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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ______________ to _______________
Commission file number 0-17660
METRIC PARTNERS
GROWTH SUITE INVESTORS, L.P.,
A CALIFORNIA LIMITED PARTNERSHIP
(Exact name of Registrant as specified in its charter)
CALIFORNIA 94-3050708
-------------------------------- ------------------------------------
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
One California Street
San Francisco, California 94111-5415
---------------------------------------- -----------------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
Registrant's telephone number, including area code: (415) 678-2000
(800) 347-6707 IN ALL STATES
Indicate by check mark whether the registrant (1) has filed all the reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
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PART 1
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED).
METRIC PARTNERS GROWTH SUITE INVESTORS, L.P.,
A CALIFORNIA LIMITED PARTNERSHIP
BALANCE SHEETS (UNAUDITED)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
2000 1999
----------- -----------
<S> <C> <C>
ASSETS
Cash and Cash Equivalents $ 1,339,000 $ 1,875,000
Restricted Cash 5,000,000 5,000,000
Accounts Receivable 498,000 499,000
=========== ===========
TOTAL ASSETS $ 6,837,000 $ 7,374,000
=========== ===========
LIABILITIES AND PARTNERS' EQUITY
Accrued Interest $ -- $ 229,000
Other Liabilities 107,000 509,000
----------- -----------
TOTAL LIABILITIES 107,000 738,000
----------- -----------
PARTNERS' EQUITY
General Partners (914,000) (914,000)
Limited Partners (59,932 Units Outstanding) 7,644,000 7,550,000
----------- -----------
TOTAL PARTNERS' EQUITY 6,730,000 6,636,000
----------- -----------
TOTAL LIABILITIES AND PARTNERS' EQUITY $ 6,837,000 $ 7,374,000
=========== ===========
</TABLE>
See notes to financial statements (unaudited).
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METRIC PARTNERS GROWTH SUITE INVESTORS, L.P.,
A CALIFORNIA LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
MARCH 31,
---------------------------
2000 1999
---------- ----------
<S> <C> <C>
REVENUES:
Hotel Operations $ -- $ 998,000
Interest and Other 108,000 145,000
---------- ----------
Total Revenues 108,000 1,143,000
---------- ----------
EXPENSES:
Hotel Operations
Rooms -- 213,000
Administrative -- 116,000
Marketing -- 101,000
Energy -- 64,000
Repair and Maintenance -- 54,000
Management Fees -- 30,000
Property Taxes -- 37,000
Other -- 57,000
---------- ----------
Total Hotel Operations -- 672,000
Interest 26,000 210,000
General and Administrative 93,000 114,000
---------- ----------
Total Expenses 119,000 996,000
========== ==========
INCOME (LOSS) BEFORE FORECLOSURE OF PROPERTY (11,000) 147,000
Loss on foreclosure of property - adjustment 105,000 --
---------- ----------
NET INCOME $ 94,000 $ 147,000
========== ==========
NET INCOME PER LIMITED PARTNERSHIP ASSIGNEE UNIT
========== ==========
Income (Loss) before Foreclosure of Property -- 2
Loss of foreclosure of property - adjustment (2) --
NET INCOME (2) 2
</TABLE>
See notes to financial statements (unaudited).
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METRIC PARTNERS GROWTH SUITE INVESTORS, L.P.,
A CALIFORNIA LIMITED PARTNERSHIP
STATEMENTS OF PARTNERS' EQUITY (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999
<TABLE>
<CAPTION>
GENERAL LIMITED
PARTNERS PARTNERS TOTAL
--------- ------------ ------------
<S> <C> <C> <C>
Balance, January 1, 2000 $(914,000) $ 7,550,000 $ 6,636,000
Loss before Foreclosure of Property -- (11,000) (11,000)
Foreclosure of Property -- 105,000 105,000
--------- ------------ ------------
Balance, March 31, 2000 $(914,000) $ 7,644,000 $ 6,730,000
========= ============ ============
Balance, January 1, 1999 $ -- $ 11,700,000 $ 11,700,000
Net Income -- 147,000 147,000
--------- ------------ ------------
Balance, March 31, 1999 $ -- $ 11,847,000 $ 11,847,000
========= ============ ============
</TABLE>
See notes to financial statements (unaudited).
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METRIC PARTNERS GROWTH SUITE INVESTORS, L.P.,
A CALIFORNIA LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
MARCH 31,
-----------------------------
2000 1999
----------- -----------
<S> <C> <C>
OPERATING ACTIVITIES
Net Income $ 94,000 $ 147,000
Foreclosure of Property (105,000) --
Adjustments to Reconcile Net Income to Net Cash Provided (Used)
by Operating Activities:
Changes in Operating Assets and Liabilities:
Accounts Receivable (9,000) (44,000)
Prepaid Expenses and Other Assets -- 74,000
Accounts Payable, Accrued Expenses, and Other Liabilities (622,000) (138,000)
----------- -----------
Net Cash Provided (Used) by Operating Activities (642,000) 39,000
----------- -----------
INVESTING ACTIVITIES
Cash Received from Sale of Personal Property 125,000 --
Costs paid on Foreclosure of Property (19,000) --
Restricted Cash - Increase -- 353,000
----------- -----------
Net Cash Provided by Investing Activities 106,000 353,000
----------- -----------
FINANCING ACTIVITIES
Notes Payable Principal Payments -- (68,000)
----------- -----------
Cash Used by Financing Activities -- (68,000)
----------- -----------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (536,000) 324,000
Cash and Cash Equivalents at Beginning of Period 1,875,000 7,485,000
=========== ===========
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,339,000 $ 7,809,000
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest Paid in Cash During the Period $ 255,000 $ 327,000
=========== ===========
</TABLE>
See notes to financial statements (unaudited).
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METRIC PARTNERS GROWTH SUITE INVESTORS, L.P.,
A CALIFORNIA LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1. REFERENCE TO THE 1999 AUDITED FINANCIAL STATEMENTS
These unaudited financial statements should be read in conjunction with
the Notes to Financial Statements included in the 1999 audited financial
statements.
The financial information contained herein reflects all normal and
recurring adjustments that are, in the opinion of management, necessary
for a fair presentation.
2. TRANSACTIONS WITH THE MANAGING GENERAL PARTNER AND AFFILIATES
In accordance with the Partnership Agreement, the Partnership is charged
by the Managing General Partner and Affiliates for services provided to
the Partnership. In the three months ended March 31, 2000 and 1999, the
Partnership was charged for reimbursement of administrative expenses of
$6,000 and $33,000, respectively.
As discussed in Note 2 to the 1999 audited financial statements,
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 March 31, 2000 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.
3. NET INCOME PER LIMITED PARTNERSHIP ASSIGNEE UNIT
The net income per limited partnership assignee Unit is computed by
dividing the net income allocated to the limited partners by 59,932
assignee Units outstanding.
4. RESTRICTED CASH
The $5,000,000 restricted cash balance represents the amount, which (as
discussed in Part II, Item 1) the Court enjoined the Partnership from
conveying, transferring, or otherwise disposing of.
5. LEGAL PROCEEDINGS
The Partnership is a plaintiff and counterclaim defendant in legal
proceedings relating to the management agreement at the Residence Inn -
Ontario, a defendant in legal proceedings seeking damages for alleged
failure to consummate a settlement of the Residence Inn - Ontario case,
and a plaintiff and defendant in other legal proceedings; see Part II,
Item 1, Legal Proceedings, for a detailed description of these matters.
6. FORECLOSURE OF PROPERTY
As discussed in the notes to the 1999 audited financial statements, the
Partnership's last property, the Residence Inn - Nashville, was sold
through foreclosure on June 18, 1999. As also discussed, specifically in
Note 10 to the 1999 audited financial statements, a mediation meeting
was held in February 2000 for purposes of settling certain issues 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 provided 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 to the 1999 audited financial statements plus
interest 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.
In March the Partnership paid $681,000 to the former lessor of the
ground lease representing the $655,000 mentioned above plus interest
earned on the $655,000 from date of foreclosure to date of payment.
While the $655,000 was reflected in the outstanding liabilities at
December 31, 1999, the $26,000 interest expense was recorded in the
first quarter of 2000. Also in March, the Partnership received the
$125,000 representing its sale
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proceeds from the sale of personal property. Of this amount, $10,000 had
been reflected in the 1999 audited financial statements and the
remaining $115,000 was recorded in the first quarter of 2000 as an
adjustment to foreclosure of property. The $115,000 was reduced by
$10,000 to $105,000 due to an increase in the expected legal
reimbursement due to Marriott pertaining to the new management agreement
for Marriott's continued management of the property.
At this time, the Partnership has reached agreement with Marriott as to
the amount to be paid tot he Partnership by Marriott with respect to the
Residence Inn - Nashville, but is awaiting concurrence of the parties
which participated in the mediation. Any adjustment to the financials
resulting from this last piece of the Settlement will be recorded when
such concurrence is obtained.
7. NOTE PAYABLE
On April 1, 1998, the balloon mortgage payment for the Residence Inn -
Nashville, totaling $8,491,000, became due and payable. The Partnership
did not make the payment and became in default. The Partnership was
unable to negotiate an extension with the lender and was unable to sell
the property (see Note 4 to the 1999 audited financial statements).
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 also
paid the debt service installments due March 1 and April 1, 1999. It was
then determined that a transfer of title via a deed in lieu of
foreclosure was not feasible and on June 18, 1999 the lender foreclosed
on the property, as discussed in Note 6 above, and the payoff was
settled. The outstanding principal at the time of the sale, after
applying a $17,000 tax impound balance held by the lender, was
$8,207,000.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
This Item should be read in conjunction with Financial Statements and other
Items contained elsewhere in this Report.
YEAR 2000 READINESS DISCLOSURE
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 May 14, 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 May 14, 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 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.
RESULTS OF OPERATIONS
During the three months ended March 31, 2000, the Partnership had net income of
$94,000 compared to $147,000 in 1999. The change is primarily due to the
foreclosure of the Partnership's last property in June 1999. Interest income
decreased in the first quarter of 2000 compared to 1999 primarily due to lower
cash balances as a result of the cash distribution to partners in September
1999. Interest expense decreased as a result of the previously mentioned
foreclosure, and while the Partnership had income and expenses from hotel
operations in 1999, there were no such operations in 2000. In the first quarter
of 2000, the Partnership did report income of $105,000
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resulting from an adjustment to the loss on foreclosure of property reported in
1999. (See Note 6 to the financial statements).
PARTNERSHIP LIQUIDITY AND CAPITAL RESOURCES
First Quarter of 2000
As presented in the Statement of Cash Flows for the three months ended March 31,
2000, cash was used by operating activities primarily for payment of the
deferred ground lease liability. Cash was provided by investing activities
primarily from receipt by the Partnership of the $125,000 proceeds from sale of
the personal property at the Residence Inn - Nashville.
In September 1999, the Partnership made distributions to the partners totaling
$5,198,000, representing a portion of the net sales proceeds from the sale in
December 1997 of eight properties. The Partnership currently maintains an
average cash balance in excess of $6 million (including $5 million of restricted
cash, as discussed in Note 7 to the 1999 audited financial statements). The
balance will change depending upon the ultimate receipt from Marriott of funds
held by it pertaining to the Partnership's ownership of hotels previously
managed by Marriott. The future cash balance also depends on interest income,
general and administrative expenses including costs of the ongoing legal
proceedings related to the Residence Inn - Nashville, as described further in
Part II, Item 1.
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, 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 1999 audited Financial
Statements; (ii) distributions the General Partners will be obligated to return
to the Partnership prior 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 14 resale transactions have been recorded on the
books of the Partnership's transfer agent between January 1, 2000 and March 31,
2000, reflecting prices ranging from $30 to $140 per Unit, with a simple average
price of $106.
As discussed in Note 8 to the 1999 audited financial statements, there is
substantial doubt regarding the Partnership's ability to continue as a going
concern.
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PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
Metric Partners Growth Suite Investors, L.P. vs. Kenneth E. Nelson, The Nelson
Group, et al., San Francisco County Superior Court, Case No. 928065 (the "SF
Lawsuit"). [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.
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.
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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 in March 2000
that was subsequently granted by the Court. 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
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.
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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 on April 15, 2000, the Court declined to rule on this
motion to disqualify Nelson's Counsel and instead referred the entire case to
the Tennessee Chancellor who is now presiding over Nashville Case I (see above).
No new hearing date has been set on the motion to disqualify Nelson's Counsel.
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 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
Page 11
<PAGE> 12
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.
The uncertainties relating to the litigation discussed above 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.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) No reports on Form 8-K were required to be filed during the
period covered by this Report.
Page 12
<PAGE> 13
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned, thereunto duly authorized.
METRIC PARTNERS GROWTH SUITE INVESTORS, L.P.,
A CALIFORNIA LIMITED PARTNERSHIP
By: Metric Realty
an Illinois general partnership
its Managing General Partner
By: SSR Realty Advisors, Inc.,
a Delaware corporation
its Managing General Partner
By: /s/ William A. Finelli
-------------------------------
William A. Finelli
Managing Director,
Principal Financial and Accounting Officer
of SSR Realty Advisors, Inc.
Date: May 12, 2000
-------------------------------
Page 13
<PAGE> 14
EXHIBIT INDEX
Exhibit
No. Description
- ------- ------------
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 6,339,000
<SECURITIES> 0
<RECEIVABLES> 498,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 6,837,000
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 6,837,000
<CURRENT-LIABILITIES> 107,000
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 6,730,000
<TOTAL-LIABILITY-AND-EQUITY> 6,837,000
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 26,000
<INCOME-PRETAX> (11,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 105,000
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 94,000
<EPS-BASIC> (2)
<EPS-DILUTED> 0
</TABLE>
