<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[ ] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted
by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
MISSION VALLEY COMFORT SUITES, LTD.
-----------------------------------
(Name of Registrant as Specified In Its Charter)
MISSION VALLEY COMFORT SUITES, LTD.
-----------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
Limited Partnership Interests
(2) Aggregate number of securities to which transaction applies: 5900
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
$847.46; computed by dividing line 4 by line 2
(4) Proposed maximum aggregate value of transaction: $5,000,000
(5) Total fee paid: $1,000
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
Notes:
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GHG HOSPITALITY, INC.
1466 9TH AVENUE
SAN DIEGO, CALIFORNIA 92101
JUNE 18, 1998
Dear Limited Partners:
Mission Valley Comfort Suites Ltd., a California Limited Partnership,
formerly Motels of America Series X, a California Limited Partnership (the
Partnership) was formed on February 24, 1988 pursuant to the California
Revised Uniform Limited Partnership Act. 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
Choice International to provide the Partnership with consultation in the
areas of design, construction, and operation of the motel. Since January 1,
1990, the motel has been operated pursuant to a management agreement with the
general partner, GHG Hospitality, Inc., formerly Grosvenor Hospitality Group,
Inc. ("GHG" or the "General Partner").
Although no required date was specified, it was initially anticipated the
Partnership would consider selling or refinancing the motel after operating
it for a period of approximately six to ten years. The motel is in its tenth
year of operations. In early 1998, GHG informally surveyed a number of
Limited Partners concerning what course of action they would like to pursue
with respect to the Property. A clear majority of those polled indicated a
desire to sell the Property. The Limited Partners polled represented a small
sample of the Limited Partners. The majority of the Limited Partners were
not contacted. On March 3, 1998 the Partnership listed the Property for sale
with a broker specializing in hotel properties.
In June 1998 the Partnership entered into a Hotel Purchase and Sale Agreement
with Escrow Instructions ("Purchase Agreement") with Piyal, LLC ("Piyal")
whereby Piyal will purchase the motel from the Partnership for $5,000,000
(the "Purchase Price"). The Purchase Price is payable in cash at Closing.
The Purchase Price is subject to downward adjustment if the limited partners'
approval has not been received by July 2, 1998. The Purchase Price will be
reduced by $3,333 per day after July 2, 1998 until such consent is received
up to a maximum reduction of $200,000.
SALE OF THE MOTEL REQUIRES THE CONSENT OF HOLDERS OF A MAJORITY OF THE
PARTNERSHIP'S 5,900 LIMITED PARTNERSHIP INTERESTS AND YOUR APPROVAL IS VERY
IMPORTANT. Votes will be counted at the close of business at 5:00 p.m.
California time on July 2, 1998. Please return your consent card as soon as
possible before July 2, 1998. The Partnership Agreement provides a failure
to return a consent card has the same effect as a "Yes" vote. However, the
General Partner believes it is important to receive as many consent cards as
possible with respect to such an important decision.
Following sale of the motel property, GHG intends to cause the Partnership to
pay cash distributions to the Partners from the net sales proceeds after
paying all expenses and liabilities of the Partnership and establishing a
reserve account in the presently anticipated approximate amount of $300,000
to cover remaining liabilities, and unexpected claims. Any amount remaining
in the reserve account will be distributed to the Partners at such time as
GHG determines all contingent liabilities have been either discharged or
provided for, whereupon GHG intends to cause the Partnership to be dissolved.
Overall, the sale of the motel is anticipated to result in liquidating
distributions of approximately $4,351,249.00, or approximately $737.50 per
Limited Partnership Interest. For further information, see the discussion
under "THE PLAN--Use of Proceeds From Property Sale, Distributions to Limited
Partners Per Interest, and Results of Partnership on Liquidation" in the
enclosed Solicitation Statement.
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GHG believes the sale of the Property at this time would be in the best
interests of the Limited Partners and recommends you complete and return the
consent card. GHG bases its recommendation on, among other things, the
following factors:
-- The proposed sale will result in sale of the motel within the
originally anticipated six-to-ten-year holding period.
-- Market conditions are such that GHG believes the proposed sale of the
motel will be at a higher price than would be likely under other
circumstances, considering current mortgage interest rates and the
availability of investor capital.
-- The motel has shown a trend of improved occupancy, revenue and net
operating income over the past few years, which GHG believes has
enhanced its marketability.
-- By selling the motel now, the Partnership will eliminate the risks
inherent in the ownership of real property, including, among other
things, the decline in value that could occur as a result of rising
interest rates, increasing real estate investor expectations and
changing competition factors in local motel markets.
-- The sale of the motel will provide liquidity to the Limited Partners.
At present, there is no established public trading market for the
Limited Partnership Interests, and liquidity has been limited.
-- In the opinion of GHG, the motel is presently in good repair, and it
is advantageous to sell it before aging, obsolescence and wear in the
ordinary course of business occurs, thereby requiring more substantial
cash expenditures for repairs and refurbishments.
Among the disadvantages which would result to holders of Limited
Partnership Interests from the sale of the motel are the following:
-- The Partnership will not benefit from possible future improvements in
economic and market conditions, which possibly could produce increased
cash flow and enhance the sales price of the motel.
-- It is not anticipated that, upon receipt of the final liquidating
distributions, the Limited Partners will have received aggregate
distributions from the sale of the Partnership Property which will
equal the amounts originally invested in the Partnership, plus the
cumulative 8% return set forth in the Partnership Agreement.
It should be noted that sale of the motel will eliminate any future liability
of the General Partner for Partnership liabilities and risks to the
Partnership which could arise from continued operation of the Partnership.
The General Partner will receive no fees in connection with the sale of the
Property or the termination and liquidation of the Partnership. It is not
anticipated the General Partner will receive any distributions from the
proceeds of the sale under the distribution provisions of the Partnership
Agreement. The sale of the motel will result in elimination of the
management fees and operating distributions which GHG presently receives.
The sale of the motel will result in the termination and liquidation of the
Partnership, which is an action that must be approved by the Limited
Partners. Accordingly, GHG is soliciting the written consent of each Limited
Partner to both elements of the Plan, which are more fully described in the
enclosed Solicitation Statement. Under the Partnership Agreement and
California law, Limited Partners do not have rights of appraisal or similar
rights if the sale is approved.
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YOU ARE URGED TO READ CAREFULLY THE SOLICITATION STATEMENT IN ITS ENTIRETY FOR A
COMPLETE DESCRIPTION OF THE PROPOSED SALE. If you have any questions, please
feel free to contact Stephen D. Burchett at (619) 699-6100.
Very truly yours,
GHG HOSPITALITY, INC.
General Partner
By: /s/ Stephen D. Burchett
----------------------------------
Stephen D. Burchett,
Vice President and General Counsel
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MISSION VALLEY COMFORT SUITES, LTD.
1466 9TH AVENUE
SAN DIEGO, CA 92101
NOTICE OF CONSENT SOLICITATION
To the holders of Limited Partnership Interests of Mission Valley Comfort
Suites, Ltd.:
NOTICE IS HEREBY GIVEN to the holders (the "Limited Partners") of the limited
partnership interests (the "Interests"), Mission Valley Comfort Suites, Ltd.,
a California limited partnership (the "Partnership"), that GHG Hospitality
Inc. (the "General Partner") on behalf of the Partnership is soliciting the
written consents of the Limited Partners (the "Consents") to approve a plan
of action (the "Plan") which includes (i) sale of substantially all of the
assets of the Partnership on the terms and conditions described in the
enclosed Solicitation Statement and (ii) the complete termination and
liquidation of the Partnership, resulting in cash distributions to the
Limited Partners, all as more fully described in the accompanying
Solicitation Statement. The Plan is comprised of two (2) proposals, each of
which must be approved by Limited Partners holding a majority of the
Interests. Limited Partners may indicate approval, disapproval or abstention
with respect to each of the two elements of the Plan. However, the Plan will
not be implemented unless Limited Partners holding a majority of the
Interests approve each element.
Only Limited Partners of record at the close of business on June 1, 1998 are
entitled to notice of the solicitation of Consents and to give their consent
to the Plan. In order to be valid, all Consents must be received before July
2, 1998 unless such date or time is extended, in the sole discretion of the
General Partner by notice to all Limited Partners. The Limited Partners'
approval of the Plan is intended to be obtained through the solicitation of
written Consents, and no meeting of Limited Partners will be held. GHG will
act as the agent of the Partnership in soliciting and counting Consents. A
Consent may be revoked by written notice of revocation or by a later dated
instrument containing different instructions received by GHG at any time on
or before the expiration of the time by which the Consent card must be
received.
YOUR APPROVAL IS IMPORTANT. PLEASE READ THE SOLICITATION STATEMENT CAREFULLY
AND THEN COMPLETE, SIGN AND DATE THE ENCLOSED CONSENT CARD AND RETURN IT IN
THE SELF-ADDRESSED PREPAID ENVELOPE. Any Consent card which is signed and
does not specifically disapprove the Plan or abstain will be treated as
approving the Plan. Although the Partnership Agreement provides a failure to
return a Consent card has the same effect as "Yes" vote, GHG believes it is
important to receive as many Consent cards as possible with respect to such
an important decision. Your prompt response will be appreciated.
Dated: June 18, 1998 GHG HOSPITALITY, INC.
---------------------- General Partner
By: /s/ Stephen D. Burchett
----------------------------------
Stephen D. Burchett,
Vice President and General Counsel
<PAGE>
MISSION VALLEY COMFORT SUITES, LTD.
1466 9TH AVENUE
SAN DIEGO, CA 92101
STATEMENT FURNISHED IN CONNECTION WITH THE
SOLICITATION OF CONSENTS
INTRODUCTION
This Statement Furnished in Connection with the Solicitation of Consents
("Solicitation Statement") is furnished to the holders ("Limited Partners")
of limited partnership interests (the "Interests") in Mission Valley Comfort
Suites, Ltd., a California limited partnership (the "Partnership"). The
Solicitation Statement is furnished to the Limited Partners in connection
with the solicitation of written consents ("Consent(s)") on behalf of the
Partnership by GHG Hospitality, Inc. ("GHG"), the general partner of the
Partnership, to approve (i) the sale of substantially all of the assets of
the Partnership (the "Sale") and (ii) the subsequent termination and
liquidation of the Partnership pursuant to the terms of the Partnership
Agreement (the "Plan of Liquidation"), all as more fully described under "THE
PLAN." Approval by Limited Partners of each of the Sale and the Plan of
Liquidation (collectively, the "Plan") is required to implement the Plan. If
approved and consummated, the Plan will result in the sale of substantially
all of the Partnership's assets, the termination of the Partnership's
business and the distribution of the net sales proceeds and any other
remaining Partnership assets to the Limited Partners of the Partnership,
after payment of all liabilities and expenses and creation of reasonable
reserves. Under the Partnership Agreement and California law, Limited
Partners do not have appraisal or similar rights if the Plan is approved.
See "NO APPRAISAL RIGHTS."
THIS SOLICITATION STATEMENT HAS BEEN PREPARED
AND IS BEING FURNISHED BY GHG ON BEHALF OF THE PARTNERSHIP.
GHG does not intend to call a meeting of the Limited Partners in connection
with this solicitation of Consents. If the Plan is approved, there will be
no further meetings of the Partners. Approval or disapproval by a Limited
Partner of the Plan is to be indicated by marking and signing the enclosed
form of Limited Partner Consent and returning it to GHG in the enclosed
self-addressed envelope, which requires no postage if mailed in the United
States. The enclosed form of Consent permits a Limited Partner to indicate
approval, disapproval or abstention with respect to each element of the Plan.
However, the Plan will not be implemented unless Limited Partners holding a
majority of the outstanding Interests approve both elements.
Consents of the Limited Partners to the Plan will be solicited until the
earlier to occur of: (i) receipt by the General Partner of the consent of a
majority of the Interests; or (ii) July 2, 1998 subject to extension in GHG's
sole discretion, by notice to all Limited Partners.
The close of business on June 1, 1998 (the "Record Date") has been fixed by
GHG for determining the Limited Partners entitled to notice of the
solicitation of Consents and to consent to the Plan. On the Record Date,
there were 5,900 outstanding Interests entitled to vote on the Plan held by
approximately 976 Limited Partners. This Solicitation Statement and the
enclosed form of Consent are anticipated to be mailed to Limited Partners on
or about June 18,1998.
Limited Partners will be notified as soon as possible as to the results of
this solicitation.
Pursuant to the Partnership Agreement, the Consent of Limited Partners
holding a majority of the outstanding Interests is required to approve the
sale of properties representing all or substantially all of the Partnership's
assets and the termination of the Partnership. Under California law and the
Partnership Agreement, any matter upon which the Limited Partners are
entitled to act may be submitted for a vote by written Consent without a
meeting. Any Consent given
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pursuant to this solicitation may be revoked by the person giving it at any
time before July 2, 1998 unless such date or time is extended, by sending a
written notice of revocation or a later dated Consent containing different
instructions to GHG before such date. Any written notice of revocation or
subsequent Consent should be sent to GHG.
In addition to solicitation by use of the mails, officers, directors,
employees and agents of GHG and its affiliates may solicit Consents in person
or by telephone, facsimile or other means of communication. Any such
directors, officers and employees will not receive additional compensation
for such services but may be reimbursed for reasonable out-of-pocket expenses
in connection with such solicitation. Arrangements have been made with
custodians, nominees and fiduciaries for the forwarding of Consent
solicitation materials to beneficial owners of Interests held of record by
such custodians, nominees and fiduciaries, and the Partnership will reimburse
such custodians, nominees and fiduciaries for reasonable expenses incurred in
connection therewith. All costs and expenses of this solicitation of
Consents, including the costs of preparing and mailing this Solicitation
Statement, will be paid by the Partnership. The Partnership will not seek a
separate Consent of the Limited Partners for such reimbursement. The
aggregate expenses to be incurred relating to this solicitation are estimated
to be approximately $20,000.
GHG recommends Limited Partners consent to the Plan. See "SPECIAL
FACTORS--Fairness of the Plan; Recommendation of GHG."
THE TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE FAIRNESS OR MERITS
OF SUCH TRANSACTION NOR UPON THE ACCURACY OR ADEQUACY OF THE INFORMATION
CONTAINED IN THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
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SUMMARY
THE FOLLOWING IS A SUMMARY OF CERTAIN INFORMATION CONTAINED ELSEWHERE IN THIS
SOLICITATION STATEMENT. THIS SUMMARY DOES NOT PURPORT TO BE COMPLETE AND IS
QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED INFORMATION CONTAINED IN THIS
SOLICITATION STATEMENT AND THE EXHIBITS HERETO. UNLESS OTHERWISE
SPECIFICALLY PROVIDED, TERMS USED IN THIS SUMMARY HAVE THE RESPECTIVE
MEANINGS ASCRIBED TO THEM ELSEWHERE IN THIS SOLICITATION STATEMENT OR, IF NOT
DEFINED HEREIN, IN THE PARTNERSHIP AGREEMENT. LIMITED PARTNERS ARE URGED TO
READ THIS SOLICITATION STATEMENT AND THE EXHIBITS IN THEIR ENTIRETY.
THE PARTNERSHIP
Mission Valley Comfort Suites, Ltd. . . . . The Partnership is a California
limited partnership which owns a
leasehold interest in the real
property (the "Property")
consisting of the motel known as
Mission Valley Comfort Suites
located at 631 Camino del Rio
South, San Diego, California,
together with a motel building
consisting of 122 guest rooms and
related improvements. GHG is the
General Partner of the
Partnership. The offices of the
Partnership are located at 1466
9th Avenue, San Diego, California
92101 and its telephone number is
(619) 699-6100.
ACTION BY WRITTEN CONSENT
Purpose of the Solicitation . . . . . . . . Consents are being solicited by
GHG to approve the Sale of the
Property which comprises
substantially all of the assets
of the Partnership, and which
will be sold to an unaffiliated
third party, Piyal, LLC, for
$5,000,000 cash; and (ii) the
subsequent termination and
liquidation of the Partnership
and the distribution to the
Limited Partners of the net sales
proceeds and other cash held by
the Partnership at the time of
distribution, other than certain
reserve amounts set aside to
provide for the payment of all
expenses and other liabilities of
the Partnership (the "Plan of
Liquidation").
Record Date; Interests Entitled to
Consent . . . . . . . . . . . . . . . . . . Limited Partners of record at
the close of business on June 1,
1998 are entitled to vote by
written Consent. At such date,
there were outstanding 5,900
Interests, each of which will
entitle the record owner thereof
to one vote.
Vote Required . . . . . . . . . . . . . . . The Plan will not be implemented
unless Limited Partners of record
holding a majority of all
outstanding Interests approve
each of the elements of the Plan.
Termination of Consent Solicitation . . . . Consents must be received by July
2, 1998 (unless such date or time
is extended, in the sole
discretion of GHG, by notice to
all Limited Partners, permitting
further solicitation of Consents
if majority approval has not been
obtained by such date).
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THE PLAN
General . . . . . . . . . . . . . . . . . . The Plan is two proposals
consisting of the Sale and the
Plan of Liquidation.
Background of the Plan. . . . . . . . . . . See "SPECIAL FACTORS--Background
of the Plan."
Security Ownership and Voting of the
General Partner . . . . . . . . . . . . . . As of the Record Date, neither
the General Partner, nor any
executive officer or director of
the General Partner, owned
directly or beneficially any
Interest other than its general
partner interest.
Consummation of the Sale. . . . . . . . . . The Sale will be consummated on
satisfaction of the terms and
conditions contained in the Hotel
Purchase and Sale Agreement
("Purchase Agreement") with
Escrow Instructions and is
anticipated to close up to 14
days following receipt of Consent
of the Limited Partners which is
anticipated to be on July 2,
1998. Failure to receive the
Consent of the Limited Partners
on or before July 2, 1998 will
result in a reduction in the
Purchase Price of $3,333 per day
thereafter until Closing. These
reductions were mandated by the
proposed buyer who would not
agree to pay the offered price
unless they had an opportunity to
obtain a significant portion of
the motel's estimated July 1998
revenues.
No Appraisal Rights . . . . . . . . . . . . Limited Partners have no
appraisal rights in connection
with the Plan. See "NO APPRAISAL
RIGHTS."
Federal Income Tax Consequences . . . . . . The Partnership will have taxable
gain or loss upon its sale of the
Property. Such gain or loss will
be allocated to the partners in
accordance with the Partnership
Agreement, and generally will
constitute Section 1231 gain or
Section 1231 loss. Any Section
1231 gains would be eligible for
a reduced tax rate. See "FEDERAL
AND STATE INCOME TAX
CONSEQUENCES--Capital Gains Tax."
See "FEDERAL AND STATE INCOME TAX
CONSEQUENCES--Sale of Properties."
Distributions to a Limited
Partner generally will not be
taxable to the extent the
distributions do not exceed the
Limited Partner's adjusted tax
basis in the Interests. The tax
basis in the Interests will be
reduced by the distributions, and
those in excess of the tax basis
generally will be treated as
capital gain, which will be
long-term if the applicable
Interests have been held for more
than eighteen (18) months.
Limited Partners who have
remaining tax basis in their
Interests after termination of
the Partnership generally will
have a capital loss. See "FEDERAL
AND STATE INCOME TAX
CONSEQUENCES."
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Final Distributions and Liquidation . . . . As promptly as practicable
following the sale of the
Property, after payment or
reserving for payment of all
costs of the Sale and this
Consent solicitation, the General
Partner will establish a
contingency reserve in the
approximate amount of $300,000
and the balance of the
Partnership's funds will be
distributed to the Limited
Partners in accordance with the
Partnership Agreement. Once all
known estimable and reasonably
contingent liabilities have been
satisfied, the Partnership will
distribute its remaining net
assets, if any, and terminate.
Upon termination any remainder of
the contingency reserve at the
expiration of such period as the
General Partner may determine in
its sole discretion, will be
distributed to the Limited
Partners in accordance with the
Partnership Agreement.
SPECIAL FACTORS
BEFORE CONSENTING TO THE PLAN, LIMITED PARTNERS SHOULD CAREFULLY CONSIDER
CERTAIN FACTORS REGARDING THE PLAN:
BACKGROUND OF THE PLAN
The Partnership was formed in 1988 with the primary purpose of acquiring,
developing, investing in, holding, managing, selling, disposing of and
otherwise acting with respect to the Property. The Partnership's investment
objectives at formation were to preserve and protect Partnership capital, to
provide partially tax-sheltered cash distributions from operations and to
provide long-term capital appreciation. In 1988, the Partnership commenced
operation of the Property as a motel. See "The Property" below.
Although the Partnership Agreement provides the term of the Partnership will,
unless previously terminated, continue until December 31, 2026, the
prospectus of the Partnership for its original public offering of Interests
stated the Partnership anticipated it would dispose of its Properties within
six to 10 years after acquisition.
Following its appointment as general partner in 1990, GHG has periodically
evaluated the desirability of sale of the Property. The potential to sell
the Property generally has been enhanced by recent improvements in the
national real estate investment market. Pension funds, real estate
investment trusts and other institutional buyers are now actively seeking new
investment properties, as compared to the early 1990's, when these same
institutional buyers were fewer and less active. The emergence of
securitized mortgage financing and lower mortgage interest rates have also
contributed to an improved market for real estate such as the Property, as
entrepreneurial buyers who require debt financing to purchase properties are
able to borrow funds at attractive rates.
More specifically, improvements in the real estate capital markets and in the
operating performance of the Property have enhanced the prospects for selling
the Property at attractive prices. Further, a resurgence in development in
the Mission Valley area has also increased the marketability of the Property.
During the early 1990's, the Property experienced devaluation due to a
nationwide slump in real estate values. Although future economic conditions
are difficult to predict, GHG believes that it is unlikely that continuing to
hold the Property would significantly enhance the Partnership's ultimate
realization on sale of the Property, or that the relative economic benefits
of continued ownership would justify the risks of such continued ownership.
The sale of all or substantially all of the assets of the Partnership
requires the approval of Limited Partners holding a majority of the Interests.
The purpose of the Plan, from the Partnership's perspective is to further its
investment objective of preserving and protecting capital by returning to the
Limited Partners a portion of their capital contributions, in order to
eliminate the
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possibility of further losses. The Sale proceeds will be used to repay all
outstanding indebtedness of the Partnership, and establish a contingency
reserve in the approximate amount of $300,000 in order to provide for
unanticipated contingencies and pay for the costs of terminating and
liquidating the Partnership. Upon termination of the Partnership after
paying all remaining Partnership liabilities, the remainder of the proceeds
of the Sale proceeds and all other Partnership assets shall be distributed to
the partners of the Partnership in accordance with the Partnership Agreement.
EFFECTS OF THE PLAN
If the Plan is approved and implemented as proposed, the effects of the Plan
will be the sale of substantially all of the Partnership's assets, the
termination of the Partnership's business, the winding up of the
Partnership's affairs and the distribution to the Limited Partners of the net
proceeds of the Sale after payment of liabilities, liquidation expenses and
establishment of a contingency reserve of approximately $300,000. Assuming
the Property is sold for $5,000,000, GHG estimates the Limited Partners will
receive an initial cash distribution of approximately $737.50 per Interest
upon completion of the Sale of the Property, and anticipates the Limited
Partners will receive an additional small distribution upon termination of
the Partnership. See "THE PLAN--Anticipated Results of Sale, Use of Proceeds
and Cash Distributions." The amount distributed to each Limited Partner
generally will not be taxable to the extent the distributions do not exceed
the Limited Partner's adjusted tax basis in the Interests. See "FEDERAL AND
STATE INCOME TAX CONSEQUENCES."
REASONS FOR THE TIMING OF THE SALE
The decision to proceed with the sale of the Property at this time was based
upon GHG's determination that improvement of the national and local real
estate markets, increases in the average room rates and occupancy rates, and
general economic factors, coupled with relatively low interest rates made
this a good time to sell. In addition, the historical performance of the
Property indicated to GHG it was unlikely continued operation of the Property
would generate significantly increased distributable cash.
The Partnership has a finite legal existence of 38 years, 12 of which have
passed. It was not intended, however, that the Partnership would hold its
Property for the full 38 year period. Although it was not possible at the
outset of the Partnership to determine precisely how quickly the investment
objectives with respect to the Property would be achieved, the Partnership's
Prospectus disclosed an anticipated holding period for the Property of six
(6) to ten (10) years.
GHG generally considered the benefits to the Limited Partners that might be
derived by holding the Property for an additional period of time. GHG
assumed the Property would probably continue to appreciate in value and as
result the Property might be able to be sold for a greater sale price in the
future. GHG weighed these assumptions against the potential risks to
investors from a longer holding period, i.e., the risk that competitive
market or general economic developments could cause the Property to decline
in value, which could result in a lesser sale price in the future. Weighing
all of these factors, GHG concluded that now rather than later was the time
to sell the Property.
The Partnership's decision to sell the Property at this time was also
influenced by the fact the originally contemplated holding period of six (6)
to ten (10) years has nearly passed. The Property was not sold earlier
because of uncertain and then adverse economic and market conditions
prevailing in the early 1990's.
Another reason for the timing of the Sale from GHG's perspective is the
increased competition faced by the Property in the form of increasing numbers
and capacities of hotels and motels located in the vicinity of the Property.
For example, a motel property approximately one (1) mile from the Property
became a Comfort Inn and Suites franchisee of Choice International in 1996
and began participation in the Choice-Reservations System used by the
Property. Due to its proximity and availability of suites, this motel now
competes directly with the Property and GHG believes it reduces the
reservations the Property would otherwise receive from the Choice Reservation
System. The proposed buyer is the owner of this competing property.
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In October 1996, GHG obtained an independent appraisal of the Property which
concluded the then current fair market value of the Property was $3.4
million. In July 1997, GHG again obtained an appraisal which concluded the
then current fair market value of the Property was $4.0 million. In early
1998, GHG conducted an informal sampling of the Limited Partners, wherein a
significant majority indicated they favored selling the Property.
On March 3, 1998, the Partnership entered into an Exclusive Listing Agreement
with Hotel Partners, Inc. (the "Broker") to sell the Property. The Broker
conducted a thorough analysis of the Property and actively sought out a
number of interested potential buyers. After discussions with the interested
potential purchasers, the Broker issued a call for offers to this group.
After review of the proposals GHG negotiated with the best four offering
parties, two of which were contingent on obtaining financing and two of which
were not. In June 1998 after the proposed buyer significantly increased the
price in its offer to purchase, GHG accepted that offer to purchase the
Property for $5.0 million in cash, subject to the approval of the Limited
Partners. GHG's decision to accept the offer was influenced both by the fact
the offer was $1.0 million more than the July 1997 appraisal, the lack of any
financing contingency and the complexity of financing a ground lease, the
financial capacity of the proposed buyer, and the fact the proposed buyer
owns a similar property nearby providing the proposed buyer with certain
potential operating efficiencies. GHG believes these factors substantially
increase the likelihood of consummating the Sale.
FAIRNESS OF THE PLAN; RECOMMENDATION OF GHG
GHG reasonably believes the Plan is fair to the Limited Partners and
recommends approval of the Plan. The most recent appraisal of the Property
was obtained less than one (1) year ago and the sale price is 25% higher than
such appraisal. No independent evaluation of the fairness of the Plan to
Limited Partners has been made.
In reaching its conclusion to recommend approval of the Plan, GHG considered
the following factors:
(1) the Property has now been held for its originally anticipated holding
period, which militates in favor of a sale of the Property at this
time;
(2) increased availability of investor capital, increased purchasing
activity and a favorable interest rate environment, which may not
continue in the future, also militate in favor of sale;
(3) improved occupancies and revenues in recent years, which contribute to
realization of a higher sale price for the Property than recent
appraisals would indicate and which may not be sustained militate in
favor of sale;
(4) the potential for future operating performance increases and a
possible increase in the value of the Property, due to increasing
development activity in the Mission Valley area might militate in
favor of holding the Property, but which also might enhance its
current marketability and sales price;
(5) the currently satisfactory physical condition of the Property and the
increasing likelihood there may be a higher need for expenditures for
repairs, replacements and improvements to be incurred in the future,
which militates in favor of a sale now;
(6) the presence of competition and the possibility of increased future
competition, which suggest a sale now may be advisable;
(7) the relative illiquidity of the Interests, which militates in favor of
sale;
(8) the historic levels of cash distributions to the Limited Partners
which suggest Limited Partners may benefit from recovering their
remaining investment now;
7
<PAGE>
(9) the potential for an increase in the amounts of distributions, which
might otherwise militate in favor of holding the Property, if such
future distributions would represent a rate of return equivalent to
that available in other investments; and
(10) it is anticipated aggregate distributions from the Partnership,
including proceeds from the Sale and any eventually remaining
contingency reserve will equal slightly more than the capital
contributions of the Limited Partners, which might militate in favor
of holding the Property for additional future appreciation, but which
might also militate in favor of a current sale in order to mitigate
the potential for losses.
(11) The terms of the underlying land lease provide for a term of 60 years.
As the remaining term of such ground lease gets shorter, this may
reduce the eventual sales price, which militates in favor of a current
sale.
VOTE REQUIRED TO APPROVE THE PLAN
Implementation of the Plan requires that GHG receive Consents approving each
element of the Plan from Limited Partners of record holding a majority of all
outstanding Interests.
OTHER OFFERS
At the time GHG accepted the offer to purchase the Property for $5.0 million
in cash, it had received two other offers with nominal purchase prices of
$5,150,000 and $5,200,000 million. However, both of these offers were
subject to financing contingencies and GHG had significant concerns about
whether such contingencies could be satisfied in light of the financial
capacity of the two offerers, the current financing market, and the appraisal
dated less than a year ago valuing the Property at $4.0 million. In
addition, a potential lender would likely require significant protections in
the loan documents because of the ground lease, which adds significantly to
the complexity of the transaction and the risk the purchase may not close.
Accordingly, GHG believes the cash offer which was accepted to be a better
offer and more likely to result in a consummated sale at that price, and was
otherwise on relatively beneficial terms.
GHG also believes Limited Partners have received an offer to purchase their
Interest from an unaffiliated entity for a price of $500 per Interest. GHG
believes the anticipated initial distribution by the Partnership of the
estimated sale proceeds available for distribution in the amount of
approximately $737.50 per Interest and an anticipated additional small
liquidating distribution, makes the Sale a better means by which to recover
the Limited Partners' Investments. Notwithstanding the foregoing, there can
be no assurance the sale will be consummated. In the event Piyal defaults
on its purchase obligations, a liquidated damage clause in the Purchase
Agreement limits the Partnerships potential recovery of damages to $100,000.
FAILURE TO APPROVE THE PLAN
If the Limited Partners fail to approve the Plan, the Partnership will
continue to own the Property. In such event, GHG expects the Partnership
will operate the Property for an indefinite period, which over time may
entail substantial expenditures for repairs and refurbishment. Consistent
with the Partnership Agreement, the General Partner may receive or solicit
offers for the sale of the Property as opportunities arise. In any such
sale, the Partnership would benefit from any increase in value of the
Property over the current value and would suffer a detriment to the extent of
decrease in such value. Failure by the Limited Partners to approve the Plan
will not affect their rights under the Partnership Agreement.
8
<PAGE>
THE PLAN
GENERAL
The Plan was developed by and is being proposed by GHG for the written
Consent by Limited Partners to each element of the Plan--the Sale and the
Plan of Liquidation. See "INTRODUCTION" and "SPECIAL FACTORS--Background of
the Plan."
GHG recommends the Limited Partners approve the Plan, which will result in
the sale of all of the Partnership's assets, followed by the termination and
liquidation of the Partnership. If the Plan is approved, the Property will
be sold on the terms set forth below. See "Proposed Sale of Property" below.
PROPOSED SALE OF PROPERTY
Pursuant to the terms and conditions of the Purchase Agreement entered into
in June 1998, by and between the Partnership and Piyal, LLC ("Piyal"), the
Partnership has (subject to receiving the requisite Consents of the Limited
Partners) agreed to sell the Property to Piyal. The sale of the Property
will be accounted for using the purchase method of accounting. Piyal is not
affiliated with the Partnership or GHG and the terms of the Purchase
Agreement were negotiated at arm's length. The Purchase Agreement contains
numerous representations, warranties and conditions common to such
transactions.
Assuming receipt of the requisite approval of the Limited Partners on July 2,
1998, the Closing is anticipated to occur within 14 days thereafter.
Pursuant to the Purchase Agreement, after July 2, 1998, the Purchase Price is
reduced by $3,333 per day until the requisite Limited Partner approval is
received. Because the closing is conditioned upon, among other things, the
approval of the Limited Partners, there can be no assurance the proposed sale
will occur. If all conditions precedent to Piyal's obligation to close are
not eventually satisfied or waived, its obligation to purchase the Property
will terminate.
THE PROPERTY
The Property consists of a 122 room "suites only" motel situated on
approximately 1.83 acres of land subject to a 60 year lease expiring in 2046.
The Property is known as Mission Valley Comfort Suites and is located at 631
Camino del Rio South, San Diego, California 92108.
The Property is subject to a security interest securing a loan with a balance
of approximately $186,565 as of June 30, 1998. The loan terms require
monthly payments in the amount of $2,175, including interest at 8% until paid
in full.
The Partnership carries on its books a deferred rent liability representing
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, 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.
Consequently, rent expense is now being recognized based on the amount due
each month rather than on the straight-line basis. 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.
PURCHASE PRICE
Subject to prorations and adjustments provided in the Purchase Agreement,
including but not limited to the reductions in Purchase Price in the event
the Limited Partners' approval has not been received on or before July 2,
1998, the purchase price for the Property is $5,000,000.
9
<PAGE>
RESULTS OF OPERATIONS
Net income was $129,950 in 1997 and $283,799 in 1996. Total revenues were
$2,040,601 in 1997 and $2,025,358 in 1996. The property operated at an
occupancy of 73.87% in 1997 and 73.86% in 1996. The average daily room rate
was $59.73 in 1997 and $59.11 in 1996.
In 1997, the Partnership incurred costs of $108,403 associated with a
proposal to reorganize the Partnership into a real estate investment trust
(REIT). The efforts were discontinued when management and the proposed
sponsor of the REIT were unable to negotiate mutually acceptable terms and
conditions for a reorganization.
LIQUIDATION
As soon as practical following the closing of the Sale, GHG will cause the
Partnership (i) to pay all costs associated with the Sale, including the
solicitation of Consents from Limited Partners, if not previously paid; and
(ii) to provide a contingency reserve in the approximate amount of $300,000
for the remaining costs of terminating and liquidating the Partnership, as
well as potential unforeseen costs and liabilities. This reserve shall be
maintained for a period to be determined by GHG in its sole discretion. The
remaining assets of the Partnership, and any remainder of the contingency
reserve, will be distributed to the Limited Partners upon the termination of
the Partnership in the manner set forth in the Partnership Agreement.
Section 17.1.2 of the Partnership Agreement provides the Partnership will
terminate and be dissolved upon the vote of a majority in interest of the
Limited Partners.
DISTRIBUTIONS AND FEES
As set forth under "Use of Proceeds and Distributions" and based on the
assumptions therein stated, GHG currently estimates upon completion of the
Sale of the Property, the General Partner will not have received any cash
distributions from liquidation and the Limited Partners will have received
cash distributions of approximately $4,351,249 in addition to those
previously received.
GHG will not receive any fees in connection with the Sale of the Property or
the liquidation and dissolution of the Partnership. Upon the Sale, the
management fees equal to 6% of gross receipts of the motel, which GHG
presently receives, will be eliminated. The Sale will also terminate GHG's
ability to receive 10% of all operating distributions, which it is currently
receiving. Sale of the Property and liquidation of the Partnership will also
eliminate any liability of GHG for future Partnership obligations which might
otherwise arise from continued operation of the Partnership.
10
<PAGE>
USE OF PROCEEDS FROM PROPERTY SALE
The following is a brief summary of the Partnership's estimated use of the
proceeds from the sale of the Property. All of the following selected
financial information is based upon amounts as of April 30, 1998 and certain
estimates of liabilities at closing. Final results may differ from these
estimates. A more detailed discussion of the financial consequences of the
sale of the Property is set forth below under the caption "Unaudited Pro
Forma Financial Information." All Limited Partners are encouraged to review
carefully the unaudited pro forma financial statements.
If the holders of a majority of the Interests approve the proposed Sale of
the Property and the Sale is closed, the Partnership will pay all of its
indebtedness, set up a contingency reserve and then distribute the remaining
net sale proceeds pursuant to the terms of the Partnership Agreement. The
estimated uses of the sale proceeds are as follows:
<TABLE>
<S> <C>
Contract Sales Price . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,000,000
Costs of Sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (162,246)
Repayments of Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (186,505)
Establishment of Contingency Reserve . . . . . . . . . . . . . . . . . . $ (300,000)
-----------
Cash Initially Available for Distribution by the Partnership
from the Sale of the Property . . . . . . . . . . . . . . . . . . . . . $ 4,351,249
-----------
-----------
Return of Limited Partners' Initial Capital Not
Previously Distributed . . . . . . . . . . . . . . . . . . . . . . $ 3,917,793
Partial Distribution of Limited Partners' Priority Return . . . . . $ 433,456
Estimated Residual Proceeds from Sale of Property . . . . . . . . . $ 0
Limited Partners' Share of Residual Proceeds from
Sale of Property (85%) . . . . . . . . . . . . . . . . . . . . . . $ 0
General Partner's Share of Residual Proceeds from
Sale of Property (15%) . . . . . . . . . . . . . . . . . . . . . . $ 0
-----------
Total Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,351,249
-----------
-----------
</TABLE>
DISTRIBUTIONS TO LIMITED PARTNERS PER INTEREST
Based upon financial information as of April 30, 1998, below is an estimate
of all cash distributions that will have been made to Limited Partners after
the initial distribution of the estimated proceeds from the Sale of the
Property is completed.
<TABLE>
<S> <C>
Summary of Estimated Cash Distributions to Limited Partners:
Limited Partners' Share of previous distributions . . . . . . . . . $ 1,982,207
Limited Partners' Share of Proceeds from Sale of the
Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,351,249
Limited Partners' Share of previously undistributed
cash from operations . . . . . . . . . . . . . . . . . . . . . . . $ 225,000
-----------
Total Estimated Cash Received by Limited Partners . . . . . . . . . . . $ 6,558,456
-----------
-----------
Total Cash Received per $1,000 of Limited Partnership Capital. . . . . . $ 1,111.60
</TABLE>
The above figures assume the Limited Partners do not receive any final
liquidating distribution. Subject to unforeseen contingencies, GHG
anticipates there will be a small liquidating distribution to the Limited
Partners upon termination of the Partnership.
11
<PAGE>
RESULTS OF PARTNERSHIP ON LIQUIDATION
Based on financial information available as of April 30, 1998, the following
table presents the estimated results of the Partnership assuming it has
completed the sale of the Property as proposed herein:
<TABLE>
<S> <C>
Dollar Amount Raised . . . . . . . . . . . . . . . . . . . . . . . . . . $5,900,000
Number of Properties Purchased Directly . . . . . . . . . . . . . . . . 1
Number of Properties Purchased Indirectly . . . . . . . . . . . . . . . 0
Date of Closing of Offering. . . . . . . . . . . . . . . . . . . . . . . March 21, 1998
Estimated Date of Sale of Property . . . . . . . . . . . . . . . . . . . July 20, 1998
Estimated Distribution Data per $1,000 of Limited Partnership Capital:
Distributions to Limited Partners from Operations . . . . . . . . . $ 374.10
Estimated Initial Distributions to Limited Partners from the
Sale of the Property . . . . . . . . . . . . . . . . . . . . . . . $ 737.50
Total Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,111.60
</TABLE>
The above figures assume the Limited Partners do not receive any final
liquidating distribution. Subject to unforeseen contingencies, GHG anticipates
there will be a small liquidating distribution to the Limited Partners upon
termination of the Partnership.
UNAUDITED PRO FORMA FINANCIAL INFORMATION
THE PARTNERSHIP
The following unaudited pro forma balance sheet assumes that as of July 15,
1998, the Partnership had sold the Property for $5,000,000. Such funds will be
used to repay indebtedness and the balance will be distributed to the Partners
pursuant to the terms of the Partnership Agreement, which generally will be
first, to the Limited Partners in an amount that equals the amount initially
contributed to the partnership capital by the Limited Partners plus a cumulative
but non-compounded 8% per annum return thereon; with the balance distributed 85
percent to the Limited Partners and 15 percent to the General Partner.
The unaudited pro forma balance sheet should be read in conjunction with the
appropriate notes to the unaudited pro forma balance sheet.
ALL OF THE FOLLOWING UNAUDITED PRO FORMA FINANCIAL INFORMATION IS BASED UPON
AMOUNTS AS OF APRIL 30, 1998 AND CERTAIN ESTIMATES OF LIABILITIES AT CLOSING
FINAL RESULTS MAY DIFFER FROM SUCH INFORMATION.
12
<PAGE>
MISSION VALLEY COMFORT SUITES, LTD
A California Limited Partnership
Proforma Balance Sheet As of July 15, 1998
(Unaudited)
<TABLE>
<CAPTION>
ASSETS July 15, 1998
-------------
<S> <C>
Current Assets:
Cash and cash equivalents $ 4,901,249
Accounts Receivable 51,454
-----------
Total current assets 4,952,703
-----------
Total Assets $ 4,952,703
-----------
-----------
LIABILITIES AND PARTNERS' CAPITAL ACCOUNTS
Current Liabilities:
Accounts Payable 25,184
Due to Affiliates 14,962
Accrued Taxes 18,900
-----------
Total current liabilities 59,046
-----------
Total Liabilities 59,046
-----------
Partners' capital accounts:
General Partner:
Capital contributions 31,210
Cumulative net earnings 205,930
Cumulative cash distributions (212,140)
-----------
25,000
-----------
Limited partners:
Capital contributions, net of offering costs 5,117,287
Cumulative net earnings 1,733,577
Cumulative cash distributions (1,982,207)
-----------
4,868,657
-----------
Total partners' Capital Accounts 4,893,657
-----------
Total Liabilities and Capital $ 4,952,703
-----------
-----------
</TABLE>
13
<PAGE>
FEDERAL AND STATE INCOME TAX CONSEQUENCES
The purpose of the following discussion of the income tax consequences of the
proposed transaction is to inform the Limited Partners of the Partnership of
the federal and state income tax consequences to the Partnership and to its
partners arising from the sale of the Property. The tax information included
herein was prepared by the General Partner. The tax information is taken
from tax data compiled by the General Partner in its role as the
Partnership's tax administrator and is not based upon the advice or formal
opinion of counsel. The tax discussion that follows is merely intended to
inform the Limited Partners of factual information and should not be
considered tax advice.
PASSIVE ACTIVITY LOSSES
Application of the passive activity loss limitation may have limited
deductible losses in prior years and created passive loss carryovers to the
year of sale. The gain on sale will incorporate all prior losses disallowed
under the loss limitations that are deductible in the year of sale.
SALE OF PROPERTIES
Any such gain or loss generally will constitute Section 1231 gain or Section
1231 loss (i.e., gains or losses from disposition of real property or
depreciable personal property used in a trade or business and held for more
than one year, other than property held for sale to customers in the ordinary
course of business). A Limited Partner's share of the gains or losses from
the Sale would be combined with any other Section 1231 gains or Section 1231
losses of the Limited Partners for the year. Net Section 1231 gains or net
Section 1231 losses generally would be treated as long-term capital gain or
ordinary loss, as the case may be. However, a Limited Partner's net Section
1231 gains would be treated as ordinary income rather than capital gain to
the extent of his or her net Section 1231 losses, if any, incurred in the
five preceding years. Furthermore, in the event that a Property is sold at a
gain, the depreciation expense may be recaptured as ordinary income under
Section 1245 or Section 1250 of the Code to the extent of the realized gain.
In general, under Section 1250, if real property is depreciated on an
accelerated basis rather than on a straight-line basis, then the lessor of
(i) any gain realized on disposition of the property or (ii) the excess of
accelerated depreciation over straight-line depreciation as of the date of
Sale will be treated as ordinary income in the year the Property is sold.
The Partnership does not expect to have any gain from the Sale of the
Property subject to recapture under Section 1250 of the Code. Limited
Partners classified as corporations for federal income tax purposes may be
required, under Section 291(a) of the Code, to treat 20% of the gain from the
sale of a Property attributable to depreciation expense not subject to
recapture under Section 1250 as ordinary income instead of Section 1231 gain.
Under Section 702(a)(3) of the Code, a Partnership is required to state
separately, and the Partners are required to account separately for, their
distributive share of all gains and losses of their Partnership.
Accordingly, each Limited Partner's allocable share of the gains or losses
from the Sale (including each Limited Partner's allocable share of Section
291(a) gain, Section 1245 gain, Section 1231 gain or Section 1231 loss) will
be separately stated and reflected on the applicable Schedule K-1 forms
provided to the Limited Partners by the Partnership.
CAPITAL GAINS TAX
With respect to individuals, trusts and estates, the Taxpayer Relief Act of
1997 ("TRA") generally reduces the maximum tax rate on net capital assets
held for more than 18 months to 20% and provides a maximum tax rate on net
capital gains derived from capital assets held for more than one year and for
not more than 18 months ("mid-term gains") of 28%. TRA does not affect the
taxation of capital gains realized by corporations. Substantially all of the
Partnership's assets have been held for longer than 18 months. Accordingly,
a substantial portion of any Section 1231 gains of the Partnership realized
on the sale of assets and allocable to Limited Partners who are individuals,
trusts and estates may be taxed at a maximum federal income tax rate of 20%
(if such gains are not recharacterized as ordinary income as described above
under "Sale of Properties," or are not subject to the special tax rate
described in the next paragraph).
14
<PAGE>
Under TRA, individuals, trusts and estates are taxed on unrecaptured Section
1250 gain at a maximum federal income tax rate of 25%. Unrecaptured Section
1250 gain generally equals the excess of (i) the lesser of the gain realized
on disposition of depreciable real property or depreciation allowed or
allowable on the property through the date of disposition, over (ii) the
amount of depreciation recapture realized upon the disposition (as described
above under "Sale of Properties").
Net capital losses of such a Limited Partner can be utilized to offset
ordinary income limited to the sum of net capital gains from other sources
recognized by the Limited Partner during the tax year, plus $3,000 ($1,500 in
the case of a married individual filing a separate return). The excess
amount of such net capital loss may be carried forward and utilized in
subsequent years subject to the same limitations but may not be carried back
to a prior year.
Limited Partners classified as corporations are taxed on capital gains at the
same rates as ordinary income. A corporate Limited Partner can deduct
capital losses only to the extent of capital gains, with any unused capital
losses generally being carried back three years and forward five years.
Because the Property is located in the State of California, Limited Partners
who are not resident in California are required to report their allocable
gain to California. California law requires the Partnership to withhold a
portion of a nonresident partner's distribution and to remit such amounts
withheld to the California Franchise Tax Board. The amount withheld will be
separately stated on the stub of the distribution check and the General
Partner will provide additional documentation of the amount of the withheld
California taxes by January 31 following the year of sale. The amount of tax
withheld will be treated as a distribution to the Limited Partner. The
withheld taxes will be allowed as a credit against any California income tax.
Limited Partners may or may not have a tax refund after the filing of the
required California tax return.
Limited Partners who are non-resident aliens or foreign corporations
("foreign persons") are subject to a withholding tax on their share of the
Partnership's income from the sale of the Property. The withholding rates
are 39.6 percent for individual partners and 35 percent for corporate
partners. The tax withheld will be remitted to the Internal Revenue Service
and the foreign person will receive a credit on their U.S. tax return for the
amount of the tax withheld by the Partnership. The tax withheld will be
treated as a distribution to the Limited Partner.
FINAL PARTNERSHIP RETURNS AND FUTURE TAX ISSUES
Upon the termination of the Partnership, the General Partner, on behalf of
the Partnership, will file a final tax return for the Partnership, and on a
timely basis will provide Schedule K-1 forms to all Limited Partners setting
forth their allocable shares of the Partnership's items of income, gain,
loss, deduction and credit. GHG will also have full responsibility and
authority for any other tax-related matter arising after the termination of
the Partnership, including acting as the "tax matters partner" representing
the Partnership in any federal or other audit of returns of the Partnership
for its final year or any prior year.
Limited Partners should understand that while the Partnership will be
terminated, such termination will not eliminate the possibility that the IRS
could challenge the tax treatment of the Partnership's activities for the
year of termination or any prior year for which the statute of limitations
for making adjustments has not elapsed. If any adjustments are made to the
Partnership's income tax return, GHG will so notify the Limited Partners.
Any tax audit or adjustments could result in assessment of additional tax
liabilities upon the Limited Partners which would be payable from their own
funds and would not be reimbursable by the General Partner or the Partnership.
NO APPRAISAL RIGHTS
If Limited Partners owning a majority of the Interests on the Record Date
vote in favor of the Plan, such approval will bind all Limited Partners. The
Partnership Agreement and the California Revised Uniform Limited Partnership
Act, under which the Partnership is governed, do not give rights of appraisal
or similar rights to Limited Partners who dissent
15
<PAGE>
from the vote of the majority in approving or disapproving the Plan.
Accordingly, dissenting Limited Partners do not have the right to have their
Interests appraised or to have the value of their Interests paid to them if
they disapprove of the action of a majority in interest of the Limited
Partners.
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
On the Record Date, there were 5,900 Interests issued and outstanding and
entitled to vote on matters upon which Limited Partners may vote or consent.
According to publicly available information, and to the best knowledge of
GHG, as of the Record Date, no person or entity owned more than 5% of the
outstanding Interests. As of the Record Date, neither the General Partner
nor any officer or director thereof, owned any Interests.
AVAILABLE INFORMATION
This Solicitation Statement does not purport to be a complete description of
all agreements and matters relating to the condition of the Partnership, the
Property and the transactions described herein. Incorporated by reference
into this Solicitation Statement is the Partnership's Annual Report on SEC
Form 10-KSB for the year ended December 31, 1997, which has previously been
distributed to each Limited Partner and provides additional information
regarding the Partnership. With respect to statements contained in this
Solicitation Statement as to the content of any contract or other document
filed as an exhibit to the Form 10-K, each such statement is qualified in all
respects by reference to such report and the schedules thereto, an additional
copy of which may be obtained without charge upon written request to the
Partnership. To make such a request, a Limited Partner must write to GHG,
1466 9th Avenue, San Diego, California 92101.
All documents filed by the Partnership with the Securities and Exchange
Commission after the date of this Solicitation Statement, but before the
Partnership takes action pursuant to this Consent, shall be deemed to be
incorporated by reference into this Solicitation Statement. Copies of these
documents will be available without charge upon request to GHG, 1466 9th
Avenue, San Diego, California 92101. Any statement contained in a document
incorporated or deemed to be incorporated by reference in this Solicitation
Statement shall be deemed to be modified or superseded for purposes of this
Solicitation Statement to the extent that a statement contained in this
Solicitation Statement (or in any other subsequently filed document that also
is or is deemed to be incorporated by reference in this Solicitation
Statement) modifies or supersedes such statement. Any statement so modified
or superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Solicitation Statement.
16
<PAGE>
CONSENT PURSUANT TO THE
SOLICITATION DATED JUNE 18, 1998
PROPOSALS:
1. To vote to approve and consent to the purchase of substantially all of
the Partnership's properties by Piyal, LLC and to authorize the
General Partner to take all actions reasonably necessary to complete
such sale on the terms set forth in the Purchase Agreement referenced
in the Solicitation Statement.
/ / For / / Against / / Abstain
2. To vote to dissolve and liquidate the Partnership following the sale
of substantially all of the Partnership's properties and distribute
the proceeds therefrom to the Partners according to the terms of the
Partnership Agreement.
/ / For / / Against / / Abstain
(Please date and sign on the other side)
<PAGE>
This Proxy, when properly executed, will be voted in the manner directed
herein by the undersigned Limited Partner. If no direction is made, this
Proxy will be voted for the Proposals 1 and 2.
Dated:______________, 1998 ____________________________________
(Signature of Limited Partner)
____________________________________
(Print Name)
____________________________________
(Number of Partnership Interests for
which this Consent is given)
Please sign exactly as your name appears on your Subscription Agreement for
Limited Partnership Interests. When shares are held by joint tenants, both
should sign. When signing as attorney, executor, administrator, trustee or
guardian, please give full title as such. If the shares are owned by a
corporation, sign in the full corporate name by the President or other
authorized officer. If the shares are owned by a Partnership, sign in the
name of the Partnership name by an authorized person. Please mark, sign,
date and return the Proxy promptly.
