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, 1996
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
--- ---
Page 1 of 20
<PAGE>
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited).
METRIC PARTNERS GROWTH SUITE INVESTORS, L.P.,
a California Limited Partnership
BALANCE SHEETS (UNAUDITED)
September 30, December 31,
1996 1995
------------ ------------
ASSETS
CASH AND CASH EQUIVALENTS $ 3,358,000 $ 10,248,000
CASH INVESTMENTS 3,893,000 --
RESTRICTED CASH 308,000 302,000
ACCOUNTS RECEIVABLE 1,551,000 1,034,000
PREPAID EXPENSES AND OTHER ASSETS 201,000 196,000
PROPERTIES AND IMPROVEMENTS 89,668,000 87,885,000
ACCUMULATED DEPRECIATION (31,100,000) (28,935,000)
------------ ------------
NET PROPERTIES AND IMPROVEMENTS 58,568,000 58,950,000
DEFERRED FINANCING COSTS 85,000 127,000
DEFERRED FRANCHISE FEES 183,000 214,000
------------ ------------
TOTAL ASSETS $ 68,147,000 $ 71,071,000
============ ============
LIABILITIES AND PARTNERS' EQUITY
ACCOUNTS PAYABLE $ 1,105,000 $ 1,022,000
ACCRUED PROPERTY TAXES 515,000 391,000
ACCRUED INTEREST 253,000 344,000
OTHER LIABILITIES 1,658,000 1,095,000
DEFERRED GAIN ON SALE OF PROPERTY 300,000 300,000
NOTES PAYABLE 42,571,000 42,669,000
------------ ------------
TOTAL LIABILITIES 46,402,000 45,821,000
------------ ------------
PARTNERS' EQUITY (DEFICIENCY):
GENERAL PARTNERS 59,000 100,000
LIMITED PARTNERS (59,932 units outstanding) 21,686,000 25,150,000
------------ ------------
TOTAL PARTNERS' EQUITY 21,745,000 25,250,000
------------ ------------
TOTAL LIABILITIES AND PARTNERS' EQUITY $ 68,147,000 $ 71,071,000
============ ============
See notes to financial statements (unaudited).
Page 2 of 20
<PAGE>
<TABLE>
METRIC PARTNERS GROWTH SUITE INVESTORS, L.P.,
a California Limited Partnership
STATEMENTS OF OPERATIONS (UNAUDITED)
<CAPTION>
For the Nine Months Ended
September 30,
---------------------------
1996 1995
----------- -----------
<S> <C> <C>
REVENUES:
Hotel operations $17,639,000 $19,194,000
Interest and other 331,000 229,000
----------- -----------
Total revenues 17,970,000 19,423,000
----------- -----------
EXPENSES:
Hotel operations:
Rooms 3,480,000 3,801,000
Administrative 2,264,000 2,375,000
Marketing 1,948,000 1,848,000
Energy 907,000 1,015,000
Repair and maintenance 1,040,000 968,000
Management fees 632,000 997,000
Property taxes 551,000 688,000
Other 653,000 697,000
----------- -----------
Total hotel operations 11,475,000 12,389,000
Depreciation and other amortization 2,196,000 2,719,000
Interest 3,263,000 3,755,000
General and administrative 972,000 482,000
----------- -----------
Total expenses 17,906,000 19,345,000
----------- -----------
NET INCOME $ 64,000 $ 78,000
=========== ===========
NET INCOME PER LIMITED PARTNERSHIP ASSIGNEE UNIT $ 1 $-
=========== ===========
CASH DISTRIBUTIONS PER LIMITED PARTNERSHIP ASSIGNEE UNIT $ 58 $ 23
=========== ===========
</TABLE>
See notes to financial statements (unaudited).
Page 3 of 20
<PAGE>
<TABLE>
METRIC PARTNERS GROWTH SUITE INVESTORS, L.P.,
a California Limited Partnership
STATEMENTS OF OPERATIONS (UNAUDITED)
<CAPTION>
For the Three Months Ended
September 30,
---------------------------
1996 1995
----------- -----------
<S> <C> <C>
REVENUES:
Hotel operations $ 6,156,000 $ 6,561,000
Interest and other 107,000 80,000
----------- -----------
Total revenues 6,263,000 6,641,000
----------- -----------
EXPENSES:
Hotel operations:
Rooms 1,207,000 1,352,000
Administrative 743,000 898,000
Marketing 675,000 625,000
Energy 274,000 362,000
Repair and maintenance 336,000 337,000
Management fees 234,000 344,000
Property taxes 121,000 234,000
Other 198,000 240,000
----------- -----------
Total hotel operations 3,788,000 4,392,000
Depreciation and other amortization 718,000 891,000
Interest 1,084,000 1,252,000
General and administrative 435,000 188,000
----------- -----------
Total expenses 6,025,000 6,723,000
----------- -----------
NET INCOME (LOSS) $ 238,000 $ (82,000)
=========== ===========
NET INCOME (LOSS) PER LIMITED PARTNERSHIP ASSIGNEE UNIT $ 4 $ (1)
=========== ===========
CASH DISTRIBUTIONS PER LIMITED PARTNERSHIP ASSIGNEE UNIT $ 43 $ 8
=========== ===========
</TABLE>
See notes to financial statements (unaudited).
Page 4 of 20
<PAGE>
METRIC PARTNERS GROWTH SUITE INVESTORS, L.P.,
a California Limited Partnership
STATEMENTS OF PARTNERS' EQUITY (DEFICIENCY) (UNAUDITED)
For the Nine Months Ended September 30, 1996 and 1995
General Limited
Partner Partners Total
------------ ------------ ------------
BALANCE, JANUARY 1, 1996 $ 100,000 $ 25,150,000 $ 25,250,000
NET INCOME 30,000 34,000 64,000
CASH DISTRIBUTIONS (71,000) (3,498,000) (3,569,000)
------------ ------------ ------------
BALANCE, SEPTEMBER 30, 1996 $ 59,000 $ 21,686,000 $ 21,745,000
============ ============ ============
BALANCE, JANUARY 1, 1995 $ (68,000) $ 23,916,000 $ 23,848,000
NET INCOME (LOSS) 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
============ ============ ============
See notes to financial statements (unaudited).
Page 5 of 20
<PAGE>
<TABLE>
METRIC PARTNERS GROWTH SUITE INVESTORS, L.P.,
a California Limited Partnership
STATEMENTS OF CASH FLOWS (UNAUDITED)
<CAPTION>
For the Nine Months Ended
September 30,
----------------------------
1996 1995
------------ -----------
<S> <C> <C>
OPERATING ACTIVITIES
Net Income $ 64,000 $ 78,000
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 2,339,000 2,813,000
Cost associated with note payable change (see Footnote 5) 74,000 --
Changes in operating assets and liabilities:
Accounts receivable (517,000) (335,000)
Prepaid expenses and other assets (5,000) (47,000)
Accounts payable, accrued expenses, and other liabilities 679,000 882,000
------------ -----------
Net cash provided by operating activities 2,634,000 3,391,000
------------ -----------
INVESTING ACTIVITIES
Proceeds from sale of cash investment 1,969,000 --
Purchase of cash investments (5,862,000) (1,409,000)
Capital improvements (1,783,000) (1,608,000)
Restricted cash - increase (6,000) --
------------ -----------
Net cash used by investing activities (5,682,000) (3,017,000)
------------ -----------
FINANCING ACTIVITIES
Notes payable principal payments (273,000) (268,000)
Cash distribution to partners (3,569,000) (1,376,000)
------------ -----------
Cash used by financing activities (3,842,000) (1,644,000)
------------ -----------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (6,890,000) (1,270,000)
Cash and cash equivalents at beginning of period 10,248,000 5,142,000
------------ -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 3,358,000 $ 3,872,000
============ ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest paid in cash during the period $ 3,211,000 $ 3,636,000
============ ===========
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCIAL ACTIVITIES
Note payable increase (see Footnote 5) $ 74,000 $-
============ ===========
</TABLE>
See notes to financial statements (unaudited).
Page 6 of 20
<PAGE>
METRIC PARTNERS GROWTH SUITE INVESTORS, L.P.,
a California Limited Partnership
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1. Reference to 1995 Audited Financial Statements
These unaudited financial statements should be read in conjunction with
the Notes to Financial Statements included in the 1995 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:
For the Nine Months Ended
September 30,
-------------------------
1996 1995
-------- --------
Partnership management fees $133,000 $120,000
Reimbursement of administrative expenses 206,000 171,000
-------- --------
Total $339,000 $291,000
======== ========
3. Net Income (Loss) Per Limited Partnership Assignee Unit
The net income (loss) per limited partnership assignee unit is computed by
dividing the net income (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.
The cash investments at September 30, 1996 mature in February and March
1997 and bear interest at an effective rate of 5.7% per annum.
5. Note Payable and Land Lease
On April 15, 1996, the Partnership made a payment of approximately
$176,000 to the lender of the underlying mortgage of the wrap note on the
Residence Inn - Nashville (Airport). The payment was made to cure defaults
by that lender to the holder of the wrap note for non-payment of the debt
and impound payments due on January 1, 1996 and February 1, 1996. As
described in Part II Item 1 - Legal Proceedings, the Partnership is now
the direct obligor to the first note holder and the note payable balance
has been increased by $74,000, the difference between the balance of the
first note and the balance of the wrap note on April 15, 1996. The $74,000
cost incurred to prevent foreclosure and to eliminate the wrap note was
recorded in the second quarter of 1996 as a general and administrative
expense in these financial statements.
The terms of the first note vary slightly from those of the wrap note. The
interest rate is 9.5% per annum on the first note compared to 9.9433% on
the wrap note and monthly payments of interest and principal are
approximately $2,600 lower on the first note. Similar to the wrap note,
the first note matures in April 1998 and requires a balloon payment.
As a further consequence of the Partnership becoming a direct obligor to
the first note holder, the payments due under the land lease on Residence
Inn - Nashville (Airport) are reduced by $50,000 per year.
Page 7 of 20
<PAGE>
6. Adaption of Accounting Pronouncement
In March, 1995, the FASB issued Statement No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of." This Statement requires impairment losses to be recorded on long-
lived assets used in operations when indicators of impairment are present
and the undiscounted cash flows estimated to be generated by those assets
during the holding period are less than the assets' carrying amount.
Statement No. 121 also addresses the accounting for long-lived assets that
are expected to be disposed of. The Partnership adopted Statement No. 121
in the first quarter of 1996. No impairment losses were required to be
recorded as a result of adopting Statement No. 121.
7. Legal Proceedings
The Partnership is a plaintiff and counterclaim defendant in legal
proceedings relating to the management agreement at the Residence Inn -
Ontario, a defendant and counterclaim plaintiff in legal proceedings
seeking damages for alleged failure to consummate a settlement of the
Residence Inn - Ontario case, and a plaintiff and/or defendant in other
legal proceedings related to the Residence Inn - Nashville; see Part II,
Item 1, Legal Proceedings, for a detailed description of these matters.
Page 8 of 20
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
This Item should be read in conjunction with Financial Statements and other
Items contained elsewhere in this Report.
Properties
A description of the properties in which the Partnership has an ownership
interest, along with the occupancy and room rate data, follows:
<TABLE>
OCCUPANCY AND ROOM RATE SUMMARY
<CAPTION>
Average Average
Occupancy Rate (%) Daily Room Rate ($)
Nine Nine Three
Months Three Months Months Months
Date Ended Ended Ended Ended
of September 30, September 30, September 30, September 30,
Name and Location Rooms Purchase 1996 1995 1996 1995 1996 1995 1996 1995
----------------- ----- -------- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Residence Inn - Ontario 200 04/88 75 76 72 70 68.78 68.18 75.41 68.41
Ontario, California
Residence Inn - Fort Wayne 80 06/88 91 93 90 97 66.87 61.44 71.01 64.55
Fort Wayne, Indiana
Residence Inn - Columbus (East) 80 06/88 87 89 90 92 74.97 68.09 77.91 68.50
Columbus, Ohio
Residence Inn - Indianapolis (North) 88 06/88 81 81 86 86 78.76 76.46 80.57 78.72
Indianapolis, Indiana
Residence Inn - Lexington 80 06/88 93 82 95 88 70.19 72.51 73.51 72.76
Lexington, Kentucky
Residence Inn - Louisville 96 06/88 88 85 93 89 87.13 80.59 92.57 84.07
Louisville, Kentucky
Residence Inn - Winston-Salem 88 06/88 85 85 85 86 75.48 70.61 73.39 72.43
Winston-Salem, North Carolina
Residence Inn - Nashville (Airport) 168 05/89 77 79 85 80 78.58 77.97 92.46 80.88
Nashville, Tennessee
Residence Inn - Atlanta (1) 128 10/89 N/A 80 N/A 83 N/A 87.99 N/A 86.87
(Perimeter West)
Atlanta, Georgia
Residence Inn - Altamonte Springs 128 03/90 86 84 85 82 84.77 79.30 87.56 77.08
Altamonte Springs, Florida
</TABLE>
(1) Property was sold in October 1995.
Page 9 of 20
<PAGE>
Results of Operations
Net income decreased $14,000 in the first three quarters of 1996 compared to the
same period in 1995 due to increased loss at the Residence Inn - Nashville,
decreased income at the Residence Inn - Ontario and an increase in the
Partnership's general and administrative expenses which were mostly offset by
improved operations at the other seven of the Partnership's remaining
properties. Net income was $238,000 for the third quarter of 1996 compared to
net loss of $82,000 for the same period in 1995. The increase in operations
resulted from improvements at all but one of the Partnership's properties only
partially offset by an increase in the Partnership's general and administrative
expenses.
Revenues from hotel operations decreased 8% and 6% in the first three quarters
and third quarter of 1996, respectively, compared to the same periods in 1995
primarily due to the loss of income from the Residence Inn - Atlanta which was
only partially offset by 5% and 7% increases, for the first three quarters and
third quarter, respectively, in hotel operating revenues from the Partnership's
remaining nine hotels.
Hotel operating expenses decreased 7% and 14% in the first three quarters and
third quarter of 1996, respectively, compared to the same periods in 1995
primarily as a result of the sale of the Residence Inn - Atlanta. Hotel
operating expenses, exclusive of the effect of the sale of one hotel, increased
7% and 3% in the first three quarters and third quarter of 1996, respectively,
compared to the same periods in 1995 primarily due to a significant increase in
administrative, marketing and repair and maintenance expenses incurred at the
Residence Inn - Nashville to counteract weak market conditions and to enable the
hotel to maintain a competitive position in the challenging operating
environment. Also, administrative expenses at the Residence Inn - Nashville
increased due to the increase in the accrual, from $40,000 at December 31, 1995
to $181,000 (including estimated penalties and interest), for potential payments
to the State of Tennessee, as a result of a sales and use tax audit covering the
period 1989-1993 (see Residence Inn - Nashville, below). Overall management fee
expense decreased compared to 1995 due to the restructured agreements with
Marriott. Interest and other income increased by $102,000 and $27,000 in the
first three quarters and third quarter of 1996 when compared to the same periods
in 1995, primarily due to higher cash balances, specifically the proceeds from
the sale of the Residence Inn - Atlanta, invested in interest bearing
instruments. Depreciation and amortization decreased in 1996 when compared to
1995 due to the sale of one hotel in the fourth quarter of 1995 as well as fully
depreciated furnishings at certain of the other hotels. Interest expense in 1996
decreased when compared to 1995 due to the sale of the Residence Inn - Atlanta.
General and administrative expenses increased $490,000 and $247,000 in the first
three quarters and third quarter of 1996, respectively, when compared to 1995
primarily due to the write-off of a $193,000 receivable (as discussed below),
increases in legal costs associated with the Residence Inn - Nashville and
increases in administrative expenses. In addition, the $74,000 additional loan
obligation, assumed as a result of the Partnership becoming the direct obligor
on the first note on the Residence Inn - Nashville, was recorded as a
Partnership expense in the second quarter of 1996. See Footnote 5 to the
Financial Statements. The $193,000 receivable from a previous management company
of the Residence Inn - Ontario has been written off. It was previously
financially supported by the contemplated sale to the Partnership by an
affiliated entity of said management company (the owner until August 1996 of the
land whereupon the Residence Inn - Nashville is located, and with whom the
Partnership is involved in various litigations [see Part II, Item 1. Legal
Proceedings]) of such land, but collection is no longer deemed probable for
financial statement purposes only.
The Partnership continually monitors the markets where the hotels are located
and reviews potential opportunities for the sale of the properties. During the
second quarter of 1995, 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 proceeds from sale were added to the Partnership's
working capital reserve. On August 15, 1996, a portion of the proceeds from this
sale, in the amount of approximately $2,000,000, was distributed pro rata to the
assignee limited partnership unit holders as of July 31, 1996. The General
Partners received a distribution of approximately $41,000 as their allocated
share of these proceeds as per the terms of the Partnership Agreement. The
remaining proceeds will continue to be held in reserve for the Partnership's
future capital improvement and working capital needs.
During the second and third quarters of 1995 the Partnership worked with
Marriott in an effort to restructure contracts on certain Partnership hotels
under their management. An agreement was reached whereby Marriott reduced
overall management fees, as well as the length of the contract terms. In
addition, the Partnership is permitted to terminate the contract after a
five-year term in connection with a sale of the hotels. A termination fee would
be payable if the
Page 10 of 20
<PAGE>
purchaser were not to continue the Residence Inn by Marriott franchise. In
exchange, the Partnership executed new agreements with Marriott for the
management of the Residence Inns located in Altamonte Springs, Nashville, and
Ontario. Effective January 1, 1996, Marriott manages all nine of the
Partnership's remaining hotels. The following discussion provides information
concerning the operations of the Partnership's nine remaining hotels.
Residence Inn - Ontario: Room revenues increased slightly for the first three
quarters of 1996 in comparison to the same period of 1995, which was offset by a
3% increase in hotel operating expenses. Occupancy and room rates remained
relatively unchanged. The hotel market in Southern California is extremely
competitive as other extended-stay hotels consistently discount rates.
Management continues to focus marketing efforts on securing business from the
numerous large construction projects in the area, as well as on expanding its
base of government business.
Residence Inn - Columbus East: Room revenues increased by 8% for the first three
quarters of 1996 as compared to the same period of 1995, due primarily to an
increase in average daily room rates (the largest increase in the portfolio-
$6.88). Occupancy declined two percentage points. The local economy appears to
be growing, with construction beginning on a large shopping mall seven miles
from the Residence Inn. Although the property continues to maintain a strong
market position, several new hotels are under construction in the area. The
current marketing strategy is aimed at attracting new clients in an attempt to
replace lower rated government business.
Residence Inn - Fort Wayne: Room revenues increased by 6% for the first three
quarters of 1996 as compared to the same period of the prior year, resulting
primarily from an increase of $5.43 in the average daily room rate. Occupancy
declined by two percentage points. Operating expenses increased by 4% resulting
primarily from increased room operating costs, marketing and administrative
expenses and repair and maintenance costs, which were partially offset by lower
management fees and property taxes. The local economy remains strong; however,
competition is intensifying within the hotel market. Management is currently
directing marketing efforts towards high quality customer service to maintain
and expand business from its existing corporate client base.
Residence Inn - Indianapolis (North): Room revenues increased by 3% for the
first three quarters of 1996 in comparison to the same period of last year,
while expenses declined 4%. Occupancy remained stable and average daily room
rates increased $2.30. The overall economy in the Indianapolis area remains
stable with conservative growth anticipated. Competition is increasing in the
marketplace, however, with several hotels currently under construction. The
sales staff is concentrating on increasing the occupancy rate by focusing on
extended-stay business from both existing and new clients.
Residence Inn - Lexington: Room revenues increased 10% during the first three
quarters of 1996 as compared to the same period of 1995, due primarily to an
improvement of 11% in occupancy (the largest increase in the portfolio). The
increase in room revenues was offset in part by a 7% increase in expenses, the
majority arising from higher marketing and administrative costs, which were
offset in part by lower management fees and room operating expenses. Competition
is growing in the Lexington market, with one competitor building a new
extended-stay hotel within a mile of the Partnership's property. The marketing
strategy is focused on increasing business from the hotel's current largest
clients through exemplary customer service and attention, while attempting to
attract new business from companies relocating to or conducting training in the
area.
Residence Inn - Louisville: Room revenues increased by 12% for the first quarter
of 1996, as occupancy improved by 3% and average daily room rates by $6.54 in
comparison to the first three quarters of 1995. Hotel operating expenses
increased by 6.5% primarily due to increased room maintenance costs and higher
marketing expenses. Competition in the market remains strong, with three new
extended-stay hotels expected to open during the first half of 1997. Sales and
marketing efforts will be focused on retaining and expanding business from
existing clients.
Residence Inn - Winston-Salem: Room revenues increased by 6% resulting from an
increase in average daily room rates of $4.87, while occupancy remained stable
for the first three quarters of 1996 as compared to the same period of 1995.
Operating expenses increased by 8%, attributable mainly to increased room
operating and marketing expenses, which were only partially offset by lower
management fees. The local economy is experiencing the effects of a change from
an industrial to a service base, and several businesses are relocating from the
area. Marketing efforts are focused on capturing business from other large
corporate clients as the hotel's current largest client is reducing its
operations in the area.
Page 11 of 20
<PAGE>
Residence Inn - Nashville (Airport): Room revenues, occupancy rates, and average
daily room rates remained relatively unchanged for the first nine months of 1996
as compared to the same period of 1995. Operating expenses increased by 21% due
in part to high repair and maintenance costs necessary to enable the hotel to
maintain market position, and to the increased accrual for the potential payment
of a sales and use tax assessed against the property by the State of Tennessee
(currently $181,000, including estimated penalties and interest) covering the
period from 1989 to 1993. The Partnership has filed a complaint with the State
disputing this tax, which remains unresolved. Competition is increasing in the
already difficult market, as other owners and managers are dramatically
discounting rates to capture business. The economy remains strong which may
absorb some of the pressure in the hotel market, including that from hotels
currently under construction.
Residence Inn - Altamonte Springs: Room revenues increased by nearly 10% for the
first three quarters of 1996 as compared to the same period of 1995, due to an
increase in occupancy of 2% and an increase in average daily room rates of
$5.47. Hotel operating expenses increased by 5%, resulting from significantly
higher marketing and administrative expenditures, which were only partially
offset by lower room operating expenses. Many large new businesses are locating
to the area which has increased the demand in the hotel market. Competition is
increasing, however, with several new extended-stay hotels either planned or
currently under construction in the area. Marketing efforts are focused on
capturing new business from relocations and training programs.
Partnership Liquidity and Capital Resources
First Three Quarters of 1996
As presented in the Statement of Cash Flows, cash was provided by operating
activities. Cash was provided from investing activities from the sale of
investments and 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 1996 and 1995 (as shown in the tables on pages 14 and 15) 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 1996, eight of the Partnership's nine remaining hotel
properties generated positive project operations before deduction for capital
improvements, while the Residence Inn - Nashville (Airport) experienced negative
operations. 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 1996, the Partnership spent $1,783,000 on capital
improvements. The majority was spent on room renovations at the Residence Inns -
Fort Wayne, Indianapolis, Winston-Salem, Nashville and Louisville. In addition,
capital was spent on stairway work and exterior painting at the Residence Inn -
Lexington and Indianapolis, doors and entry way improvements at the Residence
Inn - Fort Wayne, HVAC units at the Residence Inn - Louisville and for lock
upgrades at the Residence Inns - Columbus, Indianapolis, Lexington, Louisville
and Winston Salem. Voice mail systems were put into place at the Residence Inns
- - Altamonte Springs and Nashville. In the remainder of 1996, the Partnership
anticipates spending approximately $1,092,000 on capital improvements. These
improvements are necessary to keep properties competitive in their respective
markets and necessary under the management agreements.
In accordance with, and as is customary in the management of hotels, a
percentage of revenues is 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 part of the Partnership's
approved capital expenditure budgets. 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.
Page 12 of 20
<PAGE>
The Partnership became aware that on February 12, 1996, a third party made an
unsolicited offer, to a large number of unit holders of the Partnership, to
purchase up to 1,200 units, representing approximately 2% of the outstanding
units, at a price of $205 per unit. Under applicable securities laws, the
Partnership was required to notify its investors of the Partnership's views
regarding this offer. A letter dated February 15, 1996 was provided to investors
in fulfillment of that requirement. It should be noted that the Partnership did
not take a position with respect to the offer but rather advised the holders of
the assignee limited partnership units to consult their personal financial
advisors on the matter, as the desirability of the offer to any unit holder
could differ greatly depending upon such unit holder's financial, tax, and other
individual circumstances.
Unit holders were also advised that the Partnership and its Transfer Agent would
take such action as the Partnership deemed appropriate to ensure that resale
transactions did not result in the termination of the Partnership for tax
purposes, cause the Partnership to be classified as a publicly traded
partnership or cause the Partnership to be taxed as a corporation. In order to
protect its status as a partnership for federal income tax purposes, secondary
market activity in its units will be limited to less than 5% of the outstanding
units per year.
Gemisys, the Partnership's Transfer Agent, informed the Partnership that resale
transactions of Assignee Units in the Partnership reached 4.9 percent as of
April 9, 1996 which is near the five percent maximum percentage which, under IRS
guidance, may be traded in a calendar year without jeopardizing the
Partnership's tax status. In order to protect its tax status as a partnership
for Federal income tax purposes, the Partnership informed Gemisys that it would
no longer recognize resales of limited partnership assignee units in 1996.
Investors were notified of such suspension of trading in accordance with Section
12.3 of the Partnership Agreement by way of a special communication dated April
10, 1996.
Conclusion
The Partnership established an estimated value for the assignee units in the
Partnership as of December 31, 1995. 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, which was selected by the appraiser and, not pursuant to any
instructions from the Partnership, was the income approach to value utilizing a
discounted cash flow analysis. 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
book value of other Partnership assets, has resulted in an estimated net asset
value of each assignee unit of $521 as of December 31, 1995. 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.
This valuation is an estimate of the assignee unit value only which has been
made as of December 31, 1995 based on the methodology described herein and does
not represent a market value. 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 liquid 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. Resale transactions of which the Partnership
has knowledge reflect prices ranging from $200 to $340 in 1996 (through April 9,
1996). In 1995, sixty-five resale transactions of which the Partnership had
knowledge were recorded at a simple average price (not weighted) of $244 per
assignee unit. The Partnership's knowledge of these transactions is based solely
on the books and records of its Transfer Agent.
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 quarter of 1996 was made at an
annualized rate of 3%. A cash distribution for the second quarter of 1996 was
made at an annualized rate of 4%. A cash distribution for the third quarter of
1996 will be made at an annualized rate of 4% on or about November 15, 1996.
Cash distributions for 1995 were made quarterly, at an annualized rate of 3%. On
August 15, 1996, a portion of the proceeds from the sale of the Residence
Inn-Atlanta (Perimeter West), in the amount of $2,041,000, was distributed to
the assignee limited partnership unit holders and the General Partners.
Page 13 of 20
<PAGE>
<TABLE>
METRIC PARTNERS GROWTH SUITE INVESTORS, L.P.
a California Limited Partnership
Project Operations of the Residence Inns for
the Nine Months Ended September 30, 1996
(000's)
<CAPTION>
Columbus Fort
Ontario (East) Wayne Indianapolis Lexington Louisville
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
REVENUES:
Hotel operations:
Rooms $ 2,831 $ 1,320 $ 1,229 $ 1,410 $ 1,323 $ 1,850
Telephone and other 183 59 73 64 100 113
------- ------- ------- ------- ------- -------
Hotel operations 3,014 1,379 1,302 1,474 1,423 1,963
Interest and other 0 0 0 0 0 0
------- ------- ------- ------- ------- -------
Total revenues 3,014 1,379 1,302 1,474 1,423 1,963
------- ------- ------- ------- ------- -------
EXPENSES:
Hotel operations:
Rooms 506 298 250 329 239 337
Administrative 340 179 159 191 212 185
Marketing 334 131 142 174 167 214
Energy 168 76 68 75 67 70
Repair and maintenance 155 78 67 86 95 87
Management fees 90 52 51 44 43 81
Property taxes 69 45 8 56 36 58
Other 119 47 39 30 52 58
------- ------- ------- ------- ------- -------
Hotel operations 1,781 906 784 985 911 1,090
Depreciation and other
amortization 378 163 163 196 194 224
Interest 641 208 218 253 246 284
General and administrative 0 0 0 0 0 0
------- ------- ------- ------- ------- -------
Total expenses 2,800 1,277 1,165 1,434 1,351 1,598
------- ------- ------- ------- ------- -------
NET INCOME(LOSS) 214 102 137 40 72 365
Plus non-cash items - net 378 166 167 200 198 228
Less notes payable
principal payments 3 14 14 16 16 18
------- ------- ------- ------- ------- -------
Project operations 589 254 290 224 254 575
Capital Improvements 51 55 249 289 196 186
------- ------- ------- ------- ------- -------
Project operations after
capital improvements $ 538 $ 199 $ 41 ($ 65) $ 58 $ 389
======= ======= ======= ======= ======= =======
Occupancy 75% 87% 91% 81% 93% 88%
ADR $ 68.78 $ 74.97 $ 66.87 $ 78.76 $ 70.19 $ 87.13
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Winston Altamonte
Salem Nashville Atlanta Springs Partnership Total
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
REVENUES:
Hotel operations:
Rooms $ 1,419 $ 2,839 $ 0 $ 2,552 $ 0 $16,773
Telephone and other 83 105 0 86 0 866
------- ------- ------- ------- ------- -------
Hotel operations 1,502 2,944 0 2,638 0 17,639
Interest and other 0 0 0 0 331 331
------- ------- ------- ------- ------- -------
Total revenues 1,502 2,944 0 2,638 331 17,970
------- ------- ------- ------- ------- -------
EXPENSES:
Hotel operations:
Rooms 310 688 0 523 0 3,480
Administrative 190 526 (8) 290 0 2,264
Marketing 168 342 0 276 0 1,948
Energy 79 175 0 129 0 907
Repair and maintenance 100 251 0 121 0 1,040
Management fees 61 88 0 122 0 632
Property taxes 44 85 18 132 0 551
Other 43 202 0 63 0 653
------- ------- ------- ------- ------- -------
Hotel operations 995 2,357 10 1,656 0 11,475
Depreciation and other
amortization 192 373 0 313 0 2,196
Interest 250 655 0 508 0 3,263
General and administrative 0 0 0 0 972 972
------- ------- ------- ------- ------- -------
Total expenses 1,437 3,385 10 2,477 972 17,906
------- ------- ------- ------- ------- -------
NET INCOME(LOSS) 65 (441) (10) 161 (641) 64
Plus non-cash items - net 196 373 0 433 0 2,339
Less notes payable
principal payments 16 99 0 77 0 273
------- ------- ------- ------- ------- -------
Project operations 245 (167) (10) 517 (641) 2,130
Capital Improvements 329 345 0 83 0 1,783
------- ------- ------- ------- ------- -------
Project operations after
capital improvements ($ 84) ($ 512) ($ 10) $ 434 ($ 641) $ 347
======= ======= ======= ======= ======= =======
Occupancy 85% 77% 0% 86% 83%
ADR $ 75.48 $ 78.58 $ 0.00 $ 84.77 $ 76.16
</TABLE>
Page 14 of 20
<PAGE>
<TABLE>
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)
<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
======= ======= ======= ======= ======= =======
Occupancy 76% 89% 93% 81% 82% 85%
ADR $ 68.18 $ 68.09 $ 61.44 $ 76.46 $ 72.51 $ 80.59
</TABLE>
<PAGE>
<TABLE>
<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
======= ======= ======= ======= ======= =======
Occupancy 85% 79% 80% 84% 82%
ADR $ 70.61 $ 77.97 $ 87.99 $ 79.30 $ 74.69
</TABLE>
Page 15 of 20
<PAGE>
<TABLE>
METRIC PARTNERS GROWTH SUITE INVESTORS, L.P.
a California Limited Partnership
Project Operations of the Residence Inns for
the Three Months Ended September 30, 1996
(000's)
<CAPTION>
Columbus Fort
Ontario (East) Wayne Indianapolis Lexington Louisville
----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
REVENUES:
Hotel operations:
Rooms $ 913 $ 469 $ 432 $ 512 $ 470 $ 696
Telephone and other 58 17 25 24 32 32
----- ----- ----- ----- ----- -----
Hotel operations 971 486 457 536 502 728
Interest and other 0 0 0 0 0 0
----- ----- ----- ----- ----- -----
Total revenues 971 486 457 536 502 728
----- ----- ----- ----- ----- -----
EXPENSES:
Hotel operations:
Rooms 177 106 86 117 86 126
Administrative 107 52 69 65 49 68
Marketing 118 44 47 61 54 79
Energy 52 26 16 18 18 24
Repair and maintenance 59 27 28 21 30 28
Management fees 29 25 25 16 15 38
Property taxes 14 13 (61) 19 12 19
Other 39 12 11 8 16 16
----- ----- ----- ----- ----- -----
Hotel operations 595 305 221 325 280 398
Depreciation and other
amortization 127 54 56 68 65 76
Interest 213 69 72 84 82 94
General and administrative 0 0 0 0 0 0
----- ----- ----- ----- ----- -----
Total expenses 935 428 349 477 427 568
----- ----- ----- ----- ----- -----
NET INCOME(LOSS) 36 58 108 59 75 160
Plus non-cash items - net 127 54 58 69 66 77
Less notes payable
principal payments 0 5 5 5 5 6
----- ----- ----- ----- ----- -----
Project operations 163 107 161 123 136 231
Capital Improvements 23 6 222 198 40 38
----- ----- ----- ----- ----- -----
Project operations after
capital improvements $ 140 $ 101 ($ 61) ($ 75) $ 96 $ 193
===== ===== ===== ===== ===== =====
Occupancy 72% 90% 90% 86% 95% 93%
ADR $75.41 $77.91 $71.01 $80.57 $73.51 $92.57
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Winston Altamonte
Salem Nashville Atlanta Springs Partnership Total
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
REVENUES:
Hotel operations:
Rooms $ 462 $ 1,114 $ 0 $ 803 $ 0 $ 5,871
Telephone and other 27 40 0 30 0 285
------- ------- ------- ------- ------- -------
Hotel operations 489 1,154 0 833 0 6,156
Interest and other 0 0 0 0 107 107
------- ------- ------- ------- ------- -------
Total revenues 489 1,154 0 833 107 6,263
------- ------- ------- ------- ------- -------
EXPENSES:
Hotel operations:
Rooms 104 229 0 176 0 1,207
Administrative 56 166 0 111 0 743
Marketing 54 129 0 89 0 675
Energy 21 63 0 36 0 274
Repair and maintenance 35 69 0 39 0 336
Management fees 20 34 0 32 0 234
Property taxes 15 28 18 44 0 121
Other 13 63 0 20 0 198
------- ------- ------- ------- ------- -------
Hotel operations 318 781 18 547 0 3,788
Depreciation and other
amortization 66 117 0 89 0 718
Interest 83 216 0 171 0 1,084
General and administrative 0 0 0 0 435 435
------- ------- ------- ------- ------- -------
Total expenses 467 1,114 18 807 435 6,025
------- ------- ------- ------- ------- -------
NET INCOME(LOSS) 22 40 (18) 26 (328) 238
Plus non-cash items - net 68 117 0 131 (74) 693
Less notes payable
principal payments 5 30 0 26 0 87
------- ------- ------- ------- ------- -------
Project operations 85 127 (18) 131 (402) 844
Capital Improvements 272 114 0 29 0 942
------- ------- ------- ------- ------- -------
Project operations after
capital improvements ($ 187) $ 13 ($ 18) $ 102 ($ 402) ($ 98)
======= ======= ======= ======= ======= =======
Occupancy 85% 85% 85% 85%
ADR $ 73.39 $ 92.46 $ 87.56 $ 81.55
</TABLE>
Page 16 of 20
<PAGE>
<TABLE>
METRIC PARTNERS GROWTH SUITE INVESTORS, L.P.
a California Limited Partnership
Project Operations of the Residence Inns for
the Three Months Ended September 30, 1995
(000's)
<CAPTION>
Columbus Fort
Ontario (East) Wayne Indianapolis Lexington Louisville
----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
REVENUES:
Hotel operations:
Rooms $ 873 $ 421 $ 419 $ 501 $ 429 $ 601
Telephone and other 61 11 26 26 33 37
----- ----- ----- ----- ----- -----
Hotel operations 934 432 445 527 462 638
Interest and other 10 0 0 0 0 0
----- ----- ----- ----- ----- -----
Total revenues 944 432 445 527 462 638
----- ----- ----- ----- ----- -----
EXPENSES:
Hotel operations:
Rooms 154 91 76 107 90 103
Administrative 86 76 41 58 49 60
Marketing 103 42 38 49 40 62
Energy 76 26 21 27 17 25
Repair and maintenance 49 29 16 34 27 27
Management fees 38 28 29 34 30 41
Property taxes 24 20 18 18 13 20
Other 60 12 10 11 14 18
----- ----- ----- ----- ----- -----
Hotel operations 590 324 249 338 280 356
Depreciation and other
amortization 124 54 53 60 58 71
Interest 214 70 74 85 83 95
General and administrative 0 0 0 0 0 0
----- ----- ----- ----- ----- -----
Total expenses 928 448 376 483 421 522
----- ----- ----- ----- ----- -----
NET INCOME(LOSS) 16 (16) 69 44 41 116
Plus non-cash items - net 114 55 54 62 59 72
Less notes payable
principal payments 2 4 5 5 4 6
----- ----- ----- ----- ----- -----
Project operations 128 35 118 101 96 182
Capital Improvements 102 115 133 71 84 76
----- ----- ----- ----- ----- -----
Project operations after
capital improvements $ 26 ($ 80) ($ 15) $ 30 $ 12 $ 106
===== ===== ===== ===== ===== =====
Occupancy 70% 92% 97% 86% 88% 89%
ADR $68.41 $68.50 $64.55 $78.72 $72.76 $84.07
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Winston Altamonte
Salem Nashville Atlanta Springs Partnership Total
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
REVENUES:
Hotel operations:
Rooms $ 461 $ 1,004 $ 775 $ 739 $ 0 $ 6,223
Telephone and other 29 45 35 35 0 338
------- ------- ------- ------- ------- -------
Hotel operations 490 1,049 810 774 0 6,561
Interest and other 0 0 4 0 66 80
------- ------- ------- ------- ------- -------
Total revenues 490 1,049 814 774 66 6,641
------- ------- ------- ------- ------- -------
EXPENSES:
Hotel operations:
Rooms 101 242 197 191 0 1,352
Administrative 62 104 283 79 0 898
Marketing 36 104 80 71 0 625
Energy 20 57 46 47 0 362
Repair and maintenance 27 53 32 43 0 337
Management fees 32 32 41 39 0 344
Property taxes 17 30 27 47 0 234
Other 17 69 15 14 0 240
------- ------- ------- ------- ------- -------
Hotel operations 312 691 721 531 0 4,392
Depreciation and other
amortization 61 133 121 156 0 891
Interest 83 224 155 169 0 1,252
General and administrative 0 0 0 0 188 188
------- ------- ------- ------- ------- -------
Total expenses 456 1,048 997 856 188 6,723
------- ------- ------- ------- ------- -------
NET INCOME(LOSS) 34 1 (183) (82) (122) (82)
Plus non-cash items - net 63 134 120 193 0 926
Less notes payable
principal payments 5 28 10 20 0 89
------- ------- ------- ------- ------- -------
Project operations 92 107 (73) 91 (122) 755
Capital Improvements 13 41 12 26 0 673
------- ------- ------- ------- ------- -------
Project operations after
capital improvements $ 79 $ 66 ($ 85) $ 65 ($ 122) $ 82
======= ======= ======= ======= ======= =======
Occupancy 86% 80% 83% 82% 83%
ADR $ 72.43 $ 80.88 $ 86.87 $ 77.08 $ 75.80
</TABLE>
Page 17 of 20
<PAGE>
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 four 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 disputes in connection with management of the
Partnership's Residence Inn - Ontario by an entity controlled by Kenneth E.
Nelson ("Nelson") from April 1988 to February 1991. In March 1993, the
Partnership and Nelson verbally agreed to settle the SF Lawsuit at a settlement
conference (the "SF Settlement"), whereby the Partnership would 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. Various disagreements between the
Partnership and Nelson regarding the SF Settlement arose after March 1993 and
documents to effectuate the SF Settlement were never completed or executed.
In July 1994, the Court in the Nashville Case I, discussed below, ruled that the
Hotel had been fraudulently conveyed to NLC in 1986 and voided the conveyance.
The Court in the Nashville Case I ordered a sale of the Land, subject to all
prior encumbrances, including the ground lease of the Land by the Partnership
(the "Lease"). As discussed in more detail below (see "Nashville Case I"),
subsequent to a judicial sale held on July 24, 1996, the Court ruled in a
confirmation hearing held in August 1996 that the Land would be sold to Orlando
Residence, Ltd ("Orlando"). Unless NLC regains ownership of the Land, the
Partnership will not be able to purchase the Land as agreed in the SF
Settlement. The Partnership will ask the Court in the SF Lawsuit to resolve the
remaining issues related to the SF Settlement.
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 Elm Hill Pike, Inc. ("2300") (formerly known as Nashville Residence
Corporation until 1986) was the original owner of the Hotel (including the
Land). 2300 conveyed its interest in the Hotel (including the Land) to NLC in
1986 by unrecorded quitclaim deed. In April 1989, NLC sold the Hotel and leased
the Land to the Partnership pursuant to the Lease.
In October 1992, Orlando filed this lawsuit against NLC and its general partners
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 a judgment against 2300. In August 1993, the Court dismissed this
action against the Partnership. The Partnership's only material continuing
interest in the case is its effect on ownership of the Land and the Lease.
In August 1994, the Court held that the sale of the Hotel by 2300 to NLC was a
fraudulent conveyance and voided the conveyance. The defendants appealed the
judgment for Orlando in this case to the Tennessee Court of Appeals, but the
judgment was not stayed pending appeal. Oral argument on this appeal was held on
November 1, 1996, but no decision has yet been rendered.
Orlando requested and the Court ordered a judicial sale of the Land, with the
sale subject to encumbrances of record, including the Lease. The sale is a
credit sale, with the purchase price due in six months. This sale was held on
July 24, 1996. At a confirmation hearing in August 1996, the Court ordered the
Land to be sold to Orlando. He further ordered that Orlando was to become the
landlord under the Lease. In addition, an affiliate of Nelson's has the right to
purchase the Land from Orlando prior to January 24, 1997 for $1,500,000 cash
plus interest at the legal rate from July 24, 1996.
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
Page 18 of 20
<PAGE>
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 filed this 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 II and
indemnification for any loss resulting from the claims of Orlando, among other
claims of damage.
In February 1996, the Court granted a motion filed by 2300 and NLC for partial
summary judgement, ruling that the Partnership had breached the SF Settlement.
The action will continue to determine damages and other issues. The Partnership
does not believe it breached the SF Settlement and will appeal this ruling at an
appropriate time. However, no assurance can be given that its appeal will be
successful. In any event, the Partnership does not believe that any damages it
might ultimately be required to pay in this action will have a material adverse
effect on the Partnership.
In June 1996, the Partnership filed a counterclaim, claiming damages for the
failure of NLC to complete the SF Settlement. The Partnership also added the
general partners of NLC as additional counterclaim defendants to the case. In
July 1996, the counterclaim defendants filed an answer to the counterclaim and a
motion for summary judgment dismissing the counterclaim. A hearing on this
motion has not yet been held.
Metric Partners Growth Suite Investors, L.P., vs. Nashville Lodging Co., 2300
Elm Hill Pike, Inc., Orlando Residence, Ltd., and LaSalle National Bank, as
trustee under that certain pooling and servicing agreement, dated July 11, 1995,
for the holders of the WHP Commercial Mortgage Pass Through Certificates, Series
1995C1 and Robert Holland, Trustee, Chancery Court for Davidson County, in
Nashville, Tennessee, Case No. 96-1405-III ("Nashville Case III").
GSI filed this action May 3, 1996 to obtain, among other things, a judicial
determination of the rights and obligations of GSI and NLC under the senior
mortgage on the Hotel ("Senior Mortgage"), a note held by NLC "wrapped around"
the Senior Mortgage (the "Wrap Note") and the Lease as a consequence of GSI's
cure of certain defaults by NLC under the Senior Mortgage. GSI believes that as
a result of such cure, it has become the direct obligor to the lender under the
Senior Mortgage and that the Wrap Note has been satisfied and the payments due
under the Lease reduced by $50,000 per year. GSI also seeks preliminary and
permanent injunctive relief to prevent NLC from attempting to accelerate or
foreclose the Wrap Note and/or from attempting to enforce any remedies with
regard to the Lease in connection with this matter and a judgment establishing
that GSI is the owner of the Hotel, subject only to the Lease and certain
specified security interests.
In May 1996, the Partnership obtained a temporary injunction staying NLC from
undertaking any efforts to exercise any remedies pursuant to the Wrap Note or
the Lease. NLC and 2300 filed an answer in June, together with a counterclaim
against the Partnership. NLC and 2300 claimed damages from the Partnership and
asked the Court to permit acceleration of the Wrap Note and termination of the
Lease. In July 1996, the Partnership filed a motion for summary judgment in this
case, asking that the Court award the relief sought by it and that the Court
dismiss the counterclaim of NLC and 2300. At a hearing on this motion held in
August 1996 the Court granted the Partnership's motion. The defendants have
purported to appeal from this ruling.
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
(a) No reports on Form 8-K were required to be filed during the period
covered by this Report. On February 27, 1996, the Form 8-K, originally
filed on October 3, 1995, reporting the disposition of the Residence
Inn-Atlanta (Perimeter West), was amended to include additional
information concerning the disposition of the asset.
Page 19 of 20
<PAGE>
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 11, 1996
---------------------------
Page 20 of 20
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 7,251,000
<SECURITIES> 0
<RECEIVABLES> 1,551,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 9,003,000
<PP&E> 89,668,000
<DEPRECIATION> 31,100,000
<TOTAL-ASSETS> 68,147,000
<CURRENT-LIABILITIES> 3,531,000
<BONDS> 42,571,000
0
0
<COMMON> 0
<OTHER-SE> 21,745,000
<TOTAL-LIABILITY-AND-EQUITY> 67,847,000
<SALES> 0
<TOTAL-REVENUES> 17,639,000
<CGS> 0
<TOTAL-COSTS> 11,475,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,263,000
<INCOME-PRETAX> 64,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-PRIMARY> 64,000.00
<EPS-DILUTED> 1.00
</TABLE>
