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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1999
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)
1 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
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Limited Partnership Assignee Units
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 [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
No market for the Limited Partnership Assignee Units exists and therefore a
market value for such Units cannot be determined.
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METRIC PARTNERS GROWTH SUITE INVESTORS, L.P.,
A CALIFORNIA LIMITED PARTNERSHIP
PART I
ITEM 1. BUSINESS.
Metric Partners Growth Suite Investors, L.P., a California Limited Partnership
(the "Partnership"), was organized in 1984 under the California Uniform Limited
Partnership Act. 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 subsidiaries of Metropolitan Life Insurance Company, as were
both partners prior to the occurrence of such transactions. The associate
general partner of the Partnership is GHI Associates II, L.P., a California
Limited Partnership. The general partner of GHI Associates II is Metric Realty
and the limited partner is Prudential-Bache Properties, Inc.
The Partnership's Registration Statement filed pursuant to the Securities Act of
1933 (No. 33-8610) was declared effective by the Securities and Exchange
Commission on April 14, 1988. The Partnership marketed its securities pursuant
to its Prospectus dated April 14, 1988, which was thereafter supplemented
(hereinafter the "Prospectus"). This Prospectus was filed with the Securities
and Exchange Commission pursuant to Rule 424(b) of the Securities Act of 1933.
The principal business of the Partnership is to acquire, hold for investment,
manage and ultimately sell all-suite, extended stay hotels, which are operated
under franchise licenses from Residence Inn by Marriott, Inc. The Partnership is
a "closed" limited partnership real estate syndicate. For a further description
of the Partnership's business, see the sections entitled "Risk Factors" and
"Investment Objectives and Policies" in the Prospectus.
Beginning in April 1988, the Partnership offered $60,000,000 in Limited
Partnership Assignee Units. The offering was closed on June 30, 1989, with total
funding of $59,932,000. The net proceeds of the offering were used to purchase
ten hotel properties, which are described in Item 2. The acquisition activities
of the Partnership were completed on March 16, 1990, with the purchase of the
Residence Inn - Altamonte Springs. Since that time, the principal activity of
the Partnership has been managing its portfolio. As the Partnership's long-term
goal was to ultimately liquidate the portfolio, the markets where the hotels are
located were monitored on an ongoing basis for potential sales opportunities.
The Partnership entered into a purchase and sale agreement for the Residence
Inn-Atlanta (Perimeter West) with an unaffiliated buyer and sold the property on
October 3, 1995. In 1997, the Partnership marketed eight of the nine remaining
hotels for sale, and on December 30, 1997, the hotels were sold to an
unaffiliated buyer. The Partnership's last property, the Residence Inn -
Nashville, was sold through foreclosure on June 18, 1999, as further described
in Part II, Item 7.
Environmental site assessments were performed for each of the properties at the
time of property acquisition. No material adverse environmental conditions or
liabilities were identified at that time, nor were any identified during due
diligence conducted in conjunction with the sale of the Partnership's hotels. In
no case has the Partnership received notice that it is a potentially responsible
party with respect to an environmental clean-up site.
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ITEM 2. PROPERTIES.
A description of the hotel properties which the Partnership owned is as follows:
<TABLE>
<CAPTION>
NAME AND LOCATION ROOMS DATE OF PURCHASE DATE OF SALE
- ----------------- ----- ---------------- ------------
<S> <C> <C> <C>
Residence Inn-Ontario 200 04/88 12/97
2025 East D Street, Ontario, California
Residence Inn-Fort Wayne 80 06/88 12/97
4919 Lima Road, Fort Wayne, Indiana
Residence Inn-Columbus East 80 06/88 12/97
2084 South Hamilton Road, Columbus, Ohio
Residence Inn-Indianapolis 88 06/88 12/97
3553 Founders Road, Indianapolis, Indiana
Residence Inn-Lexington 80 06/88 12/97
1080 Newtown Pike, Lexington, Kentucky
Residence Inn-Louisville 96 06/88 12/97
120 North Hurtsbourne Lane, Louisville, Kentucky
Residence Inn-Winston-Salem 88 06/88 12/97
7835 North Point Blvd., Winston-Salem, North
Carolina
Residence Inn-Nashville 168 05/89 6/99*
2300 Elm Hill Pike, Nashville, Tennessee
Residence Inn-Atlanta (Perimeter West) 128 10/89 10/95
6096 Barfield Road, Atlanta, Georgia
Residence Inn-Altamonte Springs 128 03/90 12/97
270 Douglas Avenue, Altamonte Springs, Florida
</TABLE>
* Date of foreclosure.
ITEM 3. LEGAL PROCEEDINGS.
There are no material pending legal proceedings to which the Partnership is a
party or to which any of its assets are subject, except the following:
Metric Partners Growth Suite Investors, L.P. vs. Kenneth E. Nelson, The Nelson
Group, et al., San Francisco County Superior Court, Case No. 928065.
Nashville Lodging Company vs. Metric Partners Growth Suite Investors, L.P., et
al., Circuit Court, State of Wisconsin, Case No. 94CV001212.
Orlando Residence, Ltd. (Plaintiff) vs. 2300 Elm Hill Pike, Inc., et al.
(Defendants/Third Party Plaintiffs) vs. Metric Partners Growth Suite Investors,
L.P. (Third Party Defendant), Tennessee Chancery Court for Davidson County, Case
No. 94-1911-I.
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,
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Trustee, Chancery Court for Davidson County, in Nashville, Tennessee, Case No.
96-1405-III. [Proceeding concluded in May 1999; see Part II, Item 8, Note 7 to
the Financial Statements.]
Kenneth E. Nelson and Nashville Lodging Co., vs. Metric Realty et. al.,
Tennessee Chancery Court for Davidson County, Case No. 97-2189-III.
Metric Partners Growth Suite Investors, L.P. vs. James Reuben et al, San
Francisco County Superior Court, Case No. 998214.
Samuel A. Hardage and Samantha Hotels, LLC vs. Robert M. Holland, Jr., Trustee,
and WBL II Real Estate Limited Partnership vs. Metric Partners Growth Suite
Investors, L. P. and Nashville Lodging Company, Chancery Court for Davidson
County, in Nashville, Tennessee, Case No. 99-1749-I. [Proceeding concluded in
March 2000; see Part II, Item 8, Note 7 to the Financial Statements.]
For information regarding these lawsuits, see Management's Discussion and
Analysis of Financial Condition and Results of Operations and Part II, Item 8,
Note 7 to the Financial Statements.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matter was submitted to a vote of security holders during the period covered
by this report.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The Limited Partnership Assignee Unit holders are entitled to certain
distributions as provided in the Partnership Agreement. From inception through
September 7, 1999, Assignee Unit holders have received distributions from
operations and sales ranging from $696 - $789 for each $1,000 limited
partnership assignee Unit, inclusive of $395 from sales proceeds. No market for
Limited Partnership Assignee Units exists, nor is one expected to develop.
As of December 31, 1999, the approximate number of holders of Limited
Partnership Assignee Units was as follows:
<TABLE>
<CAPTION>
TITLE OF CLASS NUMBER OF RECORD HOLDERS
-------------- ------------------------
<S> <C>
Limited Partnership Assignee Units.................. 4,297
</TABLE>
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ITEM 6. SELECTED FINANCIAL DATA.
The following represents selected financial data for Metric Partners Growth
Suite Investors, L.P., a California Limited Partnership, for each of the five
years in the period ended December 31, 1999. The data should be read in
conjunction with the Financial Statements included elsewhere herein.
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31
------------------------------------------------------------------
1999(2) 1998 1997 1996 1995
-------- -------- -------- -------- --------
(AMOUNTS IN THOUSANDS EXCEPT PER UNIT DATA)
<S> <C> <C> <C> <C> <C>
Total Revenues $ 2,566 $ 5,171 $ 26,193 $ 25,045 $ 26,107
======== ======== ======== ======== ========
Net Income (Loss):
Income (Loss) Before Gain on Sale or Loss on
Foreclosure of Properties $ 474 $ (423) $ 2,814 $ 521 $ 69
Loss on Foreclosure of Property (340) - - - -
Gain on Sale of Properties - 300 7,505 - 3,275
-------- -------- -------- -------- --------
Net Income(Loss) $ 134 $ (123) $ 10,319 $ 521 $ 3,344
======== ======== ======== ======== ========
Net Income (Loss) per Limited Partnership Assignee Unit(1):
Income (Loss) Before Gain on Sale or Loss on
Foreclosure of Properties $ 16 $ (7) $ 47 $ 8 $ (1)
Loss of Foreclosure of Property - - - - -
Gain on Sale of Properties - 5 120 - 53
-------- -------- -------- -------- --------
Net Income(Loss) per Limited Partnership Assignee Unit $ 16 $ (2) $ 167 $ 8 $ 52
======== ======== ======== ======== ========
Total Assets $ 7,374 $ 21,845 $ 60,636 $ 67,436 $ 71,071
======== ======== ======== ======== ========
Long Term Obligations:
Notes Payable $ -- $ 8,292 $ 26,983 $ 42,518 $ 42,669
======== ======== ======== ======== ========
Cash Distributions per Limited Partnership Assignee Unit $ 85 $ 288 $ 40 $ 68 $ 32
======== ======== ======== ======== ========
</TABLE>
(1) $1,000 original contribution per limited partnership assignee Unit,
based on limited partnership assignee units outstanding during the
period, after allocation to the General Partners.
(2) See discussion in Item 7 regarding future results of operations.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
Introduction
This Item should be read in conjunction with Financial Statements contained
elsewhere in this Report.
Year 2000 Considerations
As of July 31, 1999, the managing general partner had completed a project that
replaced or modified portions of its software and hardware so that computer
systems would properly function with respect to dates in the year 2000 and
thereafter. These modifications and replacements were undertaken at no cost to
the Partnership. The managing general partner believes that with this new and
modified hardware and software, the Year 2000 issue will not pose significant
operational problems for its computer systems. As of March 30, 2000, the
Partnership has not experienced significant operational problems due to Year
2000 issues. Further, the Partnership believes that its risk for future
operational problems related to the Year 2000 issue is minimal.
The Partnership is dependent upon third parties to continue operating properly,
and as of March 20, 2000, the Partnership is unaware of any significant Year
2000 issue preventing third parties with material dealings with the Partnership
to function normally. However, as a component of its Year 2000 project, the
Partnership has discussed Year 2000
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compliance issues with its key vendors and service providers, and has developed
contingency plans, although there can be no assurance that these contingency
plans will successfully avoid future service interruption.
Due to the complexity and pervasiveness of the Year 2000 issue and, in
particular, the uncertainty regarding the compliance programs of third parties,
no assurance can be given that these estimates will be achieved; actual results
could differ materially from those anticipated.
The Partnership sold eight of its nine remaining hotels in December 1997. The
remaining property, the Residence Inn - Nashville, was sold through foreclosure
in June 1999. Accordingly, historical financial information will not be
representative of future results. Future results of operations will be dependent
on the consummation of the settlement agreement discussed in Note 10 to the
Financial Statements, general and administrative expenses and interest income,
as well as the outcome of the legal proceedings discussed in Note 7 to the
Financial Statements.
RESULTS OF OPERATIONS
1999 Compared to 1998
Net income was $134,000 in 1999 compared to a net loss of $123,000 in 1998. The
change is primarily due to the sale through foreclosure of the Partnership's
last property, the Residence Inn - Nashville, in June 1999. This disposition was
anticipated, and in 1998 the Partnership recognized a $195,000 provision for
impairment (see discussion in the following section). While net hotel operations
decreased in 1999 as a result of approximately six months of operations compared
to twelve in 1998, the $195,000 provision for impairment in 1998 (see Notes 3
and 4 to the Financial Statements) and the consequential ceasement of
depreciation expense at December 31, 1998 had a positive effect on net income.
In addition, interest expense in 1999 was only recorded for the first quarter
(see Note 4 to the Financial Statements), while 1998 reflected a full year of
interest expense. These factors, combined with a substantial decrease in general
and administrative expenses, and despite a recognition of a $300,000 deferred
gain in 1998 versus a loss on foreclosure of property of $340,000 in 1999, led
to a net income in 1999 versus a net loss in 1998.
Interest income decreased in 1999 compared to 1998 as a result of lower cash
balances primarily caused by a distribution to the partners in September 1999.
General and administrative expenses decreased in 1999 compared to 1998 primarily
due to substantially lower legal expenses, partnership management fees and
administrative costs.
1998 Compared to 1997
Net loss was $123,000 in 1998 compared to net income of $10,319,000 in 1997. The
change is primarily due to the sale of eight properties on December 30, 1997,
when a gain on sale totaling $7,505,000 was recognized. In 1998, the gain on
sale was $300,000 relating to the portion of the 1995 gain on sale of the
Residence Inn - Atlanta (Perimeter West) which had been deferred pending certain
contingencies that have now been removed. (See Item 8, Note 6 to the Financial
Statements). In 1998, the Partnership recognized a $195,000 provision for
impairment on its remaining property, the Residence Inn - Nashville, as
described in Notes 3 and 4 to the Financial Statements. Operations at the
Residence Inn - Nashville dropped slightly in 1998 compared to 1997 while
interest income increased substantially.
Revenues and expenses from hotel operations as well as depreciation and interest
expense decreased substantially in 1998 when compared to 1997 due to the sale of
the eight hotels in 1997. Revenues from the Partnership's remaining hotel also
decreased as room rates were lowered in an attempt to maintain occupancy levels.
The operating expenses decreased at this hotel in 1998 compared to 1997, as a
substantial increase in administrative expenses was more than offset by
decreases in room operating costs, marketing, repair and maintenance and ground
lease expense. The administrative expenses were unusually low in 1997 due to the
recognition of a $95,000 credit related to the settlement of disputed sales and
use taxes which had been assessed by the State of Tennessee.
Interest income increased by $311,000 in 1998 compared to 1997 due to higher
cash balances resulting from sales proceeds. General and administrative expenses
increased in 1998 compared to 1997 primarily as a result of an increase in legal
expenses which was only partially offset by decreases in Partnership management
fees and administrative costs.
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PARTNERSHIP LIQUIDITY AND CAPITAL RESOURCES
Introduction
As presented in the 1999 Statement of Cash Flows, cash was used by operating
activities. Cash was provided by investing activities from receipt by the
Partnership of the balance of an escrow account (the "Shortfall Guaranty
Account") that had been established at the time of sale of the Residence Inn -
Atlanta in October 1995. The conditions for payment from the Shortfall Guaranty
Account to the buyer of the hotel were not met and, and pursuant to the escrow
agreement, the full amount including any interest earned was returned to the
Partnership on March 31, 1999. Cash was used by financing activities for
distribution to partners and principal payments on notes payable.
The Partnership considers cash investments to be those investments (primarily
commercial paper) with an original maturity date of more than three months at
time of purchase. There were no cash investments at December 31, 1999.
The former management company at the Residence Inn-Ontario which is controlled
by Kenneth E. Nelson ("Nelson") defaulted on certain obligations under the
management agreement. In 1991, the Partnership terminated the management
agreement and initiated legal proceedings against the former management company.
The management company withheld $194,000 from property funds in unauthorized
management fees prior to relinquishing management of the property. The $194,000
was treated as a receivable in the Partnership's Financial Statements until 1996
when it was written off. As discussed in Note 7 to the Financial Statements, in
March 1993 the parties verbally agreed to settle the lawsuit (the "SF
Settlement"); however, difficulties arose in consummating the settlement. After
a hearing in May 1994, the Court ruled in June that in the settlement the
Partnership had agreed to purchase the land underlying the Residence
Inn-Nashville (the "Land") from Nashville Lodging Company ("NLC"), an affiliate
of Nelson, subject to a lis pendens on the Land.
Following this ruling, the Partnership attempted to negotiate and enter into a
settlement agreement and a land purchase agreement and related agreements (the
"Settlement Documents") among itself and Nelson and NLC and another Nelson
entity, 2300 Elm Hill Pike, Inc. ("2300"). These parties were not able to reach
agreement on all issues relating to the Settlement Documents.
As discussed in Item 8, Note 7 to the Financial Statements, in May 1991 legal
proceedings were initiated against the Partnership and others by Orlando
Residence Ltd., ("Orlando"), holder of a promissory note issued by a previous
owner of the Residence Inn-Nashville (the "Hotel"). Orlando claimed the sale of
the Hotel to the Partnership by NLC was intended to defraud, hinder and delay
Orlando's recovery of the amount owed to it. The Partnership obtained a summary
judgement dismissing the case against it on September 15, 1993.
In July 1994, the Court in the case filed by Orlando ruled that the Hotel had
been fraudulently conveyed to NLC by 2300 in 1986 and voided the conveyance.
Judgements totaling more than $1,350,000 were subsequently entered by this Court
against Nelson, NLC and 2300. Based on this judgement, Orlando purchased the
Land at a judicial sale and became the landlord under the Lease. This judgement
was reversed in December 1996 and NLC asked the Court to return ownership of the
Land to it. However, the Court denied NLC's request.
In another action in Nashville, Tennessee, 2300 and NLC have alleged that the
Partnership refused to purchase the Land as required by the SF Settlement and
demanded indemnification for all costs and losses of 2300 and NLC relating to
Orlando's claims. In February 1996, the Court in this action 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. In February 1998, the Court enjoined the Partnership from
conveying, transferring, or otherwise disposing of its cash to any extent which
would leave less than $5 million available for payment of any judgment awarded
to 2300 and NLC. The Partnership does not believe it breached the SF Settlement.
See Item 8, Note 7 to the Financial Statements for more information about the
foregoing and other related proceedings.
In December 1996 the Partnership reported its intention to proceed with the
marketing for sale of the remaining hotels in the portfolio, and the sale of
eight of the nine remaining hotels was completed on December 30, 1997.
In January 1998, the Partnership made two distributions to its general and
limited partners, one totaling $16,818,000, representing a portion of the net
sales proceeds, and another one totaling $612,000 representing a distribution
from 1997 operations. In April 1998, the Partnership made another distribution
to its partners totaling $229,000 in order to comply with certain states' tax
withholding requirements. In September 1999, the Partnership made distribution
to the partners
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totaling $5,198,000, representing a portion of the net sales proceeds from the
sale in December 1997 of eight properties. Since this latest distribution, the
Partnership has maintained approximately $6.9 million in average cash balances
(including $5,000,000 of restricted cash, as discussed in Note 7 to the
Financial Statements). The balance may change depending upon the consummation of
the settlement agreement (see Note 10 to the Financial Statements) as well as
future interest income, level of general and administrative expenses including
costs of the ongoing legal proceedings related to the Residence Inn - Nashville,
as described in Note 7 to the Financial Statements. With respect to the use of
cash, the Partnership continues to be under certain restrictions as discussed in
Item 8, Note 7 to the Financial Statements.
On April 1, 1998, the balloon mortgage payment for the Residence Inn -
Nashville, totaling approximately $8.5 million, became due and payable (see Note
4 to the Financial Statements). In exchange for a six-month forbearance
agreement, during which time the Partnership pursued the potential sale of the
property, the lender accepted a principal reduction payment of $100,000,
reimbursement of $20,000 of its costs, and regular monthly debt service payments
through November 1, 1998. The Partnership subsequently determined that a sale of
the property was not feasible, and, the forbearance agreement expired. The
Partnership attempted to negotiate with the lender to accept the deed in lieu of
foreclosure and to assume the Marriott management contract, but was
unsuccessful. A deed in lieu of foreclosure would have relieved the Partnership
of substantial contract termination fees that it might have had to pay in the
event of a foreclosure sale. In this regard, the Partnership made regular
monthly debt service payments for the months of December 1998, January,
February, March and April 1999.
On June 18, 1999, the Residence Inn - Nashville (the "Hotel"), its contents and
the land on which it is located, which was under lease to the Partnership, was
sold through foreclosure. Certain difficulties arose in the course of and as a
result of the foreclosure with respect to the foreclosure proceedings, the
allocation of net proceeds of the personal property of the Hotel, and ownership
of the net current assets held by Marriott on behalf of the Partnership from the
operations of the Hotel to the date of foreclosure. In addition, while the
Partnership believed that the ground lease associated with the property would be
terminated in the event of a foreclosure, it was unclear which party was
entitled to receipt of deferred ground rents (including accrued interest
thereon) owed by the Partnership at the time of foreclosure. For a more detailed
account, please refer to Part II, Item 7 and Item 8, Notes 3 and 5 to the
Financial Statements. The issues were settled subsequent to December 31, 1999 as
described in Note 10 to the Financial Statements.
As a result of the foreclosure, Marriott issued a notice requiring the
Partnership to pay a substantial termination fee. However, Marriott has not
pursued this request and subsequently, Marriott and the purchaser of the Hotel
entered into a management agreement for Marriott's continued management of the
property. Marriott has provided a verbal estimate of the reimbursement it will
seek from the Partnership for its costs in entering the new management
agreement. The amount is minimal.
Internal Revenue Service regulations provide that, should 5% or more of the
outstanding assignee limited partnership units of a limited partnership be
traded via non-exempt transactions within a calendar year, the limited
partnership could be classified as a publicly-traded partnership for federal tax
purposes, and could therefore be taxed as a corporation. Transfers that are
exempt from the above restrictions include transfers at death; transfers between
siblings, spouses, ancestors, or lineal descendants; and distributions from
qualified retirement plans.
In 1996, 1997, and again in 1998, the Managing General Partner suspended the
processing of most types of resale transactions, as the level of such resale
transactions reached 4.9% of the total number of outstanding Units for each of
those years. This action was taken to ensure that resale transactions did not
result in the termination of the Partnership for tax purposes, or cause the
Partnership to be classified as a publicly traded partnership or to be taxed as
a corporation.
On June 25, 1999, Gemisys, the Partnership's Servicing and Transfer Agent
notified the Managing General Partner that non-exempt trading representing
approximately 4.9% of the outstanding Units of the Partnership had been reached,
at which time the Managing General Partner again suspended processing of resale
transactions for the remainder of the calendar year. Unit holders were advised
of that suspension in accordance with Section 12.1 of the Partnership Agreement,
via a special communication dated June 25, 1999. All resale transaction
paperwork submitted subsequent to that date through the end of the year was
returned to the originator. Gemisys again began processing resale transactions
on January 3, 2000.
Conclusion
In view of (i) the foreclosure of the Residence Inn - Nashville and matters
related thereto as described in Notes 7 and 10 to the Financial Statements; (ii)
distributions the General Partners will be obligated to return to the
Partnership prior
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to its liquidation; and (iii) uncertainties related to the litigation relating
to the Residence Inn - Nashville, the Partnership no longer provides an
estimated net asset value per Unit. However, the Partnership is aware that some
resale transactions of Units have taken place in the informal secondary market.
In this informal market, transactions may or may not take place in any given
time period and occur at a price negotiated between the buyer and seller. The
Partnership has no knowledge concerning how a particular price may be
determined. A total of 131 resale transactions have been recorded on the books
of the Partnership's transfer agent between January 1, 1999 and June 25, 1999
(the date of the suspension of trading), reflecting prices ranging from $75 to
$415 per Unit, with a simple average price of $109.50. The Partnership's
knowledge of these transactions is based solely on the books and records of its
Transfer Agent.
As discussed in Item 8, Note 8 to the Financial Statements, there is substantial
doubt regarding the Partnership's ability to continue as a going concern. The
Partnership does not expect to receive any significant cash flow through
December 31, 2000.
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ITEM 8. FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES.
METRIC PARTNERS GROWTH SUITE INVESTORS, L.P.,
A CALIFORNIA LIMITED PARTNERSHIP
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Auditors ..................................................................... 11
Financial Statements:
Balance Sheets at December 31, 1999 and 1998 .................................................... 12
Statements of Operations for the Years ended December 31, 1999, 1998 and 1997 ................... 13
Statements of Partners' Equity (Deficiency) for the Years ended December 31, 1999, 1998 and 1997 14
Statements of Cash Flows for the Years ended December 31, 1999, 1998 and 1997 ................... 15
Notes to Financial Statements ................................................................... 16-24
Financial Statement Schedule:
Schedule III - Real Estate and Accumulated Depreciation at December 31, 1999 and 1998 ........... 25
</TABLE>
Financial Statements and financial statement schedules not included have
been omitted because of the absence of conditions under which they are required
or because the information is included elsewhere in the Financial Statements.
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REPORT OF INDEPENDENT AUDITORS
Metric Partners Growth Suite Investors, L.P., a California Limited Partnership:
We have audited the accompanying balance sheets of Metric Partners
Growth Suite Investors, L.P., a California Limited Partnership, (the
"Partnership") as of December 31, 1999 and 1998, and the related statements of
operations, partners' equity (deficiency) and cash flows for the three years in
the period ended December 31, 1999. Our audits also included the financial
statement schedule of the Partnership listed in the accompanying table of
contents. These financial statements and financial statement schedule are the
responsibility of the Partnership's management. Our responsibility is to express
an opinion on these financial statements and financial statement schedule based
on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
and financial statement schedule are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements and financial statement schedule. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement schedule presentation. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, the financial statements present fairly, in all material
respects, the financial position of the Partnership at December 31, 1999 and
1998, and the results of its operations and its cash flows for the three years
in the period ended December 31, 1999, in conformity with accounting principles
generally accepted in the United States. Also, in our opinion, the financial
statement schedule for 1999 and 1998, when considered in relation to the basic
financial statements taken as a whole, presents fairly in all material respects
the information set forth therein.
As discussed in Note 7 to the financial statements, the Partnership is
subject to ongoing litigation. The uncertainties relating to this litigation
create substantial doubt about the Partnership's ability to continue as a going
concern. The accompanying financial statements do not include any adjustments
that might result from these uncertainties.
Ernst & Young LLP
San Francisco, California
March 10, 2000
11
<PAGE> 12
METRIC PARTNERS GROWTH SUITE INVESTORS, L.P.,
A CALIFORNIA LIMITED PARTNERSHIP
BALANCE SHEETS
DECEMBER 31,
<TABLE>
<CAPTION>
ASSETS 1999 1998
----------- -----------
<S> <C> <C>
CASH AND CASH EQUIVALENTS ........................ $ 1,875,000 $ 7,485,000
RESTRICTED CASH .................................. 5,000,000 5,353,000
ACCOUNTS RECEIVABLE .............................. 499,000 672,000
PREPAID EXPENSES AND OTHER ASSETS ................ -- 126,000
ASSET TO BE DISPOSED OF .......................... -- 8,185,000
DEFERRED FRANCHISE FEES .......................... -- 24,000
=========== ===========
TOTAL ASSETS ..................................... $ 7,374,000 $21,845,000
=========== ===========
LIABILITIES AND PARTNERS' EQUITY
ACCOUNTS PAYABLE ................................. $ -- $ 655,000
ACCRUED PROPERTY TAXES ........................... -- 114,000
ACCRUED INTEREST ................................. 229,000 333,000
OTHER LIABILITIES ................................ 509,000 751,000
NOTE PAYABLE ..................................... -- 8,292,000
----------- -----------
TOTAL LIABILITIES ................................ 738,000 10,145,000
----------- -----------
COMMITMENTS AND CONTINGENCIES
PARTNERS' EQUITY:
GENERAL PARTNERS .............................. (914,000) --
LIMITED PARTNERS (59,932 units outstanding) ... 7,550,000 11,700,000
----------- -----------
TOTAL PARTNERS' EQUITY ........................... 6,636,000 11,700,000
=========== ===========
TOTAL LIABILITIES AND PARTNERS' EQUITY ........... $ 7,374,000 $21,845,000
=========== ===========
</TABLE>
See notes to financial statements.
12
<PAGE> 13
METRIC PARTNERS GROWTH SUITE INVESTORS, L.P.,
A CALIFORNIA LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
<TABLE>
<CAPTION>
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
REVENUES
Hotel operations ........................................... $ 2,016,000 $ 4,445,000 $25,778,000
Interest and other ......................................... 550,000 726,000 415,000
----------- ----------- -----------
Total revenues ............................................. 2,566,000 5,171,000 26,193,000
----------- ----------- -----------
EXPENSES (Including $133,000, $282,000 and $513,000 paid
to managing general partner and affiliates in 1999, 1998
and 1997, respectively)
Hotel operations
Rooms .................................................. 463,000 936,000 5,223,000
Administrative ......................................... 324,000 611,000 3,008,000
Marketing .............................................. 199,000 464,000 2,677,000
Energy ................................................. 101,000 230,000 1,262,000
Repair and maintenance ................................. 99,000 221,000 1,453,000
Management fees ........................................ 63,000 152,000 1,005,000
Property taxes ......................................... 60,000 112,000 731,000
Other .................................................. 107,000 258,000 975,000
----------- ----------- -----------
Total hotel operations ..................................... 1,416,000 2,984,000 16,334,000
Depreciation and other amortization ........................ - 533,000 1,759,000
Interest ................................................... 223,000 859,000 4,327,000
General and administrative ................................. 453,000 1,023,000 959,000
Impairment provision for asset to be disposed of ........... - 195,000 -
----------- ----------- -----------
Total expenses ............................................. 2,092,000 5,594,000 23,379,000
----------- ----------- -----------
INCOME (LOSS) BEFORE GAIN ON SALE OR LOSS ON
FORECLOSURE OF PROPERTIES .................................. 474,000 (423,000) 2,814,000
Gain on sale of properties ................................. - 300,000 7,505,000
Loss on foreclosure of property ............................ (340,000) - -
----------- ----------- -----------
NET INCOME (LOSS) .......................................... $ 134,000 $ (123,000) $10,319,000
=========== =========== ===========
NET INCOME PER LIMITED PARTNERSHIP ASSIGNEE UNIT:
Income (loss) before gain on sale or loss on foreclosure
of properties ............................................ $ 16 $ (7) $ 47
Gain on sale of properties ................................. - 5 120
Loss on foreclosure of property ............................ - - -
----------- ----------- -----------
NET INCOME (LOSS) .......................................... $ 16 $ (2) $ 167
=========== =========== ===========
CASH DISTRIBUTIONS PER LIMITED PARTNERSHIP ASSIGNEE UNIT ... $ 85 $ 288 $ 40
=========== =========== ===========
</TABLE>
See notes to financial statements.
13
<PAGE> 14
METRIC PARTNERS GROWTH SUITE INVESTORS, L.P.,
A CALIFORNIA LIMITED PARTNERSHIP
STATEMENTS OF PARTNERS' EQUITY (DEFICIENCY)
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
<TABLE>
<CAPTION>
GENERAL LIMITED
PARTNERS PARTNERS TOTAL
------------ ------------ ------------
<S> <C> <C> <C>
BALANCE, January 1, 1997 ................................. $ 59,000 $ 21,531,000 $ 21,590,000
Income Before Gain on Sale of Properties ................. 2,000 2,812,000 2,814,000
Gain on Sale of Properties ............................... 336,000 7,169,000 7,505,000
Cash Distributions ....................................... (49,000) (2,397,000) (2,446,000)
------------ ------------ ------------
BALANCE, DECEMBER 31, 1997 ............................... 348,000 29,115,000 29,463,000
Income (Loss) Before Gain on Sale of Properties .......... 5,000 (428,000) (423,000)
Gain on Sale of Property ................................. - 300,000 300,000
Cash Distributions ....................................... (353,000) (17,287,000) (17,640,000)
------------ ------------ ------------
BALANCE, DECEMBER 31, 1998 ............................... - 11,700,000 11,700,000
Income (Loss) Before Loss on Foreclosure of Property ..... (470,000) 944,000 474,000
Loss on Foreclosure of Property .......................... (340,000) - (340,000)
Cash Distributions ....................................... (104,000) (5,094,000) (5,198,000)
------------ ------------ ------------
BALANCE, DECEMBER 31, 1999 ............................... $ (914,000) $ 7,550,000 $ 6,636,000
============ ============ ============
</TABLE>
See notes to financial statements.
14
<PAGE> 15
METRIC PARTNERS GROWTH SUITE INVESTORS, L.P.,
A CALIFORNIA LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
<TABLE>
<CAPTION>
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income (loss) ......................................................... $ 134,000 $ (123,000) $ 10,319,000
Adjustments to reconcile net income (loss) to net cash
provided (used) by operating activities:
Depreciation and other amortization ................................... - 533,000 1,962,000
Loss on foreclosure of property ....................................... 340,000 - -
Impairment provision for asset to be disposed of ...................... - 195,000 -
Gain on sale of properties ............................................ - (300,000) (7,505,000)
Changes in operating assets and liabilities:
Accounts receivable ............................................... (176,000) 623,000 (580,000)
Prepaid expenses and other assets ................................. 109,000 52,000 (1,000)
Accounts payable, accrued expenses and other liabilities .......... (1,070,000) (1,381,000) 206,000
------------ ------------ ------------
Net cash provided (used) by operating activities .......................... (663,000) (401,000) 4,401,000
------------ ------------ ------------
INVESTING ACTIVITIES:
Proceeds from sale of properties .......................................... - - 58,644,000
Capital improvements ...................................................... (26,000) (480,000) (2,032,000)
Cash in escrow ............................................................ - 19,214,000 (19,214,000)
Restricted cash ........................................................... 353,000 (5,018,000) (27,000)
Purchase of cash investments .............................................. - - (3,888,000)
Costs paid on foreclosure of property ..................................... (8,000) - -
Proceeds from sale of cash investments .................................... - 3,888,000 3,893,000
------------ ------------ ------------
Net cash provided by investing activities ................................. 319,000 17,604,000 37,376,000
------------ ------------ ------------
FINANCING ACTIVITIES:
Notes payable principal payments .......................................... (68,000) (18,691,000) (15,716,000)
Prepayment penalties paid ................................................. - (438,000) -
Cash distributions to partners ............................................ (5,198,000) (17,640,000) (2,446,000)
------------ ------------ ------------
Cash used by financing activities ......................................... (5,266,000) (36,769,000) (18,162,000)
------------ ------------ ------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS .......................... (5,610,000) (19,566,000) 23,615,000
Cash and cash equivalents at beginning of year ............................ 7,485,000 27,051,000 3,436,000
------------ ------------ ------------
CASH AND CASH EQUIVALENTS AT END OF YEAR .................................. $ 1,875,000 $ 7,485,000 $ 27,051,000
============ ============ ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest paid in cash during the year ..................................... $ 327,000 $ 833,000 $ 4,080,000
============ ============ ============
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES
Capital improvements - accrued ............................................ - - $ 218,000
------------
Accrued prepayment penalties .............................................. - - $ 438,000
------------
Foreclosure of property - see Note 3
</TABLE>
See notes to financial statements.
15
<PAGE> 16
METRIC PARTNERS GROWTH SUITE INVESTORS, L.P.,
A CALIFORNIA LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization - Metric Partners Growth Suite Investors, L.P., a California
Limited Partnership (the "Partnership"), was organized under the laws of the
State of California to acquire, hold for investment, manage, and ultimately
sell, all-suite, extended stay hotels which are a franchise of the Residence Inn
by Marriott, Inc. The managing general partner is Metric Realty, an Illinois
general partnership. The Associate General Partner of the Partnership is GHI
Associates II, L.P., a California Limited Partnership, of which Metric Realty is
the general partner and Prudential-Bache Properties, Inc., a wholly-owned
subsidiary of Prudential Securities Group Inc., is the limited partner. Through
March 31, 1997, Metric Realty was owned by Metric Holdings, Inc. and Metric
Realty Corp. Metric Realty Corp. was the Managing Partner of Metric Realty. 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. The Partnership was organized on June 28, 1984,
and commenced operations on April 14, 1988. Capital contributions of $59,932,000
($1,000 per assignee Unit) were made by the limited partners.
Fair Value of Financial Instruments - The carrying amounts of cash and cash
equivalents, cash investments and restricted cash approximate their fair value.
At December 31, 1998, it was not practicable to estimate the fair value of the
note payable because the note was in default and the related property securing
the note was subject to litigation; therefore, there was no readily determinable
market for the note.
Use of Estimates - The preparation of the Financial Statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the Financial
Statements and accompanying notes. Actual results could differ from those
estimates.
Cash and Cash Equivalents - The Partnership considers all highly liquid
investments, primarily commercial paper, with an original maturity date of three
months or less at the time of purchase to be cash equivalents.
Cash Investments - Cash investments include all cash investments not considered
cash or cash equivalents. There were no cash investments at December 31, 1999
and 1998.
Restricted Cash - The $5,000,000 balance at December 31, 1999 is the amount
which (as discussed in Note 7) the Court enjoined the Partnership from
conveying, transferring, or otherwise disposing of. The additional $353,000
included in the balance at December 31, 1998, represents an amount related to
the sale of the Residence Inn - Atlanta (Perimeter West) which was deposited
into an escrow account. See Note 6. In March 1999, the escrow account was closed
and the total amount in the account was released to the Partnership.
Credit Risk - Financial instruments which potentially subject the Partnership to
concentrations of credit risk include cash and cash equivalents and restricted
cash. The Partnership places its cash deposits and temporary cash investments
with creditworthy, high-quality financial institutions. The concentration of
such cash deposits and temporary cash investments is not deemed to create a
significant risk to the Partnership.
16
<PAGE> 17
Properties and Improvements - At December 31, 1998, the Partnership's remaining
property was classified as asset to be disposed of and a provision for
impairment was recorded in 1998. The property was sold through foreclosure in
June 1999 (see Note 3).
Asset To Be Disposed Of - Asset to be disposed of at December 31, 1998 was
stated at the lower of its carrying value amount or estimated fair value.
Depreciation is not recorded on an asset to be disposed of, therefore, no
further depreciation was taken after December 31, 1998.
Gain on Sale of Properties - Sales are generally recorded at the close of escrow
or after title has been transferred to buyer and after appropriate payments have
been received and other criteria have been met.
Depreciation - Depreciation was computed using the straight-line method over
estimated useful lives of 30 years for buildings and improvements and six years
for furnishings.
Marketing - Marketing costs were expensed as incurred.
Deferred Financing Costs - Financing costs were deferred and amortized as
interest expense over the lives of the related loans.
Deferred Franchise Fees - Franchise fees, paid in connection with the
acquisition of the Residence Inns, were deferred and amortized over the lives of
the franchise agreements.
Net Income (Loss) Per Limited Partnership Assignee Unit - Net income per limited
partnership assignee Unit is computed by dividing net income allocated to the
limited partners by 59,932 assignee Units.
Income Taxes - No provision for Federal and state income taxes has been made in
the Financial Statements because income taxes are the obligation of the
partners.
Comprehensive Income - The Partnership adopted Statement of Financial Accounting
Standards No. 130, "Reporting Comprehensive Income" ("FAS 130") at December 31,
1998. Under FAS 130, the Partnership is required to display comprehensive income
(loss) and its components as part of the Financial Statements. Other
comprehensive income (loss) includes certain changes in equity that are excluded
from net income (loss). Specifically, FAS 130 requires unrealized holding gains
and losses on available-for-sale securities to be included in accumulated other
comprehensive income (loss). The Partnership has no material components of other
comprehensive income (loss) and, accordingly, the comprehensive income (loss) is
the same as net income (loss) for all periods presented.
Segment Information - The Financial Accounting Standards Board (the "FASB")
issued Statement of Financial Accounting Standards No. 131, "Disclosures about
Segments of an Enterprise and Related Information" ("FAS 131"), which is
effective for Financial Statements for periods beginning after December 15,
1997. FAS 131 establishes standards for the way that public business enterprises
report financial and descriptive information about reportable operating segments
in annual Financial Statements and in interim reporting to investors. The
Partnership adopted FAS 131 in 1998. The Partnership determined in 1998 that it
had one operating and reportable segment, the operations of its one remaining
hotel property in Nashville, which is further described in Note 3.
2. TRANSACTIONS WITH THE GENERAL PARTNERS AND AFFILIATES
In accordance with the Partnership agreement, the Partnership is charged by the
managing general partner and affiliates for services provided to the
Partnership. The amounts are as follows:
<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Partnership management fees ....... $ -- $ 72,000 $213,000
Reimbursement of expenses ......... 133,000 210,000 300,000
-------- -------- --------
Total ............................. $133,000 $282,000 $513,000
======== ======== ========
</TABLE>
Reimbursement of expenses include partnership accounting, professional services
and investor services.
In accordance with the Partnership agreement the general partners are allocated
their two percent continuing interest in the Partnership's net income or loss
and cash distributions. In addition, in 1994 the general partners were allocated
gross
17
<PAGE> 18
income of $245,000 in accordance with and calculated pursuant to the Partnership
Agreement. However, beginning in 1995 and through 1998, due to the general
partners' equity account balance, the Partnership adjusted and limited the
income allocation to the general partners to amounts equal to their two percent
continuing interest in cash distributions. Pursuant to the Partnership
Agreement, immediately prior to liquidation and if certain distribution levels
to the limited partners are not met, the general partners may be obligated to
return all or a portion of the cumulative amounts received in distributions. At
December 31, 1999, such amount is approximately $914,000 and the Partnership
believes circumstances will be such that the general partners will be required
to re-contribute this amount.
The general partners were allocated taxable gain and loss in accordance with the
Partnership Agreement.
3. ASSET TO BE DISPOSED OF AND FORECLOSURE OF PROPERTY
At December 31, 1998, the Partnership's remaining property, the Residence Inn -
Nashville, was classified as asset to be disposed of and an impairment
provision, in the amount of $195,000, was recorded to reduce the carrying value
to the estimated fair value less estimated disposal costs. The estimated fair
value for this property was determined to be equivalent to the estimated
principal balance on the mortgage note payable at the expected date for the
transfer of the property to the lender via deed in lieu of foreclosure or
through foreclosure as discussed in Note 4 below. The estimated fair value of
the property at December 31, 1998 did not necessarily represent the amount at
which the property would ultimately be disposed; however, management believed
that the estimated fair value of the property was a reasonable approximation of
the market price.
In deciding to sell or dispose of the property, the Partnership considered the
deterioration of the Nashville market, in conjunction with the substantial
capital improvements that would be required under the Marriott contract over the
next several years and which would be necessary for the hotel to remain
competitive.
On June 18, 1999, the improvements of the Residence Inn - Nashville (the
"Hotel") owned by the Partnership and the land on which it is located, which was
under lease to the Partnership, were sold through foreclosure for $9,050,000,
with net proceeds of approximately $450,000 after deduction of the outstanding
principal and other costs. The purchaser was the holder of the mortgage note
payable encumbering the Hotel (the "Lender"). The Partnership had been in
default under the mortgage note payable since April 1998 when it did not pay the
balloon mortgage payment then due. In the foreclosure sale, the lessor on the
ground lease also bid for the property. The lessor filed suit against the
foreclosure trustee, asserting that the trustee denied him his alleged right to
redeem the property by paying the debt through the foreclosure. The suit was
settled in a mediation meeting on February 29, 2000 (see Note 10 below).
Subsequent to the foreclosure, Marriott issued a notice requiring the
Partnership to pay a $1,415,000 termination fee, computed as per the management
agreement, plus certain employee costs not specified in amount. However,
Marriott and the Lender have since entered into a management agreement for
Marriott's continued management of the property and Marriott has verbally
acknowledged that a termination fee is not due. The Partnership will be required
to pay a minimal amount of less than $20,000 for costs incurred by Marriott in
renegotiating and signing a new management agreement with the Lender.
In the foreclosure sale the allocation of the $9,050,000 price was not
specified. The Partnership claimed its right to a portion of the net proceeds
from the sale because of its ownership of the personal property sold. The
estimated net cost of foreclosure to the Partnership was $311,000 (including a
writeoff of net current assets held by Marriott on behalf of the Partnership and
relating to the property at the time of foreclosure). The carrying value of the
Hotel at the time of sale was $8,236,000 (net of the $195,000 impairment of
value provision recognized in 1998) and the note payable balance, adjusted for
amounts in the impound account, was $8,207,000, resulting in a $340,000 loss on
foreclosure of property recognized in 1999. In February 2000, a mediation
meeting was held in an attempt to resolve the issue of the Partnership's right
to the personal property sold. The issue of undistributed net current assets
held by Marriott from the operations of the Hotel on behalf of the Partnership
at time of foreclosure was also addressed (see Note 10 below).
With respect to the ground lease, on May 20, 1999, the lessor issued a letter
notifying the Partnership that it had terminated the ground lease as the
Partnership had defaulted under the terms of the mortgage note for the Hotel,
thereby violating a term of the ground lease agreement. However, the Lender took
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 had not been established at December 31, 1999.
The accompanying Financial Statements reflect a $655,000 liability for deferred
ground lease expense, including interest accrued thereon, to the date of the
foreclosure. The Partnership believed that it was relieved of future payments as
of the date of foreclosure, if not as of
18
<PAGE> 19
May 20, 1999, the date the lessor claimed to be the lease termination date.
While at December 31, 1999 it was unclear which party was entitled to receipt of
the $655,000, it was determined at the February 29, 2000 mediation meeting that
the lessor is entitled to the amount plus interest the Partnership has earned on
the funds from the date of foreclosure to date of payment (see Note 10 below).
4. NOTES PAYABLE
The note payable on the Residence Inn - Nashville became due on April 1, 1998,
and a balloon payment of $8,491,000 was due. The Partnership did not make the
payment and has since been in default. The Partnership was unable to negotiate
an extension of the loan with the lender. However, the lender entered into a
six-month forbearance agreement with the Partnership, while the Partnership was
in negotiations for a potential sale, in exchange for a principal reduction
payment of $100,000 and reimbursement of $20,000 to the lender for certain
costs. In addition, the Partnership made the regular monthly debt service
payments through November 1, 1998, including payments to the tax impound
account. At that time, however, negotiations with a potential buyer, for a sale
at a contract price equal to approximately the outstanding note payable balance,
had terminated and the buyer had withdrawn its offer as the title company was
unable to issue acceptable title insurance to the buyer with respect to the land
on which the hotel is built. The forbearance agreement had expired and the
Partnership concluded that permitting the lender to foreclose was in the best
interest of the investors.
The Partnership discontinued the monthly debt service payments effective with
the payment due December 1, 1998. In January 1999, the lender contacted the
Partnership and it was agreed that the Partnership 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 and assuming the management contract
with Marriott (with Marriott's consent), thereby relieving the Partnership of a
potential obligation to pay approximately $1,400,000 in termination fees plus
other costs, and relief from the ground lease. Consequently, on February 5,
1999, the Partnership paid $265,000 to cover the monthly payments (including
impound) due through February 1, 1999. The Partnership has also paid the $88,000
due March 1, 1999 and April 1, 1999. On June 18, 1999 the lender foreclosed on
the property, as discussed in Note 3 above, and the payoff was settled. The
outstanding principal at the time of sale was $8,224,000. In the accompanying
Financial Statements, the adjusted balance was $8,207,000 after applying the
amount held in an impound by the lender.
The Residence Inn - Nashville note payable with an original balance of
$9,250,000 originally wrapped an existing loan which had a balance of
approximately $9,336,000 at the time the Partnership acquired the property.
However, 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. 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 Note 7, Legal
Proceedings, the Partnership became the direct obligor to the first note holder
and the note payable balance was 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 1996 as a general and administrative expense in the
Financial Statements. The terms of the first note varied slightly from those of
the wrap note. The interest rate was 9.5% per annum on the first note compared
to 9.9433% on the wrap note and monthly payments of interest and principal were
approximately $2,600 lower on the first note. Similar to the wrap note, the
first note matured in April 1998 and required 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 were
reduced by $50,000 per year. See Note 5.
Certain of the notes were discounted over their term to yield interest at 10.15
to 10.5 percent per annum. Discount amortization was $149,000 for the year ended
December 31, 1997. There was no discount amortization in 1999 or 1998.
Amortization of deferred financing costs totaled $54,000 for the year ended
December 31, 1997. There was no amortization of deferred financing costs in 1999
or 1998.
5. MINIMUM FUTURE RENTAL COMMITMENTS
The Residence Inn - Nashville was subject to a land lease that extended through
May 25, 2049, with an option to purchase the land. The annual payments on the
lease were $100,000 plus additional payments equal to 1.8% of the hotel's
revenues. The 1.8% additional payments requirement expired on April 15, 1998.
Additional payments of $50,000 were required and paid until the purchase money
note to the seller of the property was paid off in full in April 1996. The
$100,000 annual payment is due based upon the property achieving certain
operating results and any amounts not paid currently are accrued. The balance of
accrued rent is subject to interest charges at ten percent per annum,
19
<PAGE> 20
compounded annually. At December 31, 1999 and 1998, the balances of accrued rent
plus interest were $655,000 and $598,000, respectively. Accrued rent and accrued
interest are included in other liabilities and accrued interest, respectively,
in the accompanying Financial Statements.
Rental expense (including the 1.8% of revenues through April 15, 1998) for this
lease was $46,000, $114,000 and $178,000 in 1999, 1998 and 1997, respectively.
6. SALE OF PROPERTIES
The Partnership sold the Residence Inns - Ontario, Columbus (East), Fort Wayne,
Indianapolis, Lexington, Louisville, Winston Salem and Altamonte Springs on
December 30, 1997. The combined sales price, for the package of these eight
residence inns, was $59,500,000. After payment of the outstanding balances on
the loans totaling $33,819,000 and expenses of sale totaling $1,294,000,
including $438,000 of prepayment penalties on certain of the loans, the net
proceeds to the Partnership were $24,387,000. Pursuant to an agreement with the
lender on six of the eight residence inns, the outstanding balances on the
related six notes totaling $18,469,000, and the required prepayment penalties of
$438,000, were not paid until January 2, 1998. To secure payment to the lender
of the six notes mentioned, a portion of the net sales proceeds was retained in
an escrow account on December 30, 1997, sufficient to pay off the outstanding
principal balances, prepayment penalties due pursuant to the loan agreements and
interest accrued to date of payoff, and was reflected in Cash in Escrow on the
December 31, 1997 balance sheet.
The Partnership was required by the purchaser, under the terms of the sales
contract, not to distribute $7,500,000 of the sales proceeds for a period of one
year from the date of sale, which amount represented the maximum possible
liability of the Partnership for any breach of the sales agreement. There were
no known contingencies with respect to potential claims that could be brought
against the Partnership nor were any presented during the aforementioned period,
which expired on December 30, 1998.
The Partnership sold the Residence Inn-Atlanta (Perimeter West) on October 3,
1995. The net sales price was $11,350,000 after deducting $300,000 that was
deposited into an escrow account (the "Shortfall Guaranty Account"). The
Partnership guaranteed certain income levels to the buyer for the years from
1996 through 1998. To the extent these income levels were not attained, the
buyer would receive the deficiency, up to the maximum $300,000, from the
Shortfall Guaranty Account. The buyer did not make any demands on the Shortfall
Guaranty Account and, therefore, on December 31, 1998 the contingency was
removed and the deferred gain on sale of $300,000 was recognized in 1998.
Pursuant to an escrow agreement, the $300,000 (plus interest earned thereon) was
returned to the Partnership on March 31, 1999.
7. 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"). [The lawsuits described below are related. 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 at a
discount the land (the "Land") underlying the Partnership's Residence Inn -
Nashville (the "Hotel") then 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 executed.
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.
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<PAGE> 21
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
I").
Orlando Residence Inn Ltd. ("Orlando") filed this action against 2300 Elm Hill
Pike, Inc. ("2300") and Nashville Lodging Company ("NLC") in the Davidson County
Chancery Court to attempt to execute on a judgment against Nelson, NLC and 2300
in another action in Chancery Court by subjecting the Land to sale. In May 1995,
2300 and NLC ("TP Plaintiffs") filed a third-party complaint against the
Partnership, alleging it had refused to purchase the Land as required by the SF
Settlement. TP Plaintiffs demanded payment by the Partnership of 2300 and NLC's
costs of defending the case in which the judgment that Orlando was attempting to
enforce had been obtained 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 TP Plaintiffs for partial
summary judgment, 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 late October 1997, TP Plaintiffs filed a motion for an injunction to prohibit
GSI from distributing proceeds from the sale of the Residence Inns owned by GSI,
pending a final judgment in this case. A hearing on this motion was held in
February 1998 and the Court enjoined the Partnership from conveying,
transferring, distributing or otherwise disposing of its cash to any extent
which would leave less than $5 million available for payment of any judgment
obtained by TP Plaintiffs.
TP Plaintiffs filed an amended complaint against the Partnership in April 1998,
asserting, among other things, a bad faith breach of contract by the
Partnership. In May 1998, the Court granted a motion by the Partnership to
dismiss these bad faith allegations and to dismiss certain claims for specific
damages made by TP Plaintiffs, including attorneys' fees and the value of
Nelson's time relating to efforts to enforce the SF Settlement.
In late October 1998, TP Plaintiffs filed a second amended complaint, asserting
that a certain 1989 three-party agreement among NLC, the Partnership and the
holder of a mortgage on the Hotel and the Land entitles TP Plaintiffs to obtain
judgment for, among other things, the cost, including attorney's fees, of this
action and of Nelson's time and efforts on behalf of NLC in this action. In
November 1998, the Court granted a motion filed by the Partnership, dismissing
the claim of TP Plaintiffs to recover for the value of Nelson's time and efforts
on behalf of NLC in this and related litigation.
In December 1998, the Court granted a motion for partial summary judgment filed
by the Partnership, dismissing most of the remaining damage claims of TP
Plaintiffs, including claims for indemnification for any loss resulting from the
claims of Orlando. After these claims were dismissed, TP Plaintiffs amended
their damage claim to seek to recover the alleged differential between the price
that the Partnership agreed to pay for the Land and its alleged fair market
value. The amount of this claim is approximately $1.6 million. In addition, TP
Plaintiffs sought to recover attorneys' fees to enforce the SF Settlement.
In November 1999, the Partnership filed a motion for summary judgment seeking
dismissal of TP Plaintiffs' claim for attorneys' fees. This motion was granted
by the Court on February 25, 2000.
On February 7, 2000, TP Plaintiffs submitted an offer to settle this case. The
Partnership concluded that the settlement offer was not in the best interest of
the Partnership and rejected the offer on February 18, 2000.
The Partnership filed a motion in February 2000 to disqualify the law firm
representing the TP Plaintiffs based on a conflict of interest that arose when a
partner of the Partnership's counsel with knowledge of this case left that firm
and joined the law firm representing TP Plaintiffs. As a result of the motion,
counsel for TP Plaintiffs filed a motion to withdraw as counsel on March 7,
2000. This motion is expected to be granted. The trial of the case, which
previously has been continued several times, will be set for a new date once new
counsel for TP Plaintiffs is in place.
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 II").
GSI filed this action on 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 a cure, it became the direct obligor to the lender under the
21
<PAGE> 22
Senior Mortgage and that the Wrap Note had been satisfied and the payments due
under Lease reduced by $50,000 per year.
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 appealed all
judgments for the Partnership in this case. The Partnership and the defendants
agreed on an attorneys' fee award to the Partnership of $60,000, but no payment
was expected until the defendants' appeal is resolved. Oral arguments regarding
this appeal were held in July 1998, and in September 1998 the appellate court
affirmed the judgments for the Partnership. Defendants moved for rehearing,
which was denied in early October 1998. Defendants then filed an application
with the Tennessee Supreme Court for permission to appeal the appellate court
decision. This application was denied by the Tennessee Supreme Court in early
March 1999. Subsequently, Defendants petitioned the Tennessee Supreme Court to
reconsider its denial. This petition was denied by the Tennessee Supreme Court
on May 10, 1999. The Partnership's $60,000 attorneys' fee award is now due and
owing by the defendants.
Kenneth E. Nelson and Nashville Lodging Co. vs. Metric Realty et al., Chancery
Court for Davidson County in Nashville, Tennessee, Case No. 97-2189-III (the
"Inducement Action").
In the second quarter of 1997, Nelson alleged that Metric Realty and GHI
Associates II, L.P., the Managing and Associate General Partners, respectively,
of the Partnership, and certain of Metric Realty's affiliates (the "Affiliates")
and certain former and current employees of Metric Realty or its affiliates (the
"Employees") had improperly induced the Partnership to breach the SF Settlement.
In June 1997, Nelson and NLC filed the Inducement Action in the Chancery Court
for Davidson County in Nashville, Tennessee (the "Chancery Court") against
Metric Realty, GHI Associates II, L.P., the Affiliates and certain of the
Employees (the "Inducement Action Defendants"), seeking unspecified
compensatory, treble and punitive damages for the alleged improper inducement of
breach of contract.
In June 1998 the Inducement Action Defendants filed a motion to dismiss the
complaint against the Employees and one of the Affiliates named in the action
based on lack of jurisdiction and against the remaining Affiliates based on
failure to state a claim. The Chancery Court in September 1998 dismissed the
complaint against all Affiliates but one and denied the remaining requests for
dismissal.
A motion for summary judgment to dismiss the action on the basis of the statute
of limitations was filed in January 1999 by the Inducement Action Defendants and
was argued at a hearing held in February 1999. In April 1999, the Court denied
the motion. Discovery is ongoing and the case has not been set for trial.
The Partnership filed a motion in February 2000 to disqualify the law firm
representing Nelson and NLC ("Nelson's Counsel") based on a conflict of interest
that arose when a partner of the Partnership's counsel with knowledge of issues
related to this case left that firm and joined Nelson's Counsel. This motion was
heard on March 6, 2000 and no decision has yet been rendered.
The legal and other expenses of the Inducement Action Defendants in the
Inducement Action arising as a result of the allegations made by Nelson are
being paid by the Partnership pursuant to the indemnification provisions of the
Partnership's limited partnership agreement and subject to the conditions set
forth in those provisions.
Metric Partners Growth Suite Investors, L.P. vs. James Reuben et al., San
Francisco County Superior Court, Case No. 998214.
On September 30, 1998, the Partnership filed this lawsuit against James Reuben
and several law corporations of which he is or has been a member (the "Reuben
Defendants"), alleging breach of their professional obligations and fiduciary
duty as attorneys for the Partnership to adequately and competently represent
and advise the Partnership in connection with the SF Settlement. The Partnership
seeks unspecified damages from the Reuben Defendants arising from such breach.
The Reuben Defendants answered the complaint in January 1999. Discovery has yet
to commence and no trial date for this action has been set.
Samuel A. Hardage and Samantha Hotels, LLC vs. Robert M. Holland, Jr., Trustee,
and WBL II Real Estate Limited Partnership vs. Metric Partners Growth Suite
Investors, L. P. and Nashville Lodging Company, Chancery Court for Davidson
County, in Nashville, Tennessee, Case No. 99-1749-I.
On June 21, 1999, Samuel A. Hardage and Samantha Hotels, LLC ("Hardage") filed
this action against Robert M. Holland (the "Trustee") and WBL Real Estate
Limited Partnership (the "Lender") claiming in general that the Trustee
improperly conducted the foreclosure sale of the Hotel and the Land (the
"Collateral") by failing to (i) permit Hardage
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<PAGE> 23
to redeem the Collateral for the amount of the outstanding debt that was being
foreclosed and (ii) disqualify the Lender when it did not close its purchase of
the Collateral by noon on June 18, 1999. Among other remedies, Hardage asked
that the foreclosure sale be reconvened with the Lender disqualified as a bidder
and for a declaration that he retains a right to redeem the Collateral in excess
of the outstanding debt.
On July 19, 1999, the Trustee and the Lender responded to the complaint, made
certain counterclaims and filed a third-party complaint against the Partnership
and NLC. In general, the third-party complaint alleges that in the foreclosure
sale the Lender paid $450,000 (the "Surplus Funds") in excess of the debt, costs
and attorney's fees recoverable in connection with the debt and a $50,000
reserve for litigation costs related to the sale. As a result, the Trustee and
Lender ask the Court for an order interpleading the Surplus Funds and joining
all parties, including the Partnership and NLC, who claim an interest in the
Surplus Funds. On July 20, 1999, the Partnership filed an answer, counterclaim
and crossclaim, claiming an interest in the Surplus Funds related to the
personal property sold in the foreclosure sale.
On August 5, 1999, the Lender filed a motion for judgment on the pleadings,
claiming that the Hardage complaint failed to allege that Hardage tendered the
amount of the outstanding debt, and that Hardage failed to pay into Court the
amount of the outstanding debt. The Lender alleged that these steps were
necessary under Tennessee law for Hardage to pursue his claim that he was denied
the right to redeem the Collateral. The motion was heard on August 19, 1999. The
Court denied the motion but ordered Hardage to pay into Court the amount of the
outstanding debt within thirty (30) days to proceed with his challenge that he
was denied the right to redeem the Collateral. Hardage did not pay the debt into
Court.
On August 23, 1999, Hardage filed an answer and counterclaim to the
Partnership's claim to the Surplus Proceeds. Among other things, Hardage claims
(1) that the Partnership is not entitled to any portion of the Surplus Funds
because the personal property owned by the Partnership was not sold at the
foreclosure; and (2) that the Partnership owes Hardage accrued but unpaid rent
under the ground lease of the Land in an amount exceeding $500,000. On September
22, 1999, the Partnership answered Hardage's counterclaim, admitting that it
owes accrued but unpaid rent either to Hardage or the Lender, and asking for a
declaration as to whom the accrued but unpaid rent is owed.
At a non-binding mediation held on February 29, 2000, all parties agreed to
settle this action. Pursuant to a definitive settlement agreement dated March
10, 2000, (i) the Partnership has paid to Hardage all accrued but unpaid rent
for the Land plus interest in the aggregate approximate amount of $681,000; (ii)
the Lender has caused Hardage to be paid $500,000 as Surplus Funds plus any
interest earned on such Funds after the foreclosure and is obligated to pay by
March 30, 2000 $50,000 to the Partnership in connection with the Partnership's
claim of an interest in the Surplus Funds related to the personal property sold
at the foreclosure sale; (iii) Hardage is obligated to pay the Partnership
$75,000 from the Surplus Funds paid to him plus any interest earned on such
$75,000 after the foreclosure also in connection with the Partnership's claim
related to the Surplus Funds; and (iv) the Lender is obligated to cause the
manager of the Hotel to release to the Partnership all operational income, cash,
and cash reserves related to the Hotel held by the manager as of June 18, 1999.
The action was dismissed in March 2000 by agreement of the parties.
8. GOING CONCERN
As discussed in Note 7, the Partnership is subject to ongoing litigation. The
uncertainties relating to this litigation create substantial doubt about the
Partnership's ability to continue as a going concern. The accompanying Financial
Statements do not include any adjustments that might result from these
uncertainties.
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<PAGE> 24
9. RECONCILIATION TO INCOME TAX METHOD OF ACCOUNTING
The differences between the method of accounting for income tax reporting and
the accrual method of accounting used in the Financial Statements are as
follows:
<TABLE>
<CAPTION>
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Net income (loss) -- Financial Statements ............. $ 134,000 $ (123,000) $ 10,319,000
Differences resulted from:
Loss on foreclosure of property ................... 129,000 - -
Gain on sale of property .......................... - (300,000) 613,000
Impairment provision for asset to be disposed
of ................................................ - 195,000 -
Depreciation ...................................... (220,000) 34,000 (683,000)
Prepayment penalties .............................. - - (438,000)
Amortization of notes payable discount ............ - - 148,000
Interest .......................................... - 10,000 (23,000)
Other ............................................. (294,000) (61,000) (54,000)
------------ ------------ ------------
Net income (loss) - income tax method ................. $ (251,000) $ (245,000) $ 9,882,000
============ ============ ============
Taxable income (loss) per limited partnership
assignee unit after giving effect to the
allocation to the general partners .................... $ (4) $ (4) $ 161
============ ============ ============
Net assets and liabilities - Financial Statements ..... $ 6,636,000 $ 11,700,000 $ 29,463,000
Cumulative differences resulted from:
Gain on sale of property .......................... - - 300,000
Impairment provision for asset to be disposed
of ................................................ - 195,000
Depreciation ...................................... - 124,000 90,000
Interest .......................................... - 86,000 76,000
Other ............................................. - (20,000) 41,000
------------ ------------ ------------
Net assets and liabilities - income tax method ........ $ 6,636,000 $ 12,085,000 $ 29,970,000
============ ============ ============
</TABLE>
10. SUBSEQUENT EVENT
On February 29, 2000 a mediation meeting was held among the Lender, the former
lessor on the ground lease and the Partnership. At that meeting the parties
agreed to the terms of a settlement agreement ("Settlement") that was
subsequently signed in March 2000. The Settlement provides for (i) payment by
the Partnership to the former lessor of the ground lease the $655,000 deferred
ground rent liability discussed in Note 5 above plus interest income which the
Partnership earned on that amount until date of actual payment and (ii)
collection of $125,000 by the Partnership representing its share of proceeds
from the sale of personal property. In addition, the parties agreed that the
Partnership is entitled to operations to the date of foreclosure plus any cash
and cash reserves held by Marriott pertaining to the Partnership's ownership
period to the date of foreclosure of the Hotel. At this time, the Partnership is
awaiting receipt of Marriott's accounting, for review, of funds to be released
to the Partnership. Any adjustment to the financials resulting from the
Settlement, will be recorded in year 2000 as payments and collections take
place, except for payment of the $655,000 which liability is already reflected
in the accompanying Financial Statements.
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<PAGE> 25
SCHEDULE III
METRIC PARTNERS GROWTH SUITE INVESTORS, L.P.
A CALIFORNIA LIMITED PARTNERSHIP
REAL ESTATE AND ACCUMULATED DEPRECIATION
NOTES:
(1) The aggregate costs for Federal income tax purposes are zero and
$14,256,000 as of December 31, 1999 and December 31, 1998, respectively.
<TABLE>
<S> <C>
(2) Balance, January, 1, 1997 ....................................... $ 90,456,000
Cost of properties and improvements sold ........................ (78,797,000)
Capital improvements ............................................ 2,250,000
------------
Balance, December 31, 1997 ...................................... 13,909,000
Capital improvements ............................................ 262,000
Property and improvements reclassified to asset to be disposed of (14,171,000)
------------
Balance, December 31, 1998 ...................................... $ -
============
(3) Balance, January, 1, 1997 ....................................... $ 31,825,000
Accumulated depreciation on properties and improvements sold .... (28,297,000)
Additions charged to expense .................................... 1,735,000
------------
Balance, December 31, 1997 ...................................... 5,263,000
Additions charged to expense .................................... 528,000
Accumulated depreciation on properties and improvements sold .... (5,791,000)
------------
Balance, December 31, 1998 ...................................... $ -
============
</TABLE>
(4) Depreciation was computed on lives ranging from six to 30 years.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
The information called for by this item is incorporated herein by reference to
the Registrant's Current Report on Form 8-K filed September 14, 1994 (Commission
File No. 0-17660).
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<PAGE> 26
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The Partnership has no directors or executive officers. For informational
purposes only, the following are the names and additional information relating
to the directors and executive officers of SSR Realty Advisors, Inc. ("SSR
Realty"), the managing partner of Metric Realty, the managing general partner of
the Partnership.
(a) DIRECTORS
THOMAS P. LYDON, JR.
Director, President and Chief Executive Officer, SSR Realty
Mr. Lydon age 51, has been President and Chief Executive Officer of SSR Realty,
or one of its predecessor companies since February 1995. From March 1997 through
its dissolution in early January 2000, he was also Chairman of the Board and
Chief Executive Officer of Metric Income Trust Series, Inc., a publicly-held
real estate investment trust, of which SSR Realty was the Advisor. Prior to
joining SSR Realty, Mr. Lydon was from April 1992, an Executive Vice President
of MBL Life Assurance Corporation ("MBL") (formerly Mutual Benefit Life
Insurance Company) chosen by the New Jersey Department of Insurance to oversee
and reorganize the real estate investment division of MBL. Mr. Lydon's
experience before joining MBL included serving as Executive Vice President and
Principal of Manhattan Capital Realty Corporation, an investment banking firm,
from 1990 to 1992; and as Senior Vice President of Unicorp American Corporation,
a real estate and banking firm, from 1985 to 1990. Mr. Lydon graduated from
Syracuse University with a Bachelor's Degree in Business Administration in 1970.
RALPH F. VERNI
Chairman of the Board, SSR Realty
Mr. Verni, age 57, was elected to his position with a predecessor of SSR Realty
in March 1993. He joined State Street Research and Management Company ("State
Street Research"), a subsidiary of Metropolitan Life Insurance Company
("MetLife"), in 1992 as Chairman and Chief Executive Officer and became
President in January 1993. He also serves as Director, President and CEO of SSRM
Holdings, Inc., a wholly-owned subsidiary of MetLife which in turn serves as a
holding company for several of MetLife's investment management subsidiaries. He
is a trustee of 11 registered investment companies in the State Street Research
Fund complex which are managed by State Street Research or an affiliate. Mr.
Verni is a member of the Advisory Committee for the MIT Center for Real Estate
Development, the Colgate University Board of Trustees and its Finance Committee,
the Advisory Committee of Commonwealth Capital Ventures, L.P., and Commonwealth
Capital Ventures II, L.P. Prior to joining State Street Research, Mr. Verni was
President and Chief Executive Officer of New England Investment Companies, a
holding company for the real estate, investment management, and broker/dealer
subsidiaries of New England Mutual Life Insurance Company ("The New England"),
and was also the Chief Investment Officer and a director of The New England.
Prior to joining The New England in 1982, Mr Verni spent 16 years with The
Equitable Life Assurance Company in senior investment management positions. He
holds a Bachelor's Degree from Colgate University and a Master's Degree in
Business Administration from Columbia University.
GERARD P. MAUS
Director, SSR Realty
Mr. Maus, age 48, was elected as a director of a predecessor company of SSR
Realty in March 1993. He joined State Street Research as Executive Vice
President, Chief Financial Officer and Chief Administrative Officer in February
1993. Prior to joining State Street, Mr. Maus served since 1983 as a financial
officer of New England and its subsidiary, New England Investment Companies
("NEIC"), most recently as Executive Vice President and Chief Financial Officer
of NEIC from 1990 to January 1993. Prior to holding these positions, Mr. Maus
held financial positions with Bank of New England, Coopers & Lybrand, and
Liberty Mutual Life Insurance Company. He received a Bachelor of Arts Degree in
Business Administration from Rutgers University in 1973 and is a Certified
Public Accountant.
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<PAGE> 27
(b) EXECUTIVE OFFICERS
WILLIAM A. FINELLI
Managing Director and Chief Financial Officer, SSR Realty
Mr. Finelli, age 42, has been Managing Director, and Vice President, Chief
Financial Officer and Treasurer of SSR Realty or one of its predecessor
companies since August 1995. He is responsible for overseeing the day to day
activity of the accounting, finance, legal, technology and valuation areas of
SSR Realty. Before he joined SSR Realty, Mr. Finelli served from November 1983
as a financial executive of MBL. His last position with MBL was Vice President -
Real Estate Accounting. Prior to his years at MBL, Mr. Finelli was with Ernst &
Young, a public accounting firm. Mr. Finelli graduated from Rutgers University
with a Bachelor's Degree in Accounting in 1979 and is a certified public
accountant.
HERMAN H. HOWERTON
Managing Director and General Counsel, SSR Realty
Mr. Howerton, age 56, has served as General Counsel of SSR Realty or its
predecessor companies since 1988. From 1984 to 1988, he was employed by Fox
Capital Management Corporation ("FCMC") in various legal positions. He was
employed by Cushman & Wakefield in commercial leasing from 1983 to 1984. Prior
to that, from 1972 to 1982, Mr. Howerton held various positions with Itel
Corporation, including those of Vice President-Administration and Vice
President, General Counsel and Secretary. He received a Bachelor of Arts Degree
from California State University at Fresno in 1965 and a Juris Doctorate Degree
from Harvard Law School in 1968. He is a member of the State Bar of California.
RONALD E. ZUZACK
Executive Managing Director, SSR Realty
Mr. Zuzack, age 56, has been in charge of the Multi-Housing Operating Company of
SSR Realty since its organization in April 1997 and in charge of acquisitions
firm-wide since January 1, 1999, and was in charge of Portfolio Services for
certain predecessor companies since March 1988. From 1981 to 1988, he was
employed by FCMC in various portfolio management positions. Prior to 1981 he was
employed by Union Bank as Vice President/Manager Real Estate, Sacramento Region,
and acted as Vice President, Development and Property Management while employed
by Inter-Cal Real Estate Corporation. He received his Bachelor of Science Degree
and Master's Degree in Business Administration from the University of Missouri.
He is a licensed California real estate broker.
ITEM 11. EXECUTIVE COMPENSATION.
The Partnership does not pay or employ any directors or officers. Compensation
to the directors and officers of SSR Realty, the managing partner of Metric
Realty (the managing general partner of the Partnership), is paid by SSR Realty
or its affiliates and is not related to the results of the Partnership.
The Partnership has not established any plans pursuant to which plan or non-plan
compensation has been paid or distributed during the last fiscal year or is
proposed to be paid or distributed in the future, nor has the Partnership issued
or established any options or rights relating to the acquisition of its
securities or any plan relating to such options or rights. However, SSR Realty
is expected to receive certain allocations, distributions and other amounts
pursuant to the Partnership's limited partnership agreement. In addition,
included in the expense reimbursements made to such general partner or
affiliates by the Partnership is an allocation for a portion of the compensation
(including employee benefit plans) paid to personnel rendering asset management
services to the Partnership.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
There is no person known to the Partnership who owns beneficially or of record
more than five percent of the voting securities of the Partnership. Neither the
Partnership's managing general partner nor affiliates of the Partnership's
managing general partner have contributed capital to the Partnership.
The Partnership is a limited partnership and has no officers or directors. The
managing general partner has discretionary control over most of the decisions
made by or for the Partnership in accordance with the terms of the Partnership
27
<PAGE> 28
Agreement. Each of the directors and officers of the managing partner of the
Partnership's managing general partner, and all of these individuals as a group,
own less than one percent of the Partnership's voting securities.
There are no arrangements known to the Partnership, the operations of which may,
at a subsequent date, result in a change in control of the Partnership.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
None; except that the Partnership in 1999 paid and in 2000 will pay expense
reimbursements to Metric Realty for services provided to the Partnership. See
the Prospectus filed pursuant to Rule 424(b) of the Securities Act of 1933,
which is incorporated by reference herein, and Note 2 to the Financial
Statements in Item 8. All of the individuals listed in Item 10 above are
officers and employees of and receive compensation from SSR Realty or an
affiliate.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) 1., 2. and 3. See Item 8 of Form 10-K for Financial Statements for the
Partnership, Notes thereto, and Financial Statement Schedules. (A table
of contents to Financial Statements and Financial Statement Schedules is
included in Item 8 and incorporated herein by reference.)
(b) No reports on Form 8-K were required to be filed during the last quarter
of the period covered by this Report.
(c) Financial Statement Schedules, if required by Regulation S-K, are
included in Item 8.
28
<PAGE> 29
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
REGISTRANT
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/ Thomas P. Lydon, Jr.
Thomas P. Lydon, Jr.
President and Chief Executive Officer,
SSR Realty Advisors, Inc.
Date: March 30, 2000
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the date indicated.
<TABLE>
<S> <C>
By: /s/ William A. Finelli By: /s/ Ralph F. Verni
--------------------------------------- --------------------------------------------------
William A. Finelli Ralph F. Verni
Managing Director and Chief Financial Chairman of the Board, SSR Realty Advisors, Inc.
Officer, SSR Realty Advisors, Inc.
By: /s/ Gerard P. Maus By: /s/ Thomas P. Lydon, Jr.
--------------------------------------- --------------------------------------------------
Gerard P. Maus Thomas P. Lydon
Director, SSR Realty Advisors, Inc. Director, SSR Realty Advisors, Inc.
</TABLE>
Date: March 30, 2000
29
<TABLE> <S> <C>
<ARTICLE> 5
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