UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- --- EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
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 Identification No.)
incorporation or organization)
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 17
<PAGE>
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited).
METRIC PARTNERS GROWTH SUITE INVESTORS, L.P.,
a California Limited Partnership
BALANCE SHEETS (UNAUDITED)
March 31, December 31,
1997 1996
---- ----
ASSETS
CASH AND CASH EQUIVALENTS $ 7,230,000 $ 3,436,000
CASH INVESTMENTS -- 3,893,000
RESTRICTED CASH 322,000 308,000
ACCOUNTS RECEIVABLE 564,000 715,000
PREPAID EXPENSES AND OTHER ASSETS 137,000 209,000
PROPERTIES AND IMPROVEMENTS 90,746,000 90,456,000
ACCUMULATED DEPRECIATION (32,566,000) (31,825,000)
------------ ------------
NET PROPERTIES AND IMPROVEMENTS 58,180,000 58,631,000
DEFERRED FINANCING COSTS 60,000 73,000
DEFERRED FRANCHISE FEES 160,000 171,000
------------ ------------
TOTAL ASSETS $ 66,653,000 $ 67,436,000
============ ============
LIABILITIES AND PARTNERS' EQUITY
ACCOUNTS PAYABLE $ 994,000 $ 1,107,000
ACCRUED PROPERTY TAXES 294,000 311,000
ACCRUED INTEREST 273,000 263,000
OTHER LIABILITIES 1,271,000 1,347,000
DEFERRED GAIN ON SALE OF PROPERTY 300,000 300,000
NOTES PAYABLE 42,464,000 42,518,000
------------ ------------
TOTAL LIABILITIES 45,596,000 45,846,000
------------ ------------
PARTNERS' EQUITY (DEFICIENCY):
GENERAL PARTNERS 59,000 59,000
LIMITED PARTNERS (59,932 Units outstanding) 20,998,000 21,531,000
------------ ------------
TOTAL PARTNERS' EQUITY 21,057,000 21,590,000
------------ ------------
TOTAL LIABILITIES AND PARTNERS' EQUITY $ 66,653,000 $ 67,436,000
============ ============
See notes to financial statements (unaudited).
Page 2 of 17
<PAGE>
METRIC PARTNERS GROWTH SUITE INVESTORS, L.P.,
a California Limited Partnership
STATEMENTS OF OPERATIONS (UNAUDITED)
For the Three Months Ended
March 31,
--------------------------
1997 1996
---- ----
REVENUES:
Hotel operations $ 5,712,000 $ 5,407,000
Interest and other 102,000 112,000
----------- -----------
Total revenues 5,814,000 5,519,000
----------- -----------
EXPENSES:
Hotel operations:
Rooms 1,162,000 1,138,000
Administrative 685,000 696,000
Marketing 636,000 625,000
Energy 336,000 347,000
Repair and maintenance 313,000 325,000
Management fees 220,000 199,000
Property taxes 154,000 191,000
Other 223,000 240,000
----------- -----------
Total hotel operations 3,729,000 3,761,000
Depreciation and other amortization 752,000 764,000
Interest 1,083,000 1,093,000
General and administrative 172,000 219,000
----------- -----------
Total expenses 5,736,000 5,837,000
----------- -----------
NET INCOME (LOSS) $ 78,000 $ (318,000)
=========== ===========
NET INCOME (LOSS) PER LIMITED PARTNERSHIP
ASSIGNEE UNIT $ 1 $ (5)
=========== ===========
CASH DISTRIBUTIONS PER LIMITED PARTNERSHIP
ASSIGNEE UNIT $ 10 $ 8
=========== ===========
See notes to financial statements (unaudited).
Page 3 of 17
<PAGE>
METRIC PARTNERS GROWTH SUITE INVESTORS, L.P.,
a California Limited Partnership
STATEMENTS OF PARTNERS' EQUITY (DEFICIENCY) (UNAUDITED)
For the Three Months Ended March 31, 1997 and 1996
General Limited
Partner Partners Total
------- -------- -----
BALANCE, JANUARY 1, 1997 $ 59,000 $ 21,531,000 $ 21,590,000
NET INCOME 12,000 66,000 78,000
CASH DISTRIBUTIONS (12,000) (599,000) (611,000)
--------- ------------ ------------
BALANCE, MARCH 31, 1997 $ 59,000 $ 20.998,000 $ 21,057,000
========= ============ ============
BALANCE, JANUARY 1, 1996 $ 100,000 $ 25,150,000 $ 25,250,000
NET INCOME (LOSS) 9,000 (327,000) (318,000)
CASH DISTRIBUTIONS (9,000) (450,000) (459,000)
--------- ------------ ------------
BALANCE, MARCH 31, 1996 $ 100,000 $ 24,373,000 $ 24,473,000
========= ============ ============
See notes to financial statements (unaudited).
Page 4 of 17
<PAGE>
<TABLE>
METRIC PARTNERS GROWTH SUITE INVESTORS, L.P.,
a California Limited Partnership
STATEMENTS OF CASH FLOWS (UNAUDITED)
<CAPTION>
For the Three Months Ended
March 31,
--------------------------
1997 1996
---- ----
<S> <C> <C>
OPERATING ACTIVITIES
Net Income (Loss) $ 78,000 $ (318,000)
Adjustments to reconcile net income (loss) to net cash provided
by operating activities:
Depreciation and amortization 801,000 811,000
Changes in operating assets and liabilities:
Accounts receivable 151,000 (238,000)
Prepaid expenses and other assets 72,000 (53,000)
Accounts payable, accrued expenses, and other liabilities (196,000) 963,000
----------- ------------
Net cash provided by operating activities 906,000 1,165,000
----------- ------------
INVESTING ACTIVITIES
Proceeds from sale of cash investments 3,893,000 --
Capital improvements (290,000) (177,000)
Restricted cash - increase (14,000) (4,000)
----------- ------------
Net cash provided (used) by investing activities 3,589,000 (181,000)
----------- ------------
FINANCING ACTIVITIES
Notes payable principal payments (90,000) (90,000)
Cash distribution to partners (611,000) (459,000)
----------- ------------
Cash used by financing activities (701,000) (549,000)
----------- ------------
INCREASE IN CASH AND CASH EQUIVALENTS 3,794,000 435,000
Cash and cash equivalents at beginning of period 3,436,000 10,248,000
----------- ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 7,230,000 $ 10,683,000
=========== ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest paid in cash during the period $ 1,024,000 $ 1,083,000
=========== ============
</TABLE>
See notes to financial statements (unaudited).
Page 5 of 17
<PAGE>
METRIC PARTNERS GROWTH SUITE INVESTORS, L.P.,
a California Limited Partnership
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1. Reference to 1996 Audited Financial Statements
These unaudited financial statements should be read in conjunction with
the Notes to Financial Statements included in the 1996 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 Three Months Ended
March 31,
--------------------------
1997 1996
---- ----
Partnership management fees $ 53,000 $ 40,000
Reimbursement of administrative expense 75,000 62,000
-------- --------
Total $128,000 $102,000
======== ========
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.
There were no cash investments at March 31, 1997.
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 plaintiff and 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 Events
On April 1, 1997, Metric Holdings, Inc. and Metric Realty Corp., the
partners of the Managing General Partner, Metric Realty, were involved in
certain corporate transactions. Pursuant to these transactions, (i) Metric
Holdings, Inc. was merged into a newly-formed corporation known as SSR
Realty Advisors, Inc. ("SSR Realty"), which became the managing partner of
Metric Realty, and (ii) Metric Realty Corp. was merged into Metric
Property Management, Inc., a subsidiary of SSR Realty. Accordingly, the
partners of Metric Realty are now SSR Realty and Metric Property
Management, Inc. After consummation of these transactions, both partners
of Metric Realty continue to be wholly-owned individual subsidiaries of
Metropolitan Life Insurance Company, as were both partners prior to the
occurrence of such transactions.
Page 6 of 17
<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 Daily
Rate Room Rate
(%) (%)
---------------- ------------------
Three Three
Months Months
Ended Ended
Date March 31, March 31,
of ---------------- ------------------
Name and Location Rooms Purchase 1997 1996 1997 1996
----------------- ----- -------- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Residence Inn - Ontario 200 04/88 76 73 79.09 68.80
Ontario, California
Residence Inn - Fort Wayne 80 06/88 73 92 66.65 64.61
Fort Wayne, Indiana
Residence Inn - Columbus (East) 80 06/88 86 83 69.74 72.80
Columbus, Ohio
Residence Inn - Indianapolis (North) 88 06/88 73 77 73.11 73.51
Indianapolis, Indiana
Residence Inn - Lexington 80 06/88 87 90 70.06 63.72
Lexington, Kentucky
Residence Inn - Louisville 96 06/88 86 84 86.47 79.05
Louisville, Kentucky
Residence Inn - Winston-Salem 88 06/88 77 85 79.13 71.21
Winston-Salem, North Carolina
Residence Inn - Nashville (Airport) 168 05/89 68 67 82.16 70.80
Nashville, Tennessee
Residence Inn - Altamonte Springs 128 03/90 93 87 93.84 89.89
Altamonte Springs, Florida
</TABLE>
Page 7 of 17
<PAGE>
Results of Operations
Net income was $78,000 in the first quarter of 1997 compared to a loss of
$318,000 in the first quarter of 1996. The change is primarily attributable to
improved operations at the Residence Inns - Nashville, Lexington, Ontario, and
Indianapolis. Revenues from hotel operations increased 6% for the first quarter
of 1997 compared to the same period in 1996 particularly as a result of
increased revenues from the Residence Inns - Nashville and Ontario. Many of the
hotel operating expense categories decreased in 1997 compared to 1996 and were
only partially offset by slight increases in room, marketing, and management fee
expenses. In particular, the property tax expenses decreased as a result of a
tax refund at the Residence Inn - Indianapolis. Interest expense and
depreciation and amortization decreased only slightly in 1997 compared to 1996.
General and administrative expenses decreased in the first quarter of 1997
compared to 1996 primarily as a result of a decrease in legal expenses.
As reported in the letter to investors dated December 10, 1996, the Partnership
intends to proceed with the marketing for sale of the nine remaining hotels in
the Partnership's Portfolio. The Partnership has since interviewed and chosen
real estate brokers to market the properties for sale. Investors will be kept
appraised as to the status of operations and the potential sale of properties
either through regularly scheduled reports or special communications.
The following discussion provides information concerning the operations of the
Partnership's remaining nine hotels:
Residence Inn - Ontario: Room revenues increased 15% for the first quarter of
1997 as compared to the same period of the prior year. Occupancy improved by 3%
to 76%, while the average daily room rate climbed $10.29 to $79.09. These
increases were only offset in part by an increase of 14% in operating expenses.
The hotel continues to receive its largest share of business from the federal
government, which recently raised its per diem rates. This patronage will be
curtailed, however, as a nearby defense contractor's facility is scheduled to
close in the second quarter. Management anticipates that the business previously
generated by that facility may be replaced through the increasing number of
companies moving into the area. A concentration on direct sales accompanied by
special attention to existing clients has proven to be a successful marketing
strategy for the hotel. Two discount extended stay hotels continue to provide
strong competition for the Partnership's hotel, and a third, with an additional
126 rooms and superior visibility, is expected to open this month.
Residence Inn- Columbus (East): Room revenues remained unchanged for the quarter
as compared to the same period of the prior year. The average daily room rate
declined $3.06 to $69.74 while occupancy increased 3% to 86%. One of the hotel's
largest corporate patrons signed a contract with a competitor which
significantly impacted operations. Management has been able to replace a portion
of the business, in part by aiming sales strategies towards the weekend stay
market while continuing to target new longer term corporate clients. A total of
544 new hotel rooms were added to the Columbus market during the first quarter,
but with only a limited impact on the Partnership's hotel. However, two new
extended stay hotels are scheduled to open in the second quarter, and a third in
September which are expected to provide considerable competition.
Residence Inn - Fort Wayne: Room revenues decreased 19% over the same quarter of
the prior year, primarily resulting from a substantial decline in occupancy of
19%, to 73%. This decrease was partially offset by an increase of $2.04 in the
average daily room rate to $66.65, and a decrease in operating expenses of 13%.
Labor disputes in the automobile industry were the primary reason for the
difficulties in operations, as strikes caused a suspension of travel and
training and a slow down in the overall Fort Wayne economy. A merger involving
another of the hotel's largest clients has also impacted operations.
Competition, already intense, grew stronger as hotels competed for a share of
the market. It is anticipated that market pressure will be relieved once the
labor issues have been settled. The hotel has managed to increase business from
smaller accounts for short to mid-term stays. In addition, special attention has
been focused on servicing existing clients to retain their patronage.
Residence Inn - Indianapolis: Room revenues decreased by 5% for the first
quarter of 1997 as compared to the same period of the prior year. Occupancy
declined by 4% to 73% while the average daily room rate remained relatively
stable. However, significant savings in general operating expenses, coupled by a
large tax refund, more than offset the decline in revenues. The hotel market in
Indianapolis was sluggish for the first quarter of the year, although the
Partnership's property outperformed the competition, which averaged a decline in
occupancy of 11% from the prior year. Hotel sales and management staff
participated in a sales blitz focused on small to mid-sized companies in an
effort to increase exposure to clients that may have extended-stay needs. They
Page 8 of 17
<PAGE>
have also taken advantage of the opportunity to renegotiate higher long-term
rates from some of the largest accounts. Two new hotels opened in the market
during the first quarter, a third is scheduled to open in September, and plans
have been announced for the construction of four more. An existing competitor
will also be adding 30 new suites this summer. It is anticipated that the
Partnership's hotel will face strong competition in the market in the year
ahead.
Residence Inn - Lexington: Operating results were positive and significantly
improved for the first quarter of 1997 as compared to the same period of the
prior year, primarily due to a decline of 19% in operating expenses, coupled
with an increase of $6.34 in the average daily room rate to $70.06. The first
quarter, typically a slow season in the Lexington hotel market, received a
considerable boost this year due to the influx of FEMA employees into the area
to assist with relief efforts after severe flooding in February. This infusion
temporarily eliminated competition in the market, as several hotels, including
the Partnership's Residence Inn, had waiting lists. This business, although
beginning to decline, will positively impact operations into the second quarter.
The Partnership's hotel currently enjoys a relatively stable market, with no new
hotels on the horizon.
Residence Inn - Louisville: Room revenues increased by 12% for the quarter as
compared to the first quarter of 1996, resulting primarily from an increase of
$7.42 in the average daily room rate to $86.47, coupled with an increase of 2%
in occupancy, to 86%. These increases were only offset in part by an escalation
in overall operating expenses. The Louisville economy remains strong, supporting
the local extended-stay hotel market through continued training, project work,
and relocations. One of the largest clients of the Partnership's hotel recently
announced plans to sell a portion of its business; however, Management
anticipates it will be replaced with alternative patronage. Sales and
advertising campaigns conducted in conjunction with other Marriott products
continue to be successful for the hotel, as have direct sales calls, and
participation in a statewide trade show. Competition will increase dramatically
in 1997 as two new extended-stay hotels are expected to open during the second
quarter, followed by three more by the end of the year. Additionally, two others
are anticipating openings in 1998.
Residence Inn - Winston-Salem: Room revenues remained unchanged for the period,
as compared to the first quarter of 1996. Occupancy declined to 77% for the
first quarter in comparison to 85% for the same period of the prior year;
however the decrease was offset by an increase in the average daily room rate of
$7.92 to $79.13. The local economy continues its shift from an industrial to a
service base, largely due to the relocation of several divisions of a major
employer in the area. Management is centering its attention on direct sales
focused on the mid-term extended-stay market, with the specific goal of raising
the average daily room rate. Additional business has also been secured from one
of the hotel's larger clients, and Management anticipates further increases in
patronage from this source. Despite the flat economy, one new extended stay
hotel opened within the market during the quarter, and four more, with a total
of 410 rooms are scheduled to open by the end of the year. The Partnership's
hotel will face strong competition in the year ahead.
Residence Inn - Nashville: Room revenues increased by nearly 15% for the
quarter, due to an increase in the average daily room rate of $11.36 to $82.16.
Overall operating results for the quarter, although negative, improved
substantially over the same period of 1996. Average occupancy increased slightly
to 68%. The hotel continues to face a sales and use tax levied against it by the
State of Tennessee covering the period from 1989 through 1993. The estimated
liability for the potential payment of this tax totaled $211,000 at March 31,
1997. The Partnership filed a lawsuit against the State disputing this tax, but
recently learned that the lawsuit was dismissed for lack of prosecution by the
Partnership's attorneys. On April 25, 1997, the Court granted the Partnership's
motion to reinstate the case and a trial is expected to occur later this year.
The Residence Inn - Nashville gained significant business from FEMA resulting
from winter flooding. Additionally, expanded convention business at the Opryland
theme park has boosted demand across the market, allowing for growth in room
rates. Management is participating in cluster advertising in the local
convention and visitors bureaus, while pursuing new accounts from businesses
relocating into the Nashville area.
Residence Inn - Altamonte Springs: Room revenues increased for the quarter by 6%
as compared to the first quarter of 1996 as a result of an increase in occupancy
of 6% to 93%, coupled with an increase in the average daily room rate of $3.95
to $93.84 for the first quarter of 1997. The winter season is traditionally a
strong one for the Orlando-Altamonte Springs hotel market as patronage from
local businesses is augmented by the tourist industry. Management has been
utilizing telemarketing campaigns and sales blitzes focused on attracting new
businesses in addition to follow up servicing calls to maintain existing
clients. Currently, three hotels directly compete with the Partnership's hotel
for the extended-stay market, with five others competing for shorter term
patronage; however, one existing hotel is in the process of adding 67 suites,
and ground breaking for five new hotels is planned for this year.
Page 9 of 17
<PAGE>
Partnership Liquidity and Capital Resources
First Quarter of 1996
As presented in the Statement of Cash Flows, cash was provided by operating
activities. Cash was provided by investing activities from proceeds from sale of
cash investments and was used for capital improvements. 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 quarter
ended March 31, 1997 and 1996 (as shown in the tables on pages 12 and 13) 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
quarter of 1997, 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 quarter of 1997, the Partnership spent $290,000 on capital
improvements. The majority was spent on room renovations at the Residence Inns -
Ontario and Nashville. In addition, capital was spent on extensive stairway work
at the Residence Inn - Nashville. In the remainder of 1997, depending on the
sales activity, the Partnership anticipates spending approximately $2,000,000 on
capital improvements, which are necessary to keep the properties competitive in
their respective markets and are required under the agreements with Marriott.
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 in separate interest-bearing accounts with additions made monthly
based on revenues and expenditures which are based on approved capital
expenditure budgets by the Partnership. 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.
As reported in the Partnership's special communication dated February 27, 1997,
resale transactions reached 4.9% of the total number of outstanding Units as of
February 26, 1997, at which point the Managing General Partner suspended the
processing of resale transactions for the remainder of the calendar year. This
action was taken by the Managing General Partner in accordance with its
fiduciary responsibility and with the advice of Counsel to protect the
Partnership's tax status as a limited partnership. IRS regulations provide that
should 5% or more of the outstanding assignee limited partnership Units be
traded in a calendar year, the partnership could be classified as a publicly
traded partnership for federal tax purposes, and could therefore be taxed as a
corporation. Gemisys, the Partnership's Servicing and Transfer Agent, has been
instructed to return all paperwork regarding such transactions to the
originators. The Partnership regrets this suspension, but believes that such
action is in the best interest of the Partnership and its investors.
Conclusion
The Partnership established an estimated value for the assignee Units in the
Partnership as of December 31, 1996. 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
Page 10 of 17
<PAGE>
the properties as determined by the appraisal process, in combination with the
book value of other Partnership assets, resulted in an estimated net asset value
of each assignee Unit of $503 as of December 31, 1996. As of December 31, 1995,
the value of the properties as determined by the appraisal process, in
combination with the book value of other Partnership assets, resulted in an
estimated net asset value of each assignee Unit of $521. It should be noted 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. The change in value (from December 31, 1995 to December 31, 1996) was
primarily due to the distribution of a portion of the proceeds from the sale of
the Residence Inn - Atlanta, in the amount of $33.37 per Unit in conjunction
with the August 1996 regular quarterly distribution, and to only modest changes
in values of the hotels over the past year.
This valuation is an estimate of the assignee Unit value only which has been
made as of December 31, 1996 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 $191 to $466 in 1997 (through
February 26, 1997, at which time trading was suspended, as discussed above). 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 1997 will be made at an
annualized rate of 4%. The cash distribution for the first quarter of 1996 was
made at an annualized rate of 3%; cash distributions from operations for the
second, third and fourth quarters of 1996 were made at an annualized rate of 4%.
Page 11 of 17
<PAGE>
<TABLE>
METRIC PARTNERS GROWTH SUITE INVESTORS, L.P.
a California Limited Partnership
Project Operations of the Residence Inns for
the Three Months Ended March 31, 1997
(000's)
<CAPTION>
Columbus Fort
Ontario (East) Wayne Indianapolis Lexington Louisville
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
REVENUES:
Hotel operations:
Rooms $ 1,052 $ 404 $ 325 $ 397 $ 410 $ 600
Telephone and other 62 25 15 13 27 36
------- ------- ------- ------- ------- -------
Hotel operations 1,114 429 340 410 437 636
Interest and other 0 0 0 0 0 0
------- ------- ------- ------- ------- -------
Total revenues 1,114 429 340 410 437 636
------- ------- ------- ------- ------- -------
EXPENSES:
Hotel operations:
Rooms 194 106 82 115 74 126
Administrative 132 57 43 30 61 73
Marketing 129 43 36 46 49 69
Energy 54 35 29 21 24 22
Repair and maintenance 51 23 16 34 30 29
Management fees 50 13 10 12 13 19
Property taxes 23 20 10 (32) 12 22
Other 32 12 9 12 18 18
------- ------- ------- ------- ------- -------
Hotel operations 665 309 235 238 281 378
Depreciation and other
amortization 129 57 60 70 69 74
Interest 214 69 72 84 82 94
General and administrative 0 0 0 0 0 0
------- ------- ------- ------- ------- -------
Total expenses 1,008 435 367 392 432 546
------- ------- ------- ------- ------- -------
NET INCOME(LOSS) 106 (6) (27) 18 5 90
Plus non-cash items - net 129 58 61 71 70 76
Less notes payable
principal payments 0 5 5 6 6 7
------- ------- ------- ------- ------- -------
Project operations 235 47 29 83 69 159
Capital Improvements 101 5 2 31 9 8
------- ------- ------- ------- ------- -------
Project operations after
capital improvements $ 134 $ 42 $ 27 $ 52 $ 60 $ 151
======= ======= ======= ======= ======= =======
Occupancy 76% 86% 73% 73% 87% 86%
ADR $ 79.09 $ 69.74 $ 66.65 $ 73.11 $ 70.06 $ 86.47
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Winston Altamonte
Salem Nashville Atlanta Springs Partnership Total
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
REVENUES:
Hotel operations:
Rooms $ 450 $ 816 $ 0 $ 967 $ 0 $ 5,421
Telephone and other 27 51 0 35 0 291
------- ------- ------- ------- ------- -------
Hotel operations 477 867 0 1,002 0 5,712
Interest and other 0 0 0 0 102 102
------- ------- ------- ------- ------- -------
Total revenues 477 867 0 1,002 102 5,814
------- ------- ------- ------- ------- -------
EXPENSES:
Hotel operations:
Rooms 103 201 0 161 0 1,162
Administrative 67 109 0 113 0 685
Marketing 53 113 0 98 0 636
Energy 30 67 0 54 0 336
Repair and maintenance 31 60 0 39 0 313
Management fees 14 26 0 63 0 220
Property taxes 17 40 0 42 0 154
Other 18 75 0 29 0 223
------- ------- ------- ------- ------- -------
Hotel operations 333 691 0 599 0 3,729
Depreciation and other
amortization 78 126 0 89 0 752
Interest 83 215 0 170 0 1,083
General and administrative 0 0 0 0 172 172
------- ------- ------- ------- ------- -------
Total expenses 494 1,032 0 858 172 5,736
------- ------- ------- ------- ------- -------
NET INCOME(LOSS) (17) (165) 0 144 (70) 78
Plus non-cash items - net 79 126 0 131 0 801
Less notes payable
principal payments 6 32 0 23 0 90
------- ------- ------- ------- ------- -------
Project operations 56 (71) 0 252 (70) 789
Capital Improvements 0 129 0 5 0 290
------- ------- ------- ------- ------- -------
Project operations after
capital improvements $ 56 ($ 200) $ 0 $ 247 ($ 70) $ 499
======= ======= ======= ======= ======= =======
Occupancy 77% 68% 0% 93% -- 79%
ADR $ 79.13 $ 82.16 $ 0.00 $ 93.84 -- $ 79.50
</TABLE>
Page 12 of 17
<PAGE>
<TABLE>
METRIC PARTNERS GROWTH SUITE INVESTORS, L.P.
a California Limited Partnership
Project Operations of the Residence Inns for
the Three Months Ended March 31, 1996
(000's)
<CAPTION>
Columbus Fort
Ontario (East) Wayne Indianapolis Lexington Louisville
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
REVENUES:
Hotel operations:
Rooms $ 913 $ 405 $ 400 $ 417 $ 387 $ 537
Telephone and other 55 24 25 17 34 37
------- ------- ------- ------- ------- -------
Hotel operations 968 429 425 434 421 574
Interest and other 0 0 0 0 0 0
------- ------- ------- ------- ------- -------
Total revenues 968 429 425 434 421 574
------- ------- ------- ------- ------- -------
EXPENSES:
Hotel operations:
Rooms 164 91 77 102 84 105
Administrative 106 66 43 71 97 58
Marketing 107 44 55 51 54 64
Energy 61 33 33 33 31 25
Repair and maintenance 48 21 15 29 33 26
Management fees 30 13 17 13 13 19
Property taxes 27 13 16 19 12 20
Other 39 14 15 11 23 23
------- ------- ------- ------- ------- -------
Hotel operations 582 295 271 329 347 340
Depreciation and other
amortization 125 54 53 63 63 73
Interest 214 70 73 85 82 95
General and administrative 0 0 0 0 0 0
------- ------- ------- ------- ------- -------
Total expenses 921 419 397 477 492 508
------- ------- ------- ------- ------- -------
NET INCOME(LOSS) 47 10 28 (43) (71) 66
Plus non-cash items - net 125 55 55 65 65 74
Less notes payable
principal payments 1 4 5 5 5 6
------- ------- ------- ------- ------- -------
Project operations 171 61 78 17 (11) 134
Capital Improvements 0 26 24 15 35 63
------- ------- ------- ------- ------- -------
Project operations after
capital improvements $ 171 $ 35 $ 54 $ 2 ($ 46) $ 71
======= ======= ======= ======= ======= =======
Occupancy 73% 83% 92% 77% 90% 84%
ADR $ 68.80 $ 72.80 $ 64.61 $ 73.51 $ 63.72 $ 79.05
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Winston Altamonte
Salem Nashville Atlanta Springs Partnership Total
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
REVENUES:
Hotel operations:
Rooms $ 450 $ 713 $ 0 $ 914 $ 0 $ 5,136
Telephone and other 25 27 0 27 0 271
------- ------- ------- ------- ------- -------
Hotel operations 475 740 0 941 0 5,407
Interest and other 0 0 0 0 112 112
------- ------- ------- ------- ------- -------
Total revenues 475 740 0 941 112 5,519
------- ------- ------- ------- ------- -------
EXPENSES:
Hotel operations:
Rooms 102 243 0 170 0 1,138
Administrative 69 108 5 73 0 696
Marketing 57 99 0 94 0 625
Energy 32 53 0 46 0 347
Repair and maintenance 29 87 0 37 0 325
Management fees 14 22 0 58 0 199
Property taxes 12 28 0 44 0 191
Other 14 80 0 21 0 240
------- ------- ------- ------- ------- -------
Hotel operations 329 720 5 543 0 3,761
Depreciation and other
amortization 62 134 0 137 0 764
Interest 83 223 0 168 0 1,093
General and administrative 0 0 0 0 219 219
------- ------- ------- ------- ------- -------
Total expenses 474 1,077 5 848 219 5,837
------- ------- ------- ------- ------- -------
NET INCOME(LOSS) 1 (337) (5) 93 (107) (318)
Plus non-cash items - net 64 134 0 174 0 811
Less notes payable
principal payments 5 29 0 30 0 90
------- ------- ------- ------- ------- -------
Project operations 60 (232) (5) 237 (107) 403
Capital Improvements 14 0 0 0 0 177
------- ------- ------- ------- ------- -------
Project operations after
capital improvements $ 46 ($ 232) ($ 5) $ 237 ($ 107) $ 226
======= ======= ======= ======= ======= =======
Occupancy 85% 67% 0% 87% -- 80%
ADR $ 71.21 $ 70.80 $ 0.00 $ 89.89 -- $ 73.15
</TABLE>
Page 13 of 17
<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 proceedings described below
(other than the sales tax related case). 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"). In December, 1996, the Tennessee Court of Appeals
reversed the judgement underlying the judicial sale; this reversal is not yet
final, but could result in NLC regaining ownership of the Land pending the
outcome of a new trial. Unless NLC regains ownership of the Land, the
Partnership will not be able to purchase the Land as agreed in 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, and in December 1996, the Court of Appeals reversed the
judgement for Orlando, sending the case back to the lower court for further
proceedings.
Prior to this reversal, 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 was 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. If the afore-referenced
reversal becomes final, NLC will likely regain ownership of the Land and the
landlord under the Lease, pending the outcome of a new trial.
Page 14 of 17
<PAGE>
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 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 was held in January 1997 and the Partnership's counterclaim was
dismissed. In April 1997, the Court denied a motion for summary judgment filed
by NLC and 2300 which, in essence, claimed that the Partnership had breached the
duty of good faith and fair dealing in not consummating the SF Settlement.
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 believed that as
a result of such cure, it became the direct obligor to the lender under the
Senior Mortgage and that the Wrap Note had been satisfied and the payments due
under the Lease reduced by $50,000 per year. GSI also sought 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 will
appeal all judgments for the Partnership in this case.
Page 15 of 17
<PAGE>
Metric Partners Growth Suite Investors, L.P. vs. Joe Huddleston, Commissioner of
Revenue for the State of Tennessee, Chancery Court for Davidson County, in
Nashville, Tennessee, Case No. 94-1227-II.
GSI filed this action April 25, 1994 to challenge the assessment of a sales and
use tax deficiency by the State for the period 1989 through 1993 in the amount
of $122,799 with accrued interest through February 20, 1994 of $35,248 (the
alleged deficiency plus estimated accrued interest totaled 211,000 at March 31,
1997). In general, the claimed deficiency relates primarily to sales tax related
to food and beverage items used in the Hotel's complimentary breakfast and
evening social hour. In February 1997, GSI learned that this case had been
dismissed for failure to prosecute by its attorneys. On April 25, 1997, the
Court granted the Partnership's motion to reinstate the case and a trial is
expected to occur later this year.
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.
Page 16 of 17
<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: SSR Realty Advisors, Inc.,
a Delaware corporation,
its Managing General Partner
By: /s/ William A. Finelli
-----------------------------
William A. Finelli
Managing Director,
Principal Financial and Accounting Officer of
SSR Realty Advisors, Inc.
Date: May 14, 1997
------------
Page 17 of 17
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 7,230,000
<SECURITIES> 0
<RECEIVABLES> 564,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 7,931,000
<PP&E> 90,746,000
<DEPRECIATION> 32,566,000
<TOTAL-ASSETS> 66,653,000
<CURRENT-LIABILITIES> 2,832,000
<BONDS> 42,464,000
0
0
<COMMON> 0
<OTHER-SE> 20,998,000
<TOTAL-LIABILITY-AND-EQUITY> 66,353,000
<SALES> 0
<TOTAL-REVENUES> 5,712,000
<CGS> 0
<TOTAL-COSTS> 3,729,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,083,000
<INCOME-PRETAX> 78,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 78,000
<EPS-PRIMARY> 1.00
<EPS-DILUTED> 0
</TABLE>
