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 March 31, 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, 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 March 31, 1994 and
December 31, 1993 3
Statements of Operations for the three months
ended March 31, 1994 and 1993 4
Statement of Partners' Deficit for the three months
ended March 31, 1994 5
Statements of Cash Flows for the three months ended
March 31, 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
<TABLE>
<CAPTION>
Balance Sheets
March 31, December 31,
Assets 1994 1993
<S> <C> <C>
Real estate, at cost:
Land $ 32,231,229 $ 32,231,229
Building 80,060,478 80,060,478
Furniture, fixtures and equipment 27,564,701 27,423,641
139,856,408 139,715,348
Less-accumulated depreciation (34,465,994) (33,222,871)
105,390,414 106,492,477
Cash 1,205,285 1,488,632
Replacement reserve receivable 454,841 327,929
Rent receivable 553,858 153,541
Receivable-life safety system 6,287
Deferred charges, net of accumulated
amortization of $3,041,933 in 1994
and $2,926,568 in 1993 1,302,852 1,418,217
Total Assets $108,907,250 $109,887,083
Liabilities and Partners' Deficit
Liabilities:
Accounts payable and accrued expenses $ 70,071 $ 44,718
Due to affiliates 25,355 17,372
Mortgage loan payable 70,000,000 70,000,000
Accrued interest 8,712,007 7,885,464
Deferred interest 7,715,103 7,452,135
Notes and Loans - Affiliate 46,231,359 45,209,234
Loan payable-Hyatt 3,847,578 3,847,578
Total Liabilities 136,601,473 134,456,501
Partners' Deficit:
General Partner (960,162) (928,914)
Limited Partners (26,734,061) (23,640,504)
Total Partners' Deficit (27,694,223) (24,569,418)
Total Liabilities and Partners' Deficit $108,907,250 $109,887,083
</TABLE>
<TABLE>
<CAPTION>
Statements of Operations
For the three months ended March 31, 1994 and 1993
Income 1994 1993
<S> <C> <C>
Rental income:
Operating income $ 1,003,489 $ 512,514
Replacement escrow 267,972 245,377
Interest income 5,795 8,323
Miscellaneous income 760 246,767
Total Income 1,278,016 1,012,981
Expenses
Interest expense 3,005,385 2,829,819
Depreciation and amortization 1,358,488 1,638,187
General and administrative 38,948 86,054
Total Expenses 4,402,821 4,554,060
Net Loss $ (3,124,805) $ (3,541,079)
Net Loss Allocated:
To the General Partner $ (31,248) $ (35,410)
To the Limited Partners (3,093,557) (3,505,669)
$ (3,124,805) $ (3,541,079)
Per limited partnership unit
(7,174,100 outstanding): $ (.43) $ (.49)
</TABLE>
<TABLE>
<CAPTION>
Statement of Partners' Deficit
For the three months ended March 31, 1994
Limited General Total
Partners' Partner's Partners'
Deficit Deficit Deficit
<S> <C> <C> <C>
Balance at December 31, 1993 $(23,640,504) $(928,914) $(24,569,418)
Net loss (3,093,557) (31,248) (3,124,805)
Balance at March 31, 1994 $(26,734,061) $(960,162) $(27,694,223)
</TABLE>
<TABLE>
<CAPTION>
Statements of Cash Flows
For the three months ended March 31, 1994 and 1993
Cash Flows from Operating Activities: 1994 1993
<S> <C> <C>
Net loss $ (3,124,805) $ (3,541,079)
Adjustments to reconcile net loss to net cash
used for operating activities:
Depreciation and amortization 1,358,488 1,638,187
Increase in deferred interest on
loan payable-affiliate 1,022,125 762,913
Increase (decrease) in cash arising from changes
in operating assets and liabilities:
Replacement reserve receivable (126,912) (189,854)
Rent receivable (400,317) (70,843)
Due from Hyatt 30,355
Receivable - life safety system 6,287 18,750
Accounts payable and accrued expenses 25,353 (205,835)
Due to affiliates 7,983 1,066
Accrued and deferred interest 1,089,511 279,406
Net cash used for operating activities (142,287) (1,276,934)
Cash Flows from Investing Activities:
Purchase of real estate (141,060) (55,523)
Net cash used for investing activities (141,060) (55,523)
Net decrease in cash (283,347) (1,332,457)
Cash at beginning of period 1,488,632 1,933,721
Cash at end of period $ 1,205,285 $ 601,264
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for interest $ 893,749 $ 1,787,500
</TABLE>
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 March 31, 1994 and the
results of operation, changes in partners' deficit, and cash flows for the
three months then ended. Results of operation for the period are not
necessarily indicative of the results to be expected for the full year.
No significant events have occurred subsequent to fiscal year 1993, which
require disclosure in this interim report per Regulation S-X, Rule 10-01,
Paragraph (a)(5).
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 payment, due on January 2, 1994 to Bank of Nova Scotia with cash flow
from operations. Additionally, cash flow was sufficient to satisfy the
quarterly debt service payment due April 2, 1994. The General Partner
currently expects that the Partnership's cash flow may be sufficient to meet
the minimum payments in July 1994 due under the restructured terms of the
Mortgage Loan.
On April 27, 1993, Lehman Brothers Holdings Inc. ("Lehman"), an affiliate of
the General Partner, elected not to renew the Guaranty of the minimum pay rate
under the restructured Mortgage Loan for the year commencing July 4, 1993.
However, Lehman indicated that it would evaluate the future need for additional
funding support on a quarterly basis. The General Partner is prepared to
request financial support from Lehman to supplement cash flow from the Hotel
should the need arise.
At March 31, 1994, the Partnership had cash, which is held in an interest
bearing account, of $1,205,285 compared with $1,488,632 at December 31, 1993.
The decrease is due largely to the minimum interest payment related to the
Mortgage Loan made on January 2, 1994.
Replacement reserve receivable increased from $327,929 at December 31, 1993 to
$454,841 at March 31, 1994 primarily due to additions to the reserve exceeding
expenditures for furniture, fixtures and equipment ("FF&E"). Rent receivable
increased by $400,317 from December 31, 1993 to $553,858 at March 31, 1994
largely due to the increase in rent from operations and the timing of payments.
California Hyatt is required to reimburse the Partnership $3,000,000 with
respect to the installation of life safety systems at the Hotel (including
sprinklers) and the abatement and/or removal of asbestos where necessary. The
terms of this agreement require California Hyatt to make 36 monthly payments of
principal plus interest beginning in January 1991, as a deduction from the
Hotel's operating profit. The Partnership reduced building costs and
established a receivable from California Hyatt in the amount of $600,000 at
December 31, 1990, which represented management's estimate of the portion of
such reimbursements in excess of normal lease payments otherwise anticipated to
be received. As a result of the amendment to the Hotel lease, completed as
part of the Restructuring, California Hyatt's effective commitment to reimburse
the Partnership for the life safety system was reduced in 1992 by $187,500.
Accordingly, this amount was added to the Partnership's cost of the life safety
system. As a result of payments made, the Receivable - life safety system has
been paid in full as of March 31, 1994.
Accrued interest increased from $7,885,464 at December 31, 1993 to $8,712,007
at March 31, 1994, which represents the net of accrued interest expense for the
period less the minimum interest payment made on the Mortgage Loan. Deferred
interest increased from $7,452,135 at December 31, 1993 to $7,715,103 at March
31, 1994 and Notes and Loans - Affiliate increased from $45,209,234 at December
31, 1993 to $46,231,359 at March 31, 1994. These accounts increased primarily
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 three months ended March 31, 1994, while improved considerably over
1993 first quarter results, have continued to be affected by the competitive
hotel market conditions in San Francisco.
The average occupancy rate and average room rate for the three months ended
March 31, 1994 were 71.7% and $137.30, respectively, compared with 65.6% and
$137.16, respectively, for the corresponding period in 1993.
For the three months ended March 31, 1994, the Partnership incurred a net loss
of $3,124,805 compared with a net loss of $3,541,079 for the three months ended
March 31, 1993. The decrease in the Partnership's net loss is largely
attributable to an increase in rent from operations and a decrease in general
and administrative expenses and a decrease in depreciation and amortization due
to a portion of personal property becoming fully depreciated.
For the three months ended March 31, 1994, rental income included operating
income of $1,003,489 compared with $512,514 for the corresponding period in
1993. Contributing to the improvement are increases in both room sales and
food and beverage sales, which are largely the result of higher occupancies at
the Hotel during the first quarter of 1994 relative to the same period in 1993.
Miscellaneous income decreased to $760 for the three months ended March 31,
1994 from $246,767 for the corresponding period in 1993. The miscellaneous
income of $246,767 for the three months ended March 31, 1993 related to the
one-time receipt of real estate tax abatements.
Total expenses were $4,402,821 for the three months ended March 31, 1994,
compared with $4,554,060 for the three months ended March 31, 1993. The
decline is primarily due to a decrease in depreciation and amortization of
$279,699 for the comparative periods, and a decrease in general and
administrative expenses of $47,106 from the three months ended March 31, 1993
to $38,948 for the three months ended March 31, 1994, which were partially
offset by an increase in interest expense.
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 March 31, 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: March 13, 1994
BY: s/Jeffrey Carter/
Name: Jeffrey C. Carter
Title: President and Director
Date: March 13, 1994
BY: s/Joseph Flannery/
Name: Joseph J. Flannery
Title: Vice President and
Chief Financial Officer
