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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) February 21, 1997
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CAPITAL GROWTH MORTGAGE INVESTORS, L.P.
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(Exact name of registrant as specified in its charter)
Delaware 33-7707 13-3434580
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(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification Number)
3 World Financial Center, 29th Floor, New York, New York 10285-2900
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 526-3062
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INFORMATION TO BE INCLUDED IN REPORT
Item 5. Other Events.
As described in the Partnership's Form 8-K report dated February 5,
1997 (the "February 5th 8-K"), the Partnership holds a zero-coupon mortgage loan
(the "Hotel Loan") made to the owner of the Grand Hyatt San Francisco hotel
(the "Hotel Borrower"), whose general partner is an affiliate of the General
Partner. The Hotel Loan was secured by a second mortgage encumbering the Grand
Hyatt San Francisco Hotel (the "Hotel"). The Hotel Loan accrued interest at 11%
per annum and matured (subject to extension as provided in the original
documents, and as described in the February 5th 8-K) on January 2, 1997.
In late 1996, as described in the February 5th 8-K, the Hotel Borrower
agreed to sell the Hotel to an unaffiliated third party (the "Purchaser") at a
price of $126,900,000 (subject to adjustments) (the "Sale"). The Sale was
subject to certain conditions described in a purchase and sale agreement, dated
as of November 4, 1996, entered into between Hotel Borrower and Purchaser. The
closing of the Sale occurred on February 21, 1997. As a result of such Sale,
the Partnership received $30,250,000 (the "Pay-off Proceeds") in full
satisfaction of all of Hotel Borrower's obligations to the Partnership
(including unsecured debt obligations and the obligation to reimburse the
Partnership for certain costs). Based on the Pay-off Proceeds received, the
Partnership intends to make a distribution to its unitholders of
approximately $4 per unit.
As described in the February 5th 8-K, certain holders of Units of the
Partnership commenced an action (the "Litigation") in the Delaware Chancery
Court against the General Partner, the Hotel Borrower, its general partner, and
others on January 24, 1997, seeking to invalidate the Partnership's acceptance
of a discounted pay-off of the Hotel Loan pursuant to an Allocation and Release
Agreement (the "Allocation Agreement"), dated as of November 1, 1996, entered
into between Hotel Borrower and the Partnership. The Litigation does not,
however, challenge the closing of the Sale, but merely the allocation of the
proceeds from such Sale in accordance with the terms of the Allocation
Agreement.
To minimize the risk that the Litigation might impede the closing of
the Sale, the Partnership and Hotel Borrower entered into a Non-Distribution and
Security Agreement, dated as of February 21, 1997, and related documents,
pursuant to which certain net sales proceeds from the Sale otherwise
distributable to the Hotel Borrower, in the amount of approximately
$6,911,148.81, were deposited in a restricted bank account (the "Blocked
Account") with a nationally recognized commercial bank ("Deposit Bank"). The
terms of the Blocked Account generally prohibit the release of any funds
therefrom on or prior to April 21, 1997. In addition, Hotel Borrower granted
the Partnership a security interest in the Blocked Account until April 21,
1997, to secure certain of Hotel Borrower's obligations to the Partnership, as
they may be determined by the Litigation. If the Litigation is not resolved on
or prior to April 21, 1997, or the Blocked Account is not extended
by mutual agreement of the Hotel Borrower and the Partnership or by order of
the court, Hotel Borrower will receive the funds held therein, free from the
Partnership's security interest in such funds. There can be no assurance that
the Litigation will be resolved, the Blocked Account extended or a court order
obtained on or prior to April 21, 1997. The Partnership and its General Partner
are continuing their efforts to resolve the Litigation.
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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 hereunto duly authorized.
CAPITAL GROWTH MORTGAGE INVESTORS, L.P.,
A DELAWARE LIMITED PARTNERSHIP (REGISTRANT)
By: CG REALTY FUNDING, INC.,
A DELAWARE CORPORATION
By: /s/ Daniel M. Palmier
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Daniel M. Palmier,
Vice President and Chief
Financial Officer
Dated: February 26, 1997
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