FORM 8-K
SECURITIES AND EXCHANGE COMMISION
Washington, D.C. 20549
CURRENT REPORT
Pursuant to Section 13 or 15 (d) of
the Securities Exchange Act of 1934
June 18, 1999
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Date of Report
(Date of earliest event reported)
Metric Partners Growth Suite Investors, L.P.
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(Exact name of registrant as
Specified in its charter)
0-17660 California 94-3050708
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(Registration (State or Other (IRS Employer
File Jurisdiction of Identification
Number) Incorporation) Number)
One California Street, San Francisco, California 94111-5415
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(address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(415) 678-2000
(800) 347-6707 Wats line for all states
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Item 2. ACQUISITION OR DISPOSITION OF ASSETS
(a) The Registrant was organized to acquire, hold for investment, manage
and ultimately sell all-suite, extended-stay hotels operated under
franchise licenses from Residence Inn by Marriott, Inc. ("Marriott").
On June 18, 1999, the Residence Inn - Nashville (the "Hotel") in
Nashville, Tennessee was sold, through foreclosure, to the holder of
the mortgage note payable (the "Lender"). The Registrant had been in
default on the mortgage note payable since April 1, 1998, when it did
not pay the balloon mortgage payment due, totaling $8,491,000 as of
Apri1 1 1998. The Registrant was unable to negotiate an extension with
the Lender and was unable to sell the Hotel (see Note 5 to the 1998
audited financial statements).
In April 1998, the Registrant negotiated a six-month forbearance
agreement, during which time the Registrant pursued the potential sale
of the Hotel, in exchange for which the Lender accepted a principal
payment of $100,000, reimbursement of $20,000 of its costs, and regular
monthly debt service payments through November 1, 1998. The Registrant
subsequently determined that a sale of the Hotel was not feasible, and
it discontinued the monthly debt service payments effective with the
payment due December 1, 1998.
In January 1999, the Lender and the Registrant agreed that the
Registrant would make the monthly debt service payments to cover the
payments due December 1, 1998 through April 1, 1999, in exchange for
the Lender agreeing to work towards taking title to the property via a
deed in lieu of foreclosure, including assumption of the management
contract with Marriott (with Marriott's consent), thereby relieving the
Registrant of a potential obligation to pay approximately $1,400,000 in
termination fees plus other costs, and assumption of the ground lease.
The Registrant made the debt service payments (including a property tax
impound) through the payment due April 1, 1999, but did not make any
subsequent payments. The Lender ultimately decided to foreclose on the
Hotel, including the land on which the Hotel is located and the
improvements and personal property and rents related thereto.
On May 20, 1999, the lessor under the ground lease issued a letter
notifying the Registrant that it had terminated the ground lease as the
Registrant had defaulted under the terms of the mortgage note for the
Hotel, thereby violating a term of the ground lease agreement. However,
the Lender has taken the position that the ground lease was not
terminated until June 18, 1999, when it was terminated as a result of
the foreclosure. Therefore, the date on which the ground lease was
terminated has not been determined.
TERMS OF ORIGINAL ACQUISITION
On May 26 , 1989, the Registrant acquired the leasehold interest and the
improvements of the Residence Inn - Nashville for $11,893,000 including a
reserve for renovation, franchise fee, acquisition fee and other miscellaneous
closing costs. Of the acquisition amount, $9,250,000 was financed by a note
payable from the seller, which wrapped an existing loan with the balance of
approximately $9,336,000 at the time of acquisition. The Registrant became the
direct obligor on the underlying mortgage note payable in 1996, when it cured a
then existing default thereon by the seller.
The seller of the Hotel guaranteed certain returns to the Registrant through May
26, 1992 up to a maximum of $525,000, of which $315,000 was to be in cash and
the remaining $210,000 was to be in the form of offset to the deferred ground
lease payments. The full amount of the $525,000 guarantee was utilized by the
Registrant.
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TERMS OF DISPOSITIONS AND FINANCINGS
The improvements of the Residence Inn - Nashville owned by the Registrant and
the land on which it is located, which was under lease to the Registrant, were
sold through foreclosure on June 18, 1999 for $9,050,000, with net proceeds of
approximately $600,000 after deduction of the outstanding principal of
approximately $8,224,000 and other Lender costs. The purchaser was the holder of
the mortgage note payable encumbering the Hotel. The lessor on the ground lease
also bid for the property. The lessor has filed suit against the foreclosing
trustee, asserting that the trustee denied him his alleged right to redeem the
property by paying the debt during the foreclosure. In the foreclosure sale the
allocation of the $9,050,000 among the real and personal property securing the
loan was not specified. The Registrant is entitled to a portion of the net
proceeds from the sale because of its ownership of the personal property sold,
which portion it has estimated to be no more than $50,000. Approximately $25,000
of costs were incurred by the Registrant in the disposal of the Hotel.
With respect to the ground lease, the Registrant was relieved of future payments
as of the date of foreclosure, if not as of May 20, 1999, the date the lessor
claims to be the lease termination date. The Registrant is, however, still
liable for approximately $650,000 in deferred ground rents and interest accrued
thereon. This liability is unpaid. At this time as it is unclear which party is
entitled to these rents.
CARRYING AMOUNTS AT DATE OF SALE
At the date of foreclosure, the carrying amount of the improvements (net of
$195,000 impairment provision recognized in 1998) and unamortized deferred
franchise costs was approximately $8,239,000 for financial statement purposes.
The carrying amount was approximately $8,399,000 for tax reporting purposes.
GAIN (LOSS) ON SALE
For financial statement purposes, the estimated loss to be recognized in 1999 is
approximately $30,000. The loss does not include the potential $1,400,000 in
termination fees or other costs that might be due to Marriott in the event the
Lender does not effectively assume the management contract. Negotiations
relating to the management of the Hotel are in progress between the Lender and
Marriott.
Under the tax method of accounting, the estimated loss is approximately
$190,000.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(a) Financial Statements
Not applicable.
(b) Pro Forma Financial Information
Historical financial information and Pro Forma financial information are
included herein.
(c) Exhibits
Substitute Trustee's Quitclaim Deed, executed to be effective as of the
18th day of June, 1999 from Robert M. Holland, Jr. as Grantor , in his
capacity as Substitute Trustee, to WBL II Real Estate Limited
Partnership as Grantee, of record in the Register's Office of Davidson
County, Tennessee in Book 11536, page 808, incorporated herein by
reference.
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SIGNATURE
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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
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William A. Finelli
Managing Director, Principal Financial
and Accounting Officer of SSR Realty Advisors,
Inc.
Date: July 1, 1999
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METRIC PARTNERS GROWTH SUITE INVESTORS, L.P.
a California Limited Partnership
PRO FORMA BALANCE SHEETS (UNAUDITED)
March 31, 1999
Pro Forma As
Adjustments Adjusted
Historical (Note 1) (Note 2)
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ASSETS
Cash and Cash Equivalents $ 7,809,000 ($ 232,000) $ 7,577,000
Restricted Cash 5,000,000 0 5,000,000
Accounts Receivable 716,000 (132,000) 584,000
Prepaid Expenses and Other Assets 52,000 (52,000) 0
Asset to be Disposed of 8,185,000 (8,185,000) 0
Deferred Franchise Fee 24,000 (24,000) 0
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TOTAL ASSETS $21,786,000 ($8,625,000) $13,161,000
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LIABILITIES AND PARTNERS' EQUITY
Accounts Payable $ 773,000 ($ 254,000) $ 519,000
Accrued Property Taxes 32,000 (32,000) 0
Accrued Interest 216,000 0 216,000
Other Liabilities 694,000 (85,000) 609,000
Note Payable 8,224,000 (8,224,000) 0
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TOTAL LIABILITIES 9,939,000 (8,595,000) 1,344,000
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PARTNERS' EQUITY
General Partners 0 0 0
Limited Partners (59,932 Units
Outstanding) 11,847,000 (30,000) 11,817,000
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TOTAL PARTNERS' EQUITY 11,847,000 (30,000) 11,817,000
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TOTAL LIABILITIES AND PARTNERS' EQUITY $21,786,000 ($8,625,000) $13,161,000
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<PAGE>
METRIC PARTNERS GROWTH SUITE INVESTORS, L.P.
a California Limited Partnership
STATEMENT OF OPERATIONS
For the Year Ended December 31, 1998
Pro Forma As
Adjustments Adjusted
Historical (Note 1) (Note 2)
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REVENUES:
Hotel Operations $ 4,445,000 ($4,445,000) $ 0
Interest and Other 726,000 (17,000) 709,000
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Total Revenues 5,171,000 (4,462,000) 709,000
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EXPENSES:
Hotel Operations:
Rooms 936,000 (936,000) 0
Administrative 611,000 (577,000) 34,000
Marketing 464,000 (464,000) 0
Energy 230,000 (230,000) 0
Repair and Maintenance 221,000 (221,000) 0
Management Fees 152,000 (152,000) 0
Property Taxes 112,000 (112,000) 0
Other 258,000 (258,000) 0
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Total Hotel Operations 2,984,000 (2,950,000) 34,000
Depreciation and Other Amortization 533,000 (533,000) 0
Interest 859,000 (854,000) 5,000
General and Administrative 1,023,000 0 1,023,000
Impairment Provision for Asset to be
Disposed of 195,000 (195,000) 0
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Total Expenses 5,594,000 (4,532,000) 1,062,000
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INCOME (LOSS) BEFORE GAIN
ON SALE OF PROPERTIES (423,000) 70,000 (353,000)
Gain on Sale of Properties 300,000 0 300,000
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NET INCOME (LOSS) ($ 123,000) $ 70,000 ($ 53,000)
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NET INCOME (LOSS) PER LIMITED
PARTNERSHIP ASSIGNEE UNIT
Income (Loss) Before Gain on Sale of
Properties ($ 7) $ 1 ($ 6)
Gain on Sale of Properties 5 0 5
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NET INCOME (LOSS) ($ 2) $ 1 ($ 1)
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CASH DISTRIBUTION PER LIMITED
PARTNERSHIP ASSIGNEE UNIT $ 288 $ 0 $ 288
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METRIC PARTNERS GROWTH SUITE INVESTORS, L.P.
a California Limited Partnership
STATEMENT OF OPERATIONS
For the Three Months Ended March 31, 1999
Pro Forma As
Adjustments Adjusted
Historical (Note 1) (Note 2)
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REVENUES:
Hotel Operations $ 998,000 ($ 998,000) $ 0
Interest and Other 145,000 (1,000) 144,000
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Total Revenues 1,143,000 (999,000) 144,000
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EXPENSES:
Hotel Operations:
Rooms 213,000 (213,000) 0
Administrative 116,000 (116,000) 0
Marketing 101,000 (101,000) 0
Energy 64,000 (64,000) 0
Repair and Maintenance 54,000 (54,000) 0
Management Fees 30,000 (30,000) 0
Property Taxes 37,000 (37,000) 0
Other 57,000 (57,000) 0
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Total Hotel Operations 672,000 (672,000) 0
Depreciation and Other Amortization 0 0 0
Interest 210,000 (210,000) 0
General and Administrative 114,000 0 114,000
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Total Expenses 996,000 (882,000) 114,000
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NET INCOME $ 147,000 ($ 117,000) $ 30,000
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NET INCOME PER LIMITED PARTNERSHIP
ASSIGNEE UNIT $ 2 ($ 1) $ 1
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Basis of Presentation
Note 1.
The Residence Inn - Nashville (the "Hotel") was sold, through
foreclosure, to the holder of the first mortgage note payable on June 18, 1999.
See Item 2 of the Form 8-K for information regarding the foreclosure. The pro
forma adjustments reflect the elimination of accounts related to the Hotel
except for the deferred ground lease balance and accrued interest thereon at the
time of foreclosure, which continue to show as liabilites. It is currently not
known when and to whom payment of these liabilities will be paid.
Note 2.
The unaudited financial statements present the pro forma balance sheet
at March 31, 1999, had the Hotel been foreclosed on March 31, 1999 and the pro
forma statements of operations for the year ended December 31, 1998 and for the
three months ended March 31, 1999, had the Hotel been foreclosed on at the
beginning of each period presented. The unaudited statements also present the
historical figures previously reported in the appropriate Form 10-K and 10-Q
reports.
No provision for Federal and state income taxes has been made in the
historical or pro forma financial statements because income taxes are the
obligation of the partners.
