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 June 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 June 30, 1994 and
December 31, 1993 3
Statements of Operations for the three and
six months ended June 30, 1994 and 1993 4
Statement of Partners' Deficit for the six months
ended June 30, 1994 5
Statements of Cash Flows for the six months ended
June 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
<TABLE>
<CAPTION>
Balance Sheets
June 30, 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 27,911,530 27,423,641
140,203,237 139,715,348
Less-accumulated depreciation (35,711,427) (33,222,871)
104,491,810 106,492,477
Cash 1,683,201 1,488,632
Replacement reserve receivable 391,889 327,929
Rent receivable 411,249 153,541
Receivable-life safety system -- 6,287
Deferred charges, net of accumulated
amortization of $3,157,298 in 1994
and $2,926,568 in 1993 1,187,487 1,418,217
Total Assets $ 108,165,636 $ 109,887,083
Liabilities and Partners' Deficit
Liabilities:
Accounts payable and accrued expenses $ 36,028 $ 44,718
Due to affiliates 25,249 17,372
Mortgage loan payable 70,000,000 70,000,000
Accrued interest 9,853,749 7,885,464
Deferred interest 7,715,103 7,452,135
Notes and Loans - Affiliate 47,113,243 45,209,234
Loan Payable - Hyatt 3,847,578 3,847,578
Total Liabilities 138,590,950 134,456,501
Partners' Deficit:
General Partner (987,473) (928,914)
Limited Partners (29,437,841) (23,640,504)
Total Partners' Deficit (30,425,314) (24,569,418)
Total Liabilities and Partners' Deficit $ 108,165,636 $ 109,887,083
</TABLE>
<TABLE>
<CAPTION>
Statements of Operations
Three months ended Six months ended
June 30, June 30,
Income 1994 1993 1994 1993
<S> <C> <C> <C> <C>
Rental income:
Operating income $ 1,454,710 $ 1,389,895 $ 2,458,199 $ 1,902,409
Replacement escrow 283,877 288,393 551,849 533,770
Interest income 6,837 8,339 12,632 16,662
Miscellaneous income 690 48,650 1,450 295,417
Total Income 1,746,114 1,735,277 3,024,130 2,748,258
Expenses
Interest expense 3,054,877 2,835,384 6,060,262 5,665,203
Depreciation and
amortization 1,360,798 1,650,095 2,719,286 3,288,282
General and administrative 61,530 56,869 100,478 142,923
Total Expenses 4,477,205 4,542,348 8,880,026 9,096,408
Net Loss $(2,731,091) $(2,807,071) $(5,855,896) $(6,348,150)
Net Loss Allocated:
To the General Partner $ (27,311) $ (28,071) $ (58,559) $ (63,481)
To the Limited Partners (2,703,780) (2,779,000) (5,797,337) (6,284,669)
$(2,731,091) $(2,807,071) $(5,855,896) $(6,348,150)
Per limited partnership unit
(7,174,100 outstanding): $(.38) $(.39) $(.81) $(.88)
</TABLE>
<TABLE>
<CAPTION>
Statement of Partners' Deficit
For the six months ended June 30, 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 (5,797,337) (58,559) (5,855,896)
Balance at June 30, 1994 $(29,437,841) $(987,473) $(30,425,314)
</TABLE>
<TABLE>
<CAPTION>
Statements of Cash Flows
For the six months ended June 30, 1994 and 1993
Cash Flows from Operating Activities: 1994 1993
<S> <C> <C>
Net loss $ (5,855,896) $ (6,348,150)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation and amortization 2,719,286 3,288,282
Rental Income from replacement escrow (551,849) (533,770)
Increase in deferred interest on
loan payable-affiliate 1,904,009 1,712,474
Increase (decrease) in cash arising from
changes in operating assets and liabilities:
Rent receivable (257,708) (66,962)
Due from Hyatt -- 30,355
Receivable - life safety system 6,287 30,998
Accounts payable and accrued expenses (8,690) (224,571)
Due to affiliates 7,877 (29,563)
Accrued and deferred interest 2,231,253 2,165,229
Net cash provided by operating activities 194,569 24,322
Cash Flows from Investing Activities:
Proceeds from replacement reserve receivable 487,889 666,760
Purchase of real estate (487,889) (666,760)
Net cash used for investing activities -- --
Net increase in cash 194,569 24,322
Cash at beginning of period 1,488,632 1,933,721
Cash at end of period $ 1,683,201 $ 1,958,043
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for interest $ 1,925,000 $ 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 June 30, 1994 and the
results of operations, changes in partners' deficit, and cash flows for the six
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 and April 2, 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 due July 5, 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 will be applied toward reducing BNS's portion of the accrued
interest on the Partnership's first mortgage. The General Partner currently
expects that the Partnership's cash flow may be sufficient to meet the minimum
payments in Oc tober 1994 due under the restructured terms of the Mortgage
Loan. However, 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 June 30, 1994, the Partnership had cash, which is held in an interest
bearing account, of $1,683,201 compared to $1,488,632 at December 31, 1993.
The increase is due largely to an increase in rents from operating income
received.
Replacement reserve receivable increased from $327,929 at December 31, 1993 to
$391,889 at June 30, 1994 due to additions to the reserve exceeding
expenditures for furniture, fixtures and equipment ("FF&E"). Rent receivable
increased by $257,708 from December 31, 1993 to $411,249 at June 30, 1994 due
to the increase in rent from operations and the timing of payments.
Accrued interest increased from $7,885,464 from December 31, 1993 to $9,853,749
at June 30, 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
June 30, 1994 and Notes and Loans - Affiliate increased from $45,209,234 at
December 31, 1993 to $47,113,243 at June 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 six months ended June 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 six months ended
June 30, 1994 were 72.96% and $138.55, respectively, compared to 71.28% and
$138.12, respectively, for the corresponding period in 1993.
For the three and six months ended June 30, 1994, the Partnership incurred a
net loss of $2,731,091 and $5,855,896, respectively, compared to a net loss of
$2,807,071 and $6,348,150, respectively, for the three and six months ended
June 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 six months ended June 30, 1994, rental income included
operating income of $1,454,710 and $2,458,199, respectively, compared to
$1,389,895 and $1,902,409, respectively, for same period in 1993. Contributing
to the improvement are the increases in both room and food and beverage sales,
which are largely the result of higher occupancies at the Hotel during the
first and second quarters of 1994 relative to the same periods in 1993.
Miscellaneous income of $295,417 for the six months ended June 30, 1993 related
to the one-time receipt of real estate tax abatements.
Total expenses were $4,477,205 and $8,880,026, respectively, for the three and
six months ended June 30, 1994, compared to $4,542,348 and $9,096,408,
respectively, for the three and six months ended June 30, 1993. The decline
for the six month period is primarily due to the decrease in depreciation and
amortization of approximately $570,000 for the comparative periods, and a
decrease in general and administrative expenses of $42,445 from the six months
ended June 30, 1993 to $100,478 for the six months ended June 30, 1994, which
were partially offset by an increase in interest expense.
PART II OTHER INFORMATION
Items 1-4 Not applicable
Item 5 Other information
Effective May 20, 1994, American Express Company ("American Express")
distributed to holders of record of American Express, shares of
Lehman Brothers Holdings Inc. ("Lehman Brothers") common stock. As
a result of this transaction, the Partnership's General Partner is
no longer an affiliate of American Express. This change is not
expected to have any impact on the Partnership.
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 June 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: August 12, 1994 BY: s/Jeffrey C. Carter/
Name: Jeffrey C. Carter
Title: President and Director
Date: August 12, 1994 BY: s/Joseph J. Flannery/
Name: Joseph J. Flannery
Title: Vice President and
Chief Financial Officer