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: 33-7707
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 identification No.)
Incorporation or organization)
3 World Financial Center, 29th Floor, New York, 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
Balance Sheets
March 31, December 31,
Assets 1995 1994
Second Mortgage loan receivable,
net of unamortized discount of $8,016
in 1995 and $9,096 in 1994 $ 35,169,832 $ 34,228,767
Less-valuation allowance (35,169,832) (34,228,767)
0 0
First Mortgage loan receivable 11,920,033 11,629,648
Cash 982,053 1,018,759
Investments in U.S. Treasury securities 1,003,514 981,734
Notes receivable, net of allowance for doubtful
accounts of $2,611,952 in 1995 and 1994 0 0
Deferred charges, net of accumulated
amortization of $804,842 in 1995 and
$778,879 in 1994 181,738 207,701
Total Assets $ 14,087,338 $ 13,837,842
Liabilities and Partners' Capital
Liabilities:
Accounts payable and accrued expenses $ 27,890 $ 29,633
Due to affiliates 7,350 8,182
Total Liabilities 35,240 37,815
Partners' Capital (Deficit):
General Partner (983,819) (983,819)
Limited Partners
(7,047,000 units outstanding) 15,035,917 14,783,846
Total Partners' Capital 14,052,098 13,800,027
Total Liabilities and Partners' Capital $ 14,087,338 $ 13,837,842
Statement of Partners' Capital (Deficit)
For the three months ended March 31, 1995
Limited General Total
Partners Partner Partners
Balance at December 31, 1994 $ 14,783,846 $ (983,819) $ 13,800,027
Net income 252,071 0 252,071
Balance at March 31, 1995 $ 15,035,917 $ (983,819) $ 14,052,098
Statements of Operations
For the three months ended March 31, 1995 and 1994
Income 1995 1994
Interest income $ 1,267,989 $ 2,249,154
Less - valuation allowance (941,065) (1,962,373)
Net interest income 326,924 286,781
Miscellaneous income 1,035 2,285
Total Income 327,959 289,066
Expenses
Amortization of deferred charges 25,963 48,121
General and administrative 31,175 53,338
Investment management fee 18,750 18,750
Total Expenses 75,888 120,209
Net Income $ 252,071 $ 168,857
Net Income Allocated:
To the General Partner $ 0 $ 0
To the Limited Partners 252,071 168,857
$ 252,071 $ 168,857
Per limited partnership unit
(7,047,000 outstanding) $.04 $.02
Statements of Cash Flows
For the three months ended March 31, 1995 and 1994
Cash Flows from Operating Activities: 1995 1994
Net income $ 252,071 $ 168,857
Adjustments to reconcile net income to net cash
used for operating activities:
Valuation allowance 941,065 1,962,373
Amortization of deferred charges 25,963 48,121
Amortization of discount on loan (1,080) (1,080)
Decrease in cash arising from changes
in operating assets and liabilities:
Mortgage loans receivable (1,230,370) (2,224,180)
Investment in U.S. Treasury securities (21,780) (19,925)
Accounts payable and accrued expenses (1,743) (10,743)
Due to affiliates (832) (2,004)
Net cash used for operating activities (36,706) (78,581)
Cash Flows from Financing Activities:
Distributions - income tax withholdings
for foreign partners 0 (16,068)
Net cash used for financing activities 0 (16,068)
Net decrease in cash (36,706) (94,649)
Cash, beginning of period 1,018,759 632,903
Cash, end of period $ 982,053 $ 538,254
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 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 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, and no
material contingencies exist which would require disclosure in this interim
report per Regulation S-X, Rule 10-01, Paragraph (a)(5).
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Liquidity and Capital Resources
The Partnership's primary assets are its zero coupon mortgage loans. The
Partnership originally held two zero coupon first mortgage loans and two zero
coupon second mortgage loans. During 1993, the loan secured by EQK Green Acres
Mall was repaid together with a prepayment premium. In early 1994, the loan
secured by 417 Fifth Avenue was retired by means of a transaction which
resulted in the receipt of proceeds upon sale of that 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 March 31, 1995,
Laurel Centre, was 90.2% occupied, compared with 93.3% occupied a year earlier.
Tenant sales at the mall (excluding anchor tenants) totaled $7.1 million in the
first two months of 1995, compared with $6.8 million in the first two months of
1994.
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 ("REMIC"). The sale of Kemper's participating interest to a
REMIC may affect the Borrower's ability to refinance or restructure the loan
because of the lack of flexibility in the REMIC by-laws. 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 fully accreted amount at maturity in October 1996
will be contingent upon an improvement in capital markets for real estate
lending and investment and the borrower's ability to refinance the loan or sell
the property at maturity.
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 reduce the near-term cash demands on Union
Square in order to help the Hotel overcome the recent difficulties in the San
Francisco market. The Hotel has reported improved operating results since the
June 1992 restructuring of its debt and the strengthening of San Francisco
market conditions. Average occupancy and room rates were 78.5% and $136.97
for the first quarter of 1995 compared to 71.7% and $137.30 for the
corresponding period in 1994. The Hotel has generated sufficient cash flow to
meet its quarterly debt service payments due through April 1995. However, it
remains uncertain if the Hotel will generate sufficient cash flow to fund
future minimum 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 restructured 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.
The General Partner continues to believe that the value of the Partnership's
loan has been impaired and the ultimate collectibility of the Partnership's
loan remains uncertain.
The Partnership's investment in zero coupon Treasury securities and cash
comprise the Partnership's working capital reserve. At March 31, 1995, the
Partnership had $1,003,514 invested in zero coupon U.S. Treasury securities and
cash of $982,053, 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 quarter of 1995. The decrease
in the cash balance is due to the Partnership meeting its normal operating
expenses.
Results of Operations
For the three months ended March 31, 1995, net income totalled $252,071 as
compared with net income of $168,857 for the three months ended March 31, 1994.
Total income for the three months ended March 31, 1995 was $327,959, compared
with $289,066 for the corresponding period in 1994. The increase is primarily
due to higher interest income earned on the Laurel Centre loan and an increase
in interest income earned on the Partnership's cash.
Total expenses for the three months ended March 31, 1995 were $75,888, compared
with $120,209 for the corresponding period in 1994. The decrease is primarily
attributable to the decrease in amortization of deferred charges of
approximately $22,000 due to the retirement of the 417 Fifth Avenue loan in May
1994 and decreased legal and professional fees of approximately $19,000.
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.
CAPITAL GROWTH MORTGAGE INVESTORS, L.P.
BY: CG REALTY FUNDING INC.
General Partner
Date: May 12, 1995
BY: /s/ Kenneth L. Zakin
Name: Kenneth L. Zakin
Title: Director and President
Date: May 12, 1995
BY: /s/ Daniel M. Palmier
Name: Daniel M. Palmier
Title: Vice President and
Chief Financial Officer
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