on March 14, 1996 (collectively, the "Schedule
14D-9"), for additional information with respect to the Offer and the current
and potential conflicts of interest of MRC-85, which Items 2-4 are incorporated
herein by reference.
On March 12, 1996, the Registrant received a letter advising that the
Registrant's and Growth Hotel Investors' ("GHI") joint venture partner in
certain of the hotel properties is offering $147,400,000 in cash for all of the
28 hotel properties directly or indirectly owned by the Registrant and GHI. See
Amendment No. 2 to the Registrant's Statement on Schedule 14D-9, as filed with
the Commission on March 14, 1996, for a more complete description of this offer,
which Amendment No. 2 is hereby incorporated by reference herein. There can be
no assurance that if this offer were accepted by the Registrant and GHI, the
transactions contemplated thereby could be consummated upon the March 12, 1996
terms and conditions described therein or at all. The Managing General Partner
has not concluded its evaluation of this offer or of the ability of the offeror
to consummate the transactions contemplated thereby.
Item 2. Properties.
A description of the hotel properties in which the Registrant has an
ownership interest is as follows:
Date of
Name and Location Purchase Rooms
GROWTH HOTEL INVESTORS II
Hampton Inn-Kansas City(1) 12/87 122
11212 North Newark Circle
Kansas City, Missouri
Hampton Inn-Eden Prairie(2) 12/87 124
7740 Flying Cloud Drive
Eden Prairie, Minnesota
Hampton Inn-Dublin(3) 04/88 123
3720 Tuller Road
Dublin, Ohio
Hampton Inn-North Dallas(4) 07/88 160
4555 Beltway Drive
Addison, Texas
Hampton Inn-St. Louis(4) 07/89 124
2454 Old Dorsett Road
Maryland Heights, Missouri
Hampton Inn-Colorado Springs 12/89 128
7245 Commerce Center Drive
Colorado Springs, Colorado
GROWTH HOTEL INVESTORS
COMBINED FUND NO. 1 (6)
Hampton Inn-Memphis-I-40 East(5) 12/86 117
1585 Sycamore View Drive
Memphis, Tennessee
Hampton Inn-Columbia-West 12/86 121
1094 Chris Drive
West Columbia, South Carolina
Date of
Name and Location Purchase Rooms
GROWTH HOTEL INVESTORS
COMBINED FUND NO. 1(6) (continued)
Hampton Inn-Spartanburg 12/86 112
6023 Alexander Road
Spartanburg, South Carolina
Hampton Inn-Little Rock-North 12/86 123
500 West 29th Street
North Little Rock, Arkansas
Hampton Inn-Amarillo 12/86 116
1700 I40 East
Amarillo, Texas
Hampton Inn-Greenville 12/86 123
246 Congaree Road
Greenville, South Carolina
Hampton Inn-Charleston-Airport 12/86 125
4701 Arco Lane
North Charleston, South Carolina
Hampton Inn-Memphis-Poplar 12/86 126
5320 Poplar Avenue
Memphis, Tennessee
Hampton Inn-Greensboro 12/86 121
2004 Veasly Street
Greensboro, North Carolina
Hampton Inn-Birmingham 12/86 123
1466 Montgomery Hwy.
Birmingham, Alabama
Hampton Inn-Atlanta-Roswell 03/87 129
9995 Dogwood Road
Roswell, Georgia
Hampton Inn-Chapel Hill 03/87 122
1740 US 15 & 501 Highway
Chapel Hill, North Carolina
Date of
Name and Location Purchase Rooms
GROWTH HOTEL INVESTORS
COMBINED FUND NO. 1(6) (continued)
Hampton Inn-Dallas-Richardson 03/87 130
1577 Gateway
Richardson, Texas
Hampton Inn-Nashville-
Briley Parkway(5) 03/87 120
2350 Elm Hill Parkway
Nashville, Tennessee
Hampton Inn-San Antonio-Northwest 06/87 123
4803 Manitou Drive
San Antonio, Texas
Hampton Inn-Madison Heights 12/87 126
32420 Stephenson Highway
Madison Heights, Michigan
Hampton Inn-Mountain Brook(5) 12/87 131
2731 US Highway 280
Birmingham, Alabama
Hampton Inn-Northlake(5) 09/88 130
3400 Northlake Parkway
Atlanta, Georgia
(1) In May, 1995, the joint venture which owned this property was dissolved and
the Registrant assumed the joint venture partner's interest in the property.
(2) In October, 1989, the joint venture which owned this property was
dissolved and the Registrant assumed the joint venture partner's interest
in the property.
(3) In October, 1995, the joint venture which owned this property was dissolved
and the Registrant assumed the joint venture partner's interest in the
property.
(4) Property is owned by a joint venture in which the Registrant has a
controlling interest.
(5) The property is subject to a land lease extending as follows:
Year Option
Lease Period
Property Expires (Years)
Hampton Inn-Memphis-I-40 East 2004 20
Hampton Inn-Nashville-Briley Parkway 2006 20
Hampton Inn-Mountain Brook 2007 50
Hampton Inn-Northlake 2008 40
(6) The Registrant and an affiliated partnership have invested in a joint
venture, the Combined Fund, which has majority interest in the properties
listed. The Registrant has the majority interest in the Combined Fund.
See Item 8, "Financial Statements and Financial Statement Schedules" -
Note 8 for information regarding any encumbrances to which the properties of the
Registrant are subject.
The following chart sets forth the occupancy rate at the Registrant's
properties for the years ended December 31, 1995, 1994, 1993, 1992 and 1991:
Average
Occupancy Rate(%)
for the Year Ended
December 31,
1995 1994 1993 1992 1991
HOTELS:
GROWTH HOTEL INVESTORS II
Hampton Inn-Kansas City 82 83 75 70 69
Hampton Inn-Eden Prairie 75 76 74 72 61
Hampton Inn-Dublin 72 72 73 76 68
Hampton Inn-North Dallas 78 79 75 71 70
Hampton Inn-St. Louis 71 75 72 68 69
Hampton Inn-Colorado Springs 77 75 69 64 58
GROWTH HOTEL INVESTORS COMBINED
FUND NO. 1
Hampton Inn-Memphis-I-40 East 80 82 80 81 79
Hampton Inn-Columbia-West 81 84 84 84 80
Hampton Inn-Spartanburg 69 70 68 64 58
Hampton Inn-Little Rock-North 79 78 77 78 77
Hampton Inn-Amarillo 75 77 79 80 80
Hampton Inn-Greenville 81 80 79 80 77
Hampton Inn-Charleston-Airport 76 80 79 79 83
Hampton Inn-Memphis-Poplar 84 87 88 87 87
Hampton Inn-Greensboro 86 87 84 84 80
Hampton Inn-Birmingham 82 83 85 85 84
Hampton Inn-Atlanta-Roswell 82 82 77 75 70
Hampton Inn-Chapel Hill 87 82 79 75 78
Hampton Inn-Dallas-Richardson 78 76 67 60 66
Average
Occupancy Rate(%)
for the Year Ended
December 31,
--------------------------------
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
GROWTH HOTEL INVESTORS COMBINED
FUND NO. 1 (Continued)
Hampton Inn-Nashville-Briley Parkway 87 88 86 86 82
Hampton Inn-San Antonio-Northwest 62 72 78 80 75
Hampton Inn-Madison Heights 71 72 67 62 66
Hampton Inn-Mountain Brook 79 80 83 81 76
Hampton Inn-Northlake 81 76 73 68 70
The following chart sets forth the average daily room rates at the
Registrant's properties for the years ended December 31, 1995, 1994, 1993, 1992
and 1991:
Average
Daily Room Rates(%)
for the Year Ended
December 31,
-------------------------------------
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
HOTELS:
GROWTH HOTEL INVESTORS
Hampton Inn-Kansas City 55.41 51.87 50.21 47.15 45.51
Hampton Inn-Eden Prairie 56.96 54.33 50.25 45.53 43.50
Hampton Inn-Dublin(1) 53.91 49.05 48.00 47.53 44.74
Hampton Inn-North Dallas 61.89 56.83 53.74 51.74 48.08
Hampton Inn-St. Louis 58.12 56.57 55.43 53.44 51.32
Hampton Inn-Colorado Springs 53.07 47.45 45.97 43.49 42.08
GROWTH HOTEL INVESTORS COMBINED
FUND NO. 1
Hampton Inn-Memphis-I-40 East 53.49 50.32 48.59 46.04 42.83
Hampton Inn-Columbia-West 54.42 51.17 47.32 44.34 42.07
Hampton Inn-Spartanburg 47.83 42.89 40.36 38.75 38.30
Hampton Inn-Little Rock-North 48.79 45.52 43.20 41.24 38.34
Hampton Inn-Amarillo 50.55 47.12 44.31 40.98 37.68
Hampton Inn-Greenville 52.30 47.62 44.99 43.29 41.82
Hampton Inn-Charleston-Airport 53.48 50.16 47.35 45.41 43.09
Hampton Inn-Memphis-Poplar 64.64 60.18 56.12 52.40 48.77
Hampton Inn-Greensboro 57.99 51.50 47.11 43.76 41.54
Hampton Inn-Birmingham 58.65 55.01 50.71 46.47 43.60
Hampton Inn-Atlanta-Roswell 58.54 54.17 50.39 44.72 42.35
Hampton Inn-Chapel Hill 56.14 50.95 46.39 44.49 42.78
Hampton Inn-Dallas-Richardson 50.82 46.63 45.77 46.51 43.97
Hampton Inn-Nashville-Briley Parkway 62.03 56.98 52.69 48.39 44.69
Hampton Inn-San Antonio-Northwest 57.67 57.19 55.11 52.43 44.75
Hampton Inn-Madison Heights 54.04 51.21 49.68 47.86 44.83
Hampton Inn-Mountain Brook 58.17 54.92 51.08 47.80 44.84
Hampton Inn-Northlake 54.86 52.33 48.68 44.22 41.46
Item 3. Legal Proceedings.
William Wallace, Mildred Wallace, Edith G. Martin, Paul Allemang and
Gwen Allemang, on behalf of themselves and all others similarly situated, and
derivatively on behalf of Growth Hotel Investors, a California limited
partnership and Growth Hotel Investors II, a California limited partnership,
Plaintiff v. Devon Associates, Montgomery Realty-85, GHI Associates, Cayuga
Associates L.P., Cayuga Capital Corp., Insignia Financial Group, Inc., L.P., and
Fleetwood Corp., Defendants and Growth Hotel Investors, a California limited
partnership, and Growth Hotel Investors II, a California limited partnership,
Nominal Defendant, Supreme Court of the State of New York, County of New York,
Case No. 9600866.
On February 21, 1996, William and Mildred Wallace, holders of Units of
GHI, and Edith G. Martin and Paul and Gwen Allemang, holders of Units of the
Registrant, commenced an action on behalf of themselves and others similarly
situated, and derivatively on behalf of GHI and the Registrant, in the Supreme
Court of the State of New York, County of New York, against, among others,
MRC-85 and certain of its affiliates pertaining to the tender offer for up to
15,000 partnership Units of GHI and up to 21,000 partnership Units of the
Registrant which commenced February 15, 1996. The action alleges, among other
things, that the tender offers constitute (a) a breach of fiduciary duty owed to
limited partners of the partnerships, and (b) a breach of the provisions of the
partnership agreements of such partnerships. The action, which is sought to
brought as a class action on behalf of all limited partners, seeks to enjoin the
tender offers as well as monetary damages in an unspecified amount.
R&S Asset Partners, a Florida general partnership, and Jessie B. Small,
on their own behalves, on behalf of all others similarly situated, and
derivatively on behalf of the Nominal Defendants, Plaintiffs, v. Devon
Associates, Cayuga Associates, L.P., Cayuga Capital Corp., Fleetwood Corp., Carl
C. Icahn, Michael L. Ashner, Martin Lifton, Arthur N. Queler, Insignia Financial
Group, Inc., IFGP, Corp., National Properties Investors, Inc., NPI Equity
Investments II, Inc., Fox Realty Investors, Portfolio Realty Associates, L.P.,
Emmet J. Cashin, Jr., Jarold A. Evans, W. Patrick McDowell, Apollo Real Estate
Advisors, L.P., and Montgomery Realty Company-85, Defendants, and Growth Hotel
Investors, a California Limited Partnership, and Growth Hotel Investors II, a
California Limited Partnership, Nominal Defendants, Superior Court of the State
of California, County of Los Angeles, Case No. BC145220.
On February 28, 1996, R&S Asset Partners, holders of Units of GHI, and
Jesse B. Small, holder of Units of the Registrant, commenced an action on behalf
of themselves and others similarly situated, and derivatively on behalf of GHI
and the Registrant, in the Superior Court of the State of California, County of
Los Angeles, against, among others, MRC-85 and certain of its affiliates
pertaining to the tender offer for up to 15,000 partnership Units of GHI and up
to 21,000 partnership Units of the Registrant which commenced February 15, 1996.
The action alleges, among other things, that the tender offers constitute (a) a
breach of fiduciary duty owed to limited partners of the partnerships, (b)
negligent misrepresentation pertaining to the disclosure set forth in the offer
to purchase, (c) common law fraud, and (d) a breach of the provisions of the
partnership agreements of such partnerships. The action, which is sought to
brought as a class action on behalf of all limited partners, seeks to enjoin the
tender offers as well as monetary damages in an unspecified amount.
See Item 3 of the Schedule 14D-9, which is incorporated herein by
reference, for additional information with respect to the above actions.
Item 4. Submission of Matters to a Vote of Security Holders.
No matter was submitted to a vote of security holders during the period
covered by this Report.
PART II
Item 5. Market for The Registrant's Common Equity and Related
Stockholder Matters.
The Limited Partnership Assignee Unit holders are entitled to certain
distributions as provided in the Partnership Agreement. For each Assignee Unit
holder, cash distributions from operations for the period including December 31,
1995 have been $386 to $437 for each $1,000 of original investment. No market
for Limited Partnership Assignee Units exists, nor is any expected to develop.
For information with respect to secondary market sales prices of Units, see Item
3 of the Schedule 14D-9 which is incorporated herein by this reference.
During the years ended December 31, 1995 and 1994, the Registrant has
made the following cash distributions with respect to the Units to holders
thereof as of the dates set forth below in the amounts set forth opposite such
dates:
Distribution with Amount of Distribution
Respect to Quarter Ended Per Unit (*)
------------------------ ----------------------
1995 1994
---- ----
March 31 $ 14.38 $ 14.38
June 30 $ 14.38 $ 14.38
September 30 $ 14.38 $ 14.38
December 31 $ 14.38 $ 14.38
(*) The amounts listed represent distributions of cash from operations and
cash from sales. (See Item 7, "Management's Discussion and Analysis of
Financial Condition and Results of Operations", for information
relating to the Registrant's future distributions.)
As of March 1, 1996, the approximate number of holders of Limited
Partnership Assignee Units was 4,843.
Item 6. Selected Financial Data.
The following represents selected financial data for the Registrant for
the years ended December 31, 1995, 1994, 1993, 1992 and 1991. The data should be
read in conjunction with Item 8, "Financial Statements and Financial Statement
Schedules". This data is not covered by the independent auditors' report.
<TABLE>
<CAPTION>
For the Year Ended December 31,
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
(Amounts in thousands except per unit data)
<S> <C> <C> <C> <C> <C>
TOTAL REVENUES $50,541 $ 47,164 $ 43,458 $40,075 $ 37,672
======= ======== ======== ======= ========
INCOME (LOSS) BEFORE MINORITY
INTEREST IN JOINT VENTURES'
OPERATIONS AND EXTRAORDINARY ITEM $ 7,948 $ 6,348 $ 3,270 $ 355 $ (1,213)
MINORITY INTEREST IN JOINT VENTURES'
OPERATIONS (2,236) (1,417) (546) 413 828
EXTRAORDINARY ITEM - GAIN ON
EXTINGUISHMENT OF DEBT - 98 - - -
------- -------- -------- ------- --------
NET INCOME (LOSS) $ 5,712 $ 5,029 $ 2,724 $ 768 $ (385)
======= ======== ======== ======= ========
NET INCOME (LOSS) PER LIMITED
PARTNERSHIP ASSIGNEE UNIT(1):
INCOME (LOSS) BEFORE EXTRAORDINARY ITEM $ 95 $ 82 - - -
EXTRAORDINARY ITEM - GAIN ON
EXTINGUISHMENT OF DEBT - 2 - - -
------- -------- -------- -------- --------
NET INCOME (LOSS) $ 95 $ 84 $ 45 $ 13 $ (6)
======= ======== ======== ======== ========
TOTAL ASSETS $95,138 $ 99,974 $100,254 $101,930 $105,191
======= ======== ======== ======== ========
LONG TERM OBLIGATIONS:
Notes Payable $50,139 $ 56,885 $ 57,740 $ 58,305 $ 58,809
======= ======== ======== ======== ========
CASH DISTRIBUTIONS PER LIMITED
PARTNERSHIP ASSIGNEE UNIT (actual
amount based on admission to
partnership) $ 57.53 $ 58 $ 51 $ 35 $ 28
======= ======== ======== ======== ========
</TABLE>
- -----------
(1) $1,000 original contribution per unit.
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
Liquidity and Capital Resources
All of the Registrant's properties are hotels. The Registrant receives
hotel operating revenues and is responsible for operating expenses,
administrative expenses, capital improvements and debt service payments. The
Registrant uses working capital reserves provided from any undistributed cash
flow from operations as its primary source of liquidity. For the long term, cash
from operations will remain the Registrant's primary source of liquidity. All of
the Registrant's properties generated positive cash flow during the year ended
December 31, 1995. During 1995, the Registrant distributed $57.43 per unit
($3,393,000 in total) to the holders of limited partnership units and $69,000 to
the general partner.
The level of liquidity based on cash and cash equivalents experienced a
$4,671,000 decrease at December 31, 1995, as compared to December 31, 1994. The
Registrant's $11,819,000 of cash from operating activities was more than offset
by $13,190,000 of cash used in financing activities and $3,300,000 of cash used
in investing activities. Financing activities consisted of $5,975,000 paid to
satisfy the mortgages encumbering the Registrant's Hampton Inn -Dublin
($3,257,000) and Hampton Inn - Kansas City ($2,718,000) properties, $3,462,000
of cash distributions to partners, $2,982,000 of joint venture partner
distributions and $771,000 of notes payable principal payments. Investing
activities consisted of $4,264,000 of improvements to real estate and $375,000
for the purchase of minority interests in the Registrant's Hampton Inn - Kansas
City and Dublin joint venture properties, which were partially offset by a
$1,339,000 decrease in restricted cash. Net cash provided by operating
activities increased during the year ended December 31, 1995, as compared to
1994, due to improved operations at most of the Registrant's properties, which
was partially offset by $1,425,000 paid to MMI to amend their services
agreement. The agreement provides for a reduction in MMI's monthly asset
management fee (from $54,500 to $7,000), the elimination of fees payable to MMI
for its assistance in the refinancing and sales of properties owned by the
Registrant and provides the Registrant with the ability to terminate MMI's
services at will. Hotel improvements included the installation of electronic
locks, computer and phone system upgrades and room renovations at the Combined
Fund's eighteen properties. The improvements were funded by working capital
reserves and restricted cash. Based on the results of a review of property
physical condition (conducted by an affiliate of the Registrant's joint venture
partner in the Combined Fund), the Registrant anticipates spending approximately
$5,000,000 to upgrade the Combined Fund hotels in order to remain competitive.
The improvements will be funded by working capital reserves and restricted cash.
The increase in accounts receivable and other assets includes $375,000 paid to
purchase the Registrant's joint venture partner's economic interest in the St.
Louis hotel, effective January 1, 1996. All other increases (decreases) in
certain assets and liabilities are the result of the timing of receipt and
payment of various operating activities.
Working capital reserves are invested in money market accounts and
repurchase agreements secured by United States Treasury obligations. Subject to
the success of the tender offer described in Item 1, the Managing General
Partner believes that, if market conditions remain relatively stable, cash flows
from operations, when combined with working capital reserves, will be sufficient
to fund essential capital improvements, regular debt service payments (not
including the balloon payments) and cash distributions to partners during the
next twelve months and the foreseeable future. On October 1, 1995, the
Registrant satisfied the first mortgage encumbering its Hampton Inn - Dublin
property in the amount of approximately $3,257,000. The mortgage was due to
mature in April 1996. On December 1, 1995, the Registrant satisfied the first
mortgage encumbering its Hampton Inn - Kansas City property in the amount of
approximately $2,718,000. The mortgage was due to mature in January 1996.
A balloon payment on the mortgage encumbering the Registrant's Hampton
Inn - North Dallas property is due in December 1996 in the amount of
approximately $2,927,000. The Registrant's consolidated joint venture, the
Combined Fund, has balloon payments due in August, 1996 of approximately
$4,952,000 and in December 1996 of approximately $35,323,000. The Registrant's
remaining properties have balloon payments due in 1998 and 2016. The Managing
General Partner expects to evaluate and discuss with potential mortgage lenders
the refinancing alternatives available to the Partnership over the course of the
year.
On May 1, 1995, the Registrant acquired the 25% minority interest in
the joint venture which owned the Hampton Inn - Kansas City property for
$300,000 and on October 1, 1995, the Registrant acquired the 30% minority
interest in the joint venture which owned the Hampton Inn - Dublin property for
$75,000. In addition, the Registrant purchased, effective January 1, 1996, all
economic rights of its joint venture partner in the Hampton Inn - St. Louis
hotel for $375,000.
On January 19, 1996, the stockholders of NPI, Inc., the sole
shareholder of NPI Equity II, sold to Insignia all of the issued and outstanding
stock of NPI, Inc. Insignia has elected new officers and directors of NPI
Equity II. The Managing General Partner does not believe these events will have
a significant effect on the Registrant's liquidity or results of operations.
As described in Item 1, on February 15, 1996, Devon Associates offered
to purchase up to 21,000 and 15,000 Units of limited partnership interest in the
Registrant and GHI, respectively. The Units will represent a maximum of
approximately 36% of the Units outstanding. The offer was at a purchase price of
$750 per unit, net to the seller in cash, without interest, upon the terms and
conditions set forth in the offer to purchase. The consummation of the Offer may
have a significant impact upon the future operations and liquidity of the
Registrant. See Item 3 and 8 of the Schedule 14D-9, which are incorporated
herein by reference, for information relating to the possible impacts of the
Offer on the operations and liquidity of the Registrant.
On February 21, 1996 and February 28, 1996, holders of Units of the
Registrant commenced an action against MRC-85 and certain of its affiliates in
connection with the tender offers. (See Item 3, "Legal Proceedings"). Due to the
recent commencement of these actions, the potential affect on the Registrant's
liquidity, capital reserves and results of operations cannot be determined at
this time. However, pursuant to the terms of the partnership agreement, the
Managing General Partner is entitled to seek indemnification from the Registrant
for its costs in defending this action under certain circumstances.
Real Estate Market
The income and expenses of operating the properties owned by the
Registrant are subject to factors outside of the Registrant's control, such as
over-supply of similar properties resulting from over-building, increases in
unemployment, population shifts or changes in patterns or needs of users.
Expenses, such as local real estate taxes and miscellaneous expenses, are
subject to change and cannot always be reflected in room rate increases due to
market conditions. In addition, there are risks inherent in owning and operating
lodging facilities because such properties are management and labor intensive
and especially susceptible to the impact of economic and other conditions
outside the control of the Registrant.
There have been, and it is possible there may be other, Federal State
and local legislation and regulations enacted relating to the protection of the
environment. The Registrant is unable to predict the extent, if any, to which
such new legislation or regulations might occur and the degree to which such
existing or new legislation or regulations might adversely affect the
properties still owned by the Registrant.
Results of Operations
1995 Compared to 1994
Operating results, before minority interest in joint ventures'
operations and extraordinary item, improved by $1,600,000 for the year ended
December 31, 1995 as compared to 1994, due to an increase in revenues of
$3,377,000 which was partially offset by an increase in expenses of $1,777,000.
Revenues improved by $3,377,000 for the year ended December 31, 1995 as
compared to 1994, due to increases of $3,348,000 in hotel operations and $29,000
in interest and other income. Hotel operations improved due to increases in
average daily room rates at all properties. Occupancy remained relatively stable
on an overall basis. The largest increases in hotel operating revenues were at
the Registrant's Chapel Hill, Colorado Springs, Dublin, Northlake, Greensboro,
and North Dallas properties. Interest and other income remained relatively
constant.
Expenses increased by $1,777,000 for the year ended December 31, 1995,
as compared to 1994, due to increases in hotel operating expenses of $1,860,000
and depreciation expense of $387,000, which were partially offset by decreases
in interest expense of $59,000 and general and administrative expenses of
$411,000. Hotel operating expenses increased primarily due to an overall
increase in the cost of goods and services, coupled with increases in management
and franchise fees (in proportion to increased revenues) and $375,000 paid to
buy out an incentive management fee agreement at the Registrant's Colorado
Springs property during 1995. Depreciation expense increased due to fixed asset
additions, which was partially offset by a portion of the Registrant's prior
year assets becoming fully depreciated. Interest expense decreased due to the
satisfaction of mortgages encumbering the Registrant's Dublin and Kansas City
properties during 1995. General and administrative expenses declined due to a
decrease in asset management costs associated with the amendment of the
Registrant's services agreement in January 1995, which was partially offset by
the amortization of the cost of the buyout of the service agreement.
1994 Compared to 1993
Operating results, before minority interest in joint ventures'
operations and extraordinary item, improved by $3,078,000 for the year
ended December 31, 1994, as compared to 1993, due to an increase in revenues of
$3,706,000 and an increase in expenses of $628,000.
Revenues improved by $3,706,000 for the year ended December 31, 1994,
as compared to 1993, due to increases of $3,532,000 in hotel operations and
$174,000 in interest and other income. Hotel operations improved primarily due
to increases in average daily room rates at all of the Registrant's hotels,
coupled with increased or stable occupancy at a majority of the Registrant's
properties. The largest increases in hotel operating revenues were at the
Registrant's North Dallas, Roswell, Dallas-Richardson, Colorado Springs, Chapel
Hill and Greensboro properties. Interest and other income increased due to a
significant increase in average working capital reserves available for
investment.
Expenses increased by $628,000 for the year ended December 31, 1994, as
compared to 1993, due to an increase in hotel operating expenses of $1,240,000
and general and administrative expenses of $217,000, which was partially offset
by decreases in interest expense of $286,000, and depreciation and amortization
expense of $543,000. Hotel operating expenses increased primarily due to
increases in hotel occupancy. General and administrative expenses increased due
to an increase in partnership management fees, asset management costs and costs
associated with the management transition. Depreciation and amortization expense
declined due to a portion of the Registrant's assets becoming fully depreciated
during the prior year. Interest expense declined primarily due to the
amortization of principal balances coupled with the mortgage modification on the
Registrant's Hampton Inn - North Dallas property, which reduced the interest
rate from 11.25% to a fixed rate of 7.63% during January 1994, and a reduction
in interest rates on the Registrant's Hampton Inn - North Lake and Hampton Inn -
Mountain Brook loans from 11.25% to 7.63% in August 1993.
Item 8. Consolidated Financial Statements and Supplementary Data.
GROWTH HOTEL INVESTORS II,
a California Limited Partnership
CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1995
INDEX
<TABLE>
<CAPTION>
Page
<S> <C>
Independent Auditors' Reports............................................................................................. F - 2
Consolidated Financial Statements:
Balance Sheets at December 31, 1995 and 1994......................................................................... F - 4
Statements of Operations for the Years Ended December 31, 1995, 1994 and 1993........................................ F - 5
Statements of Partners' Equity for the Years Ended
December 31, 1995, 1994 and 1993.................................................................................. F - 6
Statements of Cash Flows for the Years Ended December 31, 1995, 1994 and 1993........................................ F - 7
Notes to Consolidated Financial Statements........................................................................... F - 8
Financial Statement Schedule:
Schedule III - Real Estate and Accumulated Depreciation at December 31, 1995.................................. F - 17
</TABLE>
GROWTH HOTEL INVESTORS COMBINED FUND NO. 1,
a California Limited Partnership
<TABLE>
<S> <C>
Independent Auditors' Reports.............................................................................................. F - 21
Consolidated Financial Statements:
Balance Sheets at December 31, 1995 and 1994.......................................................................... F - 23
Statements of Operations for the Years Ended December 31, 1995, 1994 and 1993......................................... F - 24
Statements of Partners' Equity for the Years Ended
December 31, 1995, 1994 and 1993................................................................................... F - 25
Statements of Cash Flows for the Years Ended December 31, 1995, 1994 and 1993......................................... F - 26
Notes to Consolidated Financial Statements............................................................................ F - 27
Financial Statement Schedule:
Schedule III - Real Estate and Accumulated Depreciation at December 31, 1995................................... F - 32
</TABLE>
Financial statements and financial statement schedules not included have been
omitted because of the absence of conditions under which they are required or
because the information is included elsewhere in the consolidated financial
statements.
To the Partners
Growth Hotel Investors II,
a California Limited Partnership
Greenville, South Carolina
Independent Auditors' Report
We have audited the accompanying consolidated balance sheets of Growth Hotel
Investors II, a California Limited Partnership, (the "Partnership") as of
December 31, 1995 and 1994, and the related consolidated statements of
operations, partners' equity and cash flows for the years then ended. Our audits
also included the additional information supplied pursuant to Item 14(a)(2).
These consolidated financial statements are the responsibility of the
Partnership's management. Our responsibility is to express an opinion on these
consolidated 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 consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
consolidated financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Growth
Hotel Investors II, a California Limited Partnership, as of December 31, 1995
and 1994, and the results of its operations and its cash flows for the years
then ended in conformity with generally accepted accounting principles. Also in
our opinion, the related financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as a whole,
presents fairly, in all material respects, the information set forth therein.
Certified Public Accountants
New York, N.Y.
February 15, 1996, except for Note 13,
which is dated March 12, 1996
INDEPENDENT AUDITORS' REPORT
Growth Hotel Investors II, a California Limited Partnership:
We have audited the accompanying statements of operations, partners' equity and
cash flows of Growth Hotel Investors II, (a limited partnership) (the
"Partnership") and its joint ventures, for the year ended December 31, 1993.
These consolidated financial statements are the responsibility of the
Partnership's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as will as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly,in all
material respects, the results of operations and cash flows of the Partnership
and its joint ventures for the year ended December 31, 1993, in conformity with
generally accepted accounting principles.
Deloitte & Touche LLP
San Francisco, California
March 18, 1994
GROWTH HOTEL INVESTORS II,
a California Limited Partnership
CONSOLIDATED BALANCE SHEETS
DECEMBER 31,
1995 1994
ASSETS ---- ----
Cash and cash equivalents $ 7,105,000 $ 11,776,000
Restricted cash 902,000 2,241,000
Deferred costs 2,008,000 943,000
Accounts receivable and other assets 1,376,000 843,000
Real Estate:
Real estate 121,883,000 127,768,000
Accumulated depreciation (38,136,000) (43,597,000)
------------- -------------
Real estate, net 83,747,000 84,171,000
------------- -------------
Total assets $ 95,138,000 $ 99,974,000
============= =============
LIABILITIES AND PARTNERS' EQUITY
Accounts payable and other liabilities $ 2,303,000 $ 2,021,000
Due to an affiliate of the joint
venture partner 819,000 735,000
Notes payable 50,139,000 56,885,000
------------- -------------
Total liabilities 53,261,000 59,641,000
------------- -------------
Minority interest in joint ventures 3,902,000 4,608,000
------------- -------------
Commitments
Partners' Equity (Deficit):
General partner (268,000) (313,000)
Limited partners (58,982 units
outstanding at December 31, 1995
and 1994) 38,243,000 36,038,000
------------- -------------
Total partners' equity 37,975,000 35,725,000
------------- -------------
Total liabilities and partners'
equity $ 95,138,000 $ 99,974,000
============= =============
See notes to consolidated financial statements.
GROWTH HOTEL INVESTORS II,
a California Limited Partnership
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31,
1995 1994 1993
---- ---- ----
Revenues:
Hotel operations $50,046,000 $46,698,000 $43,166,000
Interest and other 495,000 466,000 292,000
------------- ------------ -----------
Total revenues 50,541,000 47,164,000 43,458,000
------------- ------------ -----------
Expenses (including $7,642,000,
$7,308,000 and $6,650,000 paid to the
joint venture partners, general partner
and affiliates in 1995, 1994 and 1993):
Hotel operations 31,047,000 29,187,000 27,947,000
Depreciation and amortization 5,141,000 4,754,000 5,297,000
Interest 5,461,000 5,520,000 5,806,000
General and administrative 944,000 1,355,000 1,138,000
------------- ------------ -----------
Total expenses 42,593,000 40,816,000 40,188,000
------------- ------------ -----------
Income before minority interest in joint
ventures' operations and extraordinary
item 7,948,000 6,348,000 3,270,000
Minority interest in joint ventures'
operations (2,236,000) (1,417,000) (546,000)
------------- ------------ -----------
Income before extraordinary item 5,712,000 4,931,000 2,724,000
Extraordinary item:
Gain on extinguishment of debt -- 98,000 --
------------- ------------ -----------
Net income $5,712,000 $5,029,000 $2,724,000
============= ============ ============
Net income per limited partnership
assignee unit:
Income before extraordinary item $ 94.91 $ 81.92 $ 45.25
Extraordinary item -- 1.63 --
------------- ------------ -----------
Net income $ 94.91 $ 83.55 $ 45.25
============= ============ ===========
Cash distributions per limited
partnership assignee unit $ 57.53 $ 57.53 $ 51.25
============= ============ ===========
See notes to consolidated financial statements.
GROWTH HOTEL INVESTORS II,
a California Limited Partnership
CONSOLIDATED STATEMENTS OF PARTNERS' EQUITY
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
General Limited Total
partners' partners' partners'
(deficit) equity equity
--------- --------- ---------
Balance - January 1, 1993 $ (338,000) $ 34,857,000 $ 34,519,000
Net income 55,000 2,669,000 2,724,000
Cash distributions (62,000) (3,023,000) (3,085,000)
----------- ------------ ------------
Balance - December 31, 1993 (345,000) 34,503,000 34,158,000
Net income 101,000 4,928,000 5,029,000
Cash distributions (69,000) (3,393,000) (3,462,000)
----------- ------------ ------------
Balance - December 31, 1994 (313,000) 36,038,000 35,725,000
Net income 114,000 5,598,000 5,712,000
Cash distributions (69,000) (3,393,000) (3,462,000)
----------- ------------ ------------
Balance - December 31, 1995 $ (268,000) $ 38,243,000 $ 37,975,000
=========== ============ ============
See notes to consolidated financial statements.
GROWTH HOTEL INVESTORS II,
a California Limited Partnership
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31,
-------------------------------------------------
1995 1994 1993
------- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $5,712,000 $ 5,029,000 $2,724,000
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 5,463,000 4,932,000 5,460,000
Minority interest in joint ventures' operations 2,236,000 1,417,000 546,000
Deferred costs paid (1,425,000) -- --
Gain on extinguishment of debt -- (98,000) --
Changes in operating assets and liabilities:
Accounts receivable and other assets (533,000) 39,000 146,000
Accounts payable, other liabilities and due
to an affiliate of joint venture partner 366,000 (86,000) 321,000
---------- ---------- ---------
Net cash provided by operating activities 11,819,000 11,233,000 9,197,000
---------- ---------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to real estate (4,264,000) (2,205,000) (2,190,000)
Purchase of cash investments -- -- (7,201,000)
Purchase of minority interest in joint ventures (375,000) -- --
Proceeds from maturity of cash investments -- 2,376,000 7,391,000
Restricted cash decrease (increase) 1,339,000 (333,000) 711,000
---------- ---------- --------
Net cash (used in) investing activities (3,300,000) (162,000) (1,289,000)
---------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Satisfaction of note payable (5,975,000) (150,000) --
Notes payable principal payments (771,000) (655,000) (565,000)
Joint venture partner contributions -- -- 6,000
Joint venture partner distributions (2,982,000) (2,275,000) (1,623,000)
Cash distributions to partners (3,462,000) (3,462,000) (3,085,000)
---------- ---------- ----------
Net cash (used in) financing activities (13,190,000) (6,542,000) (5,267,000)
---------- ---------- ----------
(Decrease) Increase in Cash and Cash Equivalents (4,671,000) 4,529,000 2,641,000
Cash and Cash Equivalents at Beginning of Year 11,776,000 7,247,000 4,606,000
---------- ---------- ----------
Cash and Cash Equivalents at End of Year $7,105,000 $11,776,000 $7,247,000
========== =========== =============
Supplemental Disclosure of Cash Flow Information:
Interest paid in cash during the Year $4,996,000 $5,345,000 $5,628,000
========== =========== =============
Supplemental Disclosure of Non-Cash Investing
and Financing Activities:
Purchase of joint venture partners' interests - Note 5
Gain on extinguishment of debt in 1994 - Note 10.
</TABLE>
See notes to consolidated financial statements.
GROWTH HOTEL INVESTORS II,
a California Limited Partnership
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
Growth Hotel Investors II (the "Partnership") is a limited partnership organized
in 1984 under the laws of the State of California to invest in, acquire, manage
and ultimately sell limited service hotels which are franchised by Hampton Inns,
Inc. ("Hampton"), a wholly owned subsidiary of the Promus Companies, Inc. The
Partnership owns properties in Colorado, Minnesota, Missouri and Ohio and has
joint venture interests in partnerships which own properties in Alabama,
Arkansas, Georgia, Michigan, North Carolina, South Carolina, Tennessee and
Texas. The general partner is Montgomery Realty Company-85 ("MRC-85"), a
California general partnership. The general partners of MRC-85 are Fox Realty
Investors ("FRI"), a California general partnership, and NPI Realty Management
Corp. ("NPI Realty"), a Florida corporation. On February 13, 1996 NPI Realty,
which acquired its interest in MRC-85 from Montgomery Realty Corporation on
November 15, 1995, became the managing general partner of MRC-85. The associate
general partner is GHI Associates of which FRI is the general partner and
Prudential-Bache Properties, Inc. is the limited partner. Capital contributions
of $58,982,000 ($1,000 per unit) were made by the limited partners.
On December 6, 1993, NPI Equity Investment II, Inc. ("NPI Equity" or the
"Managing General Partner") became the managing partner of FRI and assumed
operational control over Fox Capital Management Corporation ("FCMC"), an
affiliate of FRI. As a result, NPI Equity became responsible for the operation
and management of the business and affairs of the Partnership and the other
investment partnerships sponsored by FRI and/or FCMC. The individuals who had
served previously as partners of FRI and as officers and directors of FCMC
contributed their general partnership interests in FRI to a newly formed limited
partnership, Portfolio Realty Associates, L.P. ("PRA"), in exchange for limited
partnership interests in PRA. In the forgoing capacity, such partners continue
to hold indirectly certain economic interests in the Partnership and such other
investment partnerships, but ceased to be responsible for the operation and
management of the Partnership and such other partnerships. NPI Equity and NPI
Realty are wholly-owned subsidiaries of National Property Investors, Inc. ("NPI
Inc.").
On January 19, 1996, the stockholders of NPI, Inc., the sole shareholder of NPI,
Inc. sold all of the issued and outstanding stock of NPI, Inc. to an affiliate
of Insignia Financial Group, Inc. ("Insignia") (see Note 12).
Consolidation
The consolidated financial statements include the Partnership and joint ventures
in which the Partnership has or had a controlling interest, including Growth
Hotel Investors Combined Fund No. 1, a California Limited Partnership (the
"Combined Fund"), in which the Partnership has a majority (approximately 68%)
interest. The general partners are the Partnership and Growth Hotel Investors,
Ltd. ("GHI") which are affiliated through their general partners. The Combined
Fund was organized to acquire a majority interest in a joint venture,
Hampton/GHI Associates No. 1., which was formed to acquire, manage and
ultimately sell eighteen hotels which are a franchise of Hampton. Cash is
distributed first to the Partnership as a priority return on its invested
capital prior to distributions to Hampton. Income before depreciation and
GROWTH HOTEL INVESTORS II,
a California Limited Partnership
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
amortization is allocated between the Combined Fund and Hampton in the same
ratio as their respective cash distributions. Depreciation and amortization are
allocated on the basis of residual interests except for the expenses related to
acquisition and loan fees paid by the Combined Fund which are allocated 100
percent to the Combined Fund. The residual interests in Hampton/GHI Associates
No. 1 are 80 percent for the Combined Fund and 20 percent for Hampton.
All significant intercompany transactions and balances have been
eliminated.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
Fair Value of Financial Instruments
In 1995, the Partnership implemented Statement of Financial Accounting Standards
("SFAS") No. 107, "Disclosure about Fair Value of Financial Instruments," as
amended by SFAS No. 119, "Disclosures about Derivative Financial Instruments and
Fair Value of Financial Instruments," which requires disclosure of fair value
information about financial instruments, whether or not recognized in the
balance sheet, for which it is practicable to estimate fair value. Fair value is
defined in the SFAS as the amount at which the instrument could be exchanged in
a current transaction between willing parties, other than in a forced or
liquidation sale. The Partnership believes that the carrying amount of its
financial instruments (except for long term debt) approximates fair value due to
the short term maturity of these instruments. The fair value of the
Partnership's long term debt, after discounting the scheduled loan payments to
maturity, approximates its carrying balance.
Real Estate
Real estate is stated at cost. Acquisition fees are capitalized as a cost of
real estate. In 1995, the Partnership adopted SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of",
which requires impairment losses to be recognized for long-lived assets used in
operations when indicators of impairment are present and the undiscounted cash
flows are not sufficient to recover the asset's carrying amount. The impairment
loss is measured by comparing the fair value of the asset to its carrying
amount. The adoption of the SFAS had no effect on the Partnership's financial
statements.
GROWTH HOTEL INVESTORS II,
a California Limited Partnership
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Cash and Cash Equivalents
The Partnership considers all highly liquid investments with a maturity of three
months or less at the time of purchase to be cash equivalents.
Concentration of Credit Risk
The Partnership maintains cash balances at financial institutions insured up to
$100,000 by the Federal Deposit Insurance Corporation. Balances in excess of
$100,000 are usually invested in money market accounts and repurchase
agreements, which are collateralized by United States Treasury obligations.
Significant cash balances exceeded these insured levels during the year.
Depreciation
Depreciation is computed using the straight-line method based on estimated
useful lives ranging from 5 to 39 years.
Deferred Costs
Deferred costs represent the buyout of a services agreement, deferred financing
costs and deferred franchise fees. The buyout of the services agreement is being
amortized over the remaining term of the services agreement which is 9 years.
Financing costs are deferred and amortized, as interest expense, over the lives
of the related loans, or expensed, if financing is not obtained. Franchise fees
paid in connection with the acquisition of the hotels are deferred and are
amortized over the lives of the franchise agreements, which range from ten to
twenty years. Land lease costs paid in connection with acquisition of certain
hotels are deferred and amortized over the lives of the lease agreements.
Net Income Per Limited Partnership Assignee Unit
Net income per limited partnership assignee unit is computed by dividing net
income allocated to the limited partners by 58,982 assignee units outstanding.
Income Taxes
Taxable income or loss of the Partnership is reported in the income tax returns
of its partners. Accordingly, no provision for income taxes is made in the
financial statements of the Partnership.
GROWTH HOTEL INVESTORS II,
a California Limited Partnership
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
2. TRANSACTIONS WITH THE GENERAL PARTNER AND AFFILIATES
In accordance with the partnership agreement, the Partnership may be charged by
the general partner and affiliates for services provided to the Partnership.
From March 1988 to December 1992 such rights were assigned pursuant to a
services agreement by the general partner and affiliates to Metric Realty
Services, L.P. ("MRS"), which performed partnership management and other
services for the Partnership.
On January 1, 1993, Metric Management, Inc. ("MMI") successor to MRS, a company
which is not affiliated with the general partner, commenced providing certain
property and portfolio management services to the Partnership under a new
services agreement. As provided in the new services agreement effective January
1, 1993, no reimbursements were made to the general partner and affiliates in
1993. Subsequent to December 31, 1992, reimbursements were made to MMI. On
December 16, 1993, the services agreement with MMI was modified and, as a result
thereof, the Managing General Partner assumed responsibility for cash management
and other Partnership services on various dates commencing December 23, 1993
(see Note 12). Related party expenses are as follows:
<TABLE>
<CAPTION>
1995 1994 1993
----------- ------------ ------------
<S> <C> <C> <C>
Reimbursement of expenses:
Partnership accounting and investor services $ 213,000 $ 163,000 $ -
Professional services - 36,000 -
--------- ----------- ------------
Total $ 213,000 $ 199,000 $ -
========= =========== ============
</TABLE>
Reimbursed expenses are primarily included in general and administrative
expenses.
In accordance with the partnership agreement, the general partner and affiliates
received a partnership management fee in the amount of 10 percent of cash from
operations available for distribution (as defined in the partnership agreement).
Fees paid pursuant to this agreement in 1995, 1994 and 1993 were $385,000,
$385,000 and $343,000, respectively and are included in general and
administrative expenses. In addition, an affiliate of the Managing General
Partner was paid fees of $10,000 relating to successful real estate tax appeals
on certain of the Partnership's properties during the year ended December 31,
1994.
In accordance with the partnership agreement the general partner was allocated
its two percent continuing interest in the Partnership's net income or loss,
taxable income or loss and cash distributions.
GROWTH HOTEL INVESTORS II,
a California Limited Partnership
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
3. RELATED PARTY TRANSACTIONS
In addition to the fees paid to the general partner and affiliates as set forth
above, the Partnership has agreements with affiliates of its joint venture
partners, which provide for the management and operations of the joint venture
properties and services provided under each property's franchise agreement. Fees
paid pursuant to these agreements are generally based on a percentage of gross
revenues from operations of the property and for the years ended December 31,
1995, 1994 and 1993 were $6,058,000, $5,753,000 and $5,304,000, respectively. In
addition, affiliates of the joint venture partners received reimbursement of
expenses during the years ended December 31, 1995, 1994, and 1993 of $986,000,
$971,000 and $1,003,000, respectively. These expenses are included in operating
expenses.
4. RESTRICTED CASH
Restricted cash at December 31, 1995 represents funds provided and maintained by
certain properties pursuant to the related notes payable agreements to meet
future capital requirements and debt service payments.
5. PURCHASE OF JOINT VENTURE PARTNERS' INTERESTS
On May 1, 1995, the Partnership acquired the 25% minority interest in the joint
venture which owned the Hampton Inn - Kansas City hotel property for $300,000.
The carrying value of the property was increased by $293,000, which reflects the
purchase price of $300,000, offset by the $7,000 payable to the joint venture
partner on May 1, 1995.
On October 1, 1995, the Partnership acquired the 30% minority interest in the
joint venture which owned the Hampton Inn - Dublin hotel property for $75,000.
The carrying value of the property was increased by $123,000, which reflects the
purchase price of $75,000, and the $48,000 receivable from the joint venture
partner on October 1, 1995.
The Partnership purchased, effective January 1, 1996, all economic rights
of its joint venture partner in the Hampton Inn - St. Louis hotel for $375,000.
6. DEFERRED COSTS
The Partnership paid $1,425,000 in January 1995 to MMI amending their services
agreement to provide for a reduction in the monthly asset management fee from
$54,500 to $7,000, to eliminate fees payable to MMI for its assistance in
refinancings and sales of properties owned by the Partnership and to allow the
Partnership to terminate MMI's services at will.
GROWTH HOTEL INVESTORS II,
a California Limited Partnership
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
6. DEFERRED COSTS (Continued)
The cost of the amendment is being amortized over the remaining term of the
service agreement of 9 years. For the year ended December 31, 1995,
approximately $143,000 has been amortized and is included in general and
administrative expenses.
At December 31, 1995 and 1994 accumulated amortization of deferred costs totaled
$1,847,000 and $1,487,000, respectively.
7. REAL ESTATE
Real estate, at December 31, 1995 and 1994, is summarized as follows:
<TABLE>
<CAPTION>
1995 1994
------------ ------------
<S> <C> <C>
Land $ 15,640,000 $ 15,598,000
Buildings and improvements 83,866,000 83,338,000
Furnishings 22,377,000 28,832,000
------------ ------------
Total 121,883,000 127,768,000
Accumulated depreciation (38,136,000) (43,597,000)
------------ ------------
Real Estate, Net $ 83,747,000 $ 84,171,000
============ ============
</TABLE>
Fully depreciated assets of $10,564,000 were retired in 1995.
8. NOTES PAYABLE
Individual properties and improvements are pledged as collateral for the related
notes payable. The mortgages encumbering sixteen of the eighteen hotels owned by
the Combined Fund are cross collateralized. The notes currently bear interest at
rates ranging from 7.63 percent to 11.5 percent, except for, the mortgage
encumbering the Partnership's St. Louis, Missouri property which is financed by
a private activity revenue bond. Interest is established monthly as provided in
the agreement. The average monthly interest rate on this note was 6.40 percent
and 5.32 percent in 1995 and 1994, respectively.
On May 4, 1994, the Partnership paid approximately $150,000 in full
satisfaction, at a discount, the contingent purchase money note on the
Partnership's Hampton Inn - Colorado Springs property (see Note 10).
GROWTH HOTEL INVESTORS II,
a California Limited Partnership
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
8. NOTES PAYABLE (Continued)
On October 1, 1995, the Partnership satisfied the mortgage encumbering its
Hampton Inn - Dublin property in the amount of $3,257,000. The mortgage was due
to mature in April 1996.
On December 1, 1995, the Partnership satisfied the mortgage encumbering its
Hampton Inn - Kansas City property in the amount of $2,718,000. The mortgage was
due to mature in January 1996.
The Partnership has balloon payments due in 1996 of approximately $43,202,000.
The Managing General Partner is confident that the properties generate
sufficient cash flow to allow all mortgages to be refinanced.
Principal payments at December 31, 1995 are required as follows:
1996 $ 43,835,000
1997 30,000
1998 2,574,000
1999 -
2000 -
Thereafter 3,700,000
Total $ 50,139,000
============
9. MINIMUM FUTURE RENTAL COMMITMENTS
Minimum future rental commitments on operating leases (including four land
leases) at December 31, 1995 are payable as follows:
1996 $ 422,000
1997 380,000
1998 380,000
1999 384,000
2000 390,000
Thereafter 2,286,000
Total $4,242,000
==========
The land leases extend through 2004, 2006, 2007 and 2008, and contain options to
extend the lease periods 20, 20, 50 and 40 years, respectively. Rental expense
for these leases was $478,000, $481,000 and $372,000 in 1995, 1994 and 1993.
GROWTH HOTEL INVESTORS II,
a California Limited Partnership
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
10. EXTRAORDINARY ITEM - GAIN ON EXTINGUISHMENT OF DEBT
On May 4, 1994, the Partnership paid approximately $150,000 in full
satisfaction, at a discount, the contingent purchase money note on the
Partnership's Hampton Inn - Colorado Springs property. The Partnership recorded
an extraordinary gain on the extinguishment of debt of $98,000, representing
$50,000 of notes payable and $48,000 of accrued interest.
11. RECONCILIATION TO INCOME TAX METHOD OF ACCOUNTING
The differences between the method of accounting for income tax reporting and
the accrual method of accounting used in the financial statements are as
follows:
<TABLE>
<CAPTION>
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Net income - financial statements $ 5,712,000 $ 5,029,000 $ 2,724,000
Differences resulted from:
Minority interest in joint ventures' operations 353,000 296,000 145,000
Depreciation and other amortization (777,000) (882,000) (300,000)
Deferred costs (1,425,000) - -
Other (5,000) 53,000 15,000
----------- ----------- -----------
Net income - income tax method $ 3,858,000 $ 4,496,000 $ 2,584,000
=========== =========== ===========
Taxable income per limited partnership
assignee unit after giving effect to the allocation
to the general partner $ 64 $ 75 $ 43
=========== =========== ===========
Partners' equity-financial statements $37,975,000 $35,725,000 $34,158,000
Differences resulted from:
Deferred sales commissions and
organization costs 2,078,000 2,078,000 2,078,000
Capital account adjustment 7,000 7,000 7,000
Minority interest in joint ventures' operations 7,500,000 7,147,000 6,851,000
Deferred costs (1,425,000) - -
Depreciation and other amortization (8,407,000) (7,630,000) (6,748,000)
Other 122,000 127,000 72,000
----------- ----------- -----------
Partners' equity-income tax method $37,850,000 $37,454,000 $36,418,000
=========== =========== ===========
</TABLE>
12. SUBSEQUENT EVENTS
On January 19, 1996, the stockholders of NPI, Inc. sold all of the issued and
outstanding stock of NPI, Inc. to an affiliate of Insignia. As a result of the
transaction, the Managing General Partner of the Partnership
GROWTH HOTEL INVESTORS II,
a California Limited Partnership
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
12. SUBSEQUENT EVENTS (Continued)
is controlled by Insignia. Insignia affiliates now maintain the Partnership
books and records and oversee its operations. Property management services
continue to be performed by prior managing agents (see Note 3). Asset management
services continue to be performed by an unaffiliated third party.
On February 15, 1996, Devon Associates ("Devon") offered to purchase up to
21,000 and 15,000 limited partnership outstanding units (the "Units") of the
Partnership, and GHI, respectively. The Partnership's Units will represent a
maximum of approximately 36% of the Units outstanding. The offer was at a
purchase price of $750 per unit, net to the seller in cash, without interest,
upon the terms and conditions set forth in the offer to purchase. Certain
beneficial owners of Devon are affiliated with the general partners of the
Partnership and GHI. In addition, an affiliate of Insignia is both a shareholder
in the general partner of Cayuga Associates LP, the controlling general partner
in Devon, and a limited partner in Devon.
13. LEGAL PROCEEDINGS AND SUBSEQUENT EVENT
On February 21, 1996, certain holders of Units of the Partnership and holders of
Units of GHI, commenced an action on behalf of themselves and others similarly
situated, and derivatively on behalf of the Partnership and GHI, in the Supreme
Court of the State of New York, County of New York, against, among others,
MRC-85 and certain of its affiliates pertaining to the tender offer. The action
alleges, among other things, that the tender offers constitute (a) a breach of
fiduciary duty owed to limited partners of the partnerships, and (b) a breach of
provisions of the partnership agreements of such partnerships. The action, which
is sought to be brought as a class action on behalf of all limited partners,
seeks to enjoin the tender offers as well as monetary damages in an unspecified
amount.
On February 28, 1996, additional holders of Units of the Partnership and holders
of Units of GHI commenced an action on behalf of themselves and others similarly
situated, and derivatively on behalf of the Partnership and GHI in the Superior
Court of the State of California, County of Los Angeles, against, among others,
MRC-85 and certain of its affiliates, pertaining to the tender offer. The action
alleges, among other things, that the tender offers constitute (a) a breach of
fiduciary duty owed to limited partners of the partnerships, (b) negligent
misrepresentation pertaining to the disclosure set forth in the offer to
purchase, (c) common law fraud, and (d) a breach of the provisions of the
partnership agreements of such partnerships. The action, which is sought to be
brought as a class of action on behalf of all limited partners, seeks to enjoin
the tender offers as well as monetary damages in an unspecified amount.
Pursuant to the terms of the partnership agreement, the general partner is
entitled to seek indemnification from the Partnership for its costs in defending
these actions. The Partnership's potential liability for the cost of defending
these actions cannot be determined at this time.
On March 12, 1996, the Partnership received a letter advising that the joint
venture partner in certain of the hotel properties has made a substantial offer
in cash for all of the hotel properties directly or indirectly owned by the
Partnership and GHI. The offer is contingent upon satisfaction of a number of
conditions as outlined in the letter. There can be no assurance that if this
offer were accepted by the Partnership and GHI that the transactions
contemplated could be consummated upon the March 12, 1996 terms and conditions
or at all. The Managing General Partner is currently evaluating this offer.
SCHEDULE III
GROWTH HOTEL INVESTORS II,
a California Limited Partnership
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1995
<TABLE>
<CAPTION>
COLUMN COLUMN COLUMN COLUMN COLUMN COLUMN COLUMN COLUMN COLUMN
A B C D E F G H I
Cost Capitalized Gross Amount at
Initial Cost Subsequent Which Carried at
to Partnership to Acquisition Close of Period(1)
-------------- ----------------- ------------------
Life
on which
Retire- Deprecia-
ments Accumu- Year tion is
Buildings and Buildings lated of Date computed
and Carrying and Deprec- Con- of in latest
Encum- Improve- Improve- Costs Improve- Total iation struc- Acqui- statement of
Description brances Land ments ments (4) Land ments (2) (3) tion sition operations
- ----------- ------- ------ ------- ----- ------ ------ ------- ------ ------- ---- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
(Amounts in thousands)
PARTNERSHIP:
Hampton Inn-Eden
Prairie
Eden Prairie,
Minnesota $ 2,631 $ 880 $ 4,426 $ 416 $ (162) $ 853 $ 4,707 $5,560 $ 1,693 1987 12/30/87 5-39 Yrs
Hampton Inn-Colorado
Springs
Colorado Springs,
Colorado - 538 3,040 607 (316) 490 3,379 3,869 1,274 1985 12/29/89 5-39 Yrs
Hampton Inn-Kansas
City
Kansas City, Missouri - 589 4,545 767 - 618 5,283 5,901 1,946 1987 12/09/87 5-39 Yrs
Hampton Inn-Dublin
Dublin, Ohio - 818 4,641 816 - 831 5,444 6,275 2,048 1988 04/07/88 5-39 Yrs
JOINT VENTURE:
Hampton Inn-North
Dallas
Addison, Texas 2,972 1,667 4,119 769 (17) 1,667 4,871 6,538 1,920 1985 07/18/88 5-30 Yrs
Hampton Inn-St. Louis
Maryland Heights,
Missouri 3,700 812 5,074 454 - 812 5,528 6,340 1,942 1987 07/27/89 5-30 Yrs
COMBINED FUND:
Hampton Inn-
Memphis-I40 East
Memphis,
Tennessee 1,800 - 3,838 941 (657) - 4,122 4,122 1,525 1984 12/19/86 5-30 Yrs
Hampton Inn-Columbia-
West
West Columbia, South
Carolina 2,096 350 4,133 781 (647) 350 4,267 4,617 1,588 1985 12/19/86 5-30 Yrs
Hampton Inn-
Spartanburg
Spartanburg, South
Carolina 1,796 275 3,545 833 (581) 275 3,797 4,072 1,390 1984 12/19/86 5-39 Yrs
</TABLE>
See accompanying notes.
SCHEDULE III (continued)
GROWTH HOTEL INVESTORS II,
a California Limited Partnership
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1995
<TABLE>
<CAPTION>
COLUMN COLUMN COLUMN COLUMN COLUMN COLUMN COLUMN COLUMN COLUMN
A B C D E F G H I
Cost Capitalized Gross Amount at
Initial Cost Subsequent Which Carried at
to Partnership to Acquisition Close of Period(1)
-------------- ----------------- ------------------
Life
on which
Retire- Deprecia-
ments Accumu- Year tion is
Buildings and Buildings lated of Date computed
and Carrying and Deprec- Con- of in latest
Encum- Improve- Improve- Costs Improve- Total iation struc- Acqui- statement of
Description brances Land ments ments (4) Land ments (2) (3) tion sition operations
- ----------- ------- ------ ------- ----- ------ ------ ------- ------ ------- ---- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
(Amounts in thousands)
Hampton Inn-Little
Rock-North
North Little Rock,
Arkansas $2,048 $524 $3,862 $668 $(620) $524 $3,910 $4,434 $1,378 1985 12/19/86 5-39 Yrs
Hampton Inn-Amarillo
Amarillo, Texas 1,138 501 1,810 758 (536) 501 2,032 2,533 758 1985 12/19/86 5-39 Yrs
Hampton Inn-Greenville
Greenville, South
Carolina 2,087 539 3,942 604 (612) 539 3,934 4,473 1,395 1985 12/19/86 5-30 Yrs
Hampton Inn-Charleston-
Airport
North Charleston, South
Carolina 2,178 495 4,205 800 (639) 495 4,366 4,861 1,562 1985 12/19/86 5-39 Yrs
Hampton Inn-Memphis-
Poplar
Memphis, Tennessee 2,843 1,236 4,993 717 (763) 1,236 4,947 6,183 1,752 1985 12/19/86 5-30 Yrs
Hampton Inn-
Greensboro
Greensboro,
North Carolina 2,014 439 3,866 761 (691) 439 3,936 4,375 1,383 1986 12/19/86 5-39 Yrs
Hampton Inn-
Birmingham
Birmingham, Alabama 2,465 758 4,447 586 (730) 758 4,303 5,061 1,522 1987 12/19/86 5-30 Yrs
Hampton Inn-Atlanta-
Roswell
Roswell, Georgia 2,686 1,207 4,668 563 (816) 1,207 4,415 5,622 1,395 1987 03/04/87 5-30 Yrs
Hampton Inn-Chapel
Hill
Chapel Hill, North
Carolina 2,293 930 3,926 606 (776) 930 3,756 4,686 1,226 1987 03/04/87 5-30 Yrs
</TABLE>
See accompanying notes.
SCHEDULE III (continued)
GROWTH HOTEL INVESTORS II,
a California Limited Partnership
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1995
<TABLE>
<CAPTION>
COLUMN COLUMN COLUMN COLUMN COLUMN COLUMN COLUMN COLUMN COLUMN
A B C D E F G H I
Cost Capitalized Gross Amount at
Initial Cost Subsequent Which Carried at
to Partnership to Acquisition Close of Period(1)
-------------- ----------------- ------------------
Life
on which
Retire- Deprecia-
ments Accumu- Year tion is
Buildings and Buildings lated of Date computed
and Carrying and Deprec- Con- of in latest
Encum- Improve- Improve- Costs Improve- Total iation struc- Acqui- statement of
Description brances Land ments ments (4) Land ments (2) (3) tion sition operations
- ----------- ------- ------ ------- ----- ------ ------ ------- ------ ------- ---- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
(Amounts in thousands)
Hampton Inn-Dallas-
Richardson
Richardson, Texas $2,813 $1,371 $4,766 $417 $(837) $1,371 $4,346 $5,717 $1,328 1987 03/04/87 5-30 Yrs
Hampton Inn-Nashville-
Briley Parkway
Nashville, Tennessee 2,218 - 4,796 652 (794) - 4,654 4,654 1,487 1987 03/04/87 5-30 Yrs
Hampton Inn-San
Antonio-Northwest
San Antonio, Texas 2,491 781 4,475 590 (848) 781 4,217 4,998 1,293 1987 06/23/87 5-30 Yrs
Hampton Inn-Madison
Heights
Madison Heights,
Michigan 2,880 963 5,323 509 - 963 5,832 6,795 2,210 1987 12/29/87 5-30 Yrs
Hampton Inn-
Mountain Brook
Birmingham, Alabama 2,587 - 4,782 578 - - 5,360 5,360 2,143 1988 12/29/87 5-30 Yrs
Hampton Inn-Northlake
Atlanta, Georgia 2,403 - 4,439 398 - - 4,837 4,837 1,978 1988 09/15/88 5-30 Yrs
------- ------- -------- ------- -------- ------- -------- -------- -------
TOTAL $50,139 $15,673 $101,661 $15,591 $(11,042) $15,640 $106,243 $121,883 $38,136
======= ======= ======== ======= ======== ======= ======== ======== =======
</TABLE>
See accompanying notes.
SCHEDULE III
GROWTH HOTEL INVESTORS II,
a California Limited Partnership
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1995
NOTES:
(1) The aggregate cost for Federal income tax purposes is $122,449,000.
(2) Balance, January 1, 1993 $123,373,000
Improvements capitalized subsequent to acquisition 2,190,000
-----------
Balance, December 31, 1993 125,563,000
Improvements capitalized subsequent to acquisition 2,205,000
-----------
Balance, December 31, 1994 127,768,000
Improvements capitalized subsequent to acquisition 4,264,000
Purchase of joint venture interests 415,000
Adjustment for retirement of assets (10,564,000)
-----------
Balance, December 31, 1995 $121,883,000
============
(3) Balance, January 1, 1993 $33,635,000
Additions charged to expense 5,245,000
-----------
Balance, December 31, 1993 38,880,000
Additions charged to expense 4,717,000
-----------
Balance, December 31, 1994 43,597,000
Additions charged to expense 5,103,000
Adjustment for retirement of assets (10,564,000)
-----------
Balance, December 31, 1995 $38,136,000
===========
(4) Carrying costs of $(162,000) and $(316,000) relate to
Hampton Inn - Eden Prairie and Hampton Inn - Colorado
Springs, respectively. Adjustment for retirement of
assets of $ (10,564,000) relate to the remaining properties
as stated.
To the Partners
Growth Hotel Investors Combined Fund No. 1,
a California Limited Partnership
Greenville, South Carolina
To the Partners
Growth Hotel Investors Combined Fund No. 1,
a California Limited Partnership
Greenville, South Carolina
Independent Auditors' Report
We have audited the accompanying consolidated balance sheets of Growth Hotel
Investors Combined Fund No.1, a California Limited Partnership (the
"Partnership"), as of December 31, 1995 and 1994, and the related consolidated
statements of operations, partners' equity and cash flows for the years then
ended. Our audits also included the additional information supplied pursuant to
Item 14(a)(2). These consolidated financial statements are the responsibility of
the Partnership's management. Our responsibility is to express an opinion on
these consolidated 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 consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
consolidated financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Growth
Hotel Investors Combined Fund No. 1, a California Limited Partnership, as of
December 31, 1995 and 1994, and the results of its operations and its cash flows
for the years then ended in conformity with generally accepted accounting
principles. Also in our opinion, the related financial statement schedule, when
considered in relation to the basic consolidated financial statements taken as a
whole, presents fairly, in all material respects, the information set forth
therein.
Certified Public Accountants
New York, N.Y.
February 15, 1996, except for Note 8,
which is dated March 12, 1996
INDEPENDENT AUDITORS' REPORT
Growth Hotel Investor's Combined Fund No. 1, a California Limited Partnership:
We have audited the accompanying statements of operations, partners' equity and
cash flows of Growth Hotel Investors Combined Fund No. 1, (a limited
partnership) (the "Partnership") and its joint ventures, for the year ended
December 31, 1993. These consolidated financial statements are the
responsibility of the Partnership's management. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as will as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the results of operations and cash flows of the Partnership
and its joint ventures for the year ended December 31, 1993, in conformity with
generally accepted accounting principles.
Deloitte & Touche LLP
San Francisco, California
March 18, 1994
GROWTH HOTEL INVESTORS COMBINED FUND NO. 1,
a California Limited Partnership
CONSOLIDATED BALANCE SHEETS
DECEMBER 31,
1995 1994
ASSETS
Cash and cash equivalents $3,657,000 $2,953,000
Restricted cash 570,000 1,988,000
Deferred costs and other assets 1,100,000 1,244,000
Real Estate:
Real estate 87,400,000 94,793,000
Accumulated depreciation (27,313,000) (34,108,000)
----------- -----------
Real estate, net 60,087,000 60,685,000
----------- -----------
Total assets $65,414,000 $66,870,000
=========== ===========
LIABILITIES AND PARTNERS' EQUITY
Accounts payable and other liabilities $1,552,000 $1,250,000
Due to an affiliate of the joint venture partner 756,000 646,000
Notes payable 40,836,000 41,361,000
----------- -----------
Total liabilities 43,144,000 43,257,000
----------- -----------
Minority interest in consolidated joint venture (4,037,000) (3,746,000)
----------- -----------
Commitments
Partners' Equity:
GHI 8,153,000 8,487,000
GHI II 18,154,000 18,872,000
----------- -----------
Total partners' equity 26,307,000 27,359,000
----------- -----------
Total liabilities and partners' equity $65,414,000 $66,870,000
=========== ===========
See notes to consolidated financial statements.
GROWTH HOTEL INVESTORS COMBINED FUND NO. 1,
a California Limited Partnership
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31,
1995 1994 1993
Revenues:
Hotel operations $36,934,000 $34,583,000 $32,121,000
Interest 222,000 283,000 131,000
---------- ---------- ----------
Total revenues 37,156,000 34,866,000 32,252,000
---------- ---------- ----------
Expenses (including $5,545,000,
$5,305,000 and $4,973,000 paid to
an affiliate of the joint venture
partner in 1995, 1994, and 1993):
Hotel operations 22,784,000 21,722,000 20,869,000
Interest 4,139,000 4,169,000 4,321,000
Depreciation and amortization 3,778,000 3,403,000 3,637,000
General and administrative 9,000 12,000 39,000
---------- ---------- ----------
Total expenses 30,710,000 29,306,000 28,866,000
---------- ---------- ----------
Income before minority interest in
joint venture's operations 6,446,000 5,560,000 3,386,000
Minority interest in joint
venture's operations (76,000) 648,000 685,000
---------- ---------- ----------
Net income $6,370,000 $6,208,000 $4,071,000
========== ========== ==========
See notes to consolidated financial statements.
GROWTH HOTEL INVESTORS COMBINED FUND NO. 1,
a California Limited Partnership
CONSOLIDATED STATEMENTS OF PARTNERS' EQUITY
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
Growth Growth
Hotel Hotel
Investors Investors II Total
Balance - January 1, 1993 $ 8,983,000 $19,939,000 $28,922,000
Capital contributions 6,000 14,000 20,000
Net income 1,292,000 2,779,000 4,071,000
Cash distributions (1,582,000) (3,403,000) (4,985,000)
----------- ----------- -----------
Balance - December 31, 1993 8,699,000 19,329,000 28,028,000
Net income 1,970,000 4,238,000 6,208,000
Cash distributions (2,182,000) (4,695,000) (6,877,000)
----------- ----------- -----------
Balance - December 31, 1994 8,487,000 18,872,000 27,359,000
Net income 2,021,000 4,349,000 6,370,000
Cash distributions (2,355,000) (5,067,000) (7,422,000)
----------- ----------- -----------
Balance - December 31, 1995 $ 8,153,000 $18,154,000 $26,307,000
=========== =========== ===========
See notes to consolidated financial statements.
GROWTH HOTEL INVESTORS COMBINED FUND NO. 1,
a California Limited Partnership
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31,
1995 1994 1993
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $6,370,000 $6,208,000 $4,071,000
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 3,916,000 3,539,000 3,761,000
Minority interest in joint venture's
operations 76,000 (648,000) (685,000)
Changes in operating assets and
liabilities:
Deferred costs and other assets (20,000) (1,000) 151,000
Accounts payable, other liabilities
and due to an affiliate of the
joint venture partner 412,000 (120,000) 165,000
---------- ---------- ----------
Net cash provided by operating activities 10,754,000 8,978,000 7,463,000
---------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to real estate (3,154,000) (1,627,000) (1,781,000)
Restricted cash decrease (increase) 1,418,000 (327,000) 262,000
---------- ---------- ----------
Net cash (used in) investing activities (1,736,000) (1,954,000) (1,519,000)
---------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Notes payable principal payments (525,000) (500,000) (442,000)
Capital contributions -- -- 20,000
Joint venture partner distributions (367,000) -- --
Cash distributions to partners (7,422,000) (6,877,000) (4,985,000)
---------- ---------- ----------
Net cash (used in) financing activies (8,314,000) (7,377,000) (5,407,000)
---------- ---------- ----------
Increase (Decrease) in Cash and Cash
Equivalents 704,000 (353,000) 537,000
Cash and Cash Equivalents at Beginning
of Year 2,953,000 3,306,000 2,769,000
---------- ---------- ----------
Cash and Cash Equivalents at End of Year $3,657,000 $2,953,000 $3,306,000
========== ========== ==========
Supplemental Disclosure of Cash Flow
Information:
Interest paid in cash during the year $3,716,000 $4,045,000 $4,197,000
========== ========== ==========
See notes to consolidated financial statements.
GROWTH HOTEL INVESTORS COMBINED FUND NO. 1,
a California Limited Partnership
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
Growth Hotel Investors Combined Fund No. 1, (the "Partnership") is a general
partnership organized in 1986 under the laws of the State of California to
acquire a majority interest in a joint venture, Hampton/GHI Associates No. 1,
which was formed to acquire, manage and ultimately sell eighteen hotels which
are franchised by Hampton Inns, Inc. ("Hampton"), a wholly owned subsidiary of
the Promus Hotels, Inc ("Promus"). The properties owned by the joint venture are
located in Alabama, Arkansas, Georgia, Michigan, North Carolina, South Carolina,
Tennessee and Texas.
The general partners are Growth Hotel Investors ("GHI") and Growth Hotel
Investors II ("GHI II"); both are California limited partnerships which are
affiliated through their general partners.
Cash is distributed first to the Partnership as a priority return on its
invested capital prior to any distributions to Hampton. Income before
depreciation and amortization is allocated between the Partnership and Hampton
in the same ratio as their respective cash distributions. Depreciation and
amortization are allocated on the basis of residual interests except for the
expenses related to acquisition and loan fees paid by the Partnership which are
allocated 100 percent to the Partnership. The residual interests in Hampton/GHI
Associates No. 1 are 80 percent for the Partnership and 20 percent for Hampton.
Consolidation
The consolidated financial statements include the accounts of the Partnership
and its majority owned joint venture. All significant intercompany transactions
and balances have been eliminated. Losses in excess of capital contributions
have been allocated to the minority interest as it is considered probable by the
managing general partner that such losses will be recovered through gains from
the eventual sale of the Partnership's properties.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
GROWTH HOTEL INVESTORS COMBINED FUND NO. 1,
a California Limited Partnership
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Fair Value of Financial Instruments
In 1995, the Partnership implemented Statement of Financial Accounting Standards
("SFAS") No. 107, "Disclosures about Fair Value of Financial Instruments," as
amended by SFAS No. 119, "Disclosures about Derivative Financial Instruments and
Fair Value of Financial Instruments," which requires disclosure of fair value
information about financial instruments, whether or not recognized in the
balance sheet, for which it is practicable to estimate fair value. Fair value is
defined in the SFAS as the amount at which the instrument could be exchanged in
a current transaction between willing parties, other than in a forced or
liquidation sale. The Partnership believes the carrying amount of its financial
instruments approximates fair value due to the short term maturity of these
instruments.
Real Estate
Real estate is stated at cost. Acquisition fees are capitalized as a cost of
real estate. In 1995, the Partnership adopted SFAS No. 121, "Accounting For the
Impairment of Long-Lived Assets and For Long-Lived Assets to be Disposed Of ",
which requires impairment losses to be recognized for long-lived assets used in
operations when indicators of impairment are present and the undiscounted cash
flows are not sufficient to recover the asset's carrying amount. The impairment
loss is measured by comparing the fair value of the asset to its carrying
amount. The adoption of the SFAS had no effect on the Partnership's financial
statements.
Cash and Cash Equivalents
The Partnership considers all highly liquid investments with an original
maturity date of three months or less at the time of purchase to be cash
equivalents.
Concentration of Credit Risk
The Partnership maintains cash balances at financial institutions insured up to
$100,000 by the Federal Deposit Insurance Corporation. Balances in excess of
$100,000 are usually invested in money market accounts. Significant cash
balances exceeded these insured levels during the year.
GROWTH HOTEL INVESTORS COMBINED FUND NO. 1,
a California Limited Partnership
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Depreciation
Depreciation is computed using the straight-line method based on estimated
useful lives ranging from 5 to 39 years.
Deferred Costs
Deferred costs represent financing costs, franchise fees and land lease cost.
Financing costs are deferred and amortized, as interest expense, over the life
of the related loans, which range from eight to ten years, or expensed, if
financing is not obtained. Franchise fees paid in connection with the
acquisition of the hotels are deferred and amortized over the lives of the
franchise agreements, which are twenty years. Land lease costs paid in
connection with the acquisition of certain hotels are deferred and amortized
over the lives of the lease agreements, which are twenty years. At December 31,
1995 and 1994 accumulated amortization of deferred costs totaled $1,347,000 and
$1,182,000, respectively. Net deferred costs of $545,000 and $711,000 for 1995
and 1994, respectively, are included in deferred costs and other assets.
Net Income Allocation
Net income is allocated between GHI and GHI II based on the ratio of each
partner's capital contribution to the Partnership.
Income Taxes
Taxable income or loss of the Partnership is reported in the income tax returns
of its partners. Accordingly, no provision for income taxes is made in the
financial statements of the Partnership.
2. RELATED PARTY TRANSACTIONS
The Partnership has agreements with an affiliate of its joint venture partner,
which provide for the management and operation of the joint venture properties
and services provided under each property's franchise agreement. Fees paid
pursuant to these agreements are generally based on a percentage of gross
revenues from operations of the property and were $5,545,000, $5,295,000 and
$4,973,000 for the years ended December 31, 1995, 1994 and 1993, respectively.
In addition, an affiliate of the managing general partner of GHI and GHI II, was
paid fees of $10,000 relating to successful real estate tax appeals on certain
of the Partnership's properties during the year ended December 31, 1994.
GROWTH HOTEL INVESTORS COMBINED FUND NO. 1,
a California Limited Partnership
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
3. RESTRICTED CASH
Restricted cash at December 31, 1995 and 1994 represents reserves for capital
improvements, provided and maintained by certain properties pursuant to the
related notes payable agreements.
4. REAL ESTATE
Hotel properties and improvements at December 31, 1995 and 1994 are summarized
as follows:
1995 1994
Land $10,369,000 $10,369,000
Buildings and improvements 62,070,000 61,919,000
Furnishings 14,961,000 22,505,000
Total 87,400,000 94,793,000
Accumulated depreciation (27,313,000) (34,108,000)
----------- -----------
Real estate, net $60,087,000 $60,685,000
=========== ===========
Fully depreciated assets of $10,547,000 were retired in 1995.
5. NOTES PAYABLE
Properties and improvements are pledged as collateral for the related notes
payable. The notes currently bear interest at rates ranging from 7.63 percent to
10 percent. The mortgages encumbering sixteen of the eighteen hotels that are
owned by the joint venture are cross collateralized. Amortization of deferred
financing costs totaled $124,000 for each of the years ended December 31, 1995,
1994 and 1993. The notes are payable monthly and mature beginning in August 1996
through December 1996. The managing general partner is confident that the
properties generate sufficient cash flow to allow all mortgages to be
refinanced.
GROWTH HOTEL INVESTORS COMBINED FUND NO. 1,
a California Limited Partnership
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
6. RENTAL COMMITMENTS
Minimum future rental commitments on operating leases (including four land
leases) at December 31, 1995 are payable as follows:
1996 $ 419,000
1997 380,000
1998 380,000
1999 384,000
2000 390,000
Thereafter 2,286,000
------------
Total $ 4,239,000
============
The land leases extend through 2004, 2006, 2007 and 2008 and contain
options to extend the lease periods 20, 20, 50 and 40 years, respectively.
Rental expense for these leases was $478,000, $481,000 and $372,000 in 1995,
1994 and 1993, respectively.
7. SUBSEQUENT EVENTS
On January 19, 1996, the stockholders of NPI, Inc., the parent of the managing
general partner of GHI and GHI II, sold all of the issued and outstanding stock
of NPI, Inc. to an affiliate of Insignia Financial Group, Inc. ("Insignia"). As
a result of the transaction, the managing general partner of GHI and GHI II are
controlled by Insignia. Insignia affiliates now maintain the Partnership books
and records and oversee its operations. Property management services continue to
be performed by an affiliate of the joint venture partner. Asset management
services continue to be performed by an unaffiliated third party.
On February 15,1996, Devon Associates ("Devon") offered to purchase up to 15,000
and 21,000 limited partnership outstanding units of GHI and GHI II,
respectively. Certain beneficial owners of Devon are affiliated with the general
partners of GHI and GHI II. In addition, an affiliate of Insignia is both a
shareholder in the general partner of Cayuga Associates L.P., the controlling
general partner in Devon, and a limited partner in Devon.
8. LEGAL PROCEEDINGS AND SUBSEQUENT EVENT
On February 21 and February 28, 1996 certain holders of limited partnership
units in GHI and GHI II commenced separate actions against, among others, the
general partner of GHI and GHI II, pertaining to the tender offer.
On March 12, 1996 GHI and GHI II received a letter advising that the joint
venture partner in the Partnership has made a substantial offer in cash for all
of the hotel properties directly or indirectly owned by GHI and GHI II,
including the hotel properties owned by the Partnership. The offer is contingent
upon satisfaction of a number of conditions as outlined in the letter. There can
be no assurance that if this offer were accepted by GHI and GHI II that the
transactions contemplated could be consummated upon the March 12, 1996 terms and
conditions described or at all. The managing general partner of GHI and GHI II
is currently evaluating this offer.
SCHEDULE III
GROWTH HOTEL INVESTORS COMBINED FUND NO. 1,
a California Limited Partnership
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1995
<TABLE>
<CAPTION>
COLUMN COLUMN COLUMN COLUMN COLUMN COLUMN COLUMN COLUMN COLUMN
A B C D E F G H I
Cost Capitalized Gross Amount at
Initial Cost Subsequent Which Carried at
to Partnership to Acquisition Close of Period(1)
-------------- ---------------- ------------------
Life
on which
Deprecia-
Accumu- Year tion is
Buildings Buildings lated of Date computed
and and Deprec- Con- of in latest
Encum- Improve- Improve- Retire- Improve- Total iation struc- Acqui- statement of
Description brances Land ments ments ments Land ments (2) (3) tion sition operations
- ----------- ------- ------ ------- ----- ------ ------ ------- ------ ------- ---- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
(Amounts in thousands)
JOINT VENTURE:
Hampton Inn-
Memphis-I40 East
Memphis,
Tennessee $ 1,800 - $ 3,838 $ 941 ($657) - $4,122 $ 4,122 $ 1,525 1984 12/19/86 5-30 Yrs
Hampton Inn-Columbia-
West
West Columbia, South
Carolina 2,096 $ 350 4,133 781 (647) $ 350 4,267 4,617 1,588 1985 12/19/86 5-30 Yrs
Hampton Inn-
Spartanburg
Spartanburg, South
Carolina 1,796 275 3,545 833 (581) 275 3,797 4,072 1,390 1984 12/19/86 5-39 Yrs
Hampton Inn-Little
Rock-North
North Little Rock,
Arkansas 2,048 524 3,862 668 (620) 524 3,910 4,434 1,378 1985 12/19/86 5-39 Yrs
Hampton Inn-Amarillo
Amarillo, Texas 1,138 501 1,810 758 (536) 501 2,032 2,533 758 1985 12/19/86 5-39 Yrs
Hampton Inn-Greenville
Greenville, South
Carolina 2,087 539 3,942 604 (612) 539 3,934 4,473 1,395 1985 12/19/86 5-30 Yrs
Hampton Inn-Charleston-
Airport
North Charleston, South
Carolina 2,178 495 4,205 800 (639) 495 4,366 4,861 1,562 1985 12/19/86 5-39 Yrs
Hampton Inn-Memphis-
Poplar
Memphis, Tennessee 2,843 1,236 4,993 717 (763) 1,236 4,947 6,183 1,752 1985 12/19/86 5-30 Yrs
Hampton Inn-
Greensboro
Greensboro,
North Carolina 2,014 439 3,866 761 (691) 439 3,936 4,375 1,383 1986 12/19/86 5-39 Yrs
See accompanying notes.
</TABLE>
SCHEDULE III
GROWTH HOTEL INVESTORS COMBINED FUND NO. 1,
a California Limited Partnership
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1995
<TABLE>
<CAPTION>
COLUMN COLUMN COLUMN COLUMN COLUMN COLUMN COLUMN COLUMN COLUMN
A B C D E F G H I
Cost Capitalized Gross Amount at
Initial Cost Subsequent Which Carried at
to Partnership to Acquisition Close of Period(1)
-------------- ----------------- ------------------
Life
on which
Deprecia-
Accumu- Year tion is
Buildings Buildings lated of Date computed
and and Deprec- Con- of in latest
Encum- Improve- Improve- Retire- Improve- Total iation struc- Acqui- statement of
Description brances Land ments ments ments Land ments (2) (3) tion sition operations
- ----------- ------- ------ ------- ----- ------ ------ ------- ------ ------- ---- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
(Amounts in thousands)
JOINT VENTURE:
Hampton Inn-
Birmingham
Birmingham, Alabama $ 2,465 $ 758 $ 4,447 $586 ($ 730) $ 758 $4,303 $5,061 $1,522 1987 12/19/86 5-30 Yrs
Hampton Inn-Atlanta-
Roswell
Roswell, Georgia 2,686 1,207 4,668 563 (816) 1,207 4,415 5,622 1,395 1987 03/04/87 5-30 Yrs
Hampton Inn-Chapel
Hill
Chapel Hill, North
Carolina 2,293 930 3,926 606 (776) 930 3,756 4,686 1,226 1987 03/04/87 5-30 Yrs
Hampton Inn-Dallas-
Richardson
Richardson, Texas 2,813 1,371 4,766 417 (837) 1,371 4,346 5,717 1,328 1987 03/04/87 5-30 Yrs
Hampton Inn-Nashville-
Briley Parkway
Nashville, Tennessee 2,218 - 4,796 652 (794) - 4,654 4,654 1,487 1987 03/04/87 5-30 Yrs
Hampton Inn-San
Antonio-Northwest
San Antonio, Texas 2,491 781 4,475 590 (848) 781 4,217 4,998 1,293 1987 06/23/87 5-30 Yrs
Hampton Inn-Madison
Heights
Madison Heights,
Michigan 2,880 963 5,323 509 - 963 5,832 6,795 2,210 1987 12/29/87 5-30 Yrs
Hampton Inn-
Mountain Brook
Birmingham, Alabama 2,587 - 4,782 578 - - 5,360 5,360 2,143 1988 12/29/87 5-30 Yrs
Hampton Inn-Northlake
Atlanta, Georgia 2,403 - 4,439 398 - - 4,837 4,837 1,978 1988 09/15/88 5-30 Yrs
---------------- ------- ---- ------------- ----- ------ ------
TOTAL $40,836 $10,369 $75,816 $11,762($ 10,547) $10,369 $77,031 $87,400 $27,313
======= ======= ======= ======= ========= ======= ======= ======= =======
</TABLE>
See accompanying notes.
GROWTH HOTEL INVESTORS COMBINED FUND NO. 1,
a California Limited Partnership
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1995
NOTES:
(1) The aggregate cost for Federal income tax purposes is $87,418,000.
(2) Balance, January 1, 1993 $91,385,000
Improvements capitalized subsequent to acquisition 1,781,000
-----------
Balance, December 31, 1993 93,166,000
Improvements capitalized subsequent to acquisition 1,627,000
-----------
Balance, December 31, 1994 94,793,000
Adjustment for retirement of assets (10,547,000)
Improvements capitalized subsequent to acquisition 3,154,000
-----------
Balance, December 31, 1995 $87,400,000
===========
(3) Balance, January 1, 1993 $27,137,000
Additions charged to expense 3,595,000
-----------
Balance, December 31, 1993 30,732,000
Additions charged to expense 3,376,000
-----------
Balance, December 31, 1994 34,108,000
Adjustment for retirement of assets (10,547,000)
Additions charged to expense 3,752,000
-----------
Balance, December 31, 1995 $27,313,000
===========
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.
Effective April 22, 1994, the Registrant dismissed its prior
Independent Auditors, Deloitte & Touche LLP ("Deloitte") and retained as its new
Independent Auditors, Imowitz Koenig & Company, LLP. Deloitte's Independent
Auditors' Report on the Registrant's financial statements for the calendar year
ended December 31, 1993 did not contain an adverse opinion or a disclaimer of
opinion, and were not qualified or modified as to uncertainty, audit scope or
accounting principles. The decision to change Independent Auditors was approved
by the Managing General Partner's Directors. During the calendar year ended 1993
and through April 22, 1994 there were no disagreements between the Registrant
and Deloitte on any matter of accounting principles or practices, financial
statement disclosure, or auditing scope of procedure which disagreements if not
resolved to the satisfaction of Deloitte, would have caused it to make reference
to the subject matter of the disagreements in connection with its reports.
Effective April 22, 1994, the Registrant engaged Imowitz Koenig &
Company, LLP as its Independent Auditors. The Registrant did not consult Imowitz
Koenig & Company, LLP regarding any of the matters or events set forth in Item
304(a)(2)(i) and (ii) of Regulation S-K prior to April 22, 1994.
PART III
Item 10. Directors and Executive Officers of the Registrant.
Neither the Registrant nor Montgomery Realty Company-85 ("MRC"), the
general partner of the Registrant has any officers or directors. NPI Realty
Management Corp. ("NPI Realty"), the managing general partner of MRC, manages
and controls substantially all of the Registrant's affairs and has general
responsibility and ultimate authority in all matters affecting its business. NPI
Realty is a wholly owned subsidiary of National Property Investors, Inc. ("NPI,
Inc."), which in turn is owned by Insignia (See Item 1, "Business - Change in
Control"). Insignia is a full service real estate service organization
performing property management, commercial and retail leasing, investor
services, partnership administration, mortgage banking, and real estate
investment banking services for various entities. Insignia commenced operations
in December 1990 and is the largest manager of multifamily residential
properties in the United States and is a significant manager of commercial
property. It currently provides property and/or asset management services for
over 2,400 properties. Insignia's properties consist of approximately 300,000
units of multifamily residential housing and approximately 64 million square
feet of commercial space.
As of March 1, 1996, the names and positions held by the officers and
directors of NPI Realty are as follows:
Has served as a
Director and/or
Officer of the Managing
Name Positions Held General Partner since
---- -------------- -----------------------
William H. Jarrard, Jr. President and Director January 1996
Ronald Uretta Vice President and January 1996
Treasurer
John K. Lines, Esquire Vice President and January 1996
Secretary
Kelley M. Buechler Assistant Secretary January 1996
William H. Jarrard, Jr., age 49, has been President of NPI Realty since
January 1996 and Managing Director - Partnership Administration of Insignia
since January 1991.
Ronald Uretta, age 40, has been Insignia's Chief Financial
Officer and Treasurer since January 1992. Since September 1990, Mr.
Uretta has also served as the Chief Financial Officer and Controller
of Metropolitan Asset Group.
John K. Lines, Esquire, age 36, has been Vice President and Secretary
of NPI Realty since January 1996, Insignia's General Counsel since June 1994,
and General Counsel and Secretary since July 1994. From May 1993 until June
1994, Mr. Lines was the Assistant General Counsel and Vice President of Ocwen
Financial Corporation, West Palm Beach, Florida. From October 1991 until May
1993, Mr. Lines was a Senior Attorney with Banc One Corporation, Columbus, Ohio.
From May 1984 until October 1991, Mr. Lines was an attorney with Squire Sanders
& Dempsey, Columbus, Ohio.
Kelley M. Buechler, age 38, has been Assistant Secretary of NPI Realty
since January 1996 and Assistant Secretary of Insignia since 1991.
Item 11. Executive Compensation.
The Registrant is not required to and did not pay any compensation to
the officers or directors of NPI Realty or NPI Equity Investments II, Inc., the
managing general partner of Fox Realty Investors, a general partner of MRC. NPI
Realty does not presently pay any compensation to any of its officers or
directors. (See Item 13, "Certain Relationships and Related Transactions").
Item 12. Security Ownership of Certain Beneficial Owners and
Management.
There is no person known to the Registrant who owns beneficially or of
record more than five percent of the voting securities of the Registrant.
Neither the Registrant's general partners nor affiliates of the Registrant's
general partners have contributed capital to the Registrant.
The Registrant is a limited partnership and has no officers or
directors. The managing general partner has discretionary control over most of
the decisions made by or for the Registrant in accordance with the terms of the
Partnership Agreement. Affiliates of the Registrant's general partner own less
than one percent of the Registrant's voting securities.
There are no arrangements known to the Registrant, the operation of
which may, at a subsequent date, result in a change in control of the
Registrant.
Item 13. Certain Relationships and Related Transactions.
In accordance with the Partnership Agreement, the Registrant may be
charged by the general partner and affiliates for services provided to the
Registrant. From March 1988 to December 1993 such amounts were assigned pursuant
to a services agreement by the general partner and affiliates to Metric Realty
Services, L.P. ("MRS"), which performed partnership management and other
services for the Partnership. On January 1, 1993, Metric Management, Inc.,
successor to MRS, a company which is not affiliated with the general partner,
commenced providing certain property and portfolio management services to the
Registrant under a new services agreement. As provided in the new services
agreement effective January 1, 1993, no reimbursements were made to the general
partner and affiliates in 1993. Subsequent to December 31, 1992, reimbursements
were made to Metric Management, Inc. On December 16, 1993, the services
agreement with Metric Management, Inc. was modified and, as a result thereof,
the Registrant's general partner assumed responsibility for cash management of
the Registrant as of December 23, 1993 and assumed responsibility for day-to-day
management of the Registrant's affairs, including portfolio management,
accounting and investor relations services as of April 1, 1994. Related party
expenses are as follows:
1995 1994 1993
---- ---- ----
Reimbursement of expenses:
Partnership accounting $213,000 $163,000 $ -
and investor services
Professional services - 36,000 -
-------- -------- ------
Total $213,000 $199,000 $ -
======== ======== ======
In accordance with the Partnership Agreement, the general partner and
affiliates received a Partnership management fee in the amount of ten percent of
cash from operations available for distribution (as defined in the Partnership
Agreement). Fees paid pursuant to this agreement in 1995, 1994 and 1993 were
$385,000, $385,000 and $343,000, respectively.
In accordance with the Partnership Agreement, the general partner was
allocated its two percent continuing interest in the Registrant's net income or
loss, taxable income or loss and cash distributions.
An affiliate of NPI Equity II was paid $9,665 in fees relating to
successful real estate tax appeals on properties owned by the consolidated joint
venture.
On February 15, 1996, Devon Associates, a New York general partnership,
commenced a tender offer (the "Offer") for up to 21,000 of the outstanding Units
at a purchase price of $750.00 per Unit. Due to the participation in the tender
offer by affiliates of NPI Realty, and the Managing General Partner's related,
existing and potential conflicts of interest, the Registrant, in its Schedule
14D-9 filed with Securities and Exchange Commission and sent to limited
partners, expressed no opinion and made no recommendation as to whether limited
partners should tender their Units pursuant to the Offer. The expiration of the
tender offers described above is midnight, New York time, on March 25, 1996. See
Items 2-4 of the Schedule 14D-9, for additional information with respect to the
Offer and the current and potential conflicts of interest of MRC-85, which Items
2-4 are incorporated herein by reference.
On March 12, 1996, the Registrant received a letter advising that the
Registrant's and GHI's joint venture partner in certain of the hotel properties
is offering $147,400,000 in cash for all of the 28 hotel properties directly or
indirectly owned by the Registrant and Growth Hotel Investors ("GHI"). See
Amendment No. 2 to the Registrant's Statement on Schedule 14D-9, as filed with
the Commission on March 14, 1996, for a more complete description of this offer,
which Amendment No. 2 is hereby incorporated by reference herein. There can be
no assurance that if this offer were accepted by the Registrant and GHI, the
transactions contemplated thereby could be consummated upon the March 12, 1996
terms and conditions described therein or at all. The Managing General Partner
has not concluded its evaluation of this offer or of the ability of the offeror
to consummate the transactions contemplated thereby.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on
Form 8-K.
(a) (1)(2) Financial Statements and Financial Statement Schedules
See Item 8 of this Form 10-K for Consolidated Financial Statements for
the Registrant, Notes thereto, and Financial Statement Schedules. (A
table of contents to Consolidated Financial Statements and Financial
Statement Schedules is included in Item 8 and incorporated herein by
reference.)
(a) (3) Exhibits
2. NPI, Inc. Stock Purchase Agreement, dated as of August 17,
1995, incorporated by reference to the Registrant's Current
Report on Form 8-K dated August 17, 1995.
3.4. Agreement of Limited Partnership, incorporated by reference to
Exhibit A to the Prospectus of the Registrant dated October
10, 1986, and thereafter supplemented, included in the
Registrant's Registration Statement on Form S-11 (Reg.
No. 33-4566).
16. Letter dated April 27, 1994 from the Registrant's Former
Independent Auditors incorporated by reference to the
Registrant's Current Report on Form 8-K dated April 22, 1994.
20 Letter, dated February 29, 1996, from the Registrant to its
limited partners, incorporated by reference to the Schedule
14D-9 of Registrant filed with the Commission on February
29, 1996.
99(a) Schedule 14D-9 of the Registrant, as filed with the
Commission on February 29, 1996.
99(b) Amendment No. 1 to Schedule 14D-9 of Registrant, as filed
with the Commission on March 7, 1996.
99(c) Amendment No. 2 to Schedule 14D-9 of Registrant, as filed
with the Commission on March 14, 1996.
99(d) Letter Agreement, dated November 15, 1995 between Montgomery
Realty Corporation, Fox Realty Investors, NPI Equity
Investments II, Inc., and NPI Realty Management Corp.
incorporated by reference to the Schedule 14D-9 of Registrant
filed with the Commission on February 29, 1996.
99(e) Second Amended and Restated Partnership Agreement of
Montgomery Realty Company 85, made and entered into to be
effective as of November 15, 1995, by and between NPI Realty
Management Corp. and Fox Realty Investors incorporated by
reference to the Schedule 14D-9 of Registrant filed with the
Commission on February 29, 1996.
99(f) Third Amended and Restated General Partnership Agreement of
Montgomery Realty Company-85, effective as of February 13,
1996, by and between NPI Realty Management Corp. and Fox
Realty Investors incorporated by reference to the Schedule
14D-9 of Registrant filed with the Commission on February
29, 1996.
(b) No reports on Form 8-K were filed during the last quarter
covered by this Report:
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.
THE REGISTRANT
GROWTH HOTEL INVESTORS II,
a California Limited Partnership
By: Montgomery Realty Company-85,
its General Partner
By: NPI Realty Management Corp.
managing partner
By: /s/ William H. Jarrard, Jr.
William H. Jarrard, Jr.
President and Director
Date: March 15, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934,
this Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the date indicated.
Signature/Name Title Date
/s/ William H. Jarrard, Jr. President and March 15, 1996
- ---------------------------
William H. Jarrard, Jr. Director
/s/ Ronald Uretta Principal Financial March 15, 1996
- ---------------------------
Ronald Uretta Officer and Principal
Accounting Officer
EXHIBIT INDEX
Exhibit
2. NPI, Inc. Stock Purchase Agreement, dated as of August 17,
1995 (1)
3. 4. Agreement of Limited Partnership (2)
16. Letter dated April 27, 1994 from the Registrant's Former
Independent Auditors (3)
20 Letter, dated February 29, 1996, from the Registrant to its
limited partners. (4)
99(a) Schedule 14D-9 of the Registrant, as filed with the
Commission on February 29, 1996.
99(b) Amendment No. 1 to Schedule 14D-9 of the Registrant, as
filed with the Commission on March 7, 1996.
99(c) Amendment No. 2 to Schedule 14D-9 of the Registrant, as
filed with the Commission on March 14, 1996.
99(d) Letter Agreement, dated November 15, 1995 between
Montgomery Realty Corporation, Fox Realty Investors, NPI
Equity Investments II, Inc., and NPI Realty Management Corp.
(4)
99(e) Second Amended and Restated Partnership Agreement of
Montgomery Realty Company 85, made and entered into to be
effective as of November 15, 1995, by and between NPI Realty
Management Corp. and Fox Realty Investors. (4)
99(f) Third Amended and Restated General Partnership Agreement of
Montgomery Realty Company-85, effective as of February 13,
1996, by and between NPI Realty Management Corp. and Fox
Realty Investors. (4)
- ------------------------------------
(1) Incorporated by reference to the Registrant's Current Report on
Form 8-K dated August 17, 1995.
(2) Incorporated by reference to Exhibit A to the Prospectus of the
Registrant dated October 10, 1986, and thereafter supplemented,
included in the Registrant's Registration Statement on Form S-11
(Reg. No. 33-4566).
(3) Incorporated by reference to the Registrant's Current Report of Form
8-K dated April 22, 1994.
(4) Incorporated by reference to the Schedule 14D-9 of Registrant filed
with the Commission on February 29, 1996.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from Growth Hotel
Investors II and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 8,007,000 <F1>
<SECURITIES> 0
<RECEIVABLES> 1,376,000 <F2>
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 121,883,000
<DEPRECIATION> (38,136,000)
<TOTAL-ASSETS> 95,138,000
<CURRENT-LIABILITIES> 0
<BONDS> 50,139,000
<COMMON> 0
0
0
<OTHER-SE> 37,975,000
<TOTAL-LIABILITY-AND-EQUITY> 95,138,000
<SALES> 0
<TOTAL-REVENUES> 50,046,000
<CGS> 0
<TOTAL-COSTS> 36,188,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,461,000
<INCOME-PRETAX> 5,712,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 5,712,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,712,000
<EPS-PRIMARY> 94.91
<EPS-DILUTED> 94.91
<FN>
<F1> Cash includes restricted cash of $902,000.
<F2> Receivables include other assets of $630,000.
</FN>
</TABLE>
