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, 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
Attn: 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
June 30, December 31,
Assets 1995 1994
Second Mortgage loan receivable,net of
unamortized discount of $6,937 in 1995
and $9,096 in 1994 $ 36,112,971 $ 34,228,767
Less-valuation allowance (36,112,971) (34,228,767)
First Mortgage loan receivable 12,222,760 11,629,648
Cash 959,784 1,018,759
Investments in U.S. Treasury securities 1,026,031 981,734
Notes receivable, net of allowance for
doubtful accounts of $2,611,952 in
1995 and 1994
Deferred charges, net of accumulated
amortization of $830,805 in 1995 and
$778,879 in 1994 155,775 207,701
Total Assets $ 14,364,350 $ 13,837,842
Liabilities and Partners' Capital
Liabilities:
Accounts payable and accrued $ 29,316 $ 29,633
expenses
Due to affiliates 14,900 8,182
Total Liabilities 44,216 637,815
Partners' Capital (Deficit):
General Partner (983,819) (983,819)
Limited Partners
(7,047,000 units 15,303,953 14,783,846
outstanding)
Total Partners' Capital 14,320,134 13,800,027
Total Liabilities and Partners' $ 14,364,350 $ 13,837,842
Capital
Statement of Partners' Capital (Deficit)
For the six months ended June 30, 1995
Limited General
Partners Partner Total
Balance at December 31, 1994 $14,783,846 $ (983,819) $13,800,027
Net income 520,107 - 520,107
Balance at June 30, 1995 $15,303,953 $ (983,819) $14,320,134
Statements of Operations
Three months ended Six months ended
June 30, June 30,
Income 1995 1994 1995 1994
Interest income $1,278,329 $ 1,660,035 $ 2,546,318 $ 3,909,189
Less - valuation allowance (943,139) (1,354,698) (1,884,204) (3,317,071)
Net interest income 335,190 305,337 662,114 592,118
Mortgage loan recovery - 2,018,716 - 2,018,716
Miscellaneous income 1,430 2,290 2,465 4,575
Total Income 336,620 2,326,343 664,579 2,615,409
Expenses
Amortization of deferred 25,963 270,752 51,926 318,873
charges
General and administrative 23,871 31,936 55,046 85,274
Investment management fee 18,750 18,750 37,500 37,500
Total Expenses 68,584 321,438 144,472 441,647
Net Income $ 268,036 $ 2,004,905 $ 520,107 $ 2,173,762
Net Income Allocated:
To the General Partner - - - -
To the Limited Partners 268,036 2,004,905 520,107 2,173,762
$ 268,036 $ 2,004,905 $ 520,107 $ 2,173,762
Per limited partnership
unit (7,047,000
outstanding) $ .04 $ .29 $ .07 $ .31
Statements of Cash Flows
For the six months ended June 30, 1995 and 1994
Cash Flows from Operating Activities: 1995 1994
Net income $ 520,107 $ 2,173,762
Adjustments to reconcile net income to net cash
provided by (used for) operating activities:
Mortgage loan recovery - (2,018,716)
Valuation allowance 1,884,204 3,317,071
Amortization of deferred charges 51,926 318,873
Amortization of discount on loans (2,159) (2,159)
Increase (decrease) in cash arising from
changes in operating assets and liabilities:
Mortgage loans receivable (2,475,157) (3,851,859)
Investment in U.S. Treasury
securities (44,297) (40,522)
Accounts payable and accrued expenses (317) (11,052)
Due to affiliates 6,718 317
Distribution Payable - 1,492,182
Net cash provided by (used for) operating activities (58,975) 1,377,897
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 (58,975) 1,888,363
Cash, beginning of period 1,018,759 632,903
Cash, end of period $ 959,784 $ 2,521,266
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 June 30, 1995, the results of operations for the three and six
months ended June 30, 1995 and 1994, the statements of cash flows for the six
months ended June 30, 1995 and 1994 and the statement of partners' capital
(deficit) for the six months ended June 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 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 June 30, 1995,
Laurel Centre, was 90.1% occupied, compared with 95.2% occupied a year earlier.
Tenant sales at the mall (excluding anchor tenants) totaled $19.8 million in
the first five months of 1995, compared with $21.4 million in the first five
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 due to the strengthening of the San
Francisco hospitality market. Average occupancy and room rates were 79.6% and
$141.56 for the second quarter of 1995 compared to 73.0% and $138.55 for the
corresponding period in 1994. The Hotel has generated sufficient cash flow to
meet its quarterly debt service payments due through July 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 June 30, 1995, the
Partnership had $1,026,031 invested in zero coupon U.S. Treasury securities and
cash of $959,784, 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 six 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 months and six months ended June 30,1995,
net income totalled $268,036 and $520,107, respectively, as compared with net
income of $2,004,905 and $2,173,762, respectively for the corresponding periods
in 1994. Net income 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 six months ended June 30, 1995 was $336,620 and
$664,579, respectively, compared with $2,326,343 and $2,615,409, respectively,
for the corresponding periods in 1994. The decrease is primarily due to: (i)
the mortgage loan recovery proceeds received and higher interest income earned
upon the retirement of the 417 Fifth Avenue loan in 1994; (ii) higher interest
income earned on the Laurel Centre loan, and; (iii) an increase in interest
income earned on the Partnership's cash.
Total expenses for the three and six months ended June 30, 1995 were $68,584
and $144,472, respectively, compared with $321,438 and $441,647, respectively,
for the corresponding periods in 1994. The decrease 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 as a result of reduced legal and audit expenses.
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 June 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: August 1, 1995
BY: /s/ Kenneth L. Zakin
Name: Kenneth L. Zakin
Title: Director and President
Date: August 1, 1995
BY: /s/ Daniel M. Palmier
Name: Daniel M. Palmier
Title: Vice President and
Chief Financial Officer
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