<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-KSB
ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 1996
Commission File No.: 33-11224-LA
Mission Valley Comfort Suites Ltd.,
A California Limited Partnership
(Name of small business issuer in its charter)
California 33-0213497
(State or other jurisdiction of (I.R.S. Employer
Identification No.)
incorporation or organization)
1466 9th Avenue, San Diego, California 92101
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (619) 699-6100
Securities registered under Section 12(b) of the Exchange Act:
None
Securities registered under Section 12(g) of the Exchange Act:
Limited Partnership Interests
(Title of Class)
Check whether the issuer (1) filed all reports required to be filed
by Section 13 or 15(d) of the Exchange Act during the past 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 / /
State issuer's revenues for its most recent fiscal year:
$2,025,358.
The aggregate market value of the voting securities held by non-
affiliates is not determinable as there is no established market
and the securities have only limited voting rights.
State the number of limited partnership interests outstanding as of
December 31, 1996: 5,900 interests held by 914 limited partners.
DOCUMENT INCORPORATED BY REFERENCE
Definitive Prospectus dated February 6, 1987, as supplemented
December 2, 1987 is incorporated by reference into Part III.
1
<PAGE>
MISSION VALLEY COMFORT SUITES, LTD.
A California Limited Partnership
PART I
Item 1. Business
Mission Valley Comfort Suites Ltd., A California Limited
Partnership, formerly Motels of America Series X, A California
Limited Partnership, (the Partnership) was formed on September 18,
1987 pursuant to the California Revised Uniform Limited Partnership
Act. As of December 31, 1996, the Partnership consisted of a
general partner, GHG Hospitality, Inc. (GHG), and 914 limited
partners owning 5,900 limited partnership interests. The limited
partnership interests sold at a public offering price of $1,000
each commencing February 6, 1987 pursuant to a Registration
Statement on Form S-18 under the Securities Act of 1933
(Registration 33-11224-LA). The offering of $5,900,000 was fully
subscribed and closed on March 21, 1988.
The Partnership was organized to lease a parcel of land in the
Mission Valley area of San Diego, California and build and operate
thereon a 122-room Comfort Suites motel as a franchise of Choice
International. The land was leased from Colony Ventures Ltd., a
nonaffiliated party, by Motels of America, Inc. (MOA) and the
former general partners in November 1986, and was held for the
benefit of the Partnership until the Partnership had raised
sufficient funds to build the motel. MOA and the former general
partners assigned the land lease to the Partnership for their
actual carrying costs. The motel was opened for business in
September 1988 under a twenty-year franchise agreement with Quality
Inns International, Inc. to provide the Partnership with
consultation in the areas of design, construction, and operation of
the motel. The agreement required the payment of initial franchise
fees of $50,000 and requires ongoing royalty and chain-affiliated
advertising fees based on a percentage of gross room revenues.
Since January 1, 1990, the motel has been operated pursuant to a
management agreement with GHG.
The profitability of a motel is subject to general economic risks,
the management ability of the operator, intense competition,
desirability of a particular location, and other factors relating
to its operations. The demand for particular accommodations may
vary seasonally and may be affected by economic recessions, changes
in travel patterns caused by changes in energy prices, strikes,
relocation of highways, the construction of additional highways and
other factors. To meet competition in the industry and to maintain
economic values, continuing expenditures must be made for
modernizing, refurnishing, and maintaining existing facilities
prior to the expiration of their anticipated useful lives.
There is no assurance that the Partnership's motel can be
profitably operated. Further, there is no assurance the motel can
be sold at a profit. Consequently, there is no guarantee of any
profit or that the limited partners' investments will be preserved
against loss.
2
<PAGE>
There is significant competition in the lodging market. The
Partnership is in competition either directly or indirectly with a
large number of hotels and motels of varying quality and sizes,
including other motels which are part of national or regional
chains. Such hotels and motels may have greater financial
resources and personnel with more experience than the
Partnership and the general partner. The San Diego area in
particular has a large number of hotel and motel projects that in
the aggregate could dilute average occupancy and affect
profitability.
The Partnership has no employees.
Item 2. Property
The Partnership was assigned the land lease on September 18, 1987.
The Partnership does not intend to acquire any additional property.
Property name and address Property description
Comfort Suites A 122-room "suites only" motel on
631 Camino del Rio South approximately 1.83 acres of land,
San Diego, CA 92108 subject to a 60-year lease expiring
in 2046.
The Partnership was assigned the land lease and reimbursed MOA and
the former general partners for approximately $218,500 in lease
payments they paid prior to the assignment of the land lease to the
Partnership. The Partnership completed construction and opened the
motel in September 1988.
In the opinion of the Partnership's management, the property is
adequately covered by insurance.
The property is subject to a trust deed with a balance of $236,911,
as of December 31, 1996.
Item 3. Legal Proceedings
The Partnership is not subject to any pending legal proceedings.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
3
<PAGE>
MISSION VALLEY COMFORT SUITES, LTD.
A California Limted Partnership
PART II
Item 5. Market for Limited Partnership Interests and Related
Partner Matters
There is no public trading market for the Partnership's limited
partnership interests. There were approximately 914 holders of the
Partnership's 5,900 limited partnership interests as of December
31, 1996. Cash distributions to holders of limited partnership
interests totalled $270,000 ($45.76 per interest) in 1996 and
$216,000 ($36.61 per interest) in 1995.
Item 6. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Financial Condition:
On February 6, 1987, the Partnership commenced its public offering
pursuant to its Prospectus. On March 21, 1988, the Partnership
completed the public offering. The Partnership received $5,117,287
(net of offering costs of $782,713) from the sale of limited
partnership interests. These funds were available for investment
in property, to pay legal fees and other costs related to the
investments, to pay operating expenses, and for working capital.
The majority of the proceeds were used to acquire and construct the
property identified in Item 2 above.
As a result of cost overruns related to the acquisition and
construction of the motel, the Partnership borrowed $200,000 from
the party that is the lessor under its land lease. The note is
payable in monthly installments of $2,175, including interest at
8%, over a 20-year period.
An independent appraisal valued the Partnership's motel property at
$3,440,000 as of October 21, 1996. The carrying amount of
investment property on the Partnership's financial statements was
$3,651,965 as of December 31, 1996. Management expects that
undiscounted cash flows from the motel will exceed its carrying
value and, therefore, an impairment loss has not been recorded.
4
<PAGE>
The deferred rent liability represents amounts accrued under the
Partnership's land lease prior to April 1, 1993. Under the
original land lease, annual rent increases were based on the
greater of 2-1/2% or the increase in the Consumer Price Index. The
Partnership was required by generally accepted accounting
principles to record rent expense and a deferred rent liability
based on projecting the 2-1/2% minimum annual rent increase over
the 60-year term of the lease. Effective April 1, 1993, the land
lease was amended. Under the amended land lease, monthly rent
payments were reduced from $30,138 per month to $20,000 per month.
Annual rent increases are based on the lesser of the increase in
the Consumer Price Index or 5%, and there is no minimum annual
increase. Rent expense under the amended lease is significantly
lower than under the previous lease. In addition, the deferred
rent liability accrued prior to April 1, 1993 is being credited to
income on a straight-line basis over the remaining term of the
lease.
Results of Operations:
Net income was $283,799 in 1996 and $223,984 in 1995. Total
revenues were $2,025,358 in 1996 and $1,883,264 in 1995. The
property operated at an occupancy of 73.80% in 1996 and 69.74% in
1995. The average daily room rate was $59.11 in 1996 and $58.36 in
1995.
Although city-wide occupancy rates are expected to increase in
1997, the Mission Valley area remains overbuilt and downtown San
Diego has become an alternative destination for both corporate and
leisure travelers. To help prevent occupancy rates from falling,
the Partnership will run advertisements in Los Angeles and Phoenix
offering competitive, lower rates. The Partnership has increased
its sales efforts to travel agents, group tours and other leisure
travelers, as well as to business. The first quarter of 1997 is
showing an increase in group bookings resulting in higher than
average occupancy. The summer months look promising and should
generate high rates at the motel. Our web page on the Internet is
resulting in additional exposure and adding to occupancy. The
property manager is exploring other advertising media such as
magazines that are available at highway rest stops and is
participating in San Diego Convention and Visitors Bureau's
nationwide campaign for San Diego. These new exposures have
resulted in additional bookings. An independent consulting firm
has forecast that overall in 1997 hotels in the San Diego area
should experience a 7% increase in occupancy and a 4.8% increase in
average daily room rates.
5
<PAGE>
During 1996 a motel property approximately one mile from the
Mission Valley Comfort Suites became a Comfort Inn and Suites
franchisee of Choice International and began participating in the
Choice Reservations System used by the Partnership's motel. Due to
the proximity of this motel to the Partnership's motel and the
availability of suites, it is in direct competition with Mission
Valley Comfort Suites and has decreased the number of reservations
that otherwise would have been received from the Choice
Reservations System. This motel opened in June 1996; therefore,
the full impact will likely not be evident until the end of 1997.
As previously discussed, Management is exploring new advertising
media in an effort to compensate for this new competition.
The effect of current operations on liquidity was net cash provided
by operating activities of $422,595 in 1996 and $397,692 in 1995.
The cash was used primarily for cash distributions to partners
which were $300,000 in 1996 and $240,000 in 1995 and for investment
property expenditures which were $95,901 in 1996 and $124,718 in
1995.
Seasonality:
The motel business is seasonal with the third quarter being the
strongest due to the tourist business and the last half of the
fourth quarter and the first half of the first quarter being the
weakest. It is not unusual for the motel operations to have
negative cash flow during this weak period.
6
<PAGE>
Item 7. Financial Statements and Supplementary Data
MISSION VALLEY COMFORT SUITES LTD.,
A California Limited Partnership
I N D E X
Pages
Independent Auditor's Report 8
Balance Sheets, December 31, 1996 and 1995 9-10
Statements of Operations, Years Ended December 31, 1996
and 1995 11
Statements of Partners' Capital, Years Ended December 31,
1996 and 1995 12-13
Statements of Cash Flows, Years Ended December 31, 1996
and 1995 14
Notes to Financial Statements 15-19
7
<PAGE>
Independent Auditor's Report
The Partners
Mission Valley Comfort Suites Ltd.,
A California Limited Partnership
We have audited the balance sheets of Mission Valley Comfort Suites
Ltd., A California Limited Partnership, as of December 31, 1996 and
1995, and the related statements of operations, partners' capital,
and cash flows for the years then ended. These financial
statements are the responsibility of the Partnership's management.
Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Mission
Valley Comfort Suites Ltd., A California Limited Partnership, as of
December 31, 1996 and 1995, and the results of its operations and
its cash flows for the years then ended in conformity with
generally accepted accounting principles.
/s/ Levitz, Zacks, Ciceric
San Diego, California
February 12, 1997
8
<PAGE>
<TABLE>
<CAPTION>
MISSION VALLEY COMFORT SUITES LTD.,
A California Limited Partnership
Balance Sheets
December 31, 1996 and 1995
(Part 1 of 2)
ASSETS 1996 1995
---------- -------- ---------
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 75,541 $ 55,694
Accounts receivable 38,797 26,647
Operating supplies 15,540 15,603
Prepaid expenses 22,422 14,207
Due from affiliate 4,848 821
--------- --------
Total current assets 157,148 112,972
Investment property, at cost:
Building and improvements 4,603,619 4,541,600
Furniture, fixtures and equipment 1,211,442 1,177,560
---------- ---------
5,815,061 5,719,160
Less accumulated depreciation 2,163,096 1,983,846
---------- ---------
Investment property, net 3,651,965 3,735,314
Franchise fees, net 29,167 31,667
---------- ---------
Total assets $3,838,280 $3,879,953
========== ==========
</TABLE>
See accompanying notes to financial statements
9
<PAGE>
<TABLE>
<CAPTION>
MISSION VALLEY COMFORT SUITES LTD.,
A California Limited Partnership
Balance Sheets
December 31, 1996 and 1995
(Part 2 of 2)
LIABILITIES AND PARTNERS' CAPITAL 1996 1995
---------------------------------- --------- ---------
<S> <C> <C>
Current Liabilities:
Accounts payable $ 41,816 $ 29,003
Accrued expenses 13,180 14,535
Due to affiliate 11,440 11,852
Current portion of long-term debt 7,415 6,847
----------- --------
Total current liabilities 73,851 62,237
Long-term debt, less current portion 229,496 236,911
Deferred rent liability 1,483,590 1,513,261
----------- ----------
Total liabilities 1,786,937 1,812,409
Partners' Capital:
General partner:
Capital contributions 31,210 31,210
Cumulative net loss (114,781) (143,161)
Cumulative cash distributions (187,640) (157,640)
---------- ----------
(271,211) (269,591)
Limited partners (5,900 interests):
Capital contributions,
net of offering costs 5,117,287 5,117,287
Cumulative net loss (1,033,025)(1,288,444)
Cumulative cash distributions (1,761,708)(1,491,708)
----------- ----------
2,322,554 2,337,135
----------- ----------
Total partners' capital 2,051,343 2,067,544
----------- ----------
Total liabilities
and partners' capital $3,838,280 $3,879,953
=========== ==========
</TABLE>
See Accompanying notes to financial statements
10
<PAGE>
<TABLE>
<CAPTION>
MISSION VALLEY COMFORT SUITES LTD.,
A California Limited Partnership
Statements of Operations
Years Ended December 31, 1996 and 1995
1996 1995
--------- --------
<S> <C> <C>
Revenues:
Room revenues $1,949,461 $1,812,551
Phone revenues 45,151 42,399
Interest income 2,095 1,188
Other 28,651 27,126
----------- ----------
Total revenues 2,025,358 1,883,264
Expenses:
Property operating expenses 631,071 589,360
Rent 223,504 218,882
Depreciation 185,610 174,492
General and administrative 165,028 156,910
Royalties and advertising 153,915 145,535
Management fees 121,396 112,996
Marketing 60,703 72,394
Real estate taxes 59,228 47,711
Repairs and maintenance 82,188 87,258
Property and liability insurance 37,163 30,749
Interest 19,253 20,493
Amortization 2,500 2,500
----------- ----------
Total expenses 1,741,559 1,659,280
----------- ----------
Net income $ 283,799 $ 223,984
=========== ===========
Net income per interest $ 43.29 $ 34.17
=========== ==========
</TABLE>
See accompanying notes to financial statements
11
<PAGE>
<TABLE>
<CAPTION>
MISSION VALLEY COMFORT SUITES LTD.,
A California Limited Partnership
Statements of Partners' Capital
Years Ended December 31, 1996 and 1995
(Part 1 of 2)
General Partner
---------------------------------------------------
Cumulative Cumulative
Capital Net Cash
Contributions Loss Distributions Total
---------------- ----------- -------------- --------
<S> <C> <C> <C> <C>
Balance, January 1, 1995 $ 31,210 $(165,559) $(133,640) $(267,989)
Net income, year ended
December 31, 1995 -0- 22,398 -0- 22,398
Cash distributions
($36.61 per interest) -0- -0- (24,000) (24,000)
---------- ----------- ------------ ----------
Balance, December 31, 1995 31,210 (143,161) (157,640) (269,591)
Net income, year ended
December 31, 1996 -0- 28,380 -0- 28,380
Cash distributions
($45.76 per interest) -0- -0- (30,000) (30,000)
---------- ------------ ------------- ----------
Balance, December 31, 1996 $ 31,210 $(114,781) $(187,640) $(271,211)
========== ============ ============= ==========
</TABLE>
See accompanying notes to financial statements
12
<PAGE>
<TABLE>
<CAPTION>
MISSION VALLEY COMFORT SUITES LTD.,
A California Limited Partnership
Statement of Partners' Capital
Years Ended December 31, 1996 and 1996
(Part 2 of 2)
Limited Partners
----------------------------------------------------
Cumulative Cumulative Total
Capital Net Cash Partners'
Contributions Loss Distributions Total Capital
------------- -------- ------------- --------- ----------
<S> <C> <C> <C> <C> <C>
Balance, January 1, 1995 $5,117,287 $(1,490,030) $(1,275,708) $2,351,549 $2,083,560
Net Income, year ended
December 31, 1995 -0- 201,586 -0- 201,586 223,984
Cash distributions
($36.61 per interest) -0- -0- (216,000) (216,000) (240,000)
----------- ------------- ----------- ---------- -----------
Balance,
December 31, 1995 5,117,287 (1,288,444) (1,491,708) 1,337,135 2,067,544
Net income, year ended
December 31, 1996 -0- 255,419 -0- 255,419 $ 283,799
Cash distributions
($45.76 per interest) -0- -0- (270,000) (270,000) (300,000)
----------- ------------ ----------- ----------- ----------
Balance,
December 31, 1996 $5,117,287 $(1,033,025) $(1,761,708) $ 2,322,554 $ 2,051,343
============ ============ ============= =========== ============
</TABLE>
See accompanying notes to financial statements
13
<PAGE>
<TABLE>
<CAPTION>
MISSION VALLEY COMFORT SUITES LTD.,
A California Limited Partnership
Statements of Cash Flows
Years Ended December 31, 1996 and 1995
1996 1995
-------- -------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 283,799 $ 223,984
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 181,750 176,992
(Increase) decrease in:
Accounts receivable (12,150) (4,058)
Operating supplies 63 (885)
Prepaid expenses (8,215) 19,749
Due from affiliate (4,027) 11,744
Increase (decrease) in:
Accounts payable 12,813 (3,172)
Accrued expenses (1,355) (2,963)
Due to affiliate (412) 5,973
Deferred rent liability (29,671) (29,672)
--------- --------
Net cash provided by
operating activities 422,595 397,692
--------- --------
Cash flows from investing activities:
Investment property expenditures (95,901) (124,718)
--------- ---------
Net cash used in investing activities (95,901) (124,718)
--------- ---------
Cash flows from financing activities:
Cash distributions to partners (300,000) (240,000)
Payments of long-term debt (6,847) (6,322)
--------- ---------
Net cash used in financing activities (306,847) (246,322)
Net increase in cash and
cash equivalents 19,847 26,652
Cash and cash equivalents, beginning of year 55,694 29,042
Cash and cash equivalents, end of year $ 75,541 $ 55,694
========= =========
Supplemental disclosure of cash flow information:
Interest paid $ (19,253) $(20,493)
========== =========
</TABLE>
See accompanying notes to financial statements
14
<PAGE>
MISSION VALLEY COMFORT SUITES LTD.,
A California Limited Partnership
Notes to Financial Statements
Years Ended December 31, 1996 and 1995
Note 1. THE PARTNERSHIP AND A SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
Mission Valley Comfort Suites Ltd., A California Limited
Partnership (the Partnership), formerly Motels of America Series X,
A California Limited Partnership, was formed on September 18, 1987
pursuant to the California Revised Uniform Limited Partnership Act.
The Partnership consists of a general partner which owns a 10%
interest and 914 limited partners which collectively own a 90%
interest. The purpose of the Partnership is to construct, own, and
operate a 122-room "suites only" motel under a franchise agreement
with Quality Inns International, Inc. The motel was opened in
September 1988.
The following is a summary of the Partnership's significant
accounting policies:
Cash and Cash Equivalents
-------------------------
The Partnership considers all highly liquid instruments purchased
with an original maturity of three months or less to be cash
equivalents.
Investment Property
-------------------
Investment property is recorded at cost. Depreciation is computed
using the straight-line method based on estimated useful lives of
5 to 35 years. Maintenance and repairs costs are expensed as
incurred, while significant improvements, replacements, and major
renovations are capitalized.
Effective January 1, 1996, the Partnership adopted Statement of
Financial Accounting Standards ("SFAS") No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed Of". SFAS No. 121 requires impairment losses to be
recorded on long-lived assets used in operations when indicators of
impairment are present and the undiscounted cash flows estimated to
be generated by those assets are less than the assets' carrying
amount. SFAS No. 121 also addresses the accounting for long-lived
assets that are expected to be disposed of. There was no effect on
the financial statements from the adoption of SFAS No. 121.
15
<PAGE>
MISSION VALLEY COMFORT SUITES LTD.,
A California Limited Partnership
Notes to Financial Statements
(Continued)
Years Ended December 31, 1996 and 1995
Franchise Fees
---------------
Franchise fees are amortized over the 20-year life of the franchise
agreement which expires in 2008.
Note 1. THE PARTNERSHIP AND A SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
Advertising
-----------
Advertising costs are expensed as incurred. Advertising expense
was $104,665 for the year ended December 31, 1996 and $100,772 for
the year ended December 31, 1995.
Income Taxes
------------
No provision for income taxes has been made as any liability for
such taxes would be that of the partners rather than the
Partnership.
Net Income Per Interest
-----------------------
Net income per interest is based upon the 90% allocated to limited
partners divided by 5,900 limited partner interests outstanding
throughout the year.
Use of Estimates
----------------
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect certain reported amounts
and disclosures. Accordingly, actual results could differ from
those estimates.
16
<PAGE>
MISSION VALLEY COMFORT SUITES LTD.,
A California Limited Partnership
Notes to Financial Statements
(Continued)
Years Ended December 31, 1996 and 1995
Note 2. PARTNERSHIP AGREEMENT
Net income or loss and cash distributions from operations of the
Partnership are allocated 90% to the limited partners and 10% to
the general partner. Profits from the sale or other disposition of
Partnership property are to be allocated to the general partner
until its capital account equals zero; thereafter, to the limited
partners until their capital accounts equal their capital
contributions reduced by prior distributions of cash from sale or
refinancing plus an amount equal to a cumulative but not compounded
annual 8% return thereon which cumulative return shall be reduced
(but not below zero) by the aggregate amount of prior distributions
of cash available for distribution; thereafter, gain shall be
allocated 15% to the general partner and 85% to the limited
partners. Loss from sale shall be allocated 1% to the general
partner and 99% to the limited partners.
Note 3. FRANCHISE AGREEMENT
The Partnership has entered into a twenty-year franchise agreement
expiring in 2008 with Quality Inns International, Inc. to provide
the Partnership with consultation in the areas of design,
construction, and operation of the motel. The agreement required
the payment of initial franchise fees of $50,000 and requires
ongoing royalty and chain-affiliated advertising fees based on a
percentage of gross room revenues.
Note 4. LONG-TERM DEBT
The Partnership has a note payable which is due in monthly
installments of $2,175, including 8% interest, through April 2013.
The note is secured by a trust deed on the Partnership's motel.
The balance outstanding was $236,911 as of December 31, 1996 and
$243,758 as of December 31, 1995. The fair value of long-term debt
approximates its carrying amount based on borrowing rates currently
available to the Partnership for loans with similar terms.
Principal payments on this note are due as follows:
<TABLE>
Year Principal payments
<S> <C>
1997 $ 7,415
1998 8,031
1999 8,697
2000 9,419
2001 10,200
Thereafter 193,149
---------
$ 236,911
==========
</TABLE>
17
<PAGE>
MISSION VALLEY COMFORT SUITES LTD.,
A California LImited Partnership
Notes to Financial Statements
(Continued)
Years Ended December 31, 1996 and 1995
Note 5. LEASE
The Partnership leases the land underlying its motel under an
operating lease which expires in 2046. Prior to April 1, 1993,
rents were subject to annual increases based on the greater of 2-
1/2% or the increase in the Consumer Price Index. The total
minimum rentals over the life of the lease, including the effects
of the 2-1/2% minimum annual increases, were being recognized on
the straight-line basis as required by generally accepted
accounting principles. Effective April 1, 1993, the lease was
amended to lower the rent payment to $20,000 per month. Rents are
still subject to annual increases based on the increase in the
Consumer Price Index, but the maximum annual increase is 5% and
there is no minimum annual increase. Consequently, rent expense is
now being recognized based on the amount due each month rather than
on the straight-line basis. The rent payment was $21,485 per month
as of December 31, 1996. As a result of the amendment to the lease
agreement, a deferred rent liability of $1,594,894, which was
incurred prior to April 1, 1993, is being credited to income on a
straight-line basis over the remaining term of the lease. The
Partnership is required to pay real estate taxes, insurance, and
maintenance for the leased land and improvements thereon.
Future minimum lease payments are due as follows:
<TABLE>
Year Lease payments
------- --------------
<S> <C>
1997 $ 257,820
1998 257,820
1999 257,820
2000 257,820
2001 257,820
Thereafter 11,580,751
------------
$12,869,851
============
</TABLE>
18
<PAGE>
MISSION VALLEY COMFORT SUITES LTD.,
A California Limited Partnership
Notes to Financial Statements
(Continued)
Years Ended December 31, 1996 and 1995
Note 6. RELATED PARTY TRANSACTIONS
The motel is operated pursuant to a management agreement with GHG
Hospitality, Inc. (GHG), the general partner. The agreement
provides for the payment of monthly management fees of 6% of gross
revenues. The agreement expires upon the termination or
dissolution of the Partnership or upon three months' written notice
from the general partner.
The Partnership has agreed to reimburse GHG for certain expenses
related to services performed in maintaining the books and
administering the affairs of the Partnership.
GHG and an affiliate, Grosvenor Management Services, Inc. (GMS),
allocate to the Partnership certain marketing, accounting, and
maintenance salaries and certain other expenses directly related to
the operations of the Partnership.
Fees, reimbursements, salaries, and other expenses paid to GHG and
GMS and included in total expenses for the
years ended December 31, 1996 and 1995 are as follows:
<TABLE>
1996 1995
------ ------
<S> <C> <C>
Management fees $121,395 $112,996
Reimbursement for partnership
administration expenses 39,188 36,151
Salaries and other allocated
expenses 120,212 138,446
--------- ---------
$ 280,795 $287,593
========= =========
</TABLE>
In addition, all motel employees are paid by GMS. The Partnership
reimbursed GMS $337,744 in 1996 and $314,663
in 1995, including a one percent processing fee, for the wages of
these employees.
Item 8. Changes In and Disagreements with Accountants on
Accounting and Financial Disclosure
None
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<PAGE>
PART III
Item 9. Directors and Executive Officers of the Registrant
The general partner has general responsibility and ultimate
authority in all matters affecting the business of the Partnership.
The general partner and its directors and executive officers as of
December 31, 1996 are as follows:
GHG HOSPITALITY, INC. (GHG) was incorporated in November 1989 under
the laws of the state of Delaware. GHG was elected as general
partner effective January 1, 1990.
J. MARK GROSVENOR, 49, is President and a Director of GHG.
From 1976 to 1988, he served as chief executive officer of Nite
Lite Inns, a California corporation, which owned Grosvenor
Enterprises, a California limited partnership, which owns Grosvenor
Inn. In 1984, he acquired Medallion Foods, Inc., a food processing
company, located in Newport, Arkansas. Mr. Grosvenor graduated
from San Diego State University with a bachelor's degree in
business and finance.
STEPHEN D. BURCHETT, 37, is Vice President of GHG. From 1984
to 1991 he worked in private business law practice in San Diego,
California with Schall, Boudreau & Gore and Kaufman, Lorber, Grady
& Farley. Mr. Burchett graduated from California State University
Fullerton in 1981 with a bachelor's degree in finance and from the
University of Santa Clara School of Law in 1984 with a juris
doctorate.
SYLVIA MELLOR CLARK, 52, is Controller of GHG. In 1978, she
joined Grosvenor Industries, Inc., where she is controller and a
director. Prior to joining Grosvenor Industries, Inc., she
operated her own accounting firm from 1976 to 1978. Ms. Clark
graduated from San Diego State University and National University.
Item 10. Executive Compensation
The Partnership has not paid and does not propose to pay any
executive compensation to the general partner or any of its
affiliates (except as described in Item 12 below). There are no
compensatory plans or arrangements regarding termination of
employment or change of control.
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<PAGE>
Item 11. Security Ownership of Certain Beneficial Owners and
Management
(a) No person or group is known to the Partnership to be the
beneficial owner of more than 5% of the outstanding limited
partnership interests in the Partnership.
(b) The general partner does not directly or indirectly own any
limited partnership interests in the Partnership. The general
partner does not possess a right to acquire beneficial ownership of
limited partnership interests in the Partnership.
(c) There are no arrangements, known to the Partnership, which may
result in a change in control of the Partnership.
Item 12. Certain Relationships and Related Transactions
The motel is operated pursuant to a management agreement with GHG.
The agreement provides for the payment of monthly management fees
of 6% of gross revenues.
The Partnership has agreed to reimburse GHG for certain expenses
related to services performed in maintaining the books and
administering the affairs of the Partnership.
GHG and an affiliate, Grosvenor Management Services, Inc. (GMS),
allocate to the Partnership certain marketing, accounting, and
maintenance salaries and other expenses directly related to the
operation of the Partnership.
Fees, reimbursements, salaries, and other expenses paid to GHG and
GMS and included in total expenses for the years ended December 31,
1996 and 1995 are as follows:
<TABLE>
1996 1995
------- --------
<S> <C> <C>
Management fees $ 121,395 $ 112,996
Reimbursement for partnership
administration expenses 39,188 36,151
Salaries and other allocated expenses 120,212 138,446
---------- ---------
$ 280,795 $ 287,593
========== ==========
</TABLE>
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<PAGE>
In addition, all motel employees are paid by GMS. The Partnership
reimbursed GMS $337,744 in 1996 and $314,663 in 1995, including a
one percent processing fee, for the wages of these employees.
Item 13. Exhibits and Reports on Form 8-K
(a) The following documents are filed as part of this report:
1. Financial Statements (see Index to Financial Statements
filed with this annual report).
2. Exhibits:
3-A. The Prospectus of the Partnership dated February 6,
1987, as supplemented December 2, 1987, as filed with
the Commission, is hereby incorporated herein by
reference.
3-B. Agreement of Limited Partnership set forth as Exhibit
B to the Prospectus, as filed with the Commission, is
incorporated herein by reference.
3-C. Amendment to Agreement of Limited Partnership dated
January 1, 1990, as filed with the Commission, is
incorporated herein by reference.
(b) No reports on Form 8-K were filed during the last quarter of
the period covered by this report.
No annual report or proxy material for the fiscal year 1996 has
been sent to the limited partners of the Partnership. An
annual report will be sent to the limited partners subsequent
to this filing and the Partnership has incorporated such
reports in this filing.
22
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act., the
registrant caused this report to be signed by the undersigned,
thereunto duly authorized.
By: GHG Hospitality, Inc.
Corporate General Partner
By: /s/ J. Mark Grosvenor Date: March 27, 1997
J. Mark Grosvenor
President and Director of GHG
In accoprdance with the Exchange Act, this report has been signed
below by the following persons on the behalf of the registrant and
in the capacities and on the dates indicated.
By: GHG Hospitality, Inc.
Corporate General Partner
By: /s/ J. Mark Grosvenor Date: March 27, 1997
J. Mark Grosvenor
President and Director of GHG
By: /s/ Stephen D. Burchett Date: March 27, 1997
Stephen D. Burchett
Vice President of GHG
By: /s/ Sylvia Mellor Clark Date March 27, 1997
Sylvia Mellor Clark
Controller of GHG
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