<PAGE> 1
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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 0-17660
METRIC PARTNERS
GROWTH SUITE INVESTORS, L.P.,
A CALIFORNIA LIMITED PARTNERSHIP
(Exact name of Registrant as specified in its charter)
CALIFORNIA 94-3050708
------------------------------- -----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One California Street
San Francisco, California 94111-5415
------------------------------- -----------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (415) 678-2000
(800) 347-6707 in all states
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
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Page 1 of 17
<PAGE> 2
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED).
METRIC PARTNERS GROWTH SUITE INVESTORS, L.P.,
A CALIFORNIA LIMITED PARTNERSHIP
BALANCE SHEETS (UNAUDITED)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1995 1994
------------- ------------
<S> <C> <C>
ASSETS
CASH AND CASH EQUIVALENTS $ 3,872,000 $ 5,142,000
CASH INVESTMENTS 1,409,000 -
ACCOUNTS RECEIVABLE 1,081,000 746,000
PREPAID EXPENSES AND OTHER ASSETS 361,000 314,000
PROPERTIES AND IMPROVEMENTS 97,821,000 96,213,000
ACCUMULATED DEPRECIATION (30,689,000) (28,008,000)
------------ ------------
NET PROPERTIES AND IMPROVEMENTS 67,132,000 68,205,000
DEFERRED FINANCING COSTS 183,000 235,000
DEFERRED FRANCHISE FEES 256,000 294,000
------------ ------------
TOTAL ASSETS $ 74,294,000 $ 74,936,000
============ ============
LIABILITIES AND PARTNERS' EQUITY
ACCOUNTS PAYABLE $ 1,008,000 $ 747,000
ACCRUED PROPERTY TAXES 704,000 319,000
ACCRUED INTEREST 292,000 317,000
OTHER LIABILITIES 1,116,000 905,000
NOTES PAYABLE 48,624,000 48,800,000
------------ ------------
TOTAL LIABILITIES 51,744,000 51,088,000
------------ ------------
PARTNERS' EQUITY (DEFICIENCY):
GENERAL PARTNERS - (68,000)
LIMITED PARTNERS (59,932 units outstanding) 22,550,000 23,916,000
------------ ------------
TOTAL PARTNERS' EQUITY 22,550,000 23,848,000
------------ ------------
TOTAL LIABILITIES AND PARTNERS' EQUITY $ 74,294,000 $ 74,936,000
============ ============
</TABLE>
See notes to financial statements (unaudited).
Page 2 of 17
<PAGE> 3
METRIC PARTNERS GROWTH SUITE INVESTORS, L.P.,
A CALIFORNIA LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED
SEPTEMBER 30,
-------------------------
1995 1994
---- ----
<S> <C> <C>
REVENUES:
Hotel operations $19,194,000 $17,907,000
Interest and other 229,000 174,000
----------- -----------
Total revenues 19,423,000 18,081,000
----------- -----------
EXPENSES:
Hotel operations:
Rooms 3,801,000 3,533,000
Administrative 2,375,000 2,058,000
Marketing 1,848,000 1,755,000
Energy 1,015,000 1,042,000
Repair and maintenance 968,000 933,000
Management fees 997,000 936,000
Property taxes 688,000 550,000
Other 697,000 670,000
----------- -----------
Total hotel operations 12,389,000 11,477,000
Depreciation and other amortization 2,719,000 3,268,000
Interest 3,755,000 3,764,000
General and administrative 482,000 477,000
----------- -----------
Total expenses 19,345,000 18,986,000
----------- -----------
NET INCOME (LOSS) $ 78,000 $ (905,000)
=========== ===========
NET INCOME (LOSS) PER LIMITED PARTNERSHIP ASSIGNEE UNIT $ - $ (18)
=========== ===========
CASH DISTRIBUTIONS PER LIMITED PARTNERSHIP ASSIGNEE UNIT $ 23 $ 23
=========== ===========
</TABLE>
See notes to financial statements (unaudited).
Page 3 of 17
<PAGE> 4
METRIC PARTNERS GROWTH SUITE INVESTORS, L.P.,
A CALIFORNIA LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
SEPTEMBER 30,
--------------------------
1995 1994
---- ----
<S> <C> <C>
REVENUES:
Hotel operations $6,561,000 $6,178,000
Interest and other 80,000 66,000
---------- ----------
Total revenues 6,641,000 6,244,000
---------- ----------
EXPENSES:
Hotel operations:
Rooms 1,352,000 1,244,000
Administrative 898,000 696,000
Marketing 625,000 581,000
Energy 362,000 349,000
Repair and maintenance 337,000 317,000
Management fees 344,000 320,000
Property taxes 234,000 130,000
Other 240,000 229,000
---------- ----------
Total hotel operations 4,392,000 3,866,000
Depreciation and other amortization 891,000 920,000
Interest 1,252,000 1,254,000
General and administrative 188,000 112,000
---------- ----------
Total expenses 6,723,000 6,152,000
---------- ----------
NET INCOME (LOSS) $ (82,000) $ 92,000
========== ==========
NET INCOME (LOSS) PER LIMITED PARTNERSHIP ASSIGNEE UNIT $ (1) $ 1
========== ==========
CASH DISTRIBUTIONS PER LIMITED PARTNERSHIP ASSIGNEE UNIT $ 8 $ 8
========== ==========
</TABLE>
See notes to financial statements (unaudited).
Page 4 of 17
<PAGE> 5
METRIC PARTNERS GROWTH SUITE INVESTORS, L.P.,
A CALIFORNIA LIMITED PARTNERSHIP
STATEMENTS OF PARTNERS' EQUITY (DEFICIENCY) (UNAUDITED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
<TABLE>
<CAPTION>
GENERAL LIMITED
PARTNER PARTNERS TOTAL
------- -------- -----
<S> <C> <C> <C>
BALANCE, JANUARY 1, 1995 $ (68,000) $23,916,000 $23,848,000
NET INCOME 96,000 (18,000) 78,000
CASH DISTRIBUTIONS (28,000) (1,348,000) (1,376,000)
--------- ----------- -----------
BALANCE, SEPTEMBER 30, 1995 $ - $22,550,000 $22,550,000
========= =========== ===========
BALANCE, JANUARY 1, 1994 $(252,000) $26,882,000 $26,630,000
NET INCOME (LOSS) 162,000 (1,067,000) (905,000)
CASH DISTRIBUTIONS (28,000) (1,348,000) (1,376,000)
--------- ----------- -----------
BALANCE, SEPTEMBER 30, 1994 $(118,000) $24,467,000 $24,349,000
========= =========== ===========
</TABLE>
See notes to financial statements (unaudited).
Page 5 of 17
<PAGE> 6
METRIC PARTNERS GROWTH SUITE INVESTORS, L.P.,
A CALIFORNIA LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED
SEPTEMBER 30,
-------------------------
1995 1994
---- ----
<S> <C> <C>
OPERATING ACTIVITIES
Net Income (Loss) $ 78,000 $ (905,000)
Adjustments to reconcile net income (loss) to net cash provided
by operating activities:
Depreciation and amortization 2,813,000 3,346,000
Changes in operating assets and liabilities:
Accounts receivable (335,000) (274,000)
Prepaid expenses and other assets (47,000) 3,000
Accounts payable, accrued expenses, and other liabilities 882,000 354,000
----------- -----------
Net cash provided by operating activities 3,391,000 2,524,000
----------- -----------
INVESTING ACTIVITIES
Capital improvements (1,608,000) (993,000)
Purchase of cash investments (1,409,000) (494,000)
Proceeds from sale of cash investments - 1,478,000
----------- -----------
Net cash used by investing activities (3,017,000) (9,000)
----------- -----------
FINANCING ACTIVITIES
Notes payable principal payments (268,000) (240,000)
Cash distribution to partners (1,376,000) (1,376,000)
----------- -----------
Cash used by financing activities (1,644,000) (1,616,000)
----------- -----------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 1,270,000 899,000
Cash and cash equivalents at beginning of period 5,142,000 4,308,000
----------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 3,872,000 $ 5,207,000
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest paid in cash during the period $ 3,636,000 $ 3,664,000
=========== ===========
</TABLE>
See notes to financial statements (unaudited).
Page 6 of 17
<PAGE> 7
METRIC PARTNERS GROWTH SUITE INVESTORS, L.P.,
A CALIFORNIA LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1. REFERENCE TO 1994 AUDITED FINANCIAL STATEMENTS
These unaudited financial statements should be read in conjunction with
the Notes to Financial Statements included in the 1994 audited financial
statements.
The financial information contained herein reflects all normal and
recurring adjustments that are, in the opinion of management, necessary
for a fair presentation.
2. TRANSACTIONS WITH THE MANAGING GENERAL PARTNER AND AFFILIATES
In accordance with the Partnership Agreement, the Partnership is charged
by the managing general partner and affiliates for services provided to
the Partnership. The amounts are as follows:
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED
SEPTEMBER 30,
-------------------------
1995 1994
---- ----
<S> <C> <C>
Partnership management fees $120,000 $120,000
Reimbursement of administrative expenses 171,000 178,000
-------- --------
Total $291,000 $298,000
======== ========
</TABLE>
3. NET INCOME (LOSS) PER LIMITED PARTNERSHIP ASSIGNEE UNIT
The net income or loss per limited partnership assignee unit is computed
by dividing the net income or loss allocated to the limited partners by
59,932 assignee units outstanding.
4. CASH INVESTMENTS
The Partnership considers cash investments to be those investments with an
original maturity date of more than three months at the time of purchase.
There were no cash investments at September 30, 1995.
5. LEGAL PROCEEDINGS
The Partnership is a plaintiff and counterclaim defendant in legal
proceedings relating to the management agreement at the Residence Inn -
Ontario, a defendant in legal proceedings seeking damages for alleged
failure to consummate a settlement of the Residence Inn - Ontario case,
and a defendant in legal proceedings related to the Residence Inn -
Nashville; see Part II, Item 1, Legal Proceedings, for a detailed
description of these matters.
6. SUBSEQUENT EVENT
The Partnership sold the Residence Inn - Atlanta (Perimeter West) on
October 3, 1995. The net sales price was $11,350,000 after deducting
$300,000 that was deposited into an escrow account (the "Shortfall
Guaranty Account"). The Partnership has guaranteed certain income levels
to the buyer for the years from 1996 through 1998. To the extent these
income levels are not attained, the buyer will receive the deficiency, up
to the maximum $300,000, from the Shortfall Guaranty Account. Any unused
funds in the Shortfall Guaranty Account at December 31, 1998, will be
returned to the Partnership together with interest.
The buyer assumed the existing loan with a balance of $5,922,000. After
payment of estimated expenses of sale, the proceeds to the Partnership are
approximately $5,384,000. Of that amount, $109,000 was, in accordance
with local laws, deposited into an escrow account to secure payment to the
State of Georgia of the amount of state real property withholding taxes
due on the gain of the sale.
Page 7 of 17
<PAGE> 8
At the date of sale, the carrying amount of the land and improvements and
unamortized deferred financing and franchise costs was approximately
$8,036,000 for financial statement purposes. Therefore, the estimated
gain to be recognized in 1995 from the sale of the Residence Inn - Atlanta
(Perimeter West) is approximately $3,270,000. The $300,000 that was
deposited in the Shortfall Guaranty Account is deferred gain and will be
recognized when, and to the extent the amount is returned to the
Partnership.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
This Item should be read in conjunction with Financial Statements and
other Items contained elsewhere in this Report.
PROPERTIES
A description of the properties in which the Partnership has an ownership
interest, along with the occupancy and room rate data, follows:
OCCUPANCY AND ROOM RATE SUMMARY
<TABLE>
<CAPTION>
AVERAGE AVERAGE
OCCUPANCY RATE (%) DAILY ROOM RATE (%)
------------------ -------------------
NINE MONTHS THREE MONTHS NINE MONTHS THREE MONTHS
DATE ENDED ENDED ENDED ENDED
OF SEPT. 30, SEPT. 30, SEPT. 30, SEPT. 30,
NAME AND LOCATION ROOMS PURCHASE 1995 1994 1995 1994 1995 1994 1995 1994
----------------- ----- -------- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Residence Inn - Ontario 200 04/88 76 69 70 70 68.18 67.56 68.41 67.55
Ontario, California
Residence Inn - Fort Wayne 80 06/88 93 88 97 93 61.44 59.75 64.55 61.25
Fort Wayne, Indiana
Residence Inn - Columbus (East) 80 06/88 89 88 92 92 68.09 63.74 68.50 64.38
Columbus, Ohio
Residence Inn - Indianapolis 88 06/88 81 85 86 90 76.46 71.53 78.72 72.16
Indianapolis, Indiana
Residence Inn - Lexington 80 06/88 82 89 88 93 72.51 70.18 72.76 70.32
Lexington, Kentucky
Residence Inn - Louisville 96 06/88 85 89 89 94 80.59 75.73 84.07 76.55
Louisville, Kentucky
Residence Inn - Winston-Salem 88 06/88 85 86 86 89 70.61 64.94 72.43 62.27
Winston-Salem, North Carolina
Residence Inn - Nashville (Airport) 168 05/89 79 74 80 84 77.97 72.95 80.88 73.43
Nashville, Tennessee
Residence Inn - Atlanta 128 10/89 80 84 83 86 87.99 76.84 86.87 77.27
(Perimeter West)
Atlanta, Georgia
Residence Inn - Altamonte Springs 128 03/90 84 80 82 74 79.30 78.11 77.08 74.38
Altamonte Springs, Florida
</TABLE>
Page 8 of 17
<PAGE> 9
RESULTS OF OPERATIONS
Net income was $111,000 for the first three quarters of 1995 compared to a
net loss of $905,000 for the same period in 1994. The change was primarily
attributable to increases in revenues from hotel operations, and reduced
depreciation. For the third quarter ended September 30, 1995 net loss was
$49,000 as compared to net income of $92,000 for the same period in 1994. This
change was primarily attributable to increases in revenues from hotel operations
and reduced depreciation which was more than offset by increases in all expense
categories, except interest expense. Room revenues increased 7% for the first
three quarters of 1995 compared to the same period in 1994 due to an increase in
room revenues at nine of the Partnership's hotels which was only partially
offset by a decrease at the Residence Inn-Lexington. Hotel operating expenses
increased 8% for the first three quarters of 1995 in comparison to the same
period in 1994 primarily due to increases in room operating and marketing costs
as well as administrative expenses which include costs related to a sales tax
audit at the Residence Inn-Atlanta. Interest and other income increased $55,000
in the first three quarters of 1995 compared to the same period in 1994 due to
higher cash balances and a modest increase in interest rates on the
Partnership's investments. Depreciation and amortization decreased $549,000 and
$29,000 in the first three quarters and third quarter of 1995 compared to the
same periods in 1994 due to fully depreciated furnishings at certain of the
hotels. General and administrative expenses increased $5,000 and $76,000 for
the first three quarters of 1995 and the third quarter of 1995, respectively,
when compared to the same periods in 1994. The $76,000 increase in the third
quarter is primarily due to administrative and legal expense increases.
On an ongoing basis, the Partnership monitors the markets where the hotels
are located and reviews potential opportunities for the sale of the properties.
During the second quarter, the Partnership initiated discussions with several
potential purchasers regarding the sale of the Residence Inn - Atlanta
(Perimeter West). After a series of negotiations, the Partnership entered into
a contract for sale with a non-affiliated buyer and on October 3, 1995 the sale
of the property was recorded.
The net sales price of the hotel was $11,350,000 after deducting $300,000
that was deposited into an escrow account (the "Shortfall Guaranty Account").
The Partnership guaranteed certain income levels to the buyer for the years 1996
through 1998. To the extent these income levels are not attained, the buyer
will receive the deficiency, up to the maximum $300,000, from the Shortfall
Guaranty Account. Any unused funds in the Shortfall Guaranty Account on
December 31, 1998, will be returned to the Partnership together with interest.
The buyer assumed the existing loan with a balance of $5,922,000. After payment
of estimated expenses of sale, the proceeds to the Partnership were
approximately $5,384,000. Of that amount, $109,000 was deposited into an escrow
account to secure payment to the State of Georgia of the amount of state real
property withholding taxes due on the gain from the sale of the hotel. (See note
6 in the notes to Financial Statements [Unaudited]).
The proceeds from sale have been added to the Partnership's working
capital reserve pending consideration and development of a plan regarding the
potential reduction of certain long-term Partnership debt and resolution of
litigation with respect to the Nelson matters (See Part II, Item 1. Legal
Proceedings).
The following discussion provides information concerning the operations of
the Partnerships remaining nine hotels:
Residence Inn-Ontario: Room revenues increased 11% for the first three
quarters of 1995 due to an improvement in occupancy and an increase in room
rates at the hotel, compared to the same period in 1994. This increase was
offset, in part, by a 5% increase in operating expenses. The Southern
California economy and hotel market continue to strengthen, with the anticipated
completion of several construction projects in early 1996, as well as relocation
of a corporate training center to the area. Marketing programs are in place to
retain the existing long-term stay business as well as to attract new business.
Residence Inn - Columbus: An increase of 9% in room revenues for the first
three quarters of 1995 was more than offset by a 17% increase in expenses in
comparison to the same period of the prior year. Expense increases were
primarily attributable to room operating costs, administrative costs and certain
repair and maintenance items. Room rates increased for the nine months ended
September 30, 1995 and occupancy improved slightly, in comparison to the same
period of 1994. Local market conditions have remained stable; however two new
hotel products are expected to come on line in 1996. Marketing efforts continue
to focus on retaining existing corporate accounts and attracting new business to
maintain competitive market position.
Page 9 of 17
<PAGE> 10
Residence Inn - Fort Wayne: Room revenues increased 9% for the first three
quarters of 1995, as compared to the same period in 1994. Both occupancy and
room rates improved for the period; however, competition remains strong and
responsive marketing efforts are being utilized to strengthen performance
results. Local economic conditions have remained relatively stable throughout
1995.
Residence Inn - Indianapolis: A slight increase in room revenues for the
first three quarters of 1995 was more than offset by a 12% increase in expenses
primarily for administrative, room operating, marketing and repair and
maintenance costs, as compared to the same period of 1994. As a result of a
fire during the first quarter of 1995, which rendered 10% of the rooms
uninhabitable, occupancy declined during the first three quarters; however, room
rates increased as compared to the same period of 1994. The damages incurred as
a result of the fire, after a deductible, will be paid through the use of
insurance proceeds. Rebuilding has recently been completed. Hotel market
conditions in Indianapolis and the local economy have continued to remain
relatively stable.
Residence Inn - Lexington: Room revenues decreased for the first three
quarters of 1995, which was offset by a 5% decline in expenses, primarily due to
a reduction in administrative costs, in comparison to the same period of 1994.
Although occupancy for the period declined 7%, room rates reflected an
improvement. The local economy remains stable; however, the hotel operating
environment continues to be challenging due to competitive properties in the
market, as well as apartment complexes offering units for extended stay at lower
rates.
Residence Inn - Louisville: A slight increase in room revenues for the
first three quarters of 1995 was more than offset by an increase in expenses, in
comparison to the same period of 1994. Although the local economy has remained
stable, the hotel market continues to be competitive due to the availability of
corporate apartments which offer rents at rates lower than the area's hotels.
Occupancy declined for the first three quarters of 1995; however, room rates
reflected a favorable increase as compared to the same period in 1994. Marketing
efforts are directed towards retaining existing corporate clients and targeting
new training business.
Residence Inn - Winston Salem: Room revenues increased 8% for the first
three quarters as compared to the same period of 1994, primarily the result of
increases in room rates. Expenses declined during the period reflecting lower
room operating and marketing costs. Local hotel market conditions remain very
competitive which resulted in a slight decrease in occupancy during the first
three quarters of 1995 as compared to the same period in the prior year.
Marketing efforts are focused on expanding and diversifying the patronage base,
as well as retaining existing clients.
Residence Inn - Nashville (Airport): A 7% increase in expenses for the
first three quarters of 1995 was more than offset by a 13% increase in room
revenues in comparison to the same period of 1994. Both room rates and
occupancy increased during the period. Despite a stable economy and a low
unemployment rate in Nashville, competition in the hotel market remains strong
as two new hotels came on line during the period and another is scheduled for
completion in early 1996. Marketing programs, including special promotional
discounts aimed at increasing extended-stay patronage, continue to be utilized
to retain a competitive position in the market place.
Residence Inn - Altamonte Springs: Revenues increased by 7% for the first
nine months of 1995 as compared to the same period in 1994 and were only
partially offset by an increase in expenses. Improved performance is
attributable to successful marketing programs as both occupancy and room rates
increased during the first three quarters of 1995 as compared to 1994. Although
competition remains prevalent in the local market, the Partnership's Residence
Inn continued to maintain a favorable market position.
During the second and third quarters of 1995 the Partnership was in
negotiations with Marriott to restructure contracts on the hotels under their
management. An agreement in principle has been reached whereby Marriott will
reduce the overall management fees as well as the length of the contract terms.
In addition, the Partnership will be permitted to terminate the contract after a
five year term. In exchange, the Partnership has agreed to execute new
agreements with Marriott for the management of the Residence Inns located in
Altamonte Springs, Nashville (Airport) and Ontario, now managed by other hotel
operators. The agreement is currently being prepared for execution by the
parties to the transaction. Once the contracts are effective, which is
anticipated to take place in the first quarter of 1996, but cannot be assured,
Marriott will manage all nine of the Partnership's remaining hotels.
Page 10 of 17
<PAGE> 11
PARTNERSHIP LIQUIDITY AND CAPITAL RESOURCES
First Three Quarters of 1995
As presented in the Statement of Cash Flows, cash was provided by
operating activities. Cash was used by investing activities for capital
improvements and purchase of cash investments. Cash was used by financing
activities for distributions to partners and principal payments on notes
payable.
The results of project operations before capital improvements for the
first three quarters of 1995 and 1994 (as shown in the tables on pages 13 and
14) are determined by net income or loss adjusted for non-cash items such as
depreciation and amortization and reduced by principal payments made on the
notes payable. The project operations before capital improvements is an
indication of the operational performance of the property. During the first
three quarters of 1995, the Partnership's ten properties generated positive
project operations before deductions for capital improvements. The Partnership,
after taking into account results of project operations before capital
improvements, interest income, and general and administrative expenses, on an
accrual basis, experienced positive results from operations for the period.
Project operations should not be considered as an alternative to net income or
loss (as presented in the financial statements) as an indicator of the
Partnership's operating performance or as an alternative to cash flow as a
measure of liquidity. The project operations after capital improvements for any
given period may not be indicative of the property's general performance as
capital improvements are likely to be made in large amounts associated with
renovation programs.
In the first three quarters of 1995, the Partnership spent $1,608,000 on
capital improvements. The majority was spent for room renovations at the
Residence Inns - Nashville, Louisville, Lexington and Columbus (East); a new key
system at Residence Inns - Atlanta and Ontario; televisions at Residence Inns -
Atlanta and Lexington; an upgrade of the gatehouse at the Residence Inn -
Altamonte Springs; siding and stucco work at the Residence Inn - Columbus (East)
and exterior painting at the Residence Inns - Fort Wayne and Louisville. In the
remainder of 1995, the Partnership anticipates spending approximately $500,000
on capital improvements. These improvements are necessary to keep the
properties competitive in their respective markets and are required under the
franchise agreements.
In accordance with, and as is customary in the management of hotels, the
various management agreements with the operators provide for a percentage of
revenues to be placed in capital replacement funds. The capital replacement
funds are used to fund on-going capital improvements as well as room or other
major renovation programs. In general, the capital replacement funds are being
held at the individual properties with additions generally made monthly based on
revenues and expenditures which are based on approved capital expenditure
budgets by the Partnership. Unused funds are being held in interest-bearing
accounts. To the extent not available from an individual property's capital
replacement fund, a capital improvement or renovation may be funded from the
Partnership's working capital reserve.
The Partnership anticipates that it will have sufficient resources to meet
its capital and operating requirements into the foreseeable future. A cash
distribution to investors for the first and second quarters of 1995 was made at
an annualized rate of 3% and will be made at the same rate for the third quarter
of 1995.
Conclusion
The Partnership established a value for the assignee units in the
Partnership as of December 31, 1994. Appraisals of the hotels were commissioned
and undertaken by a firm which is a recognized appraiser and consultant to the
hotel industry. The primary methodology employed in the appraisals used in the
evaluation was the income approach to value utilizing a discounted analysis of
property cash flows. In conjunction with the preparation of the appraisals, a
discount rate was determined by the appraiser based on several relevant factors,
including, but not limited to, the current investment climate for hotel
properties, local hotel market and economic conditions, comparisons of occupancy
and room rates with prevailing market rates for similar properties and the
status of the management contract for each hotel. The Partnership believes that
the assumptions utilized in the process were not unreasonable. The value of the
properties as determined by the appraisal process, in combination with the value
of other Partnership assets and liabilities, has resulted in an estimated net
asset value of each assignee unit of $335 per original $1,000 investment unit,
as of December 31, 1994. It should be noted, however, that appraised values
represent the opinion of the appraisal firm as of the date of the appraisals and
are based on market conditions at the time of the appraisals and on assumptions
concerning future circumstances which may or may not be accurate.
Page 11 of 17
<PAGE> 12
This valuation is an estimate of the assignee unit value only which has
been made as of December 31, 1994. There can be no assurance that the sales of
the assets in the current market or at any time in the future would yield net
proceeds which on a per assignee unit basis would be equal to or greater than
the estimated value. Further, there can be no assurance that sales of assignee
units now or in the future would yield net proceeds equal to or greater than
this value. The assignee units are illiquid and there is no formal market where
they are regularly traded. However, the Partnership is aware that some resales
have taken place in the informal secondary market. In this informal market,
transactions may or may not take place in any time period and occur at a price
negotiated between buyer and seller. We have no knowledge concerning how a
particular price may be determined. In 1994, 31 resale transactions, of which
the Partnership had knowledge, were recorded at a simple average price (not
weighted) of $196 per assignee unit. To date in 1995, 64 resale transactions, of
which the Partnership had knowledge, were recorded at a simple average price
(not weighted) of $245 per assignee unit.
During the third quarter of 1995 the Partnership commissioned updated
appraisals on the Partnership's nine remaining hotels. Accordingly, an updated
value of the Partnership's assignee limited partnership units will be made as of
December 31, 1995. This value will be published in the Partnership's Form 10-K
which will be filed in March 1996 and in the Annual Report scheduled to be
mailed to investors in April 1996.
The Partnership anticipates that it will have sufficient resources to meet
its capital and operating requirements into the foreseeable future.
Page 12 of 17
<PAGE> 13
METRIC PARTNERS GROWTH SUITE INVESTORS, L.P.
A CALIFORNIA LIMITED PARTNERSHIP
PROJECT OPERATIONS OF THE RESIDENCE INNS FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 1995
(000'S)
<TABLE>
<CAPTION>
Columbus Fort
Ontario (East) Wayne Indianapolis Lexington Louisville
------- ------ ----- ------------ --------- ----------
<S> <C> <C> <C> <C> <C> <C>
REVENUES:
Hotel operations:
Rooms $2,817 $1,224 $1,156 $1,369 $1,200 $1,657
Telephone and other 178 41 64 75 92 111
------ ------ ------ ------ ------ ------
Hotel operations 2,995 1,265 1,220 1,444 1,292 1,768
Interest and other 30 0 0 0 0 0
------ ------ ------ ------ ------ ------
Total revenues 3,025 1,265 1,220 1,444 1,292 1,768
------ ------ ------ ------ ------ ------
EXPENSES:
Hotel operations:
Rooms 482 269 224 305 262 288
Administrative 271 222 141 208 168 187
Marketing 330 108 112 162 108 173
Energy 189 72 62 75 63 66
Repair and maintenance 136 72 42 93 88 81
Management fees 120 82 79 94 84 115
Property taxes 54 64 62 54 38 59
Other 152 33 34 36 43 55
------ ------ ------ ------ ------ ------
Hotel operations 1,734 922 756 1,027 854 1,024
Depreciation and other
amortization 371 156 154 190 178 214
Interest 642 210 220 255 248 286
General and administrative 0 0 0 0 0 0
------ ------ ------ ------ ------ ------
Total expenses 2,747 1,288 1,130 1,472 1,280 1,524
------ ------ ------ ------ ------ ------
NET INCOME(LOSS) 278 (23) 90 (28) 12 244
Plus non-cash items - net 341 159 157 194 182 218
Less notes payable
principal payments 4 12 13 15 14 17
------ ------ ------ ------ ------ ------
Project operations 615 124 234 151 180 445
Capital Improvements 119 170 146 90 206 211
------ ------ ------ ------ ------ ------
Project operations after
capital improvements $ 496 $ (46) $ 88 $ 61 $ (26) $ 234
====== ====== ====== ====== ====== ======
<CAPTION>
Winston Altamonte
Salem Nashville Atlanta Springs Partnership Total
----- --------- ------- ------- ----------- -----
<S> <C> <C> <C> <C> <C> <C>
REVENUES:
Hotel operations:
Rooms $1,334 $2,811 $2,281 $2,328 $0 $18,177
Telephone and other 77 135 136 108 0 1,017
------ ------ ------ ------ ---- -------
Hotel operations 1,411 2,946 2,417 2,436 0 19,194
Interest and other 0 7 13 0 179 229
------ ------ ------ ------ ---- -------
Total revenues 1,411 2,953 2,430 2,436 179 19,423
------ ------ ------ ------ ---- -------
EXPENSES:
Hotel operations:
Rooms 263 667 479 562 0 3,801
Administrative 198 283 461 236 0 2,375
Marketing 120 289 230 216 0 1,848
Energy 67 176 113 132 0 1,015
Repair and maintenance 83 159 100 114 0 968
Management fees 92 89 120 122 0 997
Property taxes 50 83 83 141 0 688
Other 45 202 48 49 0 697
------ ------ ------ ------ ---- -------
Hotel operations 918 1,948 1,634 1,572 0 12,389
Depreciation and other
amortization 186 455 351 464 0 2,719
Interest 251 674 464 505 0 3,755
General and administrative 0 0 0 0 482 482
------ ------ ------ ------ ---- -------
Total expenses 1,355 3,077 2,449 2,541 482 19,345
------ ------ ------ ------ ---- -------
NET INCOME(LOSS) 56 (124) (19) (105) (303) 78
Plus non-cash items - net 190 449 349 574 0 2,813
Less notes payable
principal payments 15 81 28 69 0 268
------ ------ ------ ------ ---- -------
Project operations 231 244 302 400 (303) 2,623
Capital Improvements 52 339 147 128 0 1,608
------ ------ ------ ------ ---- -------
Project operations after
capital improvements $ 179 $ (95) $ 155 $ 272 $(303) $ 1,015
====== ====== ====== ====== ===== =======
</TABLE>
Page 13 of 17
<PAGE> 14
METRIC PARTNERS GROWTH SUITE INVESTORS, L.P.
A CALIFORNIA LIMITED PARTNERSHIP
PROJECT OPERATIONS OF THE RESIDENCE INNS FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 1994
(000'S)
<TABLE>
<CAPTION>
Columbus Fort
Ontario (East) Wayne Indianapolis Lexington Louisville
------- ------ ----- ------------ --------- ----------
<S> <C> <C> <C> <C> <C> <C>
REVENUES:
Hotel operations:
Rooms $2,534 $1,125 $1,058 $1,348 $1,254 $1,640
Telephone and other 169 43 57 75 100 84
------ ------ ------ ------ ------ ------
Hotel operations 2,703 1,168 1,115 1,423 1,354 1,724
Interest and other 30 0 0 0 0 0
------ ------ ------ ------ ------ ------
Total revenues 2,733 1,168 1,115 1,423 1,354 1,724
------ ------ ------ ------ ------ ------
EXPENSES:
Hotel operations:
Rooms 479 235 208 284 254 271
Administrative 313 165 139 156 212 174
Marketing 319 111 115 143 113 164
Energy 186 79 69 76 64 72
Repair and maintenance 127 54 60 76 85 81
Management fees 108 76 73 92 88 112
Property taxes 0 31 45 48 41 62
Other 113 38 30 39 44 42
------ ------ ------ ------ ------ ------
Hotel operations 1,645 789 739 914 901 978
Depreciation and other
amortization 428 232 221 278 247 294
Interest 642 211 221 256 249 288
General and administrative 0 0 0 0 0 0
------ ------ ------ ------ ------ ------
Total expenses 2,715 1,232 1,181 1,448 1,397 1,560
------ ------ ------ ------ ------ ------
NET INCOME(LOSS) 18 (64) (66) (25) (43) 164
Plus non-cash items - net 398 235 224 282 251 299
Less notes payable
principal payments 3 11 12 13 13 15
------ ------ ------ ------ ------ ------
Project operations 413 160 146 244 195 448
Capital Improvements 88 7 21 179 25 182
------ ------ ------ ------ ------ ------
Project operations after
capital improvements $325 $153 $125 $65 $170 $266
====== ====== ====== ====== ====== ======
<CAPTION>
Winston Altamonte
Salem Nashville Atlanta Springs Partnership Total
----- --------- ------- ------- ----------- -----
<S> <C> <C> <C> <C> <C> <C>
REVENUES:
Hotel operations:
Rooms $1,236 $2,490 $2,084 $2,177 $0 $16,946
Telephone and other 83 121 123 106 0 961
------ ------ ------ ------ ----- -------
Hotel operations 1,319 2,611 2,207 2,283 0 17,907
Interest and other 0 15 13 0 116 174
------ ------ ------ ------ ----- -------
Total revenues 1,319 2,626 2,220 2,283 116 18,081
------ ------ ------ ------ ----- -------
EXPENSES:
Hotel operations:
Rooms 278 592 421 511 0 3,533
Administrative 179 236 250 234 0 2,058
Marketing 128 257 215 190 0 1,755
Energy 68 194 105 129 0 1,042
Repair and maintenance 88 162 97 103 0 933
Management fees 86 78 109 114 0 936
Property taxes 49 90 42 142 0 550
Other 56 204 55 49 0 670
------ ------ ------ ------ ----- -------
Hotel operations 932 1,813 1,294 1,472 0 11,477
Depreciation and other
amortization 261 510 340 457 0 3,268
Interest 253 676 466 502 0 3,764
General and administrative 0 0 0 0 477 477
------ ------ ------ ------ ----- -------
Total expenses 1,446 2,999 2,100 2,431 477 18,986
------ ------ ------ ------ ----- -------
NET INCOME(LOSS) (127) (373) 120 (148) (361) (905)
Plus non-cash items - net 265 495 338 559 0 3,346
Less notes payable
principal payments 13 74 28 58 0 240
------ ------ ------ ------ ----- -------
Project operations 125 48 430 353 (361) 2,201
Capital Improvements 59 355 25 52 0 993
------ ------ ------ ------ ----- -------
Project operations after
capital improvements $66 ($307) $405 $301 ($361) $1,208
====== ====== ======= ====== ===== =======
</TABLE>
Page 14 of 17
<PAGE> 15
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
Metric Partners Growth Suite Investors, L.P. vs. Kenneth E. Nelson, The
Nelson Group, et al., San Francisco County Superior Court, Case No. 928065 (the
"SF Lawsuit). [This lawsuit is related to the other three proceedings described
below. Terms defined in the description of one case may be used in the
description of the other cases.]
This lawsuit relates to management of the Partnership's Residence Inn -
Ontario by an entity controlled by Kenneth E. Nelson ("Nelson") from April 1988
to February 1991. As a result of several defaults by the Nelson entity under
the management agreement, the Partnership gave notice of termination of the
management agreement and filed the SF Lawsuit in January 1991 seeking damages
and declaratory and injunctive relief against Nelson and certain related parties
(collectively, the "Nelson Parties"). The Nelson Parties counterclaimed for
damages and declaratory relief.
In March 1993, the Partnership and the Nelson Parties verbally agreed to
settle the SF Lawsuit at a settlement conference (the "SF Settlement"). Under
this settlement, the Partnership is to purchase the land (the "Land") underlying
the Partnership's Residence Inn - Nashville (the "Hotel") currently leased by
the Partnership from Nashville Lodging Company ("NLC"), an entity controlled by
Nelson. The Land purchase would be 100% seller-financed pursuant to a
non-recourse promissory note of the Partnership in the amount of $1,700,000. The
Court retained jurisdiction to enforce the terms of the SF Settlement.
Various disagreements between the Partnership and Nelson regarding the
meaning of several provisions of the SF Settlement arose after March 1993. A
major disagreement related to whether the SF Settlement required the Partnership
to purchase the Land subject to a certain lis pendens filed against the Land by
Orlando Residence Ltd. ("Orlando") (see the "Nashville Case I" below). In
February 1994, the Nelson Parties filed a motion to enforce the SF Settlement
which was granted and in June 1994, the Court ruled that the Partnership had
agreed to purchase the Land subject to the lis pendens filed by Orlando.
Following this ruling, the Partnership has attempted to negotiate and
enter into a settlement agreement and a land purchase agreement and related
agreements (the "Settlement Documents") among itself and Nelson and NLC and
another Nelson entity, 2300 Elm Hill Pike, Inc. ("2300"). To date, these
parties have not been able to reach agreement on all issues relating to the
Settlement Documents. Since June 1994, numerous appearances before the Court
have been made in an effort to resolve all issues regarding the Settlement
Documents, but as of the date hereof, the Settlement Documents had not been
completed or executed.
In July 1994, the Court in the Nashville Case I ruled that the Hotel had
been fraudulently conveyed to NLC by 2300 in 1986 and voided the conveyance.
Orlando may attempt to execute judgments against Nelson, NLC and 2300 on the
Land, which could deprive the Partnership of the benefits of the SF Settlement.
There is also some risk that consummation of the SF Settlement, which would
result in ownership of the Hotel and the Land being combined in the Partnership
while the Land may be subject to the lis pendens filed by Orlando and/or other
liens and judgments related to Nashville Case I, may adversely affect the
Partnership's equity interest in the Hotel. However, the Partnership does not
believe that consummation of the SF Settlement will have a material adverse
effect on the Partnership or on its equity interest in the Hotel.
Orlando Residence Ltd. vs. Metric Partners Growth Suite Investors, L.P. et
al., Chancery Court for Davidson County, in Nashville, Tennessee, Case No.
92-3086-III ("Nashville Case I")
2300 was the original owner of the Hotel (including the Land). In 1985,
2300's shareholders severed their business relationships and 2300 executed a
promissory note (the "Note") in favor of Orlando. 2300 defaulted on the Note
and in March 1990 Orlando obtained a judgment against 2300 on the Note. 2300
conveyed its interest in the Hotel (including the Land) to NLC in 1986. In
April 1989, NLC sold the Hotel and leased the Land to the Partnership.
In October 1992, Orlando filed this lawsuit against Nelson and NLC and
2300, and the Partnership, alleging that the sale of the Hotel and the Land by
2300 to NLC in 1986 and NLC's subsequent sale of the Hotel and lease of the Land
to the Partnership in 1989 were fraudulent conveyances, intended to hinder
Plaintiff's recovery of its Note judgment
Page 15 of 17
<PAGE> 16
against 2300. In August 1993, the Court dismissed this action against the
Partnership. Orlando has previously stated that it will appeal this judgment
for the Partnership.
The Partnership cross-claimed against NLC for indemnity and breach of
representations and warranties under the purchase and sale agreement between NLC
and the Partnership. In April 1995, the Court awarded judgment to the
Partnership against NLC for a portion of the Partnership's legal fees in this
case.
In July 1994, the Court ruled that the sale of the Hotel by 2300 to NLC
had been a fraudulent conveyance and voided this conveyance. In September 1994,
the Court entered judgment against Nelson, NLC and 2300 for approximately
$500,000. These rulings do not directly adversely affect the equity interest of
the Partnership in the Hotel or its leasehold interest in the Land. In
September 1995, punitive damages of $850,000 against Nelson, NLC and 2300 were
awarded to Plaintiff. All judgments in this case are expected to become final
on or about November 27, 1995, absent appeals.
Nashville Lodging Company vs. Metric Partners Growth Suite Investors, L.P.
et al., Circuit Court, State of Wisconsin, Case No. 94CV001212.
In February 1994, NLC served this lawsuit on the Partnership. NLC alleges
fraud, breach of settlement contract and breach of good faith and fair dealing
and seeks compensatory, punitive and exemplary damages in an unspecified amount
for the Partnership's failure to consummate the SF Settlement. In February
1994, the Partnership filed an answer and requested that the Court stay the
action pending resolution of the SF Lawsuit including all appeals. The Court
refused to stay the action and discovery commenced. In February 1995, the Court
determined that the Partnership could be sued in Wisconsin but stayed the case
until the settlement of the SF Lawsuit has been finalized.
Orlando Residence Ltd. vs. 2300 Elm Hill Pike, Inc. and Nashville Lodging
Company vs. Metric Partners Growth Suite Investors, L.P., Chancery Court for
Davidson County, in Nashville, Tennessee, Case No. 94-1911-I ("Nashville Case
II").
Orlando has filed an action against 2300 and NLC in the Davidson County
Chancery Court to attempt to execute on its judgment against Nelson, NLC and
2300 in Nashville Case I by subjecting the Land to sale. In May 1995, 2300 and
NLC filed a third-party complaint against the Partnership, alleging it had
refused to purchase the Land as required by the SF Settlement. 2300 and NLC
demand payment by the Partnership of 2300 and NLC's costs of defending
Nashville Case I and Nashville Case II and indemnification for any loss
resulting from the claims of Orlando.
In September 1995, the Court dismissed this action by Orlando against 2300
and NLC for lack of standing. However, the Court has refused to dismiss the
third-party action against the Partnership. Trial was scheduled for November
21, 1995, but has been continued to a date to be determined. 2300 and NLC have
filed a motion for partial summary judgment alleging that the Partnership is
liable for breach of the SF Settlement. A hearing on this motion is scheduled
for December 15, 1995. The Partnership does not believe that it could have
breached the SF Settlement since all essential terms of such settlement have not
yet been definitely determined.
The ultimate disposition of these lawsuits cannot be predicted at this
time; however, based solely on the facts known to it as of the date hereof, the
Partnership does not believe the lawsuits will have a material adverse effect on
the Partnership.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
No report on Form 8-K was required to be filed during the period covered
by this Report.
Page 16 of 17
<PAGE> 17
SIGNATURE
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.
METRIC PARTNERS GROWTH SUITE INVESTORS, L.P.,
A CALIFORNIA LIMITED PARTNERSHIP
By: Metric Realty
an Illinois general partnership
its Managing General Partner
By: Metric Realty Corp.
a Delaware corporation
its managing general partner
By: /s/ Margot M. Giusti
---------------------------
Margot M. Giusti
Executive Vice President, Finance and
Administration; Principal Financial
and Accounting Officer of Metric Realty Corp.
Date: November 9, 1995
Page 17 of 17
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-30-1995
<EXCHANGE-RATE> 1
<CASH> 5,281,000
<SECURITIES> 0
<RECEIVABLES> 1,081,000
<ALLOWANCES> 0
<INVENTORY> 800,000
<CURRENT-ASSETS> 0
<PP&E> 97,821,000
<DEPRECIATION> 30,689,000
<TOTAL-ASSETS> 74,294,000
<CURRENT-LIABILITIES> 3,120,000
<BONDS> 48,624,000
<COMMON> 0
0
0
<OTHER-SE> 22,550,000
<TOTAL-LIABILITY-AND-EQUITY> 74,294,000
<SALES> 0
<TOTAL-REVENUES> 19,423,000
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 19,345,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 78,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 78,000
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
