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, 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: 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 March 31, 1995 and
December 31, 1994 3
Statement of Partners' Deficit for
the three months ended March 31, 1995 3
Statements of Operations for the three months
ended March 31, 1995 and 1994 4
Statements of Cash Flows for the three months
ended March 31, 1995 and 1994 5
Notes to the Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7
PART II OTHER INFORMATION
Items 1-6 9
Signatures 10
Balance Sheets
March 31, December 31,
Assets 1995 1994
Real estate, at cost:
Land $ 32,231,229 $ 32,231,229
Building 80,121,007 80,121,007
Furniture, fixtures and
equipment 28,850,676 28,749,108
141,202,912 141,101,344
Less-accumulated depreciation (39,500,485) (38,235,817)
101,702,427 102,865,527
Cash 2,791,216 2,668,685
Replacement reserve receivable 279,557 89,506
Rent receivable 559,173 194,244
Deferred charges, net of accumulated
amortization of $3,503,322 in
1995 and $3,388,028 in 1994 841,463 956,757
Total Assets $106,173,836 $106,774,719
Liabilities and Partners' Deficit
Liabilities:
Accounts payable and
accrued expenses $ 30,875 $ 66,420
Due to affiliates 19,372 28,342
Mortgage loan payable 70,000,000 70,000,000
Accrued interest 12,319,584 11,580,105
Deferred interest 8,382,254 8,020,283
Notes and Loans - Affiliate 50,034,121 48,891,636
Loan payable-Hyatt 3,772,578 3,772,578
Total Liabilities 144,558,784 142,359,364
Partners' Deficit:
General Partner (1,067,069) (1,039,066)
Limited Partners (37,317,879) (34,545,579)
Total Partners' Deficit (38,384,948) (35,584,645)
Total Liabilities and
Partners' Deficit $106,173,836 $106,774,719
Statement of Partners' Deficit
For the three months ended March 31, 1995
Limited General
Partners Partner Total
Balance at December 31, 1994 $(34,545,579) $(1,039,066) $(35,584,645)
Net loss (2,772,300) (28,003) (2,800,303)
Balance at March 31, 1995 $(37,317,879) $(1,067,069) $(38,384,948)
Statements of Operations
For the three months ended March 31, 1995 and 1994
Income 1995 1994
Rental income:
Operating income $ 1,567,204 $ 1,003,489
Replacement reserve 291,619 267,972
Interest income 31,550 5,795
Miscellaneous income 650 760
Total Income 1,891,023 1,278,016
Expenses
Interest expense 3,275,185 3,005,385
Depreciation and amortization 1,379,962 1,358,488
General and administrative 36,179 38,948
Total Expenses 4,691,326 4,402,821
Net Loss $(2,800,303) $(3,124,805)
Net Loss Allocated:
To the General Partner $ (28,003) $ (31,248)
To the Limited Partners (2,772,300) (3,093,557)
$(2,800,303) $(3,124,805)
Per limited partnership unit
(7,174,100 outstanding): $(.39) $(.43)
Statements of Cash Flows
For the three months ended
March 31, 1995 and 1994
Cash Flows from Operating Activities: 1995 1994
Net loss $(2,800,303) $(3,124,805)
Adjustments to reconcile net loss
to net cash provided by
(used for) operating activities:
Depreciation and amortization 1,379,962 1,358,488
Rental income from replacement
reserve (291,619) (267,972)
Increase in deferred interest
on loan payable-affiliate 1,142,485 1,022,125
Increase (decrease) in cash
arising from changes in operating
assets and liabilities:
Rent receivable (364,929) (400,317)
Receivable - life safety system - 6,287
Accounts payable and
accrued expenses (35,545) 25,353
Due to affiliates (8,970) 7,983
Accrued and deferred interest 1,101,450 1,089,511
Net cash provided by (used for)
operating activities 122,531 (283,347)
Cash Flows from Investing Activities:
Proceeds from replacement
reserve receivable 101,568 141,060
Additions to real estate (101,568) (141,060)
Net cash used for investing activities - -
Net increase (decrease) in cash 122,531 (283,347)
Cash at beginning of period 2,668,685 1,488,632
Cash at end of period $ 2,791,216 $ 1,205,285
Supplemental Disclosure of Cash Flow Information:
Cash paid during the
period for interest $ 1,031,250 $ 893,749
Notes to the Financial Statements
The unaudited interim financial statements should be read in conjunction with
the Partnership's annual 1994 financial statements within Form 10-K.
The unaudited financial statements include all adjustments which are, in the
opinion of management, necessary to present a fair statement of financial
position as of March 31, 1995 and the results of operations and cash flows for
the three months ended March 31, 1995 and 1994 and the statement of changes in
partners' capital (deficit) for the three months ended March 31, 1995. Results
of operations for the periods are not necessarily indicative of the results to
be expected for the full year.
No significant events have occurred subsequent to fiscal year 1994, 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 payments, due on January 2, 1995 and April 3, 1995 to the Bank of Nova
Scotia ("BNS"), with cash flow from operations. While the General Partner
currently expects that the Partnership's cash flow will be sufficient to meet
the minimum payment due on July 2, 1995 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 Brothers Holdings"), to supplement cash flow from the Hotel should the
need arise. Lehman Brothers Holdings has indicated that it would evaluate the
need for additional funding on a quarterly basis.
On April 27, 1993, Lehman Brothers Inc. elected not to renew the Guaranty of
the minimum pay rate under the restructured Mortgage Loan for the year
commencing July 4, 1993. The General Partner believes that this decision does
not reflect a change of position by Lehman Brothers Inc., and that they will
evaluate the future need for additional funding on a quarterly basis. The
General Partner anticipates the need for continued interest accruals and
deferrals pursuant to the Restructuring, for the foreseeable future. However,
if the Partnership continues to remit only the minimum debt service payments,
interest will continue to accrue. This accrual of interest may affect the
Partnership's ability to refinance and/or sell the hotel property at a price
which enables the repayment of the Partnership's restructured debt, including
the accrued and deferred interest.
At March 31, 1995, the Partnership had cash, which is held in an interest
bearing account, of $2,791,216 compared to $2,668,685 at December 31, 1994.
The increase primarily is due to the increase in cash provided by operating
activities.
Replacement reserve receivable increased from $89,506 at December 31, 1994 to
$279,557 at March 31, 1995, largely due to additions to the reserve exceeding
expenditures for furniture, fixtures and equipment ("FF&E"). Rent receivable
increased by $364,929 from December 31, 1994 to $559,173 at March 31, 1995, due
to the increase in rent from operations and the timing of payments.
Accounts payable and accrued expenses decreased to $30,875 at March 31, 1995
compared with $66,420 at December 31, 1994, primarily due to the payment of
taxes due to the City of San Francisco and the payment of audit fees accrued as
of year-end 1994. Accrued interest increased to $12,319,584 at March 31, 1995
compared with $11,580,105 at December 31, 1994, which is the net of accrued
interest expense for the period less the minimum interest payment made on
January 3, 1995. Deferred interest increased from $8,020,283 at December 31,
1994 to $8,382,254 at March 31, 1995 and Notes and Loans - Affiliate increased
from $48,891,636 at December 31, 1994 to $50,034,121 at March 31, 1995. These
accounts have increased due to compounding of interest on the principal
balances.
Due to the earlier downturn in operating results of the Hotel, the General
Partner suspended payment of cash distributions starting 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
While the Hotel's operations have improved, it still operates in a highly
competitive environment which continues to keep hotel profits and Partnership
rental income reduced from pre-1988 levels. Operations during the quarter
ended March 31, 1995, while improved over results for the corresponding period
in 1994, continued to be affected by the strong competition in the San
Francisco hotel market.
The average occupancy rate and average room rate for the three months ended
March 31, 1995 were 78.6% and $136.97, respectively, compared to 71.7% and
$137.30, respectively, for the corresponding period in 1994.
For the three months ended March 31, 1995, the Partnership incurred a net loss
of $2,800,303 compared to a net loss of $3,124,805 for the corresponding period
in 1994. The decrease in the Partnership's net loss is primarily attributable
to an increase in income from operations and interest income, which was
partially offset by an increase in interest expense and depreciation and
amortization.
For the three months ended March 31, 1995, rental income included operating
income of $1,567,204, compared to $1,003,489 for the same period in 1994. The
improvement for the three months ended March 31, 1995 is largely due to
improved Hotel operating results. Operating results were positively impacted
by increases in room sales, food and beverage sales, telecommunication sales
and other rental income, resulting from higher average occupancy at the Hotel
during 1995 compared to 1994. Also contributing is the reduction of general
operating and administrative expenses at the Hotel for the 1995 period.
Total expenses were $4,691,326 for the three months ended March 31, 1995,
compared to $4,402,821 for the three months ended March 31, 1994. The increase
primarily is due to higher interest expense resulting from the compounding of
interest on the principal debt balance and an increase in the prime rate during
1994 and 1995.
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, 1995.
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: May 12, 1995
BY: /s/Jeffrey C. Carter
Name: Jeffrey C. Carter
Title: President, Director and
Chief Financial Officer
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