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, 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: 33-7707
CAPITAL GROWTH MORTGAGE INVESTORS, L.P.
(Exact name of registrant as specified in its charter)
Delaware 13-3434580
(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) identification No.)
3 World Financial Center, 29th Floor,
New York, NY Andre Anderson 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
Balance Sheets
September 30, December 31,
Assets 1995 1994
Second Mortgage loan receivable, net of unamortized
discount of $5,858 in 1995 and $9,096 in 1994 $37,056,111 $34,228,767
Less-valuation allowance (37,056,111) (34,228,767)
First Mortgage loan receivable 12,527,954 11,629,648
Cash 931,878 1,018,759
Investments in U.S. Treasury securities 1,049,315 981,734
Notes receivable, net of allowance for doubtful
accounts of $2,611,952 in 1995 and 1994 - -
Deferred charges, net of accumulated
amortization of $856,768 in 1995 and
$778,879 in 1994 129,812 207,701
Total Assets $14,638,959 $13,837,842
Liabilities and Partners' Capital
Liabilities:
Accounts payable and accrued expenses $24,420 $29,633
Due to affiliates 8,850 8,182
Total Liabilities 33,270 37,815
Partners' Capital (Deficit):
General Partner (983,819) (983,819)
Limited Partners (7,047,000 units outstanding) 15,589,508 14,783,846
Total Partners' Capital 14,605,689 13,800,027
Total Liabilities and Partners' Capital $14,638,959 $13,837,842
Statement of Partners' Capital (Deficit)
For the nine months ended September 30, 1995
Limited General
Partners Partner Total
Balance at December 31, 1994 $14,783,846 $(983,819) $13,800,027
Net income 805,662 - 805,662
Balance at September 30, 1995 $15,589,508 $(983,819) $14,605,689
Statements of Operations
Three months ended Nine months ended
September 30, September 30,
Income 1995 1994 1995 1994
Interest income $1,290,366 $1,156,638 $3,836,684 $5,065,827
Less - valuation allowance (943,140) (849,782) (2,827,344) (4,166,853)
Net interest income 347,226 306,856 1,009,340 898,974
Mortgage loan recovery - - - 2,018,716
Miscellaneous income 3,330 2,778 5,795 7,353
Total Income 350,556 309,634 1,015,135 2,925,043
Expenses
Amortization of deferred charges 25,963 25,963 77,889 344,836
General and administrative 20,288 24,148 75,334 109,422
Investment management fee 18,750 18,750 56,250 56,250
Total Expenses 65,001 68,861 209,473 510,508
Net Income $285,555 $240,773 $805,662 $2,414,535
Net Income Allocated:
To the General Partner $- $- $- $-
To the Limited Partners 285,555 240,773 805,662 2,414,535
$285,555 $240,773 $805,662 $2,414,535
Per limited partnership unit
(7,047,000 outstanding) $.04 $.03 $.11 $.34
Statements of Cash Flows
For the nine months ended September 30, 1995 and 1994
Cash Flows from Operating Activities: 1995 1994
Net income $805,662 $2,414,535
Adjustments to reconcile net income to net cash
used for operating activities:
Mortgage loan recovery - (2,018,716)
Valuation allowance 2,827,344 4,166,853
Amortization of deferred charges 77,889 344,836
Amortization of discount on loans (3,238) (3,239)
Increase (decrease) in cash arising from changes
in operating assets and liabilities:
Mortgage loans receivable (3,722,412) (4,976,855)
Investment in U.S. Treasury securities (67,581) (61,827)
Accounts payable and accrued expenses (5,213) (16,870)
Due to affiliates 668 (3,632)
Net cash used for operating activities (86,881) (154,915)
Cash Flows from Investing Activities:
Proceeds from retirement of loan - 2,018,716
Net cash provided by investing activities - 2,018,716
Cash Flows from Financing Activities:
Distributions - income tax withholdings
for foreign partners - (16,068)
Cash Distribution - (1,492,182)
Net cash used for financing activities - (1,508,250)
Net increase (decrease) in cash (86,881) 355,551
Cash, beginning of period 1,018,759 632,903
Cash, end of period $931,878 $988,454
Notes to the Financial Statements
The unaudited interim financial statements should be read in conjunction with
the Partnership's annual 1994 audited 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 September 30, 1995, the results of operations for the three and
nine months ended September 30, 1995 and 1994, the statements of cash flows for
the nine months ended September 30, 1995 and 1994 and the statement of
partners' capital (deficit) for the nine months ended September 30, 1995.
Results of operations 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 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 primary assets are zero coupon mortgage loans. The
Partnership originally held two zero coupon first mortgage loans and two zero
coupon second mortgage loans. During 1993, the first mortgage loan secured by
EQK Green Acres Mall was repaid together with a prepayment premium. In early
1994, the second mortgage loan secured by 417 Fifth Avenue was retired by means
of a transaction which resulted in the receipt of proceeds upon sale of the
property. Below is a summary of the status of the Partnership's two remaining
loans secured by Laurel Centre Mall and the Grand Hyatt San Francisco.
Laurel Centre Loan - The Partnership holds a 24% interest in a zero coupon
first mortgage loan in the original amount of $5,555,431. At September 30,
1995, Laurel Centre was 86.5% occupied, compared with 90.6% occupied a year
earlier. Tenant sales at the mall (excluding anchor tenants) totaled $32.8
million in the first eight months of 1995, versus $33.9 million in the first
eight months of 1994. The decline in third quarter sales figures reflect weak
back-to-school sales as well as continued strong competition from local
discount stores.
During 1993, Kemper Investors Life Insurance Company ("Kemper") sold its 76%
participating interest in the Laurel Centre loan to a real estate mortgage
investment conduit. The most recent appraised value of the property was in
excess of the fully accreted amount of the Partnership's first mortgage loan.
However, the ability of the Partnership to collect its portion of the loan at
maturity will be contingent upon further improvements in the real estate
lending and investment markets which will affect the borrower's ability to
refinance the loan or sell the property.
Union Square Loan - The Partnership holds a zero coupon second mortgage in the
original amount of $13,325,000 funded to Union Square Hotel Partners L.P.
("Union Square," formerly Shearson Union Square Associates L.P.), which owns
the Grand Hyatt San Francisco Hotel (the "Hotel") located in San Francisco,
California. The Partnership's loan is subordinate to a first mortgage held by
the Bank of Nova Scotia (the "Bank") in the original principal amount of
$70,000,000. On June 30, 1992, Union Square consummated a restructuring of its
financing and property management arrangements with the Bank, the Partnership
and certain other creditors. A detailed description of the terms of the
restructuring is incorporated herein by reference to the Partnership's Current
Report on Form 8-K filed with the Securities and Exchange Commission on July
14, 1992.
The restructuring was designed to help the Hotel overcome difficulties in the
San Francisco market. The Hotel's operations have improved since the June 1992
restructuring of its debt due to the strengthening of the San Francisco
hospitality market. Average occupancy and room rates were 81.2% and $141.88
for the third quarter of 1995 compared to 74.7% and $138.46 for the
corresponding period in 1994. The Hotel has been able to meet its quarterly
debt service payments due through October 1995. Under the terms of the
restructuring, the interest rate on the Hotel's first mortgage loan is
scheduled to increase from 8.5% per annum to 9.69% per annum as of January 1,
1996. While it is anticipated that the Hotel will be able to meet its January
1996 payment, there can be no assurance the Hotel will be able to meet future
debt service payments. In April 1993, an affiliate of the Union Square general
partner elected not to renew its guarantee of the minimum debt service payment
under the r estructured first mortgage. The affiliate of the Union Square
general partner indicated that it would evaluate the future need for additional
funding support on a quarterly basis. If required, the Union Square general
partner is prepared to request an additional loan to supplement cash flow from
the Hotel, however, there is no assurance that such loan will be provided.
It is the General Partner's belief that the value of the Partnership's loan has
been impaired and the ultimate collectibility of the loan remains uncertain.
The Partnership's investment in zero coupon Treasury securities and cash
comprise the Partnership's working capital reserve. At September 30, 1995, the
Partnership had $1,049,315 invested in zero coupon U.S. Treasury securities and
cash of $931,878 compared to $981,734 and $1,018,759, respectively, at December
31, 1994. The increase in U.S. Treasury securities represents interest accrued
on the securities for the first nine months of 1995. The decrease in the cash
balance is due to the Partnership meeting its normal operating expenses.
Results of Operations
For the three and nine months ended September 30,1995, net income totalled
$285,555 and $805,662, respectively, compared with net income of $240,773 and
$2,414,535, respectively, for the corresponding periods in 1994. The increase
in net income for the three-month period is primarily attributable to higher
interest income. Net income for the nine-month period in 1994 largely
consisted of mortgage loan recovery proceeds resulting from the retirement of
the 417 Fifth Avenue Loan.
Total income for the three and nine months ended September 30, 1995 was
$350,556 and $1,015,135, respectively, compared with $309,634 and $2,925,043,
respectively, for the corresponding periods in 1994. The decrease in total
income for the nine-month period is primarily attributable to proceeds
received upon the retirement of the 417 Fifth Avenue Loan in 1994. Total
income for the three-month period ended September 30, 1995 increased over the
1994 level primarily due to the compounding of interest on the Laurel Centre
loan.
Total expenses for the three and nine months ended September 30, 1995, were
$65,001 and $209,473, respectively, compared with $68,861 and $510,508,
respectively, for the corresponding periods in 1994. The decrease in the
nine-month period is primarily attributable to the decrease in amortization of
deferred charges due to the retirement of the 417 Fifth Avenue loan in May
1994. In addition, general and administrative expenses declined largely as a
result of lower professional fees relating to the resolution of the 417 Fifth
Avenue loan.
PART II OTHER INFORMATION
Items 1-5 Not applicable
Item 6 Exhibits and reports on Form 8-K.
(a) Exhibits
(27) Financial Data Schedule
(b) Reports on Form 8-K - No reports on Form 8-K were filed during the
quarter ended September 30, 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.
CAPITAL GROWTH MORTGAGE INVESTORS, L.P.
BY: CG REALTY FUNDING INC.
General Partner
Date: November 13, 1995
BY: /s/ Kenneth L. Zakin
Name: Kenneth L. Zakin
Title: Director and President
Date: November 13, 1995
BY: /s/ Daniel M. Palmier
Name: Daniel M. Palmier
Title: Vice President and
Chief Financial Officer
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