UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 1994
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: 33-6678
UNION SQUARE HOTEL PARTNERS, L.P.
(Exact name of registrant as specified in its charter)
Delaware 13-3389008
(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) identification No.)
3 World Financial Center, 29th Floor, NY, NY 10285
(Address of principal executive offices) (Zip code)
(212) 526-3237
(Registrant's telephone number, including area code)
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
INDEX
Page No.
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets at September 30, 1994 and
December 31, 1993 3
Statements of Operations for the three and
nine months ended September 30, 1994 and 1993 4
Statement of Partners' Deficit for the nine months
ended September 30, 1994 5
Statements of Cash Flows for the nine months
ended September 30, 1994 and 1993 6
Notes to the Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
PART II OTHER INFORMATION
Items 1-6 10
Signatures 11
Balance Sheets
September 30, December 31,
Assets 1994 1993
Real estate, at cost:
Land $ 32,231,229 $ 32,231,229
Building 80,060,478 80,060,478
Furniture, fixtures and equipment 28,434,294 27,423,641
140,726,001 139,715,348
Less-accumulated depreciation (36,980,569) (33,222,871)
103,745,432 106,492,477
Cash 1,339,581 1,488,632
Replacement reserve receivable 149,124 327,929
Rent receivable 742,720 153,541
Receivable-life safety system 0 6,287
Deferred charges, net of accumulated
amortization of $3,272,663 in 1994
and $2,926,568 in 1993 1,072,122 1,418,217
Total Assets $107,048,979 $109,887,083
Liabilities and Partners' Deficit
Liabilities:
Accounts payable and accrued expenses $ 32,216 $ 44,718
Due to affiliates 17,372 17,372
Mortgage loan payable 70,000,000 70,000,000
Accrued interest 10,325,457 7,885,464
Deferred interest 8,002,919 7,452,135
Notes and Loans - Affiliate 48,000,379 45,209,234
Loan Payable - Hyatt 3,847,578 3,847,578
Total Liabilities 140,225,921 134,456,501
Partners' Deficit:
General Partner (1,014,989) (928,914)
Limited Partners (32,161,953) (23,640,504)
Total Partners' Deficit (33,176,942) (24,569,418)
Total Liabilities and Partners' Deficit $107,048,979 $109,887,083
Statements of Operations
Three months ended Nine months ended
September 30, September 30,
Income 1994 1993 1994 1993
Rental income:
Operating income $ 1,476,502 $ 1,176,384 $ 3,934,701 $ 3,078,793
Replacement escrow 279,999 278,576 831,848 812,346
Interest income 6,548 5,460 19,180 22,122
Miscellaneous income 805 579 2,255 295,996
Total Income 1,763,854 1,460,999 4,787,984 4,209,257
Expenses
Interest expense 3,082,993 2,884,129 9,143,255 8,549,332
Depreciation and amortization 1,384,507 1,535,952 4,103,793 4,824,234
General and administrative 47,982 63,818 148,460 206,741
Total Expenses 4,515,482 4,483,899 13,395,508 13,580,307
Net Loss $(2,751,628) $(3,022,900) $(8,607,524) $(9,371,050)
Net Loss Allocated:
To the General Partner $ (27,516) $ (30,230) $ (86,075) $ (93,711)
To the Limited Partners (2,724,112) (2,992,670) (8,521,449) (9,277,339)
$(2,751,628) $(3,022,900) $(8,607,524) $(9,371,050)
Per limited partnership unit
(7,174,100 outstanding): $(.38) $(.42) $(1.19) $(1.29)
Statement of Partners' Deficit
For the nine months ended September 30, 1994
Limited General Total
Partners' Partner's Partners'
Deficit Deficit Deficit
Balance at December 31, 1993 $(23,640,504) $ (928,914) $(24,569,418)
Net loss (8,521,449) (86,075) (8,607,524)
Balance at September 30, 1994 $(32,161,953) $(1,014,989) $(33,176,942)
Statements of Cash Flows
For the nine months ended September 30, 1994 and 1993
Cash Flows from Operating Activities: 1994 1993
Net loss $(8,607,524) $(9,371,050)
Adjustments to reconcile net loss
to net cash used for operating activities:
Depreciation and amortization 4,103,793 4,824,234
Rental income from replacement escrow (831,848) (812,346)
Increase in deferred interest on
loan payable-affiliate 2,791,145 2,508,833
Increase (decrease) in cash arising from changes
in operating assets and liabilities:
Rent receivable (589,179) (92,279)
Due from Hyatt 0 30,355
Receivable - life safety system 6,287 49,856
Accounts payable and accrued expenses (12,502) (218,397)
Due to affiliates 0 (48,015)
Accrued and deferred interest 2,990,777 2,465,499
Net cash used for operating activities (149,051) (663,310)
Cash Flows from Investing Activities:
Proceeds from replacement reserve receivable 1,010,653 1,251,479
Additions to real estate (1,010,653) (1,251,479)
Net cash used for investing activities 0 0
Net decrease in cash (149,051) (663,310)
Cash at beginning of period 1,488,632 1,933,721
Cash at end of period $ 1,339,581 $ 1,270,411
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for interest $ 3,361,333 $ 3,575,000
Notes to the Financial Statements
The unaudited interim financial statements should be read in conjunction with
the Partnership's annual 1993 audited financial statements within Form 10-K.
The unaudited financial statements include all adjustments consisting of only
normal recurring accruals which are, in the opinion of management, necessary to
present a fair statement of financial position as of September 30, 1994 and the
results of operations, changes in partners' deficit, and cash flows for the
nine months then ended. Results of operations for the period are not
necessarily indicative of the results to be expected for the full year.
The following significant event has occurred subsequent to fiscal year 1993,
which requires disclosure in this interim report per Regulation S-X, Rule
10-01, Paragraph (a)(5).
Note 1:
On July 5, 1994 a payment of $405,083 was made to the Bank of Nova Scotia
("BNS") representing the excess of rents received by the Partnership less
disbursements for the period from July 1, 1993 through June 30, 1994, as
defined in the Amended and Restated Promissory Note Secured by the Deed of
Trust dated June 30, 1992. This payment will be applied toward reducing BNS's
portion of the accrued interest on the Partnership's first mortgage.
Part I, Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Liquidity and Capital Resources
The Partnership's liquidity and capital resources have been substantially
impacted by the funding of the renovation plan which was completed in January
1990 (the "Renovation Plan") and extensive borrowing subsequent to the initial
offering. Combined with weak results from operations since 1989, these factors
led to a default by the Partnership on its January 2, 1992 debt-service payment
with respect to its $70 million first mortgage loan (the "Mortgage Loan").
This default created other defaults under the Partnership's subordinate
financings. Effective June 30, 1992, a restructuring of the Partnership's
indebtedness and property leasing arrangements (the "Restructuring") was
successfully executed resulting in the waiver or cure of each of the
Partnership's defaults.
There can be no assurance that the Partnership's hotel (the "Hotel" or
"Property") will generate sufficient cash flow to enable the Partnership to
satisfy its debt service obligations. The Partnership made its quarterly debt
service payments, due on January 2, 1994, April 2, 1994 and July 5, 1994 to
Bank of Nova Scotia ("BNS") with cash flow from operations, and cash flow was
also sufficient to satisfy the quarterly debt service payment made on
October 3, 1994. In addition, on July 5, 1994 a payment of $405,083 was made
to BNS representing the excess of rents received by the Partnership less
disbursements for the period from July 1, 1993 through June 30, 1994, as
defined in the Amended and Restated Promissory Note Secured by the Deed of
Trust dated June 30, 1992. This payment was applied toward reducing BNS's
portion of the accrued interest on the Partnership's first mortgage. While
the General Partner currently expects that the Partnership's cash flow may be
sufficient to meet the minimum payments in January 1995 due under the
restructured terms of the Mortgage Loan, there can be no assurance that cash
flow will continue to be sufficient to satisfy future payments. The General
Partner is prepared to request financial support from an affiliate, Lehman
Brothers Holdings Inc. ("Lehman"), to supplement cash flow from the Hotel
should the need arise. Lehman indicated that it would evaluate the need for
additional funding on a quarterly basis.
At September 30, 1994, the Partnership had cash, which is held in an interest
bearing account, of $1,339,581 compared to $1,488,632 at December 31, 1993.
The decline is due largely to an increase in cash used for operating
activities.
Replacement reserve receivable decreased from $327,929 at December 31, 1993 to
$149,124 at September 30, 1994 due to expenditures for furniture, fixtures and
equipment ("FF&E") exceeding additions to the reserve. Rent receivable
increased by $589,179 from December 31, 1993 to $742,720 at September 30, 1994
due to the increase in rent from operations and the timing of payments.
Accrued interest increased from $7,885,464 at December 31, 1993 to $10,325,457
at September 30, 1994, which represents the net of accrued interest expense for
the period less the minimum interest payment and the payment from excess cash
flow made on the Mortgage Loan. Deferred interest increased from $7,452,135 at
December 31, 1993 to $8,002,919 at September 30, 1994 and Notes and Loans -
Affiliate increased from $45,209,234 at December 31, 1993 to $48,000,379 at
September 30, 1994. These accounts increased due to the compounding of
interest on the principal balances.
Due to the downturn in operating results of the Hotel, the General Partner
suspended payment of cash distributions beginning with the second quarter of
1988. Future distributions will be dependent on the Partnership's cash flow
from operations and will be restricted until such time as the Hotel's cash flow
reaches a sufficient level in excess of its debt service as required under the
terms of the restructured Mortgage Loan.
Results of Operations
The Partnership's Hotel operates in an intensely competitive environment which
has had an adverse affect on the Partnership's rental income. Operations
during the nine months ended September 30, 1994, while improved over results
for the corresponding period in 1993, have continued to be affected by the
sluggish national economy, and strong competition in the San Francisco hotel
market.
The average occupancy rate and average room rate for the nine months ended
September 30, 1994 were 74.7% and $138.46, respectively, compared to 73.1% and
$137.32, respectively, for the corresponding period in 1993.
For the three and nine months ended September 30, 1994, the Partnership
incurred a net loss of $2,751,628 and $8,607,524, respectively, compared to a
net loss of $3,022,900 and $9,371,050, respectively, for the three and nine
months ended September 30, 1993. The decrease in the Partnership's net loss is
primarily attributable to an increase in rent from operations and a decrease in
depreciation and amortization due to a portion of personal property becoming
fully depreciated, which was partially offset by an increase in interest
expense.
For the three and nine months ended September 30, 1994, rental income included
operating income of $1,476,502 and $3,934,701, respectively, compared to
$1,176,384 and $3,078,793, respectively, for the same period in 1993.
Contributing to the improvement are the increases in both room and
telecommunications sales, which are largely the result of higher occupancies at
the Hotel during the nine month period in 1994 relative to the corresponding
period in 1993. Also contributing is the reduction of room, food and beverage,
and telecommunications expenses. Miscellaneous income of $295,996 for the nine
months ended September 30, 1993 related to the one-time receipt of real estate
tax abatements.
Total expenses were $4,515,482 and $13,395,508, respectively, for the three and
nine months ended September 30, 1994, compared to $4,483,899 and $13,580,307,
respectively, for the three and nine months ended September 30, 1993. The
decline for the nine month period is primarily due to the decrease in
depreciation and amortization of $720,441 for the comparative periods, and a
decrease in general and administrative expenses of $58,281 from the nine months
ended September 30, 1993 to $148,460 for the nine months ended
September 30, 1994, which were partially offset by an increase in interest
expense. The increase for the three month period is primarily due to an
increase in interest expense, which was partially offset by a decrease in
depreciation and amortization of $151,445 and a decrease in general and
administrative expenses of $15,836.
PART II OTHER INFORMATION
Items 1-5 Not applicable
Item 6 Exhibits and reports on Form 8-K.
(a) Exhibits - None
(b) Reports on Form 8-K - No reports on Form 8-K were filed
during the quarter ended September 30, 1994.
SIGNATURES
Pursuant to the requirements 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.
UNION SQUARE HOTEL PARTNERS, L.P.
BY: UNION SQUARE/GP CORP.
General Partner
Date: November 11, 1994 BY: s/Jeffrey C. Carter/
Name: Jeffrey C. Carter
Title: President, Director and
Chief Financial Officer
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