<PAGE>
SIGNATURE X LTD. LIMITED PARTNERSHIP
Signature Inn Florence, Kentucky
Signature Inn Sharonville, Ohio
SOLICITATION
AND
INFORMATION STATEMENT
REGARDING
PROPOSED SALE OF PARTNERSHIP ASSETS
AND OTHER MATTERS
THIS 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.
August ____, 1996
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TABLE OF CONTENTS
I. Introduction
II. Special Factors and Summary of Material Features of Proposed
Transactions
III. Description of the Partnership Business
IV. The Proposed Sale/Purchase Transaction Between the Partnership, as
Seller, and Signature Inns, Inc., as Buyer
V. Required Amendments to the Partnership Agreement
VI. Dissolution, Termination and Final Distributions
VII. Summary of Estimated Benefits from Sale of Property and Liquidation of
Partnership
VIII. Purpose and Procedure for Majority Vote by Limited Partners
IX. General Partner's Duties, Conflicts of Interest and Risk Factors
X. Federal Income Tax Consequences
XI. Selected Financial Data
XII. Book Value, Distributions and Income
XIII. Pro Forum Financial Information
XIV. Regulatory Requirements
XV. Appraisal Reports
XVI. Material Contracts
XVII. Marketability of Units of Limited Partnership Interests
XVIII. Form 10-KSB and 10-QSB Reports
XIX. Rule 13e-3 Transaction Statement
<PAGE>
EXHIBITS
A Form 10-KSB Annual Report for 1995
B Form 10-QSB Quarterly Report for Quarter Ended March 31, 1996
C Summary Report of Complete Appraisal of Signature Inn - Florence,
Kentucky
D Summary Report of Complete Appraisal of Signature Inn - Sharonville, Ohio
E Text of Consent Resolutions of Limited Partners
F Text of Amendments to Partnership Agreement
G Rule 13e-3 Transaction Statement
<PAGE>
SIGNATURE X LTD. LIMITED PARTNERSHIP
250 East 96th Street, Suite 450
Indianapolis, Indiana 46240
Telephone (317) 581-1111
SOLICITATION AND INFORMATION STATEMENT
August __, 1996
I. Introduction
This Solicitation and Information Statement (the "Statement") and the
enclosed form of Irrevocable Consent (the "Consent") are being mailed to
limited partners (the "Limited Partners") of Signature X Ltd. Limited
Partnership (the "Partnership") on or about August __, 1996, which date is
more than 20 days before the "Deadline" for the return of the Consents, as
established below. This Statement is being furnished in connection with the
General Partner's solicitation of Consents in connection with the General
Partner's proposals described below. A Limited Partner who executes and
returns a Consent may not revoke, modify or renounce the consent at any time
before February 28, 1997, which is the expiration date of the Consents.
The entire cost of soliciting Consents will be borne by the Partnership.
In addition to the use of the mails, Consents may be solicited by personal
interview, telephone and facsimile transmission by directors, officers and
employees of Signature Inns, Inc., the General Partner of the Partnership,
without extra compensation. The Partnership also will furnish, upon request,
a sufficient number of copies of this Statement to brokers, dealers, banks,
voting trustees, custodians and nominees, if any, for delivery to the
beneficiaries of units of limited partnership interest (the "Units"), and the
Partnership will undertake to reimburse such persons for their actual and
reasonable expenses incurred by such persons in forwarding consent material to
beneficial owners of the Units.
The General Partner has fixed the close of business on _____________,
August _____, 1996, as the record date for the determination of Unit
Holders entitled to receive this Statement and to give or withhold the Consent
which accompanies this Statement. Only Unit Holders of record at the close of
business on that date will be entitled to give or withhold a Consent. As of
the record date, there were 364 Units of Limited Partnership Interest which
were held by the Limited Partners of the Partnership. The Holders of a
"majority" must provide their written Consents to the proposed transactions in
order for them to be approved and effectuated. The General Partner of the
Partnership owns ten (10) Units of Limited Partnership Interest. For the
purpose of determining a "Majority Vote", the Units of Limited Partnership
held by the General Partner shall not be considered "outstanding" and shall
not be voted by the General Partner. Accordingly, the holders of 178 Units
must provide their written consent to the proposed transactions in order for
them to be approved. Approximately $1,298,000 will be applied against the
note payable to the General Partner net of discount.
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You are urged to read all sections of this Statement carefully. You are
also urged to discuss the General Partner's proposals, as well as the
information set forth in this Statement, with your tax consultant and with
your other professional advisors. Following your review of this Statement and
your discussions with your professional advisors, you are urged to sign the
enclosed Irrevocable Consent of Limited Partner (yellow consent form) and
return it to the General Partner in the enclosed, self-addressed, stamped
yellow envelope so that it is received no later than August _____, 1996
(the "Deadline"). In its discretion, the General Partner may extend the
Deadline.
The General Partner believes that the proposed transactions are fair to
the Limited Partners, and that they represent an excellent opportunity for the
Limited Partners of the Partnership to liquidate their investments in the
Partnership at an appropriate time and at an acceptable price, for the reasons
stated herein (particularly Section II hereof) and in the cover letter which
accompanies this Statement.
II. Special Factors and Summary of Material Features of Proposed Transactions
Summary of the Proposals. In accordance with Sections 14.04 and 20.01 of
the Signature X Ltd. Limited Partnership Amended Certificate and Agreement of
Limited Partnership, as amended, (the "Partnership Agreement"), the General
Partner of the Partnership is soliciting from the Limited Partners their
written Consents to certain proposals of the General Partner. Specifically,
the General Partner is proposing: (a) the sale by the Partnership to the
General Partner of an undivided 85% interest (equal to the 85% interest of the
Limited Partners) in the real estate, improvements, furnishings, furniture,
fixtures and other tangible and intangible personal property which comprise
the Partnership's two Hotel Properties, as described in Section IV of this
Statement (the "Sale"), and the distribution of 100% of the net proceeds of
the Sale to the Limited Partners; (b) the adoption of certain Amendments to
Articles VII and VIII of the Partnership Agreement, as described in Section V
of this Statement, which amendments are necessary to accomplish the proposed
transactions; and, (c) the dissolution, termination, liquidation and
winding-up of the Partnership, as described in Section VI of this Statement
and, in connection therewith, the distribution in kind of the remaining 15%
interest (equal to the 15% interest of the General Partner) in the Hotel
Properties to the General Partner (the "Proposals").
Purposes, Alternatives, Reasons and Effects of the Proposed Transactions.
The investment by the Limited Partners in the Partnership always has been and
will continue to be illiquid. Currently, there is no ready market for the
resale of Units of limited partnership interest, and it is not likely that a
market for the Units ever will develop. Further, there are a number of
restrictions on transferability of Units contained in the Partnership
Agreement. Accordingly, absent a liquidation of the Partnership through a
sale of all or substantially all of the Partnership's properties, Limited
Partners' investment in the Partnership will remain illiquid. Accordingly,
one of the primary purposes of the proposed transaction is to afford the
Limited Partners the opportunity to "cash out" their investments in the
Partnership through the sale by the Partnership of its assets to the General
Partner and the liquidation and winding-up of the Partnership.
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The General Partner believes that trends in the hotel industry and values
of hotel properties are approaching cyclical highs. Accordingly, it is the
General Partner's belief that this may be an opportune time for the Limited
Partners to liquidate their investments in the Partnership at an optimum
price. With hotel prices increasing, and with supply of hotel rooms more
closely in balance with demand for those rooms, performances of individual
properties such as the Hotel Properties operated by the Partnership have
improved, making them more appealing to prospective purchasers, including the
General Partner.
Moreover, although the proposed purchase of the Hotel Properties by the
General Partner cannot be considered arms-length, the purchase prices to be
paid by the General Partner for those properties are supported by written and
well-documented appraisals by a nationally recognized, qualified and
independent appraisal firm. Further, the engagement by the General Partner on
behalf of the Partnership of an independent, qualified legal counsel to
represent the Partnership in reviewing the Asset Purchase Agreement also is
designed to provide added assurance of the overall fairness of the proposed
transaction to the Partnership and its Limited Partners. Finally, the
fiduciary duty of the General Partner, as described in Section IX of this
Statement, requires the General Partner to exercise the utmost good faith and
fairness in its dealings with the Partnership.
The General Partner believes that the proposed transactions serve its own
best interests, as well. Currently, the hotels which comprise the Signature
Inn System are owned by a total of 21 legally distinct and separate entities,
each of which is bound to the General Partner through an elaborate plan of
partnership, management and franchise contracts and relationships. By
eliminating this complicated and cumbersome set-up, and by replacing it with a
simplified, unified company-owned hotel structure, the General Partner hopes
to:
(1) Combine all 24 existing Signature Inn hotels into a single
portfolio of hotels, the combined revenues of which will afford
much greater income stability and income predictability than
the current set-up of essentially "one-op" (i.e., single hotel)
operating entities;
(2) Achieve through this combination a greatly enhanced ability to
obtain pools of financing from hotel lenders for new hotels and
for refinancings of existing hotels through
cross-collateralized mortgages, rather than single hotel loans
on individual properties, as currently is the case;
(3) Be able to retain earnings from hotel operations to fund future
growth, rather than being required to pay out all cash
available for distribution to Partners under the current
Partnership Agreements; and,
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(4) Increase value for its shareholders by reducing substantially
the legal risks, liabilities and obligations which attend the
General Partner's exercise of its duties under the existing
partnership, management and franchise system.
Accordingly, the General Partner believes that the proposed transaction
will provide substantial benefits both to the affiliated limited partnerships
and their limited partners and to the General Partner and its shareholders.
Thus, the ultimate goal and affect of the proposed transactions between
the General Partner and its affiliated limited partnerships, including the
Partnership, is to: (a) allow all limited partners to liquidate their
investments in the affiliated partnerships based upon values of the various
hotel properties which equal or, in some cases, exceed, the fair market value
of those properties as established by an independent, qualified appraiser; (b)
place the fee simple ownership and complete operations of all of the existing
Signature Inn hotels within the General Partner, thereby eliminating,
entirely, the current system of affiliated partnerships, management contracts
and franchise relationships, with a view to enhancing the value and prospects
of the General Partner; and, (c) accomplishing the goals of (a) and (b) in a
manner which is least disruptive to the current business, operations, value
and prospects of the affiliated partnerships and the General Partner. The
specific federal tax consequences to the General Partner and the Partnership
resulting from the proposed transactions is described under Section X of this
Statement.
The primary detriment to the Limited Partners which will result from the
consummation of the proposed transactions, as pointed out in Section IX of
this Statement, is that the Limited Partners will no longer share in any
future income, distributions and credits or any other benefits to be generated
by the future operations of the Partnership's Hotel Properties. Also, the
Limited Partners will not share in any future increases, if any, in the values
of the Hotel Properties. However, the Partnership's ability to produce future
income, distributions and credits and other benefits to the Limited Partners
is subject to the same competitive factors and vagaries of the market place as
were described in the prospectus pursuant to which the Units were sold to the
Limited Partners. Moreover, there can no assurance that the values of hotel
properties (including the Partnership's Hotel Properties) will not decrease
rather than continue to rise.
Source and Amounts of Funds or Other Consideration. The General Partner
intends to fund its proposed acquisition of the hotel properties from its
other affiliated limited partnership entities through an equity
offering/placement and through the assumption by the General Partner of the
current first mortgage indebtedness on those properties. The total equity
funds required to acquire the Hotel Properties owned by the Partnership will
be approximately $420,000, and approximately $4,450,000 of mortgage
indebtedness will be assumed by the General Partner. The balance of the
purchase price represents the amount of the value of the General Partner's
interest in the Partnership and debt forgiveness by the General Partner. The
General Partner's ability to obtain both equity and debt financing of the
acquisitions are conditions precedent to the General Partner's obligation to
acquire the properties. As a result, if the General Partner is unable to
obtain equity financing and debt assumptions sufficient to allow it to acquire
the hotel properties, the proposals will be withdrawn and the proposed
acquisitions terminated.
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The Partnership will incur certain expenses in connection with the
proposed transactions. An itemized list of those expenses is as follows:
(a) Appraisal Fees $10,000.00
(b) Legal Fees 1,000.00
(c) Proxy Statement and Schedule 13E-3 Filing Fees 1,332.00
(d) Printing, Mailing and Other Solicitation Expenses 3,000.00
Total: $15,332.00
In addition to the foregoing direct costs and expenses to the Partnership
resulting from the proposed transactions, the Partnership will incur the
adjustments, prorations and charges described under Sections V and VII of this
Statement in connection with the closing of the Sale and the winding-up and
liquidation of the Partnership.
Fairness of the Transaction. The General Partner reasonably believes
that the proposed transactions are fair to the Limited Partners of the
Partnership. The Board of Directors of the General Partner voted unanimously
in favor of approving the proposed transactions from the standpoint both of
the General Partner and the Partnership.
The material factors upon which the General Partner's belief is based and
the weight, if any, assigned to each factor by the General Partner are as
follows:
(1) The appraisals of the Partnership's Hotel Properties by an
independent, qualified appraiser, which analyzed all
appropriate data and which estimated the fair market value of
the Hotel Properties based upon the Income Capitalization
Approach and the Sales Comparison Approach, are intended by the
General Partner to constitute the primary assurance to the
Limited Partners that the prices proposed by the General
Partner to be paid for the Partnership's HotelProperties
represent the true, fair market values of those properties.
See Section XV for a complete discussion of the USRC appraisal
reports, summaries of which are also attached to this Statement
as Exhibits C and D.
(2) The planned engagement by the General Partner on behalf of the
Partnership of an independent, qualified attorney to represent
the Partnership in connection with the execution of the Asset
Purchase Agreement by reviewing the commercial reasonableness
of the terms (other than price) of that agreement is also
intended by the General Partner to provide additional assurance
of the fairness of the transactions to the Partnership and its
Limited Partners.
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(3) According to reliable industry sources, hotel occupancy rates,
average daily room rates, revenue per available room, gross
operating profit and net income levels, as well as the market
value of hotel properties, have been increasing substantially
during the past several years. As a result, the General
Partner believes that the economic and market conditions in the
hotel industry favor the sale of the Partnership's properties
at this time.
The Purchase Price and Appraisal. The purchase price to be paid by the
General Partner for the 85% undivided fractional interest in the Hotel
Properties will be $6,035,000, which equals 85% of the $7,100,000, appraised
fair market value of the Hotel Properties, as supported by appraisals as of
February 28 and 29, 1996. The appraisal was performed by USRC Realty
Consultants, Inc. of Columbus, Ohio, an independent, experienced and
qualified real estate and hotel appraiser. A description of the experience,
qualifications and independence of the appraiser and a Summary of the Complete
Appraisal Reports, as well as other information, is set forth in Section XV
and in Exhibits C and D of this Statement. Upon written request, Limited
Partners may inspect the Complete Appraisal Report at the corporate offices of
the General Partner at 250 East 96th Street, Suite 450, Indianapolis, IN
46240.
Limited Partner Consents. Under Article XIV of the Partnership
Agreement, the Limited Partners are granted the exclusive right by "Majority
Vote" and without concurrence of the General Partner to, among other things,
approve or disapprove the Sale of the Partnership's Hotel Properties. Under
Section 1.25 of the Partnership Agreement, the term "Majority Vote" is defined
as the "affirmative vote or written consent of Limited Partners then owning of
record more than 50% of the outstanding Units of the Partnership."
Accordingly, whether or not the General Partner favors or opposes a proposed
sale of the Partnership's Hotel Properties is not determinative, since the
General Partner's concurrence is not required. Units of limited partnership
interest held by the General Partner (if any) cannot be voted by the General
Partner for or against the proposed sale.
The Partnership currently has 364 Units of limited partnership interest,
which are held by its Limited Partners, including 10 which are held by the
General Partner. Because the 10 Units held by the General Partner will not be
considered "outstanding" for the purpose of determining a "Majority Vote", the
holders of 178 Units must provide their written consent to the proposed
transactions in order for those transactions to be approved. The General
Partner shall not vote its 10 Units of Limited Partnership Interest.
<PAGE>
Amendments to Partnership Agreement. In connection with the approval of
the Sale of the Partnership's Hotel Properties to the General Partner, it will
be necessary to amend certain subparagraphs of Articles VII and VIII of the
Partnership Agreement in order to allow the allocation of 100% of the income
and the distribution of 100% of the cash proceeds of the Sale to the Limited
Partners, as a group, and the distribution in kind of the remaining 15%
undivided interest in the Hotel Properties to the General Partner.
Accordingly, at the conclusion of the transactions, the Limited Partners will
receive 100% of the cash proceeds of the Sale, and the General Partner will
receive 100% of the Hotel Properties. The Sale is being structured in this
two-step manner in order to provide certain tax advantages to the General
Partner, but without prejudice to the tax considerations of the Limited
Partners. As with the Sale transaction, the written consent of the holders of
a majority of Units is necessary to approve the amendments to the Partnership
Agreement. Copies of the proposed amendments to the Partnership Agreement
and copies of the consent resolutions adopting those amendments are attached
as Exhibits E and F to this Statement.
Dissolution of Partnership. Assuming that the conditions to closing set
forth in the Asset Purchase Agreement are satisfied and that the Sale
transaction is completed, the Partnership will be dissolved in accordance with
Section 18.01(e) of the Partnership Agreement and liquidated in accordance
with Article XIX of the Partnership Agreement. However, the General Partner,
in its discretion, may elect not to close the Sale transaction in the event
that: (a) the General Partner is unable to obtain required financing with
which to complete the Sale; (b) the General Partner is unable to obtain the
consents of the mortgage lenders to the assumption by the General Partner of
the mortgage indebtedness on the Partnership's Hotel Properties; (c) the
holders of a majority of the Units of limited partnership interest in the
Partnership fail to approve the transactions by timely supplying their written
Consents; or, (d) the General Partner is unable to complete any or all of its
other proposed transactions with other related, affiliated partnerships. In
any such event, the Asset Purchase Agreements will be canceled, and the
Partnership will continue to own and operate the Hotel Properties as it has
done in the past.
General Partner Duties and Conflicts. The duties of the General Partner,
as well as certain conflicts of interest between the General Partner and the
Partnership, in connection with the Proposals as well as certain risk factors,
are described in Section IX of this Statement.
Cash Payments and Tax Consequences. You, as a Limited Partner of the
Partnership, already have received your usual check for your share of the Cash
Available for Distribution generated from the Partnership's operations for the
year ending December 31, 1995. In addition, if the Proposals are approved and
the transactions closed and consummated, you will receive your allocable share
of the Cash Available for Distribution from January 1, 1996, through the date
of closing, as well as your share of various cash reserves and escrow accounts
which will be liquidated in connection with the dissolution of the
Partnership. The overall economic benefits of the proposed transactions to
the General and Limited Partners are described later in Section VII under the
heading "Summary of Estimated Benefits from Sale of Property and Liquidation
of Partnership". Also, the federal tax consequences of the proposed
transactions are generally described later in Section X. Finally, certain
historical financial information is set forth in the Forms 10-KSB and 10-QSB
reports which are attached to this Statement as Exhibits A and B.
<PAGE>
III. Description of Partnership Business
The Partnership was originally organized pursuant to a Certificate and
Agreement of Limited Partnership dated September 19, 1986, which was filed for
record with the Recorder's Office of Marion County, Indiana, (the "Recorder")
on September 19, 1986, in accordance with the Indiana Uniform Limited
Partnership Act ("ULPA") (I.C. Section 23-4-2-1 et seq.). On April 15, 1988, an
Amended Certificate and Agreement of Limited Partnership was executed by and
between the General Partner and the Limited Partners, which was filed for
record with the Recorder on April 15, 1988. On June 15, 1988, a second
Amended Certificate and Agreement of Limited Partnership was executed by and
between the General Partner and the Limited Partners, which was filed for
record with the Recorder on June 15, 1988. On July 1, 1988, the Partnership
filed a Certificate of Limited Partnership under the Revised Uniform Limited
Partnership Act ("INRULPA"), thereby electing to be governed under the
provisions of INRULPA. As a result, effective on July 1, 1988, the
Partnership became a partnership governed by INRULPA rather than by the ULPA.
Subsequent to its organization, the Partnership commenced a Securities
and Exchange Commission ("SEC") registered, public offering of Units of
limited partnership interest (the "Units") at $10,000 per Unit, with a minimum
subscription of one-half Unit pursuant to a Registration Statement which
originally became effective on May 29, 1987. The offering was concluded in
October, 1988, and a total of 364 Units, aggregating $3,640,000, was sold in
the offering to 386 purchasers who became the limited partners of the
Partnership. Signature Inns, Inc., in its capacity as General Partner,
contributed $404,445 as its capital contribution to the Partnership. In
addition, to its capital contribution in its capacity as a General Partner,
Signature Inns, Inc. acquired 10 Units in the offering at the same price and
on the same terms as paid by all other investors in the offering.
The business of the Partnership currently consists exclusively of the
ownership and operation of two Signature Inn hotels located in Florence,
Kentucky, and Sharonville, Ohio (on the north side of the Cincinnati
metropolitan area) (the "Hotel Properties"). A listing of these hotels, the
number of rooms, location and opening dates is as follows:
<TABLE>
<CAPTION>
Location of Hotel Number of Rooms Opening Date
_________________ _______________ ___________
<S> <C> <C>
I-75/71 & Turfway Road 125 07/14/87
Florence, Kentucky
I-75 & Sharon Road 130 09/08/87
Sharonville, Ohio
</TABLE>
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Each of the foregoing properties is operated as a franchisee of the
General Partner. The Partnership has entered into a standard Signature Inn
Individual Hotel License Agreement (the "Franchise Agreement") with the
General Partner with respect to each of the Hotel Properties. By the terms of
those Franchise Agreements, the Partnership pays to the General Partner
monthly franchise fees (i.e., royalties) equal to 4% of the gross receipts of
each of the Partnership's two hotels, and, in addition, contributes an
additional 3.5% of gross receipts to advertising and reservation funds
administered by the General Partner to fund cooperative advertising programs
and a reservation system. The terms of each of the Franchise Agreements is 10
years, with each expiring on December, 2003. The Partnership has an option to
renew each of those agreements for an additional term of 5 years. Under the
franchise agreements, the Partnership is authorized to use the name "Signature
Inn," as well as other trademarks and logos associated with the Signature
system, and the General Partner provides a multitude of services in relation
to that system.
Each of the Partnership's hotels is managed by the General Partner
pursuant to a Management Agreement entered into between the Partnership and
the General Partner. Under the Management Agreements, the General Partner
establishes policies for the Partnership's employees having direct
responsibility for the hotel's operation. In addition, the General Partner
establishes room rates, directs the promotional activity of the Partnership's
employees, supervises the purchase and replacement of equipment and supplies,
supervises maintenance activities and selects vendors, suppliers and
independent contractors. In addition, the General Partner performs all
bookkeeping and administrative duties in connection with each of the Hotel
Properties and administers payments and reports to the Limited Partners. The
Partnership is required to pay to the General Partner, as compensation for its
management services, an amount equal to 5% of the gross receipts per month for
each of the Hotel Properties. This compensation is in addition to the cost of
compensating the Partnership's own employees and the costs of goods and
services acquired by the Partnership from independent contractors. However,
the management fee covers all of the General Partner's overhead for which
there is no separate charge. The terms of the management agreements both
expire on July, 1999.
A mortgage loan of $2,730,000 at December 31, 1995, relating to
industrial revenue bonds issued by the City of Florence, Kentucky, is secured
by the Florence hotel and includes various principal amounts which bear
interest at an effective rate of 9.75% and mature serially to 2016. The bond
indenture requires the maintenance of a debt service fund of $225,000 before
distributions can be made to the partners. Withdrawals from the fund are
permitted for working capital and other operating needs.
A mortgage loan of $2,504,869 at December 31, 1995, is secured by the
Sharonville hotel and is payable in monthly installments of $23,503, including
interest at 10.0%. The interest rate and monthly installments are adjustable
at three-year intervals to 3.75% above the three-year U.S. Treasury Constant
Maturity rate, based on maturity in 2018. The interest rate is not to exceed
15% through maturity in 1998, or be less than 10%.
The Partnership's note payable to the General Partner in the amount of
$2,377,361 is non-interest bearing and repayments are dependent on future
annual cash flows of the Partnership. The note matures in 2004 and requires
annual principal payments equal to 50% of defined available cash flow but not
in excess of $237,736. In connection with the Sale, a total of $1,297,833
will be paid to the General Partner in full settlement and satisfaction of the
Note, and the $1,279,228 balance will be forgiven.
<PAGE>
Additional information concerning the Partnership's business is set forth
under Part I, Item 1, entitled "Business of Signature X Ltd. Limited
Partnership," of the Form 10-KSB Annual Report, which is attached to this
statement as Exhibit A.
IV. The Proposed Sale/Purchase Transaction Between
the Partnership, as Seller, and Signature Inns, Inc., as Buyer
Introduction. The General Partner intends to acquire 100% of the
Partnership's Hotel Properties, which, as of February 29, 1996, had a combined
appraised value of $7,100,000. However, the acquisition will be accomplished
in two parts. Part one will involve a sale of a portion of the Hotel
Properties to the General Partner, and the second part will involve a
liquidating distribution of the remaining portion of the Hotel Properties to
the General Partner.
First, the Partnership will sell and the General Partner will purchase an
undivided 85% interest (the "Initial Interest") in all of the real estate,
improvements, fixtures, furnishings, furniture, equipment and all other
tangible and intangible personal property which comprise the Partnership's
Hotel Properties (the "Sale"). For the Initial Interest, the General Partner
will pay to the Partnership a purchase price of $6,035,000 (i.e. 85% of the
$7,100,000 appraised value), of which: (1) approximately $65,000 will be
deducted to defray 85% of the anticipated property tax prorations and closing
costs; (2) approximately $420,000 will be paid in cash at the time of
closing;(3) approximately $4,450,000 will be paid through the assumption by
the General Partner of a portion of the mortgage indebtedness owed by the
Partnership as of the date of closing; and, (4) approximately $1,100,000 will
be applied against the note payable to the General Partner.
The entire net cash proceeds of the Sale will be distributed to the
Limited Partners, as a group. The General Partner will receive a portion of
those proceeds for the 10 Units which it holds. As the second part of the
transaction, the General Partner will receive a liquidating distribution of
the remaining undivided 15% interest (the "Remaining Interest") in the Hotel
Properties at the time of the dissolution of the Partnership (the
"Distribution In-kind").
The net result of the Sale and the Distribution In-kind will be to
allocate to the Limited Partners, as a group, 100% of the net cash proceeds of
the Sale (i.e. 85% of the value of the Hotel Properties) for their 85%
partnership interest in the Partnership and to distribute in-kind to the
General Partner the 15% Remaining Interest in the Hotel Properties in
liquidation of the General Partner's 15% interest in the Partnership.
The transaction is being structured in this manner in order to provide
certain tax advantages to the General Partner. The Limited Partners will not
be prejudiced by this two part structure, however, since they will receive the
same share of cash and the same tax consequences as they would have received
had the entire transaction been structured as an outright purchase by the
General Partner of 100% of the Partnership's Hotel Properties.
<PAGE>
Assuming that Limited Partners holding the required number of Units
consent to these transactions, the Partnership, as seller, and the General
Partner, as buyer, will immediately enter into a written Asset Purchase
Agreement (the "Purchase Agreement"). The Purchase Agreement shall constitute
a legally binding obligation of both the Partnership to sell and the General
Partner to purchase the Initial Interest in the Hotel Properties. However,
the General Partner's obligations under the Purchase Agreement shall be
conditioned upon the satisfaction of several conditions precedent to closing,
which are described below. Each of these conditions must be satisfied or, in
the discretion of the General Partner, waived on or before February 28, 1997.
If those conditions are not satisfied or waived on or before that date,
the Purchase Agreement will be terminated and canceled, and the proposed
transactions will not occur.
This Section IV to the Statement is devoted to an explanation of some of
the terms of the Purchase Agreement. The description includes a brief
discussion of the general terms of the Purchase Agreement, the adjustments,
prorations and credits which will be made in connection with the Sale, the
conditions precedent to closing, the closing procedures and the distribution
of net sale proceeds to the Limited Partners. However, this is a summary only
of some of the terms of the Purchase Agreement and, accordingly, does not
describe all of the terms of that Agreement. Upon request, Limited Partners
may inspect the actual form of the Purchase Agreement which will be executed
by and between the Partnership and the General Partner following receipt of
the Limited Partners' written consent. Inspection may be made at the
corporate offices of the General Partner at 250 East 96th Street, Suite 450,
Indianapolis, Indiana 46240.
General Terms of the Purchase Agreement
Description of Property to be Sold. The Initial Interest to be purchased
by the General Partner will be equal to an undivided 85% interest in all of
the real and personal property comprising the Hotel Properties, consisting of:
(1) real estate; (2) all improvements constructed on the real estate; (3) all
furniture, furnishings, fixtures, equipment and other tangible personal
property owned by the Partnership and located on or used in connection with
the operation or maintenance of the Hotel Properties; (4) all of the
Partnership's interests in all equipment leases and contracts relating to the
ownership, maintenance, use or operation of the Hotel Properties; (5) all of
the Partnership's interests in room rental and other lease agreements (if
any); and (6) all of the Partnership's rights, title and interest in and to
all intangible personal property used in connection with the Hotel Properties,
including all books and records, plans and specifications, drawings, reports,
rights, guarantees, licenses, permits and warranties.
<PAGE>
Purchase Price and Payment. For the Initial Interest, the General
Partner will pay to the Partnership a Purchase Price of $6,035,000 (i.e. 85%
of the $7,100,000 appraised value). Of that amount: approximately $65,000
will be deducted to defray 85% of tax prorations and closing costs;
approximately $420,000 will be paid in cash at the time of closing,
approximately $4,450,000 will be paid through the assumption by the General
Partner of a portion of certain mortgage indebtedness owed by the Partnership
to its mortgage lenders as of the date of closing, and approximately
$1,100,000 will be applied against the Note payable to the General Partner.
The Purchase Price will be subject to certain adjustments, prorations and
credits, as described below. A $2,500 earnest money deposit (the "Earnest
Money") will be required to be paid by the General Partner at the time of the
signing of the Purchase Agreement. In the event the Purchase Agreement
expires or is terminated by the General Partner, the Earnest Money will be
paid to the Partnership in consideration for its agreement to allow the
General Partner until February 28, 1997, in which to satisfy the conditions
precedent to Closing.
Date of Closing. The Closing of the Sale shall take place on or before
February 28, 1997. It can be expected that Closing of the Sale, the
distributions of cash and the Remainder Interest and dissolution of the
Partnership will occur simultaneously.
Real Estate Commissions. Payment of commissions to a real estate broker
in the range of from 3% to 5% of the purchase price for a property is normal
and customary in commercial real estate transactions. Because the General
Partner is the buyer, however, no real estate commission, finders fee or
similar compensation will be paid by the Partnership or the General Partner to
any person in connection with the Sale. Therefore, the net proceeds to be
realized by the Partnership will be greater than they would have been in a
brokered sale.
Title Insurance, Survey and Environmental Matters. The Partnership will
be required to furnish to the General Partner, at the Partnership's expense, a
commitment (the "Title Commitment") to issue an owner's policy of title
insurance insuring fee simple title to the Hotel Properties in the name of the
General Partner upon delivery of a limited warranty deed from the Partnership
to the General Partner. The Title Commitment shall set forth the state of
title to the real estate together with all exceptions or conditions to such
title, including, but not limited to, all easements, restrictions,
rights-of-way, covenants, reservations and all other encumbrances affecting
the real estate which would appear in an owner's policy of title insurance
issued pursuant to the Title Commitment. The Title Commitment will contain
the commitment of the title Company to insure such title in the General
Partner for the full amount of the appraised value of the Hotel Properties,
and will contain the further agreement of the title company to insure access
from the real estate to a dedicated public right-of-way which is contiguous to
the boundary of the real estate, a 3.0 zoning endorsement certifying that the
real estate is zoned under the zoning ordinance of the zoning jurisdiction in
which the real estate is located to permit the use of the real property as a
hotel.
The Partnership shall also be required to furnish the General Partner, at
the Partnership's expense, a boundary survey of the real estate prepared by a
surveyor or engineer who is licensed by the appropriate governmental
authorities of the state in which the real estate is located and who is
acceptable to the General Partner. The Survey shall be prepared in accordance
with Minimum Standard Detail Requirements for Land Title Surveys jointly
established and adopted by ALTA and ACSM in 1992, and shall certify that the
real estate is not located within a Special Flood Hazard Area. The Survey
shall be certified to the Partnership, the General Partner, and such other
parties as the General Partner may request.
<PAGE>
It is customary in real estate transactions such as the Sale for an
environmental survey to be provided to the purchaser. Because the General
Partner was involved in the original purchase of the real estate and the
construction of the Hotel and has managed the Hotel Properties continuously
since then, no environmental survey is being required by the General Partner
in connection with the Sale. The waiver by the General Partner of an
environmental survey is a benefit to the Partnership and the Limited Partners.
Covenants, Representations and Warranties. The Purchase Agreement will
require the General Partner and the Partnership, at all times between the
signing of the Purchase Agreement and Closing: (1) not to enter into any new
undertakings or agreements relating to the management, financing or
maintenance of the Hotel Properties, other than in the ordinary course of
business; (2) to continue to operate and maintain the Hotel Properties in the
same manner that the Partnership has operated and maintained the Hotel
Properties during its ownership, and to continue complying with all provisions
of the service contracts and other agreements to which they are parties, and
to continue compliance with all applicable laws, ordinances, rules and
regulations to which the Partnership or the Hotel Properties is subject; (3)
to maintain all insurance on the Hotel Properties; (4) not to remove any
personal property from the Hotel Properties unless such personal property is
replaced with property of like kind and like value; (5) not to enter into any
agreement granting to any other party the right to purchase the Hotel
Properties or to alienate, lien, encumber or otherwise transfer any portion of
the Hotel Properties or any interest therein.
The Partnership and the General Partner will make the following
representations and warranties to each other in the Purchase Agreement: (1)
that they are duly organized and validly existing under the laws of Indiana;
(2) that they have the power and authority to enter into the Purchase
Agreement and that all necessary action has been taken to authorize their
respective executions and performance of the Purchase Agreement and the
consummation of the transactions contemplated therein; (3) that the
Partnership owns good, marketable and indefeasible fee simple title to the
Hotel Properties free and clear of all liens, encumbrances, security interests
and other defects in title other than permitted exceptions; and (4) that the
Partnership owns good and marketable title to the personal property free and
clear of all liens, encumbrances security interests and other defects in title
other than permitted exceptions.
The General Partner will not assume any indebtedness, obligations,
commitments or liabilities of the Partnership relating to the Hotel Properties
imposed under any law relating to the environment, health or safety, and
arising out of any act, event or condition occurring or existing prior to the
Closing. Although customary in transactions such as the Sale, the Partnership
will not be required to make any representations or warranties regarding
environmental matters. The waiver by the General Partner of any requirement
that the Partnership make environmental warranties and representations is a
benefit to the Partnership.
Agreement Regarding Employees. The Partnership will take all action as
is necessary to terminate the employment of all Partnership employees as of
the Closing Date. The General Partner will take all action as is necessary to
employ all Partnership employees as of the Closing Date in the positions and
with the compensation and benefits equivalent to those employees' employment
with the Partnership. The General Manager and Assistant General Manager
currently already are employees of the General Partner.
<PAGE>
Closing Costs. The Partnership and the General Partner each shall be
responsible for their respective costs and expenses (including attorneys fees)
incurred in connection with the execution of the Purchase Agreement and the
closing of the transactions contemplated therein.
Default and Remedies. If the General Partner fails to perform any of its
obligations under the Purchase Agreement, or fails to keep or observe any
other covenant, agreement or obligation to be kept or observed by the General
Partner under the Purchase Agreement and does not cure such failure prior to
Closing, then the Partnership shall have the right to terminate the Purchase
Agreement in which event the Earnest Money shall be paid to the Partnership
and the Partnership may pursue any and all other rights available at law or in
equity. If the Partnership fails to perform any of its obligations under the
Purchase Agreement, or the Partnership fails to keep or perform any other
covenant, agreement or obligation to be kept or performed by the Partnership
under the Purchase Agreement and does not cure such failure prior to the
Closing then the General Partner may terminate the Purchase Agreement or the
General Partner may enforce specific performance of the Purchase Agreement.
If the Purchase Agreement is terminated for cause by the General Partner, the
Earnest Money shall be immediately returned to the General Partner.
Separate Legal Representation. Upon approval of the Proposals by the
Limited Partners of the Partnership, the General Partner shall select and
engage on behalf of the Partnership independent legal counsel to represent the
Partnership with respect to the terms (other than price) of the Purchase
Agreements and related documents and the consummation of the transactions
contemplated therein.
Conditions Precedent to Closing. The obligation of the General Partner
to consummate the Sale will be, at the General Partner's option, subject to
the occurrence of the following events prior to February 28, 1997:
Financing Condition. The General Partner shall have obtained
financing in amounts and subject to terms satisfactory to the General
Partner in its sole discretion, including, but not limited to, the
satisfactory completion of a public offering of the General Partner's
common stock.
Lender and Other Consents. The Partnership shall have received
consents of all third parties necessary to consummate the Proposals and
the transaction, including, but not limited to consents from mortgage
lenders.
Limited Partnership Approval by Majority Vote. The Sale shall have
received the consent of the holders of a majority of the Units of limited
partnership interests in the Partnership in accordance with the
Partnership Agreement and applicable law.
<PAGE>
Closings of Other Transactions With Related, Affiliated
Partnerships. The General Partner shall have obtained the approval of
the limited partners holding a majority of units of limited partnership
interests of Signature I, II, III, IV, V, VI, VII, VIII, IX, XI, XII,
XIV, XVII, XXI, Northwestern, Southport, Elkhart, Normal/Peoria and
Knoxville, Ltd. Limited Partnerships to the sale of the respective hotel
properties owned by those partnerships to the General Partner in
accordance with asset purchase agreements similar to the Purchase
Agreements, and the General Partner shall have satisfied or waived all
conditions to closing of each of those asset purchase agreements, subject
to the General Partner's right, in its discretion, to waive this
condition with respect to the acquisition of one or more of the other
affiliated partnership properties.
Adjustments, Prorations and Credits. Set forth below are certain items
to be adjusted, prorated or credited between the Partnership and the General
Partner at Closing. All credits to the General Partner from the Closing
adjustments and prorations described herein shall reduce the cash payable at
Closing, and all credits to the Partnership from the Closing adjustments and
prorations described herein shall increase the cash payable at Closing.
For purposes of this discussion, it is assumed that the Sale and the
Distribution In-kind will occur on the same day.
Taxes and Assessments. All real estate and personal property taxes
assessed against the Hotel Properties for years prior to the year of the
Closing and all penalties and interest thereon shall be paid by the
Partnership. All real estate and personal property taxes assessed against the
Hotel Properties for the year of the Closing shall be prorated between the
Partnership and the General Partner as of the Closing Date on the basis of the
exact number of days each will own the Hotel Properties.
Utilities. Water, electricity, sewer , gas, cable television, telephone
and other utility charges shall be prorated based, to the extent practicable,
on final meter readings and final invoices, and on the basis of the actual
number of days of the month which shall have elapsed as of the Closing Date.
The Partnership shall be responsible for all such charges for the periods
prior to the Closing Date. The General Partnership shall be responsible for
such charges for the period on and after the Closing Date.
Accounts Payable. Accounts payable accrued prior to the Closing Date
shall be the responsibility of the Partnership. The General Partner shall be
responsible for all accounts payable accruing on and after the Closing Date.
Guest Advance Deposits. The liability for all unearned guest advance
deposits (if any) on the books of the Partnership on the Closing Date shall be
assumed by the General Partner and shall be credited against payment of the
Purchase Price.
<PAGE>
Accrued Payroll and Employee Expenses. To the extent practicable, all
accrued but unpaid employee salaries and benefits and all accrued but unpaid
payroll, F.I.C.A., employee benefit and other employee-related taxes
("Employees Costs") due and payable for the period prior to the Closing Date
shall be paid by the Partnership in full at or prior to Closing without
proration or contribution from the General Partner. The General Partner shall
assume and receive credit against payment of the Purchase Price for all
accrued Employees Costs prior to Closing which are not paid on or before
Closing. The General Partner shall be responsible for all Employee Costs
accruing on and after Closing.
Sales/Lodging Taxes. All sales and/or lodging taxes applicable to guest
room rental charges or public room rental charges accruing prior to the
Closing Date shall be the responsibility of the Partnership. The General
Partner shall be responsible for such taxes accruing on or after the Closing
Date.
Prepaid Insurance. Any amounts of prepaid insurance on the books of the
Partnership as of the Closing Date representing payments for insurance
coverage for any period subsequent to the Closing Date shall be credited to
the Partnership and paid at Closing.
Accounts Receivable. All accounts receivable accruing prior to the
Closing Date shall remain the sole property of the Partnership, and the
General Partner shall have no rights, title or interest in such accounts
receivable.
Closing Procedures. If the Proposals are approved, Closing of the Sale
shall take place as follows:
Closing shall occur on a date specified by the General Partner not
earlier than five (5)days following satisfaction of all conditions to
closing in the Purchase Agreements.
The Closing shall occur in the offices of Johnson Smith Pence
Densborn Wright & Heath, Indianapolis, Indiana, or at such other location
as may be selected by the General Partner.
Distributions to Limited Partners of Net Sale Proceeds: Procedures and
Timetables. On or within five business days after the Closing Date, the
Partnership shall make cash distributions to the Limited Partners in an amount
equal to 100% of the net proceeds of Sale which represents 85% of the
appraised value of the Hotel Properties. See Section VI below for a
description of distributions to Limited Partners in connection with the
dissolution and termination of the Partnership.
V. Required Amendments to the Partnership Agreement
In order to facilitate the sale of the Hotel Property, the following
revisions, deletions and additions to the Partnership Agreement have been
determined to be necessary. The complete text of the revisions, deletions and
additions appear in the Second Amendment to Second Amended Certificate and
Agreement of Limited Partnership of Signature X Ltd. Limited Partnership (the
"Amendment") which is attached to this Statement as Exhibit F and incorporated
herein and by this reference made a part hereof:
<PAGE>
Amendment to Section 7.06 of the Partnership Agreement. Section 7.06
contains provisions concerning the allocation of gain or loss on the sale of
partnership property. The Amendment adds new language which provides that in
the case of a sale of an undivided fractional interest in the partnership
property by the Partnership to the General Partner which undivided fractional
interest is equal to the aggregate units of limited partnership interests in
the Partnership owned by all Limited Partners (as a group), the gain or loss
on the sale of such undivided fractional interest shall be allocated entirely
to the Limited Partners (as a group), provided that: (a) the Limited Partners
(as a group) receive all distributable cash sale proceeds resulting from that
sale; and, (b) the General Partner receives the distribution of the remaining
undivided fractional interest in the partnership property as a distribution in
kind in connection with the dissolution and termination of the Partnership in
accordance with Article XVIII of the Partnership Agreement.
Amendments to Section 8.02 of the Partnership Agreement. Section 8.02
contains provisions concerning the distribution of net proceeds of sales,
financings and refinancings of Partnership properties. The Amendment adds new
language which provides that in the event of any sale of an undivided
fractional interest in the Partnership properties to the General Partner which
undivided fractional interest is equal to the aggregate units of limited
partnership interests in the Partnership owned by all Limited Partners (as a
group), all net proceeds of such sale shall be allocated and distributed to
the Limited Partners (as a group), and the General Partner shall not receive
any allocation or distribution of any such cash. Rather, the General Partner
shall receive instead a distribution in-kind of the remaining undivided
fractional interest in the Partnership's property represented by the General
Partner's interest in the Partnership in connection with the dissolution and
termination of the Partnership. The purpose of these revisions is to ensure
that, in the event of a sale of an undivided fractional interest in the
Partnership property to the General Partner, the Limited Partners will receive
100% of all distributable cash from the Net Sale Proceeds, and the General
Partner will receive the remaining undivided fractional interest in the
Partnership property.
VI. Dissolution, Termination and Final Distributions
Dissolution/Termination of Partnership. Pursuant to Section 18.01(e) of
the Partnership Agreement and the consents of the holders of a majority of
Units, the Partnership will be dissolved and terminated upon the sale of the
Hotel Properties. Following Closing, the General Partner will cause to be
filed with the Secretary of State of Indiana a Certificate of Cancellation of
Indiana Limited Partnership to effectuate such dissolution. This Certificate
will effectively terminate the legal existence of the Partnership.
<PAGE>
Under Section 19.01 of the Partnership Agreement, upon the dissolution
and final termination of the Partnership, the General Partner must take
account of the Partnership's assets and liabilities and must conduct the
liquidation of such assets as promptly as is consistent with obtaining the
fair market thereof. Any proceeds received from the liquidation of the assets
are required to be applied in the following order:
(1) To the payment of all debts and liabilities of the Partnership
to creditors in the order of priority provided by law and to the expenses
of liquidation;
(2) To the establishment of any reserves deemed necessary for any
contingent liabilities or obligations of the Partnership;
(3) To the repayment of any loans or advances that may have been
made by any Partner to the Partnership;
(4) To the Limited Partners in an amount equal to the excess, if
any, of their capital contributions over prior distributions to them from
all sources; and
(5) Eighty-five percent (85%) of any remaining balance shall be
allocated to the Limited Partners based on their percentage interest in
the Partnership and fifteen percent (15%) to the General Partner, except
that the General Partner shall not receive any part of any balance of
cash remaining from the Net Sale Proceeds.
Pursuant to Section 19.03 of the Partnership Agreement, each Limited
Partner will be furnished with a Liquidation Statement describing the
disposition of the assets and liabilities of the Partnership and reporting any
other information with respect to the liquidation of the Partnership.
Finally, Limited Partners shall be provided with a notice that the Partnership
has been dissolved and that a Certificate of Cancellation of the Partnership
has been filed in accordance with applicable law.
Termination of Contracts. The Partnership's obligations under the
Management Agreements between the General Partner and the Partnership, and the
Partnership's obligations under the Franchise Agreements between the
Partnership and the General Partner shall be canceled and terminated without
cost or penalty to the Partnership upon the dissolution of the Partnership.
Thus, the Partnership will have no further duties, obligations or
responsibilities with respect to either the Management Agreements or the
Franchise Agreements.
<PAGE>
Final Cash Distributions to Limited and General Partners. As described
above, the Limited Partners of the Partnership will receive 100% of the net
cash proceeds of the Sale on or within five business days of Closing. Upon
the final wind-up of the Partnership, the Limited Partners will receive their
allocable share of 85% of all other remaining cash, including (a) accounts
receivable collections, (b) the net balance at Closing of the FF&E cash
reserve, (c) the net cash balance at Closing of the Tax Escrow Account, (d)
all cash generated from the operations of the Partnership up to the date of
Closing, and (e) interest on such amounts, which amounts will be reduced by
any and all liabilities of the Partnership which are not assumed by the
General Partner in connection with the Sale, and which were not credited
against the General Partner's payment of the Purchase Price. The General
Partner will receive the remaining 15% of those items of cash, as reduced.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
VII. Summary of Estimated Benefits from Sale
of Properties and Liquidation of Partnership
The following table includes pro forma financial information as if the
Sale and the other proposed transactions occurred on December 31, 1995 and
illustrates the disposition of proceeds of Sale, including payment of the
Partnership's liabilities and the completion of distributions to the Limited
Partners.
<TABLE>
<CAPTION>
Table of Estimated Benefits
Pro forma
Purchase of Hotel Properties 12/31/95
____________________________ _________
<S> <C> <C>
Hotel Sales Prices (real estate and personal property) $ 7,100,000
(Less) estimated costs for title insurance, survey, appraisal, etc. (34,000)
Adjustments for Real Estate Taxes unpaid (42,084)
_________
Adjusted Hotel Sales Price 7,023,916
(Less) Mortgage Settlement or Assumption:
Principal Outstanding Balance (5,234,868)
Debt Service Reserve Balance 3,000
(Less) Note Payable to Signatures, Inns, Inc. (2,577,061)
Discount of Note Balance offered by SII 1,279,228
Note payable net of discount (1,297,833)
___________
Net Proceeds from Real Estate Sale (note 1) 494,215
Limited Partners Share 85%
Limited Partners Share Amount $ 420,082
Number of Limited Partner Units 364
Amount per Limited Partner Unit $ 1,154
Note 1: The General Partner's share of Net Proceeds from Real Estate Sale
shall be distributed in the form of a deed of the "Remaining
Interest" in the Hotel Properties.
</TABLE>
<TABLE>
<CAPTION>
Pro forma
Winding-up of Partnership 12/31/95
_________________________ _________
<S> <C>
Add assets acquired by Buyer or liquidated:
Working capital cash balance $ 200,162
Prepaid Insurance 5,536
Account Receivables 47,288
Supplies 46,000
FF&E Cash Reserve 87,841
Tax Escrow Cash Account 50,307
(Less) liabilities assumed by Buyer or paid:
Trade Accounts Payable $ (24,349)
Guests Advance Deposits (742)
Accrued Payroll Expense (34,290)
Sales and Lodging Taxes (15,498)
Net Business Assets and Liabilities (note 2) $ 362,256
_________
Limited Partners Share 85%
Limited Partners Share Amount $ 307,918
Number of Limited Partner Units 364
Amount per Limited Partner Unit $ 846
Note 2 - Does not include Limited Partner's Share of operating income since
January 1, 1996.
</TABLE>
<PAGE>
VIII. Purpose and Procedures for Majority Vote by Limited Partners
Requirements Under Applicable Securities Laws. Under applicable state
securities laws, regulations and policies pursuant to which the Units of
limited partnership interests were sold to the Limited Partners, the General
Partner was required to include in the Partnership Agreement certain
"democracy" voting rights for the Limited Partners. Pursuant to those
"democracy" rights, the Limited Partners are required to be given the right to
determine by majority vote of limited partnership interests, among other
matters, whether or not to (1) amend the partnership agreement, (2) approve or
disapprove the sale of all or substantially all of the assets of the
partnership, and (3) dissolve the partnership. All of these determinations
are authorized to be done by the Limited Partners, only, and
withoutconcurrence of the General Partner. Moreover, the General Partner may
be prohibited by certain regulations/policies from exercising any vote or
consent with respect to any Unit of limited partnership interest owned by the
General Partner regarding any matter submitted to the vote of the Limited
Partners.
Requirements Under Article XIV of the Partnership Agreement. Article XIV
of the Partnership Agreement grants to the Limited Partners, as a group, the
sole right, by a "Majority Vote" of units of limited partnership interest, and
without the concurrence of the General Partner, to among other matters: (a)
amend the Partnership Agreement; (b) dissolve the Partnership; and (c) approve
or disapprove the sale or exchange of all or substantially all of the
properties of the Partnership. Under Section 1.25 of the Partnership
Agreement, the term "Majority Vote" is defined as the "affirmative vote or
written consent of Limited Partners then holding of record more than 50% of
the outstanding Units of the Partnership". Accordingly, under Article XIV of
the Partnership Agreement, the Limited Partners are granted the exclusive
right to approve or disapprove the transactions proposed by the General
Partner. The Partnership currently has 364 Units of Limited Partnership
interest, which are held by its Limited Partners. Ten (10) Units of Limited
Partnership interest are held by the General Partner. For the purpose of
determining a "Majority Vote", the Units of Limited Partnership held by the
General Partner shall not be considered "outstanding" and shall not be voted
by the General Partner. Accordingly, the holders of 178 Units must provide
their written consent to the proposed transactions in order for them to be
approved.
Voting Procedures and Instructions. The procedures and instructions for
voting on (i.e. consenting to) the proposed transactions are set forth on both
sides of the "Irrevocable Consent of Limited Partner of Signature X Ltd.
Limited Partnership," which accompanies this Statement. Please read those
instructions carefully.
IX. General Partner's Duties, Conflicts of Interest and Risk Factors
General Partner's Fiduciary and Other Duties to the Partnership and Its
Limited Partners. A General Partner in an Indiana limited partnership has a
fiduciary duty to exercise the utmost good faith, fairness and loyalty with
respect to limited partners under both statutory and common law. This standard
requires the General Partner to determine the best interests of the
partnership and its limited partners and to conduct the business and affairs
of the limited partnership accordingly. The fiduciary duty of a General
Partner to a limited partnership and its limited partners is one of the
highest duties recognized by law.
<PAGE>
In addition to the above-described general duties which obligate a
General Partner as a matter of law, the Partnership Agreement requires the
General Partner to perform other particular duties. These duties include,
among others, the overall management, conduct and operation of the Partnership
in all matters respecting the Partnership, its business and its property,
subject to certain restrictions enumerated in the Partnership Agreement.
However, provision has been made in the Partnership Agreement to the effect
that the General Partner shall have no liability to the Partnership for any
loss arising out of any act or omission by the General Partner, provided that
the General Partner determined in good faith that its conduct was in the best
interest of the Partnership and, provided, further that its conduct did not
constitute fraud, gross negligence or intentional misconduct.
The fiduciary duty of a General Partner to a limited partnership and its
partners also includes the duty to disclose to the limited partners all
significant and material information regarding the partnership and its
affairs. Additionally, General Partners must exercise reasonable care in
furnishing such information to the limited partners. With respect to a sale
of the partnership assets, the General Partner of a syndicated partnership
must obtain the limited partners' consent, and the General Partner bears the
burden of complete disclosure of material facts relevant to the limited
partners' decision whether or not to consent to such a transaction.
In transactions between a limited partnership and its General Partner,
the actions of the General Partner are subject to even greater scrutiny
because the terms of the transaction are not the result of arms's length
negotiations, and the General Partner is in a position to control all terms of
the transaction. Such terms must be the result of the exercise of the General
Partner's judgment in a manner consistent with its fiduciary responsibility to
the limited partners and the partnership.
The General Partner has endeavored in all respects to structure a
commercially reasonable sale pursuant to a Purchase Agreement containing terms
and provisions which are fair and reasonable to both parties. Although the
price for the Hotel has not been determined from an arm's length bargaining
process, as described in Section IV. of this Statement, the price offered by
the General Partner is the result of an independent appraisal conducted by a
qualified appraiser which has extensive experience in appraising hotel
properties. The General Partner believes that the appraisal reflects the
fair market value of the Hotel Properties.
Conflicts of Interest. The General Partner is subject to various
conflicts of interest arising out of its relationships with the Partnership
and its Limited Partners. Because the Partnership originally was organized by
the General Partner and because the Partnership has continuously been operated
by the General Partner since then, these conflicts cannot be resolved through
arms-length negotiations but must be resolved, if at all, through the exercise
by the General Partner of its judgment consistent with its fiduciary
responsibilities to the Partnership and its Limited Partners and the
investment objectives and policies of the Partnership. These conflicts
include, but are not limited to, the following:
<PAGE>
Transactional Conflicts. The General Partner is the proposed
purchaser of the Partnership's Hotel Properties. As such, the General
Partner is naturally desirous of obtaining the lowest possible price and
the most favorable terms to it in connection with the transaction. As
the proposed seller, the Partnership is naturally desirous of obtaining
the highest possible price and the most favorable terms to it in
connection with the transaction. However, by virtue of its dual position
as the General Partner of the Partnership and as the purchaser in the
transaction, the General Partner is in the position of exercising
complete control over all of the terms of the Sale, both for itself as
buyer and for the Partnership as seller. Therefore, there exists the
potential for the General Partner to fashion the terms of the transaction
in ways which are more favorable to it as the buyer than to the
Partnership as the seller. The General Partner has endeavored to
minimize these conflicts by engaging a qualified, independent appraiser
to appraise the fair market value of the Hotel Properties on behalf of
the Partnership in order to provide a more independent basis for
determining the purchase price for the Hotel Properties to be paid by the
General Partner. In addition, the General Partner has attempted to
further reduce the conflicts by planning to engage the services of an
independent counsel to review the Purchase Agreement, prior to its
execution by the parties, to determine the general commercial
reasonableness and fairness (other than price) of the terms of that
Agreement. However, these efforts cannot eliminate totally the conflicts
which exist.
Choice of Legal Representative. Because of its position as manager
of the Partnership, the General Partner will have complete control over
the selection of the legal counsel to represent the Partnership in
connection with the review of the Purchase Agreement to determine
commercial reasonableness and fairness of its terms. However, the
General Partner believes that it will be able to retain an independent,
qualified legal counsel to represent the Partnership in these matters.
Choice of Appraiser. In its capacity as manager of the Partnership,
the General Partner had total control over the selection of US Realty
Consultants, Inc., as the appraiser of the Hotel Properties. However,
the General Partner believes that USRC is a qualified, independent
appraiser possessing extensive experience in appraising hotel properties
and that USRC's appraisal is an accurate estimation of the fair market
value of the Hotel Properties.
Risk and Other Factors. In addition to the factors set forth elsewhere
in this Statement, limited partners should specifically consider the following
risk factors before signing the Consent accompanying this Statement:
Failure to Satisfy Conditions Precedent. As explained in Section IV
of this Statement, the Purchase Agreement contains certain conditions
precedent which must be satisfied before closing. Among others, these
conditions include the requirement that the General Partner be able to
acquire any or all of the properties owned by other affiliates of the
General Partner. If any condition precedent to those proposed
acquisitions is not satisfied, the closing and consummation of the
subject transaction may not occur.
Tax Effects. As more completely described in Section X of this
Statement, the subject transaction will result in certain federal income
tax effects with respect to the Limited Partners. These effects include,
among others, the treatment of the distribution of the sale proceeds of
the Hotel Properties to the Limited Partners as a fully taxable
transaction. Although highly unlikely, the federal income tax liability
could exceed the amount of cash received by the Limited Partner upon
dissolution. Limited partners should carefully review Section X of this
Statement and consult their tax advisors where appropriate.
<PAGE>
Release of Rights to Future Revenues. Although the General Partner
believes that current trends in the hotel industry are such that now is a
favorable time for Limited Partners to cash out their investments, there
can be no assurance that values of hotel properties (including the
Partnership's Hotel Properties) will not continue to rise. Limited
Partners should be aware that, by consenting to the subject transaction,
they are releasing and terminating any and all rights they may have to
share in any future income, distributions and credits to be generated by
the Partnership's Hotel Properties.
Partners in More Than One Partnership. As described earlier in this
Statement, the General Partner is proposing to acquire each of the hotel
properties owned by all of its affiliated limited partnerships, including
the Hotel Properties owned by this Partnership. The successful
acquisition by the General Partner of each of those hotel properties is a
condition precedent to the closing of the purchase of the Hotel
Properties of this Partnership and the other transactions as described in
this Statement. Therefore, a limited partner who is a partner in both
this Partnership and one or more of the other partnerships may be faced
with a dilemma in deciding whether to provide his consent to each of the
proposed transactions.
For example, a partner of the Partnership may wish to consent to the
sale by this Partnership of its Hotel Properties to the General Partner,
but may wish to withhold his consent to the proposed sale by another
partnership of its hotel properties to the General Partner. The
withholding of such a limited partner's consent in connection with
another proposed transaction between the General Partner and another
partnership, however, may adversely effect the consummation of the
proposed sale by this Partnership of its Hotel Properties, since closing
of the transaction with this Partnership is conditional upon the General
Partner's ability to consummate each of the other proposed transactions.
X. Federal Income Tax Consequences
The following is a summary of the principal U.S. Federal income tax
consequences resulting from the transactions described in the General
Partner's Proposals. This summary does not purport to consider all the
possible U.S. Federal income tax consequences of those transactions and is not
intended to reflect the individual tax position of any Limited Partner. This
summary deals with interests in the Partnership held as capital assets.
Because the General Partner is unaware of the existence of Limited Partners
who are non-United States persons not subject to U.S. Federal income tax on
their worldwide income, this summary is inapplicable to such persons. This
summary is based upon the U.S. Federal tax laws and regulations as now in
effect and as currently interpreted and does not take into account possible
changes in such laws or interpretations, any of which may be applied
retroactively. It does not include any description of the tax laws of any
state, local or foreign governments possibly applicable to the transactions
contemplated by the Proposals. Limited Partners should consult their own tax
advisors concerning the application of U.S. Federal tax laws to their
particular situations as well as any consequences to them under the laws of
any other taxing jurisdiction.
<PAGE>
Tax Treatment of Transactions Comprising the Proposal. The acquisition
by the General Partner of an undivided interest in the Hotel Property for cash
and assumption of debt, the allocation of gain or loss attributable to that
acquisition exclusively to the Limited Partners, the distribution of
acquisition proceeds exclusively to the Limited Partners and the dissolution
of the Partnership will likely be treated for U.S. Federal income tax purposes
as, inter alia, a taxable sale of interests in the Partnership by the Limited
Partners to the General Partner. In the event those transactions are
respected for Federal U.S. income tax purposes, the following would be the
material differences in tax effect when compared to that resulting from a sale
of an interest in the Partnership: (i) section 1231 gain on the sale of Hotel
Property by the Partnership may be recharacterized from capital gain to
ordinary income in the hands of a Limited Partner who previously reported
ordinary losses from net section 1231 losses; and (ii) Limited Partners who
are not Indiana residents may be subject to Indiana tax on gains from the
disposition of Hotel Property located in Indiana allocable to them.
Gain or Loss on Sale. Gain or loss realized from a sale of interests in
the Partnership will be the difference between the gross amount realized and
the Limited Partner's tax basis in such interest. The "gross amount realized"
will equal the amount of cash received in the proposed distributions plus the
amount of any Partnership liabilities allocable to such interest. Under
certain unlikely circumstances, the amount of gain recognized by a Limited
Partner or even the federal income tax liability resulting therefrom could
exceed the amount of cash that Limited Partner received pursuant to the
proposed transactions. Except as described below, any gain recognized upon a
sale or other taxable disposition of interests of the Partnership will be
treated as gain attributable to the sale or disposition of a capital asset.
Any amount realized upon the sale of an interest in the Partnership
attributable to the selling Limited Partner's share of "unrealized
receivables" of the Partnership (as defined in Section 751 of the Code) will
be treated as proceeds from the sale of property other than capital assets.
Unrealized receivables include, to the extent not previously included in
Partnership income, any rights to payment for services rendered or to be
rendered, and amounts that would be subject to recapture as ordinary income if
the Partnership had sold the Hotel Property and its other assets at fair
market value.
Basis of Units. In general, each Limited Partner had an initial tax
basis in his interest in the Partnership ("Initial Basis") equal to the cash
or other property he transferred to acquire that interest. A Limited
Partner's Initial Basis in his interest in the Partnership generally is
increased by (i) such Limited Partner's share of Partnership taxable and
tax-exempt income and (ii) increases in such Limited Partner's allocable share
of liabilities of the Partnership. Generally, such Partner's basis in his
interest in the Partnership is decreased (but not below zero) by (A) such
Partner's share of Partnership distributions, (B) decreases in such partner's
allocable share of liabilities of the Partnership, (C) such Partner's share of
losses of the Partnership and (D) such partner's share of nondeductible
expenditures of the Partnership that are not chargeable to his capital
account. In calculating a Limited Partner's basis in his interest in the
Partnership, an accounting will be made of that Partner's allocable share of
income, gain, loss and deduction of the Partnership for the year of the
Partnership which includes the date of Closing, determined through the date of
Closing, not previously distributed to such Limited Partner. Any U.S. Federal
income tax consequences resulting from the partial satisfaction of the
Partnership's note payable to the General Partner will be allocated to or
otherwise borne by the General Partner only.
<PAGE>
Suspended Losses. Certain taxpayers, including individuals and
"closely-held C corporations," are prohibited from deducting in any taxable
year otherwise allowable losses from a particular business or activity,
including losses allocable to an investment in the Partnership, in excess of
the aggregate amount such taxpayers are "at risk" with respect to such
business or activity as of the end of such year. Losses of the Partnership
not deductible by a Limited Partner in the year they are initially sustained
because of the "at risk" limitation may be deductible in succeeding tax
periods, again subject to the "at risk" and other limitation provisions. In
general, a Limited Partner will be considered "at risk" in respect of his
interest in the Partnership to the extent of the sum of (i) the Initial Basis;
(ii) the difference between profits of the Partnership previously allocated to
that Partner over losses of the Partnership previously allocated to such
Partner and (iii) gain recognized by a Limited Partner on the transfer of the
interest in the Partnership through the proposed transactions.
Separate and apart from the "at risk" rules described above, Section 469
of the Code generally prohibits certain taxpayers, including individuals,
estates, trusts and personal service corporations, from deducting in any
taxable year otherwise allowable losses from "passive" activities in excess of
income and gains from the same or other "passive" activities in such year.
(In addition, certain "closely-held C corporations" will be subject to the
passive activity loss limitation rule except that losses from "passive"
activities may offset net "active" income, but not "portfolio" income.) For
this purpose, "passive" income does not include interest, dividends, annuities
and royalties not derived in the ordinary course of a trade or business and
gain or loss derived from the disposition of property producing such income
or held for investment ("portfolio" income). A Limited Partner's
determination of income which passive losses may currently offset must exclude
such "portfolio" income. Disallowed losses carry forward and are treated as
"passive" losses in subsequent years to the extent of the taxpayer's net
"passive" income in such year. Disallowed "passive" losses will be deductible
by a Limited Partner upon the completion of the transactions described in the
General Partner's proposals, offsetting, in the following order, income or
gain realized in respect of the Partnership, other net "passive" income, and
any "portfolio" and "active" income.
Possible Withholding of Portion of Proceeds. The General Partner will
withhold ten percent (10%) of the "gross" amount realized by any Limited
Partner from the proposed transactions unless such Limited Partner provides
written proof, in a form and in accordance with instructions satisfactory to
the General Partner, that such Limited Partner is a U.S. citizen, U.S.
resident or otherwise subject to U.S. Federal income tax on income derived
from worldwide sources.
XI. Selected Financial Data
The following table sets forth certain historical financial data relating
to the Partnership's operating revenues, income (loss) from continuing
operations, total assets and long term obligations for the five year period
from 1991 through 1995. Income (loss) from continuing operations per Unit, as
well as other per Unit information, is set forth in Section XII.
<PAGE>
<TABLE>
<CAPTION>
Schedule of Selected Five Year Financial Data
Concerning the Partnership's Operations
Hotels: Florence & Sharonville
Statistics: 1991 1992 1993 1994 1995
<S> <C> <C> <C> <C> <C>
Number of Rooms - Florence 125 125 125 125 125
Number of Rooms - Sharonville 130 130 130 130 130
Occupancy - Florence 50.5% 57.3% 63.5% 66.2% 67.3%
Occupancy - Sharonville 49.1% 57.8% 53.5% 56.8% 55.6%
Average Daily Rate - Florence $48.86 $47.26 $46.87 $48.94 $51.74
Average Daily Rate - Sharonville 48.42 47.91 50.43 53.40 54.59
Revpar - Florence 24.67 27.08 29.76 32.40 34.82
Revpar - Sharonville 23.77 27.69 26.98 30.33 30.35
</TABLE>
<TABLE>
<CAPTION>
Operating Results: 1991 1992 1993 1994 1995
<S> <C> <C> <C> <C> <C>
Hotel Revenue -
Florence $1,151,176 $1,258,840 $1,392,543 $1,522,097 $1,624,252
Hotel Revenue -
Sharonville 1,172,779 1,339,666 1,337,702 1,489,641 1,475,081
Net Income (Loss)-
Florence (354,183) (225,716) (156,692) (11,230) 81,830
Net Income (Loss)-
Sharonville (459,827) (354,226) (261,418) 25,943 8,453
</TABLE>
<TABLE>
<CAPTION>
Total Assets: 1991 1992 1993 1994 1995
<S> <C> <C> <C> <C> <C>
Florence $4,357,115 $4,219,069 $4,107,779 $4,000,785 $4,038,033
Sharonville 4,974,007 4,685,879 4,465,184 4,425,408 4,353,208
Total: 9,331,122 8,904,948 8,572,963 8,426,193 8,391,241
</TABLE>
<TABLE>
<CAPTION>
Long Term Debt
Obligations: 1991 1992 1993 1994 1995
<S> <C> <C> <C> <C> <C>
Florence $2,535,000 $2,570,000 $2,605,000 $2,645,000 $2,685,000
Sharonville 3,055,104 2,923,353 2,779,142 2,638,835 2,512,742
Total: $5,590,104 $5,493,353 $5,384,142 $5,283,835 $5,197,742
</TABLE>
<PAGE>
XII. Book Value, Distributions and Income
The following table sets forth certain information concerning the
Partnership's book value per Unit, cash distributions declared and paid per
Unit and income (loss) per Unit from continuing operations for the five year
period from 1991 through 1995:
<TABLE>
<CAPTION>
Schedule of Per Unit Book Value, Cash Distributions and Income (Loss)
Book Value: 1991 1992 1993 1994 1995
<S> <C> <C> <C> <C> <C>
Total (Florence &
Sharonville) $603,963 $24,021 $(393,530) $281,866 $372,149
Number of L.P. Units 364 364 364 364 364
Per Limited
Partner Unit $ 1,410 $ 56 $ (919) $ 658 $ 869
</TABLE>
<TABLE>
<CAPTION>
Limited Partner
Cash Distributions: 1991 1992 1993 1994 1995
<S> <C> <C> <C> <C> <C>
Total (Florence
& Sharonville) $0 $0 $0 $0 $0
Number of L.P. Units 364 364 364 364 364
Per Limited
Partner Unit $0 $0 $0 $0 $0
</TABLE>
Cumulative Limited Partner Distributions Per Unit, $0.00
1986 to 1995
As a percentage of Original Investment Per Unit 0.0%
<TABLE>
<CAPTION>
Income (Loss): 1991 1992 1993 1994 1995
<S> <C> <C> <C> <C> <C>
Total Net Income (Loss)
(Florence &
Sharonville) $(814,010) $(579,942) $(418,110) $14,713 $90,283
Number of L.P. Units 364 364 364 364 364
Income (Loss) Per
Limited Partner
Unit $ (1,900) $ (1,354) $ (976) $ 35 $ 211
</TABLE>
XIII. Pro Forma Financial Information
The Summary of Estimated Benefits from Sale of Property and Liquidation
of Partnership, which is included in Section VII of this Statement, sets forth
certain pro forma financial information Concerning the Sale and the other
proposed transactions, as if the Sale and the other transactions had occurred
on December 31, 1995, the end of the Partnership's last fiscal year. The
purpose of that pro forma financial information is to provide the Limited
Partners with information concerning the impact of the proposed transactions
by showing how the transactions might have effected historical financial
statements, had the transactions been consummated at an earlier time.
However, because the Partnership will be liquidated and dissolved, assuming
the transactions are effectuated, no pro forma financial information is being
supplied with respect to the future prospects of the Partnership as would
ordinarily be required under Article 11 of Regulation SX.
<PAGE>
XIV. Regulatory Requirements
The Partnership is required to comply with the rules and regulations
promulgated under the federal and state securities laws administered by the
Indiana Secretary of State, other state regulatory agencies and the United
States Securities and Exchange Commission ("SEC") in connection with the
solicitation of Consents with respect to, and the consummation of, the
transactions proposed herein by the General Partner. The Partnership must
also comply with the substantive and procedural requirements of the
Partnership Agreement. Please refer to Section XVI of this Statement for a
description of the terms and conditions of the Partnership Agreement. The
Partnership believes that it is, and will continue to be, in full compliance
with all the requirements of federal and state securities laws and the
Partnership Agreement.
Other than the requirements of federal and state securities laws and the
Partnership Agreement, there are no federal or state regulatory requirements
which must be complied with or with respect to which approval must be obtained
in connection with the transactions proposed herein by the General Partner.
XV. Appraisal Reports
US Realty Consultants, Inc. Appraisal Reports. On February 16, 1996 the
general partner on behalf of the partnership engaged the services of US Realty
Consultants, Inc. ("USRC") to perform appraisals of the Partnership's two
Hotel Properties located in Florence, Kentucky and Sharonville, Ohio and to
estimate the fair market value (on a going concern basis) of the fee simple
estate in those properties, including the furniture, fixtures and equipment
components thereof. The scope of the appraisals involved the systematic
research and analysis necessary for USRC to reach value conclusions for the
Hotel Properties. In connection with their analysis, USRC inspected both
Hotel Properties, conducted market research in regard to similar and
comparable hotel properties, assembled data from the general market area for
the Hotel Properties and studied the competitive hotel markets for the Hotel
Properties. In addition, USRC gathered and analyzed data in regard to income,
expense, capitalization rate, discount rate, comparable improved sales and
real estate tax, zoning and flood plane data relating to the Hotel Properties.
In order to estimate the market value of the Hotel Properties, USRC
utilized the Income Capitalization and the Sales Comparison approaches to
commercial real estate valuations. Based upon their research and analysis,
USRC estimated the market value of the fee simple estate of the going concern
of the Florence, Kentucky Signature Inn Hotel, as of February 28, 1996, at
$3,800,000 and the similar value of the Sharonville, Ohio Signature Inn Hotel
at $3,300,000, for a combined appraised value of both hotels of $7,100,000.
USRC issued Summary Reports of Complete Appraisals on both Hotel Properties
dated February 28 and 28, 1996, copies of which are attached to this statement
as Exhibits C and D. In addition, USRC has issued more descriptive summary
reports, which are available for review by any limited partner at the
corporate offices of the general partner of the partnership, Signature Inns,
Inc., 250 E. 96th Street, Suite 450 Indianapolis, Indiana 46240.
<PAGE>
Experience and Qualifications of the Appraiser. USRC was organized in
1983. USRC operates regional offices in Atlanta, Georgia, Chicago, Illinois
and Florence, Kentucky. USRC specializes in providing commercial real estate
appraisal and consulting services in four major areas of the real estate
industry: Health Care Services Facilities, Hospitality & Resort Industry
Services, Golf and Country Club Services and Real Estate Appraisal Services.
Through its Hospitality & Resort Industry Services Group, USRC has
extensive experience in providing appraisal services for the hotel industry.
USRC employs professionally-trained hotelierswith outstanding academic
credentials and over forty combined years of industry experience. USRC has
participated in over 500 hotel and resort-related engagements since 1991 and
has knowledge and experience in all product segment types of the hotel
industry including limited-service to full-service, hard-budget to luxury
resort, commercial to convention and extended-stay to all-suite.
Many of USRC's hotel appraisal assignments have been national in scope
and have included national brand name affiliations such as Best Western, Days,
Embassy Suites, Fairfield Inn, Hampton Inn, Hilton, Holiday Inn, Howard
Johnson, Knights Inn, LaQuinta, Quality, Radisson, Ramada, Red Roof, Sheraton
and Westin. USRC has been a major participant in the development of
analytical software programs designed specifically for hospitality and resort
consulting and appraising purposes. As further evidence of USRC's expertise
in providing appraisal services in the hotel industry, USRC publishes a
seasonal pamphlet titled Hospitality Perspectives which provides information
with respect to trends in the hotel industry including regional reports on
average daily rates and occupancy.
Independence of the Appraiser. Prior to its engagement by the General
Partner on behalf of the Partnership, USRC had only minor prior business
relationship with the General Partner or any of its other affiliated entities.
However, the General Partner, on behalf of certain other of its affiliated
Limited Partnerships, has engaged USRC to conduct appraisals on behalf of
those entities, as well. Nonetheless, the General Partner does not believe
that the engagement of USRC by other affiliated partnerships for purposes of
appraising their respective properties interferes with the independence of
USRC in conducting the appraisal of the Partnership's Hotel Properties. In
order to document USRC's independence, the General Partner has obtained from
USRC a completed due diligence questionnaire which supports the independence
of the appraiser.
Cost of Appraisal. The Partnership has a paid the $10,000 cost of the
appraisals.
XVI. Material Contracts
A. Past and Present Material Contracts.
The Franchise Agreements. The Partnership has entered into a standard
Signature Inn Individual Hotel License Agreement with the General Partner with
respect to each of the Hotel Properties. Those agreements are more fully
described in Section III of this Statement.
<PAGE>
The Management Agreements. The Partnership has also entered into a
Management Agreement with the General Partner with respect to each of the
Hotel Properties. Those agreements are more fully described in Section III of
this Statement.
The Partnership Agreement. The Partnership Agreement sets forth the
terms and conditions pursuant to which the affairs of the Partnership are
governed and the relative rights and duties of the General Partner and the
Limited Partners. The discussion which follows refers only to the Partnership
Agreement, that is, the Second Amended Certificate and Agreement of Limited
Partnership dated August 13, 1986, as amended, and not to any preceding
certificates or agreements. Please refer to Section III of this Statement for
a discussion of prior certificates and agreements.
Powers of the General Partner. The General Partner has full,
exclusive, and complete authority and discretion in the management and control
of the business of the Partnership. Limited Partners have no right or power
to take part in the management of, or to bind, the Partnership.
Liabilities of the Limited Partners. The Partnership Agreement
provides that no Limited Partner shall be liable for any debts or obligations
of the Partnership in excess of the amount of his/her Capital Contribution
which has not been previously returned to him/her, except that, under
applicable law, the Limited Partners may be required to return (with interest)
amounts distributed to them as a return of their Capital Contributions if the
Partnership is unable to pay creditors who extended credit to the Partnership
prior to the date of any such return of capital. In addition, all
undistributed Cash Available for Distribution and proceeds of the sale or
financing of Partnership Properties which would otherwise be distributed to
the Partners are available, along with all Partnership assets, to creditors to
satisfy the debts and obligations of the Partnership until actually
distributed. Upon payment in full of the subscription price, Units acquired
by Limited Partners pursuant to the Partnership Agreement become fully paid
and nonassessable. No Limited Partner has the right to withdraw all or any
portion of his Capital Contribution until the full and complete winding up and
liquidation of the business of the Partnership, except as otherwise provided
by law.
Voting Rights of the Limited Partners. Limited Partners may, with
the affirmative vote of those holding more than 50% of the Units, take action
on the following matters: (a) the approval or disapproval of the sale or
exchange of all or substantially all of the Partnership's properties; (b)
dissolution of the Partnership; (c) removal of a General Partner or any
successor General Partner; (d) election of new General Partner upon the
removal, retirement, bankruptcy, insolvency or death of a General Partner or
any successor General Partner; (e) amendment of the Partnership Agreement.
The right of the Limited Partners to amend the Partnership Agreement, however,
is limited with respect to amendments affecting limited liability of the
Limited Partners and the rights and interests of the General Partner.
Amendments receiving the requisite vote will be executed by the General
Partner on behalf of all Limited Partners acting pursuant to the power of
attorney contained in the Partnership Agreement.
<PAGE>
Other Terms and Conditions. For a more complete description of the
terms and conditions of the Partnership Agreement please refer to the
Partnership's Form 10-KSB for 1995 attached hereto as Exhibit A.
B. Proposed Material Contracts
The General Partner is proposing that the General Partner and the
Partnership enter into an Asset Purchase Agreement which shall constitute a
legally binding obligation of both the Partnership to sell and the General
Partner to but the Initial Interest in the Hotel Properties. A description of
the terms and conditions of the Asset Purchase Agreement is set forth in
Section IV of this Statement.
XVII. Marketability of Units of Limited Partnership Interests
The Partnership's common equity consists of Units of limited partnership
interest in the Partnership. There is only one class of Units, and all Units
have the same rights and the same interests in income, loss, distributions and
capital of the Partnership. Each Unit represents a total required capital
contribution of $10,000. Units are not subject to assessment for additional
contributions. Holders of the Units possess certain limited voting rights
(with respect to those matters which are submitted to a vote of the Limited
Partners) and rights to certain distributions. Such voting and distribution
rights will be based upon the number of Units owned by each Limited Partner.
The Partnership Agreement contains a number of restrictions on the
transferability of the Units. The General Partner does not have the right and
is not obligated to redeem or repurchase the Units, and the Partnership
Agreement prohibits the holders of the Units from withdrawing their respective
capital contributions.
The Units are not listed on any securities exchange and are not subject
to any quotations under the "NASDAQ" system. The Units are not actively
traded in any established public trading market. Units are expected to be
transferable, if at all, only in privately negotiated transactions.
Accordingly, the Partnership is unable to furnish any information with respect
to ranges of high and low bid quotations for the Units during the past two
years.
The following table sets forth the number of Units outstanding and the
approximate number of holders or record of the Units as of the date of this
report:
<TABLE>
<CAPTION>
Number of Number of
Outstanding Units Holders of Record
_________________ _________________
<S> <C>
364 386
</TABLE>
<PAGE>
XVIII. FORM 10-KSB AND 10-QSB REPORTS
Until recently, the Partnership was required to file annual, quarterly
and current reports with the Securities and Exchange Commission ("SEC"),
pursuant to the requirements of Section 12(g) of the Securities Exchange Act
of 1934 (the "Act"). As a result, however, of a recent amendment to Rule
12g-1 promulgated by the SEC under the Act, the Partnership became eligible
for an exemption from the registration and reporting requirements under
Section 12(g), provided that the Partnership file a Form 15 Certification and
Notice of Termination of Registration under Section 12(g) of the Act ("Form
15"). The Partnership filed its Form 15 on July 17, 1996, and, under Rule
12g-4, termination of the Partnership's registration of its Units of Limited
Partnership Interest shall take effect 90 days thereafter (i.e., October 15,
1996).
On or about March 31, 1996, the Partnership filed its Form 10-KSB Annual
Report with the SEC for the year ended December 31, 1995. A copy of that
report is attached to this Statement as Exhibit A. Also, on May 15, 1996, the
Partnership filed its Form 10-QSB Quarterly Report with the SEC for the
quarter ended March 31, 1996. A copy of that report is attached to this
Statement as Exhibit B.
XIX. RULE 13e-3 TRANSACTION STATEMENT
Rule 13e-3 promulgated by the SEC under the Act requires the Partnership
to file a Schedule 13E-3 with the SEC in connection with this Statement. A
copy of the Schedule 13E-3 is attached to this Statement as Exhibit G.
<PAGE>
EXHIBIT INDEX
A Form 10-KSB Annual Report for 1995
B Form 10-QSB Quarterly Report for Quarter Ended March 31, 1996
C Summary Report of Complete Appraisal of Signature Inn - Florence,
Kentucky
D Summary Report of Complete Appraisal of Signature Inn - Sharonville, Ohio
E Text of Consent Resolutions of Limited Partners
F Text of Amendments to Partnership Agreement
G Rule 13e-3 Transaction Statement
<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
Annual Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the fiscal year ended December 31, 1995
Commission File Number 33-1687036
SIGNATURE X LTD. LIMITED PARTNERSHIP
(Exact name of small business issuer in its charter)
Indiana 35-1687036
------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.
250 East 96th Street, Suite 450, Indianapolis, Indiana 46240
------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number (317) 581-1111
--------------
Securities registered pursuant to Section 12(b) of the Exchange
Act: None
Securities registered pursuant to Section 12(g) of the Exchange
Act: None
Check whether the Registrant (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
---- ----
Check if there is no disclosure of delinquent filers in response
to Item 405 of Regulation S-B contained in this form. No
disclosure will be contained, to the best of Registrant's
knowledge, in any definitive proxy or information statements
incorporated by reference herein. [ X ]
Issuer's revenues for the most recent fiscal year $3,117,727
Aggregate Market Value of Units Held by Non-Affiliates: Unknown
(See Item 5)
Documents Incorporated By Reference: None
Transitional Small Business Disclosure Format (check one):
Yes No X
---- ----
<PAGE>
PART I
------
Item 1. Business of Signature X Ltd. Limited Partnership.
A. Organization.
Signature X Ltd. Limited Partnership (hereinafter sometimes
referred to as the "Issuer," the "Partnership" or the
"Registrant") was originally organized pursuant to a Certificate
and Agreement of Limited Partnership dated September 19, 1986,
which was filed for record with the Marion County, Indiana,
Recorder on September 19, 1986, in accordance with the Indiana
Uniform Limited Partnership Act (I.C. Section 23-4-2-1 et seq.)
("ULPA"). On July 1, 1988, the Partnership filed a Certificate
of Limited Partnership under the Revised Uniform Limited
Partnership Act ("INRULPA"), thereby electing to be governed
under the provisions of INRULPA. As a result, effective on July
1, 1988, the Partnership became a partnership governed by INRULPA
rather than by the ULPA.
Subsequent to its organization, the Partnership commenced an
SEC registered, public offering of Units of limited partnership
interest (the "Units") at $10,000 per Unit, with a minimum
subscription of one-half Unit pursuant to a Registration
Statement which originally became effective on May 29, 1987. The
offering was concluded in October, 1988. A total of 364 Units,
aggregating $3,640,000, was sold in the offering to 386
purchasers who became limited partners of the Partnership.
Signature Inns, Inc. (hereinafter sometimes referred to as
the "General Partner"), in its capacity as General Partner,
contributed $404,445 as its capital contribution to the
Partnership. In addition to its capital contribution in its
capacity as a General Partner, Signature Inns, Inc. acquired 10
Units in the offering at the same price and on the same terms as
paid by all other investors in the offering, which Units the
General Partner is required to hold indefinitely.
B. The General Partner.
The General Partner of the Partnership is Signature Inns,
Inc. ("General Partner"), an Indiana corporation, which was
incorporated on March 31, 1978.
C. The General Partner's Affiliated Partnerships and Joint
Ventures.
The General Partner, directly or through a wholly-owned
subsidiary, is the general partner of a total of 21 Indiana
limited partnerships and joint venture partnerships. The
partnerships own an aggregate of 23 Signature Inn hotels totaling
2,748 rooms. Each of those 23 operating hotels and one
additional eighty-one room hotel currently under construction are
operated under long-term management and franchise agreements with
the General Partner, from which the General Partner derives
substantial fee revenue.
<PAGE>
D. The General Partner's Subsidiaries.
The General Partner has four, wholly-owned subsidiary
corporations. Signature Securities Corporation ("SSC"), is an
SEC/NASD registered "limited" broker-dealer which previously was
engaged in the offer and sale of direct participation programs
(e.g., limited partnership real estate offerings) of partnerships
affiliated with Signature Inns, Inc. SSC has marketed thirteen
limited partnership programs. However, SSC has not offered
limited partnership interests since 1989.
The Signature Franchise Corporation ("SFC") subsidiary was
organized in connection with the 1992 Debt Restructuring. SFC
never engaged in any business operations.
The P & N Corporation ("P & N") subsidiary was organized in
late 1993 and acts as the general partner of the Peoria/Normal
Signature Limited Partnership, which owns and operates the Normal
and Peoria, Illinois, Signature Inn hotel properties , the
Knoxville Signature Limited Partnership which owns and operates
the Knoxville, Tennessee, Signature Inn hotel property and
Meridian Signature Limited Partnership which owns land and a
hotel under construction in Indianapolis, Indiana. Those
properties are managed and franchised under management and
franchise agreements between the partnerships and the General
Partner.
The S.I.E. Corporation subsidiary was organized in December
1995 and acts as general partner for Signature Northwestern Ltd.
- - I.
E. Location of Signature Inn Hotels.
The General Partner's ownership interest in the following
affiliated hotel partnerships ranges between 5% and 50%,
depending upon the capital contributions made to the particular
partnership and other factors relating to the structuring of the
partnership. All mortgage loans on partnership properties are
non-recourse to the General Partner.
<PAGE>
<TABLE>
GENERAL PARTNER'S AFFILIATED SIGNATURE INN HOTEL
PARTNERSHIPS AND JOINT VENTURES
<CAPTION>
Partnership Date Organized Location of Hotel(s)
- ----------- -------------- --------------------
<S> <C> <C>
Signature I Ltd. 01/16/81 Fort Wayne, IN
Signature II Ltd. 11/12/81 Indianapolis, IN
Signature III Ltd. 02/04/82 Lafayette, IN
Signature IV Ltd. 08/27/82 Muncie, IN
Signature V Ltd. 03/09/84 Cincinnati, OH
Signature Southport 04/23/84 Indianapolis, IN
Joint Venture
Signature Northwestern 12/31/84 Indianapolis, IN
Ltd. - I
Signature VI Ltd. 01/16/85 Indianapolis, IN
Signature VII Ltd. 04/24/85 Columbus, OH,
and Kokomo, IN
Signature VIII Ltd. 11/05/85 Evansville, IN
Signature IX Ltd. 07/01/86 Terre Haute, IN
Signature Elkhart Ltd. 07/02/86 Elkhart, IN
Signature X Ltd. 09/19/86 Florence, KY,
and Sharonville, OH
Signature XI Ltd. 09/26/86 Miamisburg
(i.e., Dayton), OH
Signature XII Ltd. 10/03/86 South Bend, IN
Signature XIV Ltd. 12/12/86 Louisville, KY
Signature XVII Ltd. 09/20/88 Indianapolis (North), IN
Signature XXI Ltd. 06/12/89 Bettendorf, IA
Peoria/Normal Signature 12/16/93 Normal, IL
Limited Partnership and Peoria, IL
Knoxville Signature 05/04/94 Knoxville, TN
Limited Partnership
Meridian Signature July 96 Carmel, IN
Limited Partnership Planned opening
</TABLE>
<PAGE>
F. The Signature Inn Hotel Concept.
The Signature Inn concept has been continuously improved
since 1981 and has been favorably received by the traveling
public. The Signature Inn concept is predicated upon a simple
principle of providing first-class service to its hotel Guests on
a consistent basis in all hotels. In order to accomplish this
type of service, Signature has developed a guest services program
entitled "Legendary Service," which involves the employment of
individuals who are goal and team oriented, possess a positive
mental attitude, a good work ethic, have a sincere desire to
serve our Guests and portray the clean-cut "Signature Look."
Those employees are then trained under the Legendary Service
program to provide efficient, friendly and courteous service.
The Legendary Service program also requires that, in the event a
problem cannot be resolved to the satisfaction of a guest, the
guest will receive a money-back guarantee.
In addition to the Legendary Service provided by the
employees to hotel Guests, the Signature concept is also
identified by the physical features and specialized services
offered to Guests. Signature Inn hotels have large, spacious,
well furnished and attractively decorated lobby-registration
areas. The guest rooms are attractively decorated and designed
to have a high aesthetic appeal and to provide convenience and
comfort. Signature rooms feature a queen or king-sized bed and a
recliner chair. Special services and amenities offered by
Signature Inn hotels include:
Newspaper delivered to room HBO, cable and in-room movies
Fax Machines Meeting rooms
Large desk in all rooms Interview centers
Free local calls Guest storage facilities
Free Breakfast Express Business center facilities
Professional conference center No-Smoking rooms
Outdoor or indoor swimming pool Guest spa rooms
Guest voice mail
Other than the professional conference center, meeting rooms, in-room movies
and long distance charges for fax machines, all items
on the foregoing list are furnished to the guest on a
complimentary basis.
Although each Signature Inn hotel offers high quality
lodging accommodations and services to the public, Signature Inn
hotels do not offer restaurant, bar or lounge facilities. As
with many other economy/limited service hotels, the General
Partner eliminated what it considered to be the lower profit
margin departments of "food and beverage" and the unproductive
and costly, large public areas associated with full service
hotels. However, the Signature Inn hotels are generally located
adjacent to or near quality restaurants for the convenience of
their Guests. Because Signature Inns do not have restaurants
inside the hotels, Signature Inn hotels, like other
economy/limited service hotels, generally have a significantly
lower break-even threshold and are not as labor and management
intensive as All-Suite or Full Service hotels.
<PAGE>
G. Hotel Industry Overview and Partnership Hotel Results.
Signature Inn hotels operate in the "upper economy/limited
service" segment of the hotel industry. The following table
illustrates average occupancy and average daily room rates
("ADR") for the years indicated of the Partnership hotels and the
Signature Inn chain (23 hotels) compared to "upper economy
chains" and the industry:
<TABLE>
Occupancy ADR
-------------------- --------------------
<CAPTION>
1995 1994 1993 1995 1994 1993
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Florence 67.3% 66.2% 63.5% $51.74 $48.94 $46.87
Sharonville 55.6% 56.8% 53.5% $54.59 $53.40 $50.43
Signature Inn Chain 67.2% 67.9% 66.2% $55.81 $53.45 $50.48
Upper Economy Chains* 64.4% 65.4% 64.4% $47.39 $46.08 $44.31
Hotel Industry* 65.5% 65.1% 63.1% $67.34 $63.64 $61.31
*Source: Smith Travel Research.
</TABLE>
The General Partner believes an important indicator of hotel
performance within a segment of the industry is "revenue per
available room" (REV PAR), which combines both the occupancy and
the average daily room rate achieved. REV PAR for the years
indicated for the Signature Inn chain and the "upper economy
chains" is as follows:
<TABLE>
REV PAR
--------------------------------
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Signature Inn Chain $37.50 $36.29 $33.42
Upper Economy Chains $30.52 $28.87 $27.38
</TABLE>
The upper economy/limited service hotels have performed
better than all other segments in the industry during the past
several years. It is management's belief that the
economy/limited service hotel segment will continue to be the
fastest growing segment in the U.S. hotel industry. Accordingly,
management believes that the Signature Inn chain of hotels are
competitively positioned within the domestic lodging industry.
<PAGE>
The hotel industry experienced declines in average occupancy
rates for several years prior to 1991 brought on by room supply
growth exceeding room demand, and annual average daily rate
increases less than inflation due to significant discounting of
room rates. In 1992, the industry began to improve with
increasing average occupancy and larger average daily rate gains.
Through 1995, this favorable trend has continued. However,
continuation of this positive trend in the hotel industry is
dependent in large part on demand growth in relation to supply
growth over the next several years. Room demand growth continues
to increase faster than supply growth, although recently the
supply growth appears to be accelerating.
H. Trademarks.
The mark "Signature Inn" with related logo was registered by
the General Partner with the Indiana Secretary of State effective
on October 8, 1980. In addition, on October 4, 1982, the mark
"Signature Inn" (with logo) was registered on the principal
register of the United States Patent and Trademark Office. On
September 18, 1984, the mark "Signature Inn", only, and the
stylized "S" logo, only, were registered on the principal
register of the United States Patent and Trademark Office. On
February 14, 1990, the declarations of five years use for each of
the marks was accepted by the United States Patent and Trademark
Office. These registrations are now in effect until a renewal
date of September 18, 2004. Another mark, "We Help You Get Down
to Business," which is used by Signature Inns in its hotel
operations, was registered with the United States Patent and
Trademark Office on October 12, 1982. An additional mark,
"Sincerely Yours," was registered in 1990 with the United States
Patent and Trademark Office. The mark "Breakfast Express" was
registered with the U.S. Patent and Trademark Office on November
3, 1992. The Mark "There's Something Personal About a Signature"
was registered with the U.S. Patent and Trademark Office on April
30, 1991.
On June 1, 1989, Signature Inns, Inc. entered into an
agreement with a Canadian group which had owned the Canadian
trademark registration of "Signature Inn." Under the agreement,
the Canadian registration of the mark "Signature Inn" became the
property of Signature Inns, Inc.
I. The General Partner's Corporate Account Sales and Marketing.
The General Partner systematically develops regional and
national accounts consisting of corporations and travel agency
consortiums which use one or more Signature Inn hotels in the
chain on a regular basis. Many of these publish their own
corporate travel directories, stipulating hotel locations which
have been approved for lodging accommodations. Signature Inns
appears in numerous corporate and travel consortium directories,
including the following: Maritz, Carlson/Wagonlite, BTI
Americas, ABC Corporate Services, Rosenbluth Travel, General
Motors, Ameritech, and Navistar. In addition, a National Sales
Director and Director of Hotel Sales work with and assist hotel
employees responsible for local sales efforts in Signature Inn
markets. This corporate marketing program gives Signature Inn
hotels excellent visibility to business customers who are likely
to utilize Signature Inns on a systematic and chain-wide basis.
<PAGE>
J. The General Partner's Centralized Reservation System.
Signature Inn hotels utilize Teleservice Resources, a
subsidiary of AMR Company based in Dallas/Fort Worth, Texas, to
provide central reservation services. The 800 number utilized by
Signature as its central reservation number allows the public in
the United States and Canada to make toll-free reservations by
telephone, and travel agents can make electronic reservations by
using one of several electronic airline reservation systems.
K. The General Partner's Hotel Advertising.
The General Partner utilizes the services of Lord, Sullivan
& Yoder, Inc. Advertising of Columbus, Ohio, to provide
full-service advertising for the Signature Inn chain and to
direct the chain's advertising program. Lord, Sullivan & Yoder,
Inc. assists in the formulation of the Signature Inn chain and
individual hotel advertising programs and budgets. The General
Partner also utilizes Montgomery Zukerman Davis, Inc., a full-service
advertising firm located in Indianapolis, Indiana, for
public relations activities.
L. The General Partner's Employees.
Including its five executive officers, the General Partner
employs twenty-five full-time employees at its corporate office.
In addition, the general and assistant general manager at each of
the 23 operating Signature Inns are employees of the General
Partner. The General Partner also employs approximately seventy-five
full-time employees at three of the hotels managed by the
General Partner. The General Partner believes it has an
excellent relationship with its employees.
M. Seasonality.
Demand for hotel accommodations varies seasonally in the
General Partner's current market areas. Typically, demand for
hotel accommodations and, correspondingly, occupancy rates for
each of the Signature Inn hotels within the Signature chain will
be higher during the period from March through October and lower
during the period from November through February.
N. Competition.
The operation of hotels is an extremely competitive
business. The General Partner as a management General Partner and
its affiliated hotel partnerships as owners of hotels are each in
competition with numerous management companies and hotel chains
in their respective areas of operation of varying quality and
size, including national and regional chains, and hotels which
have available to them greater name recognition and financial
resources than the General Partner. The General Partner believes
its management possesses adequate experience and that the
Signature Inn concept is sufficiently recognized to enable the
chain to compete successfully against its competitors.
<PAGE>
O. Refurbishing.
To meet competition in the industry and to maintain economic
values, continuing expenditures must be made for modernizing,
refurbishing and maintaining existing facilities prior to the
expiration of their anticipated useful lives. If such
expenditures are not made, the value and profitability of the
property may be diminished. Each affiliated hotel limited
partnership establishes reserve funds in connection with the
operation of its hotel for refurbishing which are based upon
specified percentages of hotel revenues.
P. Energy and Environmental Factors.
Present and future regulations issued to meet federal or
local antipollution standards, limitations on or rationing of
gasoline usage, gasoline shortages, or other effects of any
future energy crisis or shortage of natural resources may affect
adversely utilization of one or more of the Signature Inn hotel
properties by travelers or increase the cost of operating such
properties and thus adversely affect the General Partner's
operations. Further, environmental studies required to be
performed by the General Partner and its affiliated partnerships
in connection with the acquisition of properties in order to
avoid potential liability under the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended by
the Super Fund Amendments and Reauthorization Act of 1986, add to
the costs and risks of acquisition of real estate sites
generally.
Q. Americans With Disabilities Act.
The General Partner believes that all Signature Inn hotels
within the Signature Inn chain currently are in compliance with
the Americans With Disabilities Act and does not anticipate that
future compliance with this regulation will require substantial
cash resources.
R. Miscellaneous.
Neither the General Partner nor any of its affiliated
limited partnerships are dependent upon a single customer or a
very few customers, the loss of any one of which would not have a
material adverse effect on the General Partner. All raw
materials utilized by the General Partner and its affiliated
limited partnerships in the construction or refurbishing of their
respective hotels are believed to be readily available at
competitive prices. The General Partner is not engaged in any
material research or development activities.
<PAGE>
S. The Partnership's Hotels.
The business of the Partnership consists exclusively of the
ownership and operation of two Signature Inn hotels located in
Florence, Kentucky, and Sharonville, Ohio. A listing of these
hotels, location, the number of rooms, and opening dates is as
follows:
<TABLE>
<CAPTION>
Location of Hotel Number of Rooms Opening Date
- ----------------- --------------- ------------
<S> <C> <C>
I-75/71 & Turfway Road 125 07/14/87
Florence, Kentucky
I-75 & Sharonville Road 130 09/08/87
Sharonville, Ohio
</TABLE>
Each of the foregoing properties is operated as a franchisee
of the General Partner. The Partnership has entered into a
Signature Inn Individual Hotel License Agreement with respect to
each of the hotels. By the terms of those agreements, the
Partnership was to pay to Signature Inns, Inc. monthly franchise
fees (i.e., royalties) equal to 4% of the gross receipts of each
of the hotels and, in addition, contribute an additional 3.5% of
gross receipts to advertising and reservation funds administered
by Signature Inns, Inc. to finance advertising programs and a
reservation system. Certain of these fees have been waived or
modified. See Item 6, Management's Discussion and Analysis of
Financial Condition and Results of Operations. The initial term
of each of the agreements is 10 years, and the Partnership has an
option to renew each of those agreements for an additional term
of 5 years. Under the terms of the agreements, the Partnership
is authorized to use the name "Signature Inn," as well as other
trademarks and logos associated with the Signature system, and
the General Partner provides various services in relation to that
system.
Each of the Partnership's hotels is managed by the General
Partner pursuant to a Management Agreement entered into between
the Partnership and the General Partner. Under the Management
Agreements, the General Partner establishes policies for the
Partnership's employees having direct responsibility for the
hotel's operation. In addition, the General Partner establishes
room rates, directs the promotional activity of the Partnership's
employees, supervises the purchase and replacement of equipment
and supplies, supervises maintenance activities and selects
vendors, suppliers and independent contractors. In addition, the
General Partner performs all bookkeeping and administrative
duties in connection with each of the hotels and administers
payments and reports to the Limited Partners.
The Partnership is required to pay to the General Partner as
compensation for its management and accounting services an amount
equal to 5% of gross receipts per month for each of the hotels.
This compensation is in addition to the cost of compensating the
Partnership's own employees and the costs of goods and services
acquired by the Partnership from independent contractors.
However, the management fee covers all of the General Partner's
overhead for which there is no separate charge.
<PAGE>
A mortgage loan of $2,730,000 at December 31, 1995, relating
to industrial revenue bonds issued by the City of Florence,
Kentucky, is secured by the Florence hotel and includes various
principal amounts which bear interest at an effective rate of
9.76% and mature serially to 2016. The bond indenture requires
the maintenance of a debt service fund of $225,000 before
distributions can be made to the partners. Withdrawals from the
fund are permitted for working capital and other operating needs.
A mortgage loan of $2,504,869 at December 31, 1995, is
secured by the Sharonville hotel and is payable in monthly
installments of $23,502, including interest at 10.0%. The
interest rate and monthly installments are adjustable at three-year
intervals to 3.75% above the three-year U.S. Treasury
Constant Maturity rate, based on maturity in 2018. The interest
rate is not to exceed 15% through maturity in 1998, or be less
than 10%.
In 1994, the General Partner restructured the note payable
to General Partner, which had a balance of $3,038,045, and
reduced the balance to $2,377,361 resulting in an extraordinary
gain from the restructuring of $660,684. The restructured note
is non-interest bearing and repayments are dependent on future
annual cash flows of the Partnership. The note matures in 2004
and requires annual principal payments equal to 50% of defined
available cach flow but not in excess of $237,736.
In the opinion of Partnership management, both hotel
properties are adequately insured.
Sharonville Office Building. In 1994, the Partnership
demolished an office building at a cost of $7,500, and the City
of Sharonville added additional parking on the former building
site which is adjacent to the new Sharonville Convention Center.
The Partnership entered into a twenty-year cost-sharing agreement
with the City for the maintenance of this parking lot which
provides for annual payments to the Partnership of $2,400,
increasing 4% each year. The agreement allows the City to
utilize the new parking area for a period of twenty years. The
Partnership has the right to terminate the agreement at any time
prior to the end of the twenty year period, with a payment to the
City of $6,000 for each of the remaining years of the contract.
T. Reserves.
Although the Partnership attempts to maintain adequate
working capital reserves, the Partnership's working capital
reserves historically have been inadequate. In the past, the
General Partner periodically has advanced funds to the
Partnership. The General Partner may be unable or unwilling to
make future advances to the Partnership.
<PAGE>
As a result of the Partnership's recurring losses from
operations and decreases in cash flows, the Partnership's audited
financial statements include Note 1 which states that failure to
reach the anticipated increased revenues could jeopardize the
Partnership's ability to meet its obligations.
U. Employees.
As of December 31, 1995, the Partnership employed
approximately 50 employees, approximately ten (10) of whom were
employed on a part-time basis.
V. Summary of Partnership Agreement.
The following is a brief summary of certain provisions of
the Partnership Agreement.
(1) Powers of the General Partner. Signature Inns, Inc.
(the "General Partner") has full, exclusive, and complete
authority and discretion in the management and control of the
business of the Partnership. (Sections 9.01 and 9.02.) Limited
Partners have no right or power to take part in the management
of, or to bind, the Partnership. (Section 14.01.)
(2) Liabilities of the Limited Partners. The Partnership
Agreement provides that no Limited Partner shall be liable for
any debts or obligations of the Partnership in excess of the
amount of his/her Capital Contribution which has not been
previously returned to him/her (Section 14.03), except that,
under applicable law, the Limited Partners may be required to
return (with interest) amounts distributed to them as a return of
their Capital Contributions if the Partnership is unable to pay
creditors who extended credit to the Partnership prior to the
date of any such return of capital. (Section 6.03.) In
addition, all undistributed Cash Available for Distribution and
proceeds of the sale or financing of Partnership Properties which
would otherwise be distributed to the Partners are available,
along with all Partnership assets, to creditors to satisfy the
debts and obligations of the Partnership until actually
distributed. (Section 14.03.)
Upon payment in full of the subscription price, Units
acquired by Limited Partners pursuant to the Partnership
Agreement become fully paid and nonassessable. (Section 6.06.)
No Limited Partner has the right to withdraw all or any portion
of his Capital Contribution until the full and complete winding
up and liquidation of the business of the Partnership, except as
otherwise provided by law. (Section 6.03.)
(3) Meetings and Voting Rights of the Limited Partners.
Meetings of the Limited Partners may be called at any time by the
General Partner or by one or more Limited Partners holding more
than 25% of the Units. Limited Partners can vote at any meeting
and the Limited Partners can act without a meeting by written
consent, provided that written consents are delivered to the
General Partner. Limited Partners are entitled to one vote for
each Unit held. (Section 14.04.)
<PAGE>
Limited Partners may, with the affirmative vote of those
holding more than 50% of the Units, take action on the following
matters: (a) the approval or disapproval of the sale or exchange
of all or substantially all of the Partnership's properties; (b)
dissolution of the Partnership; (c) removal of a General Partner
or any successor General Partner; (d) election of new General
Partner upon the removal, retirement, bankruptcy, insolvency or
death of a General Partner or any successor General Partner; and,
(e) amendment of the Partnership Agreement (Section 14.01.).
The right of the Limited Partners to amend the Partnership
Agreement, however, is limited with respect to amendments
affecting limited liability of the Limited Partners and the
rights and interests of the General Partner. (Section 14.02.)
Amendments receiving the requisite vote will be executed by the
General Partner on behalf of all Limited Partners acting pursuant
to the power of attorney contained in the Partnership Agreement.
(Section 17.01.)
(4) Reserves. The General Partner shall make an initial
provision for adequate reserves (by retention of proceeds from
the sale of Units and Cash Flow from operations) for working
capital in an amount equal to approximately 5% of the "Project
Cost" of each hotel and for replacements of furniture, fixtures,
and equipment in the amount set forth under Section 9.02(1).
(5) Books and Records. The General Partner is required to
maintain at the Partnership's principal office full and accurate
records for the Partnership, and all Limited Partners shall have
the right to inspect and examine such books and records at all
reasonable times and upon reasonable notice. (Section 13.01.)
Annual audits of the Partnership's affairs will be conducted by
such firm of independent certified public accountants as may from
time to time be engaged by the Partnership. (Section 13.02.)
(6) Limited Transferability of Units. There are a number
of restrictions on the transferability of Units, including, among
others, the following: Units may not be subdivided after
purchase; and investors transferring less than all of their Units
must transfer a number of Units such that, after the transfer,
both the transferor and the transferee shall own not less than
one Unit. A transfer fee in an amount sufficient to cover
transfer costs will be established by the General Partner, and
payment thereof shall be a condition to effectiveness of a
transfer. All transfers of Units must be pursuant to assignment
documentation satisfactory in form and substance to the General
Partner. No Unit may be sold, assigned or exchanged if the sale
of such Unit, when added to the total of all other Units sold or
exchanged within the period of 12 consecutive months prior to the
proposed date of sale or exchange, would, in the opinion of
counsel for the Partnership, result in the termination of the
Partnership under Section 708 of the Internal Revenue Code
(dealing with transfers of 50% or more of the outstanding
interests of a partnership) unless the Partnership and the
transferring holder shall have received a ruling by the Internal
Revenue Service that the proposed sale or exchange will not cause
such termination. (Section 15.03.)
<PAGE>
An Assignee of Units shall not become a substituted Limited
Partner in place of his/her assignor unless there is compliance
with, among others, the following additional conditions: (i) the
written consent of the General Partner to such substitution shall
have been obtained, which consent in the General Partner's
absolute discretion may be withheld and (ii) the Assignee shall
have expressly agreed to become a party to the Partnership
Agreement. (Section 15.04.)
(7) Assignability of General Partner's Interest. With the
consent of the General Partner and Limited Partners holding more
than 50% of the Units, the General Partner may designate a
successor or additional General Partners, in each case with such
participation in such General Partner's interest as such General
Partner and such successor or additional General Partners may
agree upon, provided that the interests of the Limited Partners
are not affected thereby.
A General Partner may withdraw from the Partnership at any
time upon 60 days prior written notice to the Limited Partners
and any other General Partner or may transfer his interest to an
entity controlling, controlled by, or under common control with
it; provided, however, that in either such event, if it is
determined that the Partnership business is to be continued
rather than dissolved and liquidated upon the happening thereof,
the withdrawal or transfer shall be effective only after receipt
by the Partnership of an opinion of legal counsel to the effect
that such withdrawal or transfer will not cause the Partnership
to be classified as an association taxable as a corporation
rather than as a partnership for federal income tax purposes.
(Section 15.01.)
(8) Dissolution and Termination. The Partnership is to
continue until April 22, 2035, but may be dissolved earlier as
provided in the Partnership Agreement or by law. (Article V.)
The Partnership Agreement provides that the withdrawal,
bankruptcy, insolvency, death, or removal by the Limited Partners
of the General Partner will dissolve the Partnership unless the
General Partner, or, if there is no remaining General Partner,
the Limited Partners, by a majority vote in interest, elect to
continue the business of the Partnership. (Section 18.01.) The
Limited Partners also can dissolve the Partnership by a vote of a
majority in interest without removing the General Partner.
(Section 18.01.) In the event the Partnership is dissolved, the
assets of the Partnership shall be liquidated as promptly as is
consistent with obtaining the fair market value thereof; the
proceeds therefrom, together with assets distributed in kind,
shall be distributed first to creditors to satisfy debts and
liabilities of the Partnership other than loans or advances made
by Partners to the Partnership, then to the establishment of
reserves deemed reasonably necessary to satisfy contingent or
unforeseen liabilities or obligations of the Partnership or of
the General Partner arising out of or in connection with the
Partnership, then to the repayment of loans or advances made by
any of the Partners to the Partnership, with the balance, if any,
to be distributed among the Partners as provided in the
Partnership Agreement (Section 19.01. and "Distribution
Policies") and upon completion of the foregoing the Partnership
shall be terminated.
<PAGE>
(9) Distribution Policies.
(a) Time of Distributions and Allocation Among Limited
Partners. The Partnership makes annual distributions of all Cash
Available for Distribution, if any. Net proceeds of sale of
Partnership Properties (and of refinancing thereof, where the
proceeds of such refinancing are not to be reinvested in the
acquisition of additional Properties) will be distributed as soon
as possible following their receipt.
The record date for determining the Limited Partners
entitled to participate in a distribution shall be the last day
of the calendar month preceding the date of distributions.
Each distribution will be allocated to the Limited Partners
in the ratio which the number of Units owned by each of them
bears to the total number of Units outstanding, subject to
adjustment with respect to Units issued by the Partnership during
the fiscal year.
(b) Allocations and Distributions to the General
Partner and Limited Partners.
Allocation of Income and Loss and Distributions of
Cash. The following table sets forth (1) the allocation of
Partnership income, gains, losses, deductions, and credits
between the General Partner and the Limited Partners (as a group)
and (2) the entitlements of the General Partner and the Limited
Partners (as a group) to cash distributions. The information set
forth with respect to each category, both before and after
"Reallocation Date."
With respect to distributions of Cash Available for
Distribution under Section 8.01 of the Agreement, "Reallocation
Date" refers to the date on which the Limited Partners have
received an amount equal to 150% of their Capital Contributions
as a result of the distribution to them of Cash Available for
Distribution under Section 8.01 of the Agreement. With respect
to distribution of Net Proceeds under Section 8.02, "Reallocation
Date" refers to the date on which the Limited Partners have
received an amount equal to 100% of their Capital Contributions
as a result of the distribution to them of Net Proceeds under
Section 8.02 of the Agreement.
<PAGE>
<TABLE>
<CAPTION>
General Limited General Limited
Partner % Partner % Partner % Partner %
Before Before After After
Item Reallocation Reallocation Reallocation Reallocation
- ---- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Income, Gains, 25% 75% 50% 50%
Losses, Deduc-
tions and Credits
Cash Available 25% 75% 50% 50%
for Distribution
(From Operations)
Net Proceeds From 25% 75% 50% 50%
Sales, Financing
and Refinancing
of Properties
</TABLE>
(c) Allocation of Net Income and Net Losses Among the
Limited Partners. Net income and net loss shall be allocated
among the Limited Partners in proportion to the number of Units
owned by each of them as of the last day of the year, subject to
adjustment with respect to Units issued by the Partnership or
transferred by Partners during the year.
(10) Reports to Limited Partners.
Within 75 days after the end of the fiscal year (December
31) of the Partnership, the General Partner will deliver to each
Limited Partner such information as is necessary for the
preparation by each Limited Partner of his/her federal income tax
return and state income or other tax returns with regard to
jurisdictions in which properties are located.
Within 90 days after the end of each Partnership fiscal
year, the General Partner will deliver to each Limited Partner an
annual report which will include audited financial statements of
the Partnership prepared in accordance with generally accepted
accounting principles. Such financial statements will include a
profit and loss statement, a balance sheet, a statement of cash
flows, and a statement of changes in Partners' capital. The
annual report for each year will report on the Partnership's
activities for that year, set forth the compensation paid to the
General Partner and its Affiliates with a statement of the
services performed in consideration therefor, and contain such
other information as is deemed reasonably necessary by the
General Partner to advise the Limited Partners of the affairs of
the Partnership.
Each Limited Partner will be furnished within 60 days after
the end of the first six-month period of each Partnership year,
an unaudited semi-annual financial report for that period
including a profit and loss statement, a balance sheet, and a
statement of cash flows. The foregoing reports for any period in
which fees are paid to the General Partner or its Affiliates for
services shall set forth the fees paid and the services rendered.
<PAGE>
W. The General Partner's Past Financial Difficulties,
Restructurings, Refinancings and Capital Appreciation Fee.
In October, 1989, the General Partner's primary development
lender and lead bank on its line of credit refused to renew on
normal terms the General Partner's line of credit, which had
previously been routinely renewed on an annual basis. In March
1990, the bank refused to further renew the line of credit at
all. The Bank's refusal to renew the line of credit caused the
General Partner to terminate two on-going public offerings of
affiliated limited partnership interests and prevented the
General Partner from structuring and syndicating any such
offerings after 1989. As a result, nine hotels in their "start-up" phase
were not adequately financed and their operation caused
the General Partner to exhaust substantially all of its cash
resources and historically adequate working capital reserves. In
order to protect the General Partner's assets from threatened
action by the lenders, and to provide sufficient time to
structure alternative financing arrangements, the General Partner
initiated a Chapter 11 bankruptcy proceeding in April, 1990. As
the debtor-in-possession, the General Partner continued in
possession and control of its nine hotel properties and other
assets.
In March 1991, a Court order and judgment were entered
confirming the General Partner's Plan of Reorganization
("Confirmed Plan"). The General Partner made the required
payments under the Confirmed Plan throughout the balance of 1991.
During the latter part of 1991, occupancy and average daily room
rate levels for the nine General Partner-owned hotels, as a
group, were substantially lower than the levels which had been
projected as a basis of the General Partner's Confirmed Plan. As
a result, the General Partner's operating results were
significantly adversely affected. The cash flow from the General
Partner's operations, together with the cash balances on hand at
the confirmation of the Confirmed Plan, were not sufficient to
allow the General Partner to continue to service its indebtedness
under the terms of the Confirmed Plan. In January 1992, the
General Partner suspended debt service payments to four banks,
resulting in material defaults under the Confirmed Plan.
During 1992 and 1993, the General Partner transferred
ownership of a total of six General Partner-owned hotels to
construction mortgage lenders in lieu of foreclosure and in full
release and discharge of the mortgage indebtedness owing by the
General Partner on those hotels. In addition, three previously
affiliate-owned hotels were also reconveyed to the respective
mortgage lenders. As a result, during those two years, the
number of Signature Inn hotels operating in the Signature Inn
chain decreased from 32 hotels to 23 hotels.
<PAGE>
In December 1992, the General Partner and its lead bank
entered into a comprehensive Restructure Agreement, pursuant to
which indebtedness owing by the General Partner in the aggregate
principal amount of $35,242,000 was significantly modified and
restructured and warrants for preferred stock were issued to the
bank (the "Restructuring"). In November 1993, the General
Partner entered into an Addendum to Restructure Agreement (the
"Addendum"). Under the terms of the Addendum, the General
Partner's primary bank granted to the General Partner the right
and option, exercisable not later than December 31, 1993, to pay
$6,000,000 in cash in full settlement, satisfaction, release and
discharge of all indebtedness and other obligations owing by the
General Partner under the Restructure Agreement, including the
warrant obligations under the Restructuring. As a condition to
the option, the General Partner was required to convey to a to-be-formed
affiliated limited partnership (the "Partnership") the
General Partner's Normal and Peoria hotels, thereby eliminating
the mortgage indebtedness owing on those hotels.
In December 1993, the General Partner, with Banc One Capital
Corporation of Columbus, Ohio ("BOCC"), acting as financial
advisor, completed the settlement, satisfaction, release and
discharge of all obligations under the Restructuring (the
"Refinancing"). The necessary funds required by the Refinancing
were provided by the following sources:
(a) Bank One, Indianapolis, N.A. ("Bank One") provided
a "senior" credit facility in the principal amount of
$2,500,000, with an initial maturity date of December 31,
1995, renewable annually thereafter on May 31 of each year
for a two-year term.
(b) Banc One Capital Partners II Limited Partnership
("BOCP II") provided a variable rate subordinated loan in
the principal amount of $1,800,000, with a final maturity
date of December 16, 1998 ("the "Subordinated Loan").
(c) The General Partner provided approximately
$1,200,000, which represented the amount which the General
Partner, as seller, realized upon the sale of its Normal and
Peoria Hotel Properties to Peoria/Normal Signature Limited
Partnership.
(d) The General Partner also provided approximately
$1,000,000 from its general, unrestricted corporate cash
balances.
The gain to the General Partner from debt extinguishment in
connection with the Refinancing eliminated entirely the General
Partner's shareholders' deficit and restored a positive
shareholders' equity.
<PAGE>
In connection with the Subordinated Loan, the General
Partner agreed to pay to BOCP II a "Capital Appreciation Fee"
equal to 25% of the value of the General Partner, measured
according to three alternative calculations, not earlier than 36
months nor later than 72 months after December 16, 1993. In
August, 1995, the General Partner entered into a Repayment
Agreement with BOCP II pursuant to which (a) the unpaid principal
balance of the Subordinated Loan was repaid in full, together
with all accrued interest thereon, and (b) the General Partner
paid, and BOCP II accepted, a payment of $900,000 in full
satisfaction of the General Partner's Capital Appreciation Fee
obligation, subject to adjustment to the original terms of the
Capital Appreciation Fee in the event of a Private Sale of the
General Partner, as defined in the original fee agreement, on or
before December 16, 1996.
In connection with the BOCP II subordinated debt financing,
BOCP II required the General Partner's officers to commit to
invest at least $500,000 in the General Partner's Common Stock.
In order to facilitate such investment, allow the other
shareholders an opportunity to avoid possible dilution of their
interests in the General Partner and to raise additional equity
for the General Partner, the General Partner filed a Registration
Statement with the Securities and Exchange Commission on April
12, 1994, pursuant to which the General Partner's existing
shareholders were issued non-transferrable rights to purchase an
additional five (5) shares of the General Partner's Common Stock
for each one (1) share currently held at a purchase price of
twenty cents ($.20) per share. In addition to the investment by
Management, a total of 1,808,520 shares of Common Stock were
issued, for an aggregate purchase price of $361,704, pursuant to
the rights offering.
X. Certain Affiliated Partnerships' Operating Losses.
A number of the General Partner's affiliated partnerships
have experienced financial difficulties in varying degrees, in
most cases principally resulting from operating losses and cash
flow deficits experienced by certain hotels owned by such
partnerships.
Signature XVI Ltd., the owner of a Signature Inn hotel in
Lexington, Kentucky, filed a voluntary petition under Chapter 11
of the Bankruptcy Code on September 26, 1991. Because Signature
XVI Ltd. was not able to secure replacement financing, the
mortgage lender on the Lexington property obtained title to the
Lexington hotel in July, 1992. The Signature XVI Ltd.
partnership was thereafter terminated and dissolved.
Signature XXI Ltd., which owned Signature Inn hotels in
Bettendorf, Iowa, and Auburn Hills, Michigan, filed a voluntary
petition under Chapter 11 of the Bankruptcy Code on July 26,
1991. A foreclosure and sale of the Auburn Hills property took
place in February 1992, with the mortgage holder taking title to
the Auburn Hills property. The Signature XXI Ltd. Plan of
Reorganization was confirmed by the Bankruptcy Court on November
2, 1992 and provided for the continuation of the Partnership and
its operation of the Bettendorf hotel. The Bettendorf mortgage
loan was restructured, retroactive to January 1, 1992, into three
non-recourse replacement notes maturing December, 1995, with an
option to extend the maturity to December, 1997.
Defaults have also existed with respect to hotel financings
involving Signature XI Ltd.'s Dayton, Ohio, hotel project and
Signature XVII Ltd.'s Indianapolis, Indiana, hotel project. The
defaults with respect to those hotels were cured under
restructured financing arrangements with the Partnership's
lenders completed in 1994.
<PAGE>
Item 2. Description of Properties. A description of the
location and general character of the Partnership's hotels and
related facilities and other property is set forth under Item 1.
Item 3. Legal Proceedings. With the exception of the prior
Chapter 11 bankruptcy proceedings of Signature Inns, Inc. and the
prior Chapter 11 bankruptcy proceedings of Signature XVI Ltd. and
Signature XXI Ltd., affiliates of the Registrant, described
earlier, all of which matters have been resolved, neither the
Registrant nor any of its subsidiaries nor any of its affiliates,
is or was a party to, nor is their property the subject of, any
material pending legal, administrative, judicial, or similar
proceeding. The Registrant and certain of its affiliated limited
partnerships are involved, from time to time, in routine
litigation incidental to their businesses. There are no
proceedings to which any director, officer, nominee or affiliate
of the Registrant or its subsidiaries or affiliates is a party
adverse to the Registrant or its subsidiaries or affiliates or
has a material adverse interest to the Registrant or its
subsidiaries or affiliates.
Item 4. Submission of Matters to a Vote of Security
Holders. No matter was submitted to a vote of the security
holders of the Registrant during the fourth quarter of the fiscal
year covered by this Form 10-KSB Report.
PART II
-------
Item 5. Market for the Registrant's Equity and Related
Equity Holder Matters. The Registrant's common equity consists
of Units of limited partnership interest in the Partnership.
There is only one class of Units, and all Units have the same
rights and the same interests in income, loss, distributions and
capital of the Partnership. Each Unit represents a total
required capital contribution of $10,000. Units are not subject
to assessment for additional contributions. Holders of the Units
possess certain limited voting rights (with respect to those
matters which are submitted to a vote of the Limited Partners)
and rights to certain distributions. Such voting and
distribution rights will be based upon the number of Units owned
by each Limited Partner. The Partnership Agreement contains a
number of restrictions on the transferability of the Units. The
General Partner does not have the right and is not obligated to
redeem or repurchase the Units, and the Partnership Agreement
prohibits the holders of the Units from withdrawing their
respective capital contributions.
The Registrant's Units are not listed on any securities
exchange and are not subject to any quotations under the "NASDAQ"
system. The Units are not actively traded in any established
public trading market. Units are expected to be transferable, if
at all, only in privately negotiated transactions. Accordingly,
the Registrant is unable to furnish any information with respect
to ranges of high and low bid quotations for the Units during the
past two years.
<PAGE>
The following table sets forth the number of Units
outstanding and the approximate number of holders or record of
the Units as of the date of this report:
Number of Number of
Outstanding Units Holders of Record
- ----------------- -----------------
364 412
Item 6. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
Results of Operations.
Certain operating and financial data for the years ended
December 31, 1995, 1994 and 1993 is as follows:
<TABLE>
<CAPTION>
Occupancy Average Daily Rate
------------------ ----------------------
1995 1994 1993 1995 1994 1993
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Florence 67.3% 66.2% 63.5% $51.74 $48.94 $46.87
Sharonville 55.6% 56.8% 53.5% $54.59 $53.40 $50.43
</TABLE>
<TABLE>
<CAPTION>
1995 1994
1995 1994 1993 vs 1994 vs 1993
---- ---- ---- ------- -------
<S> <C> <C> <C> <C> <C>
Room & Other Hotel
Revenues $3,101,641 $3,011,365 $2,729,897 $90,276 $281,468
Interest Income $16,086 $10,452 $3,216 $5,634 $7,236
Operating & Related
Expenses $2,162,901 $2,069,709 $1,957,663 $93,192 $112,046
Interest Expense $560,145 $562,403 $769,261 ($2,258) ($206,858)
Depreciation and
Amortization $304,398 $374,993 $423,740 ($70,595) ($48,747)
Income (loss) before
extraordinary
item $90,283 $14,712 ($417,551) $75,571 $432,263
Net Income (loss) $90,283 $675,396 ($417,551) ($585,113) $1,092,947
</TABLE>
<PAGE>
Room and other hotel revenues of the two hotels increased in
1995 and 1994 due to increases in average room rates at the two
hotels for each of the last two years and an increase in
occupancy in 1994 compared to 1993.
Interest income in 1995 and 1994 increased as there were
higher yields on more investable cash during 1995 and 1994.
Hotel operations and salaries and benefits represent all of the
operational and administrative costs of operating the hotels,
including all payroll, supply, utilities, maintenance and
miscellaneous expenses. For 1995, hotel operations and salaries
and benefits increased primarily due to increased employee
related and maintenance costs in 1995 compared to 1994. In 1994,
hotel operations increased due to increased costs associated with
the increase in rooms sold and maintenance costs of new computer
systems. In 1994, salaries and benefits increased due to the
increased number of rooms sold during the year.
In 1994, the Partnership demolished an office building at a
cost of $7,500 and added additional parking adjacent to the new
Sharonville Convention Center which opened in early 1994. The
twenty-year cost sharing agreement entered into with the City of
Sharonville provides for the maintenance of this parking lot and
allows the City to utilize the new parking area.
Management and franchise fees increased in both 1995 and
1994 due to the increase in room and other hotel revenues for
1995 and 1994. These fees (9% of revenues, as defined) represent
amounts paid to Signature Inns, Inc., the general partner of the
Partnership, for property management, accounting services and
franchise fees. Partnership contributions to a cooperative
advertising and reservation fund administered by the General
Partner (3.5% of revenues, as defined) increased due to the
increase in room and other hotel revenues for 1995 and 1994.
Interest expense represents interest on hotel mortgage
loans, general partner advances and capitalized equipment lease
obligations. During 1995, interest expense decreased due to the
scheduled amortization reduction of the notes. During 1994,
interest expense decreased primarily due to the restructuring of
the general partner note.
A partnership obligation owed to the general partner was
restructured in June 1994. The note had a balance of $3,038,045;
the balance was reduced to $2,377,361 resulting in an
extraordinary gain from the restructuring of $660,684.
LIQUIDITY AND CAPITAL RESOURCES
The general partner believes that cash generated from the
operation of the two hotels, along with existing cash balances,
will provide adequate liquidity for the Partnership to meet its
operating needs during the next twelve months.
<PAGE>
Item 7. Financial Statements. The balance sheets of the
Registrant as of December 31, 1995 and 1994, and the related
statements of operations, partners' equity and statement of cash
flows for the years ended December 31, 1995 and 1994, together
with the independent auditors' report thereon, which statements
meet the requirements of Regulation S-B, are attached as an
exhibit to this report.
Item 8. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure. None.
PART III
--------
Item 9. Directors, Executive Officers, Promoters and
Control Persons. The names, ages, positions and backgrounds of
each officer, director, promoter and control persons of Signature
Inns, Inc., the General Partner of the Partnership are as
follows:
JOHN D. BONTREGER, 47 President, Chief Executive Officer
and Chairman of the Board
Mr. Bontreger has served as President, Chief Executive
Officer and Chairman of the Board of Signature Inns, Inc. since
the General Partner's inception on March 31, 1978.
DAVID R. MILLER, 54 Secretary, Executive Director of
Sales and Marketing and Director
Mr. Miller has been employed by Signature Inns, Inc. since
August 1978 and has served as the Secretary (and Treasurer until
May 1986) of the General Partner since September, 1978. Since
June 1984, he has been President of Signature Securities
Corporation. Since 1990, Mr. Miller has been the Executive
Director of Marketing responsible for hotel room sales programs
and the central reservation system.
MARK D. CARNEY, 39 Vice President Finance, Chief
Financial Officer and Director
Mr. Carney has been employed by Signature Inns, Inc. since
September 1992 as Vice-President Finance and Chief Financial
Officer. Mr. Carney was previously employed with the public
accounting firm KPMG Peat Marwick in its real estate, hospitality
and financial institution practices. He received his CPA
certification in 1982.
BO HAGOOD, 46 Vice President Hotel Operations and
Director
Mr. Hagood has been employed by Signature Inns, Inc. since
December 1980 starting as General Manager. In January 1984, he
was promoted to Director of Hotel Operations and then to Vice
President Hotel Operations in 1987. Mr. Hagood has been in the
hospitality industry for over 20 years. Prior to Signature
Inns, Mr. Hagood managed several hotels for national chains.
<PAGE>
MARTIN D. BREW, 35 Treasurer and Controller
Mr. Brew has been employed by Signature Inns, Inc. since
April 1986. In December 1987, Mr. Brew assumed the position of
Controller and additionally, in April 1992, he began serving as
Treasurer. Prior to his employment with Signature Inns, Mr. Brew
worked four years with KPMG Peat Marwick. He received his CPA
certification in 1985.
ORUS E. WEAVER, 72 Director
Mr. Weaver has been an independent life insurance broker
since 1981 and previously assisted in the sale of securities of
Signature Inns, Inc. in various capacities. Mr. Weaver has been
a member of the National Association of Life Underwriters for
almost twenty years.
GEORGE A. MORTON, 59 Director
Mr. Morton has been part owner of Morton Farms, Inc. since
1962, and serves as Vice President and Secretary of that Company.
From April 1987 to January 1989, Mr. Morton served as Deputy
Commissioner of Agriculture for the State of Indiana. He served
as the Indiana Director of Farmers Home Administration from 1989
to 1993.
RICHARD E. SHANK, 63 Director
Mr. Shank has been self-employed in the real estate business
since 1961. Mr. Shank was an elected representative in the
Indiana General Assembly for 21 years, and was a State Senator
from 1976 to 1987. He served as Executive Director of the
Indiana Professional Licensing Agency during 1988.
RICHARD L RUSSELL, 60 Director
Mr. Russell has been the Executive Director, Direct Regions
of the National Retail Hardware Association, and has been
involved in the hardware industry for nearly thirty years. He
has also served as President or director of several community and
civic organizations.
STEPHEN M. HUSE, 53 Director
Mr. Huse has been President and Chief Executive Officer,
Huse Food Group, Inc., in Bloomington, Indiana, since 1986. Mr.
Huse is also a director of Marsh Supermarkets, Inc., and a member
of the Advisory Board of Society National Bank, Central Indiana
District, Indianapolis, Indiana.
<PAGE>
Item 10. Executive Compensation. Not applicable. For a
description and listing of all fees and reimbursements paid by
the Partnership to its General Partner, see Note (3) of Notes to
the Financial Statements of the Partnership.
Item 11. Security Ownership of Certain Beneficial Owners
and Management. The General Partner owns 10 Units of limited
partnership interest in the Partnership. The General Partner's
general partnership interest in the Partnership is described
under Item 1.
Item 12. Certain Relationships and Related Transactions.
There was no transaction during the Registrant's last fiscal year
of a kind described in Item 404 of Regulation S-B to which the
Registrant was a party or in which the persons described in Item
404 had a direct or indirect material interest, nor did any
relationship of a kind described in Item 404 exists during the
Registrant's last fiscal year. No loans were made by the
Registrant to its General Partner or any officer, director or
affiliate of its General Partner.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Exchange Act of 1934, the Registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly
authorized.
SIGNATURE X LTD. LIMITED
PARTNERSHIP
By____________________________
John D. Bontreger,
President, Chairman of the
Board and Chief Executive
Officer of Signature Inns,
Inc., its General Partner
ATTEST:
_____________________________
David R. Miller, Secretary
of Signature Inns, Inc., its
General Partner
Date: March 25, 1996
Pursuant to the requirements of the Exchange Act of 1934,
this report has been signed below by the following persons on
behalf of the Registrant and in the capacities and on the dates
indicated.
Date: March 25, 1996 ______________________________
John D. Bontreger, President
Chairman of the Board and
Chief Executive Officer and
Director of Signature Inns,
Inc., its General Partner
Date: March 25, 1996 ______________________________
David R. Miller, Secretary and
Director of Signature Inns,
Inc., its General Partner
<PAGE>
Date: March 25, 1996 ______________________________
Mark D. Carney, Vice President
Finance, Chief Financial
Officer and Director of
Signature Inns, Inc., its
General Partner
Date: March 25, 1996 ______________________________
Bo L. Hagood, Vice President -
Hotel Operations and Director
of Signature Inns, Inc., its
General Partner
Date: March 25, 1996 _____________________________
Martin D. Brew, Treasurer and
Controller of Signature Inns,
Inc., its General Partner
Date: March 25, 1996 _____________________________
George A. Morton, Director of
Signature Inns, Inc., its
General Partner
Date: March 25, 1996 _____________________________
Stephen M. Huse, Director of
Signature Inns, Inc., its
General Partner
Date: March 25, 1996 ______________________________
Richard L. Russell, Director
of Signature Inns, Inc., its
General Partner
Date: March 25, 1996 ______________________________
Richard E. Shank, Director of
Signature Inns, Inc., its
General Partner
Date: March 25, 1996 ______________________________
Orus W. Weaver, Director of
Signature Inns, Inc., General
Partner
<PAGE>
Item 13. Exhibits and Reports on Form 8-K.
(a) EXHIBIT INDEX
Title of Exhibit Reference
Plan of Acquisition,
Reorganization, etc. Not applicable
Partnership Agreement and
Certificate Incorporated by reference to
S-1 Registration Statement
Instruments Defining Rights
of Security Holders Incorporated by reference to
S-1 Registration Statement
Voting Trust Agreement Not applicable
Material Contracts Incorporated by reference to
Registrant's 1993 Form 10-KSB
Statement Regarding Computation
of Earnings Per Share Not applicable
Annual or Quarterly Reports,
Form 10-QSB Not applicable
Letter on Change in Certifying
Accounting Not applicable
Letter on Change in Accounting
Principals Not applicable
Subsidiaries of the Registrant Not applicable
Published Report Regarding
Matters Submitted to Vote Not applicable
Power of Attorney Not applicable
1995 Annual Report of
Signature X Ltd. Limited
Partnership Exhibit A, page 31
(b) No reports on Form 8-K were filed by the Registrant
during the last quarter of the period covered by this report.
<PAGE>
SIGNATURE X LTD. LIMITED PARTNERSHIP
1995 FORM 10-KSB ANNUAL REPORT
Index to Financial Statements
Submitted in Response to Requirements of
Items 7 and 13 of Form 10-KSB
Page
Independent Auditors' Report on Financial Statements 31
Balance Sheets--December 31, 1995 and 1994 32
Statement of Operations--Years ended December 31,
1995 and 1994 33
Statements of Partners' Equity (Deficit)--Years Ended
December 31, 1995 and 1994 34
Statements of Cash Flows--
Years ended December 31, 1995 and 1994 35
Notes to Financial Statements--
December 31, 1995 and 1994 36-39
<PAGE>
Exhibit A
SIGNATURE X LTD.
LIMITED PARTNERSHIP
Annual Report
December 31, 1995 and 1994
(With Independent Auditors' Report Thereon)
Independent Auditors' Report
The Partners Signature X Ltd. Limited Partnership:
We have audited the accompanying balance sheets of Signature X
Ltd. Limited Partnership as of December 31, 1995 and 1994, and
the related statements of operations, partners' equity (deficit),
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 Signature X Ltd. Limited Partnership as of December 31, 1995
and 1994, and the results of its operations and its cash flows
for the years then ended in conformity with generally accepted
accounting principles.
/s/ KPMG Peat Marwick LLP
Indianapolis, Indiana
February 2, 1996
<PAGE>
<TABLE>
SIGNATURE X LTD. LIMITED PARTNERSHIP
Balance Sheets
December 31, 1995 and 1994
<CAPTION>
Assets 1995 1994
---- ----
<S> <C> <C>
Current assets:
Cash and short-term cash investments $ 308,404 208,858
Investments held by trustee 1,463 3,148
Cash and cash equivalents 309,867 212,006
Accounts receivable 47,290 52,702
Other current assets 74,028 99,944
------- -------
Total current assets 431,185 364,652
------- -------
Property and equipment:
Land 1,693,614 1,693,614
Land improvements 384,347 384,347
Buildings 6,846,694 6,846,694
Furniture and equipment 1,875,612 1,711,625
--------- ---------
10,800,267 10,636,280
Less accumulated depreciation 3,050,739 2,803,658
---------- ----------
Net property and equipment 7,749,528 7,832,622
Furniture and equipment reserves 87,841 90,524
Deferred costs, net of accumulated amortization
of $296,889 and $281,181 122,687 138,395
--------- ---------
$8,391,241 8,426,193
========= =========
Liabilities and Partners' Equity
Current liabilities:
Current portion of long-term debt 104,573 89,044
(note 2)
Accounts payable 25,090 24,554
Accrued payroll and related taxes 34,290 31,456
State and local taxes 57,582 55,591
Accrued interest (note 3) 22,454 23,421
------- -------
Total current liabilities 243,989 224,066
Long-term debt, less current portion 5,197,742 5,283,835
(note 2)
Note payable to general partner (note 3) 2,377,361 2,377,361
Advances from general partner (note 3) 200,000 259,065
--------- ---------
Total liabilities 8,019,092 8,144,327
Partners' equity 372,149 281,866
--------- ---------
$ 8,391,241 8,426,193
=========== =========
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
SIGNATURE X LTD. LIMITED PARTNERSHIP
Statements of Operations
Years ended December 31, 1995 and 1994
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Revenue:
Guest room revenue $ 3,014,783 2,908,447
Other hotel revenue 86,858 102,918
Interest 16,086 10,452
--------- ---------
3,117,727 3,021,817
Costs and expenses:
Hotel operations 981,443 961,023
Salaries and benefits 797,081 730,297
Management and franchise fees 278,020 269,523
(note 3)
Advertising and reservations 108,119 104,815
(note 3)
Interest (note 3) 560,145 562,403
Depreciation and amortization 304,398 374,993
Loss (gain) on disposal of equipment ( 1,762) 4,051
-------- -------
3,027,444 3,007,105
Income before extraordinary gain 90,283 14,712
--------- ---------
Extraordinary gain from debt
restructuring (note 3) - 660,684
--------- ---------
Net income 90,283 675,396
General partner's interest 13,542 101,309
--------- ---------
Limited partners' interest $ 76,741 574,087
Per limited partner unit:
Income before extraordinary gain 211 34
Extraordinary gain - 1,543
--------- ---------
Net income $ 211 1,577
========= =========
Number of limited partner units outstanding 364 364
========= =========
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
SIGNATURE X LTD. LIMITED PARTNERSHIP
Statements of Partners' Equity (Deficit)
Years ended December 31, 1995 and 1994
<CAPTION>
General Limited
Partner Partners Total
------- -------- -----
<S> <C> <C> <C>
Balance at December 31, 1993 $(59,412) (334,118) (393,530)
Net income 101,309 574,087 675,396
-------- -------- --------
Balance at December 31, 1994 41,897 239,969 281,866
Net income 13,542 76,741 90,283
-------- -------- --------
Balance at December 31, 1995 $ 55,439 316,710 372,149
======== ======== ========
Accumulated balances:
Capital contributions 404,445 3,640,000 4,044,445
Offering expenses - (455,000) (455,000)
Net loss (349,006) (2,868,290) (3,217,296)
-------- ---------- ----------
Balance at December 31, 1995 $ 55,439 316,710 372,149
======== ========== ==========
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
SIGNATURE X LTD. LIMITED PARTNERSHIP
Statements of Cash Flows
Years ended December 31, 1995 and 1994
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $ 90,283 675,396
Items which do not use cash:
Depreciation of property and equipment 288,690 359,285
Amortization of deferred costs 15,708 15,708
Extraordinary gain from debt restructuring - (660,684)
Loss (gain) on disposal of equipment (1,762) 4,051
Accrued revenue and expenses, net 35,722 (77,915)
------- --------
Net cash provided by
operating activities 428,641 315,841
------- -------
Cash flows from investing activities:
Additions to furniture and
equipment reserves, net (147,886) (81,447)
Other additions to property and equipment (59,666) (7,132)
Proceeds from disposal of equipment 6,401 -
-------- -------
Net cash used in investing activities (201,151) (88,579)
-------- -------
Cash flows from financing activities:
Payments on long-term debt (89,507) (120,290)
Proceeds from installment note 18,943 -
Repayment of advances from general partne r(59,065) -
-------- --------
Net cash used in financing activities (129,629) (120,290)
-------- --------
Increase in cash and cash equivalents 97,861 106,972
Cash and cash equivalents at beginning 212,006 105,034
of year ------- -------
Cash and cash equivalents at end of year $ 309,867 212,006
======== =======
Additional disclosures:
Interest paid $ 561,112 574,399
======== =======
Additions to property and equipment from
furniture and equipment reserves $ 150,569 113,016
======== =======
See accompanying notes to financial statements.
</TABLE>
<PAGE>
SIGNATURE X LTD. LIMITED PARTNERSHIP
Notes to Financial Statements
December 31, 1995 and 1994
(1) Organization and Significant Accounting Policies
Organization
Signature X Ltd. Limited Partnership (the Partnership) was
organized on September 19, 1986 to operate as a franchisee of
Signature Inns, Inc. The Partnership completed construction and
began operating Signature Inn hotels in Florence, Kentucky in
July 1987 and in Sharonville, Ohio in September 1987.
Signature Inns, Inc., the general partner, is responsible
for the overall management and operation of the Partnership and
presently receives 15% of partner distributions, which is to
increase to 30% if the limited partners receive cumulative cash
distributions equal to their original capital contribution plus a
10% annual return. The general partner also owns 10 of the
limited partner units.
Property and Equipment
Property and equipment are recorded at cost and include
assets leased under noncancelable agreements and construction
loan interest and fees. Depreciation is provided on the
straight-line basis over the estimated useful lives of the
related assets.
In 1994, the Partnership demolished an office building at a
cost of $7,500, and the City of Sharonville added additional
parking on the former building site which is adjacent to the new
Sharonville Convention Center. The Partnership entered into a
twenty-year cost-sharing agreement with the City for the
maintenance of the parking lot which provides for annual payments
to the Partnership of $2,400, increasing 4% each year. The
agreement allows the City to utilize the new parking area for a
period of twenty years. The Partnership has the right to
terminate the agreement at any time prior to the end of the
twenty-year period, with a payment to the City of $6,000 for each
of the remaining years of the contract.
Deferred Costs
Fees and other costs incurred in financing the hotels are
amortized on the straight-line basis over the life of the related
financing.
Cash and Cash Equivalents
Cash and cash equivalents represent cash on deposit with
banks and highly liquid short-term cash investments with
maturities of three months or less.
<PAGE>
Furniture and Equipment Reserves
Cash reserves for refurbishings, replacements and major
repair contingencies are established at amounts equal to 4% of
defined gross receipts. Related expenditures are disbursed from
this account. In 1995, an additional deposit of $20,000 was made
to the reserve account.
Income Taxes
As a partnership, the allocated share of taxable income or
loss is includable in the income tax returns of the partners;
accordingly, income taxes are not reflected in the Partnership's
financial statements.
Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions relating to the reporting of
assets and liabilities and the disclosure of contingent assets
and liabilities. Actual results could differ from those
estimates.
With anticipated increased revenues, the general partner
estimates that the Partnership will be able to generate
sufficient levels of cash flows from operations to meet hotel
operating expenses and mortgage debt service obligations.
However, failure to reach these levels could jeopardize the
Partnership's ability to meet its obligations. The accompanying
financial statements do not include any adjustments that might
arise from the outcome of this uncertainty.
Financial Instruments
The carrying amounts of the long-term debt secured by the
Sharonville hotel of $2,504,369 and advances from Signature Inns,
Inc. of $200,000 approximate fair value because the interest
rates on these instruments change with market interest rates.
The fair value of the Partnership's long-term debt secured by the
Florence hotel of $2,730,000 is estimated to be $2,869,000 by
discounting the future cash flow payments at rates which are
believed to be currently available to the Partnership for similar
debt instruments of comparable maturities. The carrying amounts
of all other financial instruments approximate fair value because
of short-term maturity of these items.
(2) Long-term Debt
Signature Inn Florence
A mortgage loan of $2,730,000 at December 31, 1995 relating
to industrial revenue bonds issued by the City of Florence,
Kentucky is secured by the Florence hotel and includes various
principal amounts which bear interest at an effective rate of
9.76% and mature serially to 2016. The bond indenture requires
the maintenance of a debt service fund of $225,000 before
distributions can be made to the partners. Withdrawals from the
fund are permitted for working capital and other operating needs.
<PAGE>
Signature Inn Sharonville
A mortgage loan of $2,504,869 at December 31, 1995 is
secured by the Sharonville hotel and is payable in monthly
installments of $23,502, including interest at 10.0%. The
interest rate and monthly installments are adjustable at
three-year intervals to 3.75% above the three-year U.S. Treasury
Constant Maturity rate, based on maturity in 2018. The interest
rate is not to exceed 15% through maturity in 1998, or be less
than 10%.
General
Capitalized lease obligations of $48,968 at December 31,
1995 are due in monthly installments, including imputed interest
at rates which range from 13.96% to 14.43%, through maturity in
1998. The lease payments for each of the next three years range
from $4,353 to $26,121 and aggregate $56,595 over the remaining
terms of the leases, including imputed interest of $7,627.
Furniture and equipment includes $264,892 of leased assets, and
related accumulated depreciation amounted to $242,071 and
$228,028 at December 31, 1995 and 1994, respectively.
Included in long-term debt at December 31, 1995 is an
installment note of $18,479 which is secured by a vehicle and is
due in monthly installments of $598, including interest at 8.5%,
through December 1998.
The annual aggregate maturities of long-term debt over the
next five years are $104,573 in 1996, $116,688 in 1997,
$2,501,055 in 1998, $60,000 in 1999 and $65,000 in 2000.
(3) Signature Inns, Inc.
The general partner receives 9.0% of defined gross revenue
for hotel management and franchise fees and $7,000 for annual
partnership accounting and related services. The Partnership
contributes 3.5% of defined gross revenue to a cooperative
advertising and reservation fund administered by the general
partner.
In 1994, the general partner restructured the note payable
to general partner, which had a balance of $3,038,045, and
reduced the balance to $2,377,361 resulting in an extraordinary
gain from the restructuring of $660,684. The restructured note
is non-interest bearing and repayments are dependent on future
annual cash flows of the Partnership. The note matures in 2004
and requires annual principal payments equal to 50% of defined
available cash flow but not in excess of $237,736.
The general partner's advances bear interest at the prime
rate plus 1.0% adjusted quarterly (9.75% and 9.5% at December 31,
1995 and 1994, respectively). Interest expense on the general
partner note and advances amounted to $25,913 and $21,537 in 1995
and 1994, respectively, and related accrued interest amounted to
$1,988 and $1,925 at December 31, 1995 and 1994, respectively.
<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter ended March 31, 1996 Commission File Number 33-14003
-------------- --------
SIGNATURE X LTD. LIMITED PARTNERSHIP
- ------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Indiana 35-1687036
- ------------------------------ -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
250 East 96th Street, Suite 450, Indianapolis, Indiana 46240
- ------------------------------------------------------ -----
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code (317) 581-1111
---------------
Check whether the Registrant (1) has filed all reports required to be filed by
Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months, and (2) has been subject to such filing requirements for
the past 90 days.
Yes X No
------------ ------------
<PAGE>
<TABLE>
SIGNATURE X LTD. LIMITED PARTNERSHIP
INDEX
<CAPTION>
Part I - FINANCIAL INFORMATION PAGE #
- ----------------------------- ------
<S> <C>
Item 1. Financial Statements (Unaudited)
Balance Sheets 1
March 31, 1996 and December 31, 1995
Statements of Operations 2
Three months ended March 31, 1996 and 1995
Statement of Partners' Equity 3
Three months ended March 31, 1996
Statements of Cash Flows 4
Three months ended March 31, 1996 and 1995
Note to Financial Statements 5
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 6
Part II - OTHER INFORMATION 8
- ---------------------------
SIGNATURES 9
</TABLE>
<PAGE>
<TABLE>
SIGNATURE X LTD. LIMITED PARTNERSHIP
Balance Sheets
(Unaudited)
<CAPTION>
March 31, December 31,
1996 1995
ASSETS ---------- ------------
<S> <C> <C>
Current assets:
Cash and short-term cash investments $ 363,693 308,404
Investments held by trustee 1,537 1,463
---------- ----------
Cash and cash equivalents 365,230 309,867
Accounts receivable 56,806 47,290
Other current assets 79,786 74,028
---------- ----------
Total current assets 501,822 431,185
---------- ----------
Property and equipment:
Land 1,693,614 1,693,614
Land improvements 384,346 384,347
Buildings 6,846,695 6,846,694
Furniture and equipment 1,904,283 1,875,612
---------- ----------
10,828,938 10,800,267
Less accumulated depreciation 3,122,706 3,050,739
---------- ----------
Net property and equipment 7,706,232 7,749,528
Furniture and equipment reserves 86,037 87,841
Deferred costs, net of accumulated
amortization of $300,816 and $296,889 118,760 122,687
---------- ----------
$ 8,412,851 8,391,241
========== ==========
LIABILITIES AND PARTNERS' EQUITY
Current liabilities:
Current portion of long-term debt 100,322 104,573
Accounts payable 42,857 25,090
Accrued payroll and related taxes 24,194 34,290
State and local taxes 68,805 57,582
Accrued interest 89,019 22,454
---------- ----------
Total current liabilities 325,197 243,989
Long-term debt, less current portion 5,187,723 5,197,742
Note payable to general partner 2,377,361 2,377,361
Advances from general partner 200,000 200,000
---------- ----------
Total liabilities 8,090,281 8,019,092
Partners' equity 322,570 372,149
---------- ----------
$ 8,412,851 8,391,241
========== ==========
</TABLE>
<PAGE>
<TABLE>
SIGNATURE X LTD. LIMITED PARTNERSHIP
Statements of Operations
(Unaudited)
<CAPTION>
Three Months Ended
March 31,
---------------------------
1996 1995
---------- ----------
<S> <C> <C>
Revenue:
Room revenue $ 694,211 577,029
Other hotel revenue 26,912 30,380
Interest 2,658 1,653
----------- -----------
723,781 609,062
Cost and expenses:
Hotel operations 262,577 233,406
Salaries and benefits 204,721 180,232
Management and franchise fees 64,815 54,198
Advertising and reservations 25,206 21,077
Interest 135,878 139,249
Depreciation and amortization 80,163 73,819
----------- -----------
773,360 701,981
----------- -----------
Net loss (49,579) (92,919)
General partner's interest (7,437) (13,938)
----------- -----------
Limited partner's interest $ (42,142) (78,981)
=========== ===========
Number of limited partner 364 364
units outstanding =========== ===========
Limited partners' interest per unit $ (116) (217)
=========== ===========
</TABLE>
<PAGE>
<TABLE>
SIGNATURE X LTD. LIMITED PARTNERSHIP
Statement of Partners' Equity
Three months ended March 31, 1996
(Unaudited)
<CAPTION>
General Limited
Partner Partners Total
---------- ---------- ----------
<S> <C> <C> <C>
Balance at December 31, 1995 $ 55,439 316,710 372,149
Net loss (7,437) (42,142) (49,579)
---------- ---------- ----------
Balance at March 31, 1996 $ 48,002 274,568 322,570
========== ========== ==========
Accumulated balances:
Capital contributions 404,445 3,640,000 4,044,445
Offering expenses - (455,000) (455,000)
Net loss (356,443) (2,910,432) (3,266,875)
---------- ---------- ----------
Balance at March 31, 1996 $ 48,002 274,568 322,570
========== ========== ==========
</TABLE>
<PAGE>
<TABLE>
SIGNATURE X LTD. LIMITED PARTNERSHIP
Statements of Cash Flows
Three months ended March 31, 1996 and 1995
(Unaudited)
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (49,579) (92,919)
Items which do not use (provide) cash:
Depreciation of property and equipment 76,236 69,892
Amortization of deferred costs 3,927 3,927
Accrued revenue and other expenses, net 70,185 -
Gain on disposal of property and equipment (134) 98,807
---------- ----------
Net cash provided by operating activities 100,635 79,707
---------- ----------
Cash flows from investing activities:
Additions to furniture and equipment
reserves, net (24,381) -
Proceeds from disposal of property and equipment 134 -
Other additions to property and equipment (6,755) (54,966)
---------- ----------
Net cash used in investing activities (31,002) (54,966)
---------- ----------
Cash flows from financing activities:
Payments on long-term debt (14,270) (12,616)
Advance from general partner - 20,000
---------- ----------
Net cash provided by financing
activities (14,270) 7,384
---------- ----------
Change in cash and cash equivalents 55,363 32,125
---------- ----------
Cash and cash equivalents at beginning
of period 309,867 212,006
---------- ----------
Cash and cash equivalents at end of period $ 365,230 244,131
========== ==========
Additional disclosures:
Interest paid $ 135,669 139,062
========== ==========
Additions to property and equipment
from furniture and equipment reserves $ 26,185 51,626
========== ==========
</TABLE>
<PAGE>
SIGNATURE X LTD. LIMITED PARTNERSHIP
NOTE TO FINANCIAL STATEMENTS (UNAUDITED)
MARCH 31, 1996
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information. Accordingly, the financial statements do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for
a fair presentation have been included. Operating results for the interim
period are not necessarily indicative of the results that may be expected for
the year ended December 31, 1996. For further information, refer to the
financial statements included in the Partnership's annual report on Form 10-KSB
for the year ended December 31, 1995.
<PAGE>
<TABLE>
SIGNATURE X LTD. LIMITED PARTNERSHIP
------------------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
-----------------------------------------------------------
AND RESULTS OF OPERATIONS
-------------------------
RESULTS OF OPERATIONS
- ---------------------
Certain operating and financial data for the quarter ended March 31, 1996 and
1995 is as follows:
<CAPTION>
Occupancy Average Daily Rate
---------------------- ----------------------
YTD YTD YTD YTD
Hotel 3/31/96 3/31/95 3/31/96 3/31/95
- ----- ------- ------- ------- -------
<S> <C> <C> <C> <C>
Florence 63.5% 59.0% $50.17 $48.83
Chester Road 52.2% 40.8% $55.22 $53.48
</TABLE>
<TABLE>
<CAPTION>
QTD QTD
3/31/96 3/31/95 Change
-------- ------- -------
<S> <C> <C> <C>
Room & Other Hotel Revenues $721,123 $607,409 $113,714
Interest Income $2,658 $1,653 $1,005
Operating & Related Expenses $557,319 $488,913 $68,406
Interest Expense $135,878 $139,249 $(3,371)
Depreciation & Amortization $80,163 $73,819 $6,344
Net Loss $49,579 $92,919 $(43,340)
</TABLE>
Room and other hotel revenues of the two hotels increased for the three month
period ended March 31, 1996 compared to the same period in 1995 due to
increases in occupancy and average room rates.
Operating and related expenses of the hotels consist of the following costs
and expenses - hotel operations, salaries and benefits, management and
franchise fees and advertising and reservation contributions:
<PAGE>
Hotel operations and salaries and benefits represent all of the
operational and administrative costs of operating the hotels, including all
payroll, supply, utilities, maintenance and miscellaneous expenses. These
expenses increased primarily due to the increase in the number of rooms sold
during the first three months of 1996 compared to 1995.
Management and franchise fees increased due to the increase in room and
other hotel revenue for the same periods. These fees represent amounts paid
to Signature Inns, Inc., the general partner of the Partnership, for property
management, accounting services and franchise fees.
The Partnership contributes to a cooperative advertising and reservation
fund administered by the general partner. Contributions increased due to the
increase in room and other hotel revenue for the period.
Interest expense represents interest on hotel mortgage loans, general partner
advances and capitalized equipment lease obligations. During 1995, interest
expense decreased due to the scheduled amortization reduction of the notes.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
The general partner believes that cash generated from the operation of the two
hotels, along with existing cash balances, will provide adequate liquidity for
the Partnership to meet its operating needs during the next twelve months.
<PAGE>
PART II - OTHER INFORMATION
- ---------------------------
Item 1. Legal Proceedings
See note below
Item 2. Changes in Securities
See note below
Item 3. Default upon Senior Securities
See note below
Item 4. Submission of matters to a Vote of Security Holders
See note below
Item 5. Other Information
See note below
Item 6. Exhibits and Reports on Form 8-K
See note below
NOTE: The response to each of the above items is not applicable or is
in the negative and does not require a response pursuant to the instructions.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SIGNATURE INNS, INC., General Partner
of Signature VII Ltd. Limited
Partnership
Date May 14, 1996 By
------------ ---------------------------------------
John D. Bontreger, President and C.E.O.
Signature Inns, Inc.
Date May 14, 1996 By
------------ ---------------------------------------
Mark D. Carney, Vice President Finance
and C.F.O.
Signature Inns, Inc.
Date May 14, 1996 By
------------ ---------------------------------------
Martin D. Brew, Treasurer/Controller
Signature Inns, Inc.
<PAGE>
SUMMARY REPORT
OF A COMPLETE APPRAISAL
of the
Signature Inn - North
11385 Chester Road
Cincinnati, Ohio
as of
February 29, 1996
FOR
Mr. Mark Carney
Vice President
Signature Inn X Limited
One Parkwood Crossing
250 East 96th Street
Suite 450
Indianapolis, Indiana 46240
<PAGE>
March 11, 1996
Mr. Mark Carney
Vice President
Signature Inn X Limited
One Parkwood Crossing
250 East 96th Street, Suite 450
Indianapolis, Indiana 46240
RE: Signature Inn - North
Cincinnati, Ohio
Dear Mr. Carney:
In accordance with the engagement letter dated February 16, 1996, we have
appraised the property referenced above. The purpose of this appraisal is to
estimate the market value of the going concern of the fee simple estate in the
subject, including the furniture, fixtures, and equipment component. The
effective date of the value estimate is February 29, 1996, and the appraisal
is based upon market conditions as observed on this same date.
Subject to all conditions and explanations contained in this report, it is our
opinion that the market value of the fee simple interest of the going concern
in the subject (including the contributory value of the existing furniture,
fixtures, and equipment), as of February 29, 1996, is:
THREE MILLION THREE HUNDRED THOUSAND DOLLARS
$3,300,000
Your attention is called to the Standard and Special Conditions and
Certification which follow. This complete appraisal is communicated in a
short, summary report format. A more descriptive summary report will follow.
This appraisal process and reporting format conforms to the guidelines
stipulated by the Appraisal Institute and the Uniform Standards of
Professional Appraisal Practice.
Respectfully submitted,
U S REALTY CONSULTANTS, INC.
_______________________________ _______________________________
James A. Powers, MAI, CRE Jeffrey H. Walker, CHSE
President Director of Hospitality Development
Ohio General Appraiser #381516
<PAGE>
PROPERTY IDENTIFICATION
The subject consists of a 130-unit, limited-service Signature Inn hotel. The
property is located at 11385 Chester Road, Cincinnati, Hamilton County, Ohio.
A legal description has been provided and is maintained in our files.
PURPOSE AND FUNCTION OF THE APPRAISAL
The purpose of the appraisal is to estimate the as is market value of the
going concern of the fee simple estate in the subject, including furniture,
fixtures and equipment (FF&E), subject to the Uniform Standards of
Professional Appraisal Practice (USPAP), and Title XI (and amendments) of the
Financial Institution Reform Recovery and Enforcement Act of 1989 and 1994
(FIRREA). This report is to be used as an information tool to assist the
limited partners regarding the possible acquisition of the property by the
general partner.
LEGAL INTEREST APPRAISED
The legal interest appraised herein is the fee simple estate in the land and
improvements.
EFFECTIVE DATE OF VALUATION
The appraisal is based upon market conditions as of February 29, 1996, the
current date of our market research and property inspection.
DEFINITION OF VALUE
Market value is defined in the Uniform Standards of Professional Practice,
1995 Edition as follows:
"The most probable price which a property should bring in a competitive
and open market under all conditions requisite to a fair sale, the buyer and
seller each acting prudently and knowledgeably, and assuming the price is not
affected by undue stimulus. Implicit in this definition is the consummation
of a sale as of a specified date and the passing of title from seller to buyer
under conditions whereby:
1. Buyer and seller are typically motivated;
2. Both parties are well informed or well advised, and acting in what
they consider their own best interests;
3. A reasonable time is allowed for exposure in the open market;
4. Payment is made in terms of cash in United States dollars or in
terms of financial arrangements comparable thereto; and
5. The price represents the normal consideration for the property
sold unaffected by special or creative financing or sales concessions granted
by anyone associated with the sale."
The definition of going-concern value is as follows:
The value created by a proven property operation; considered as a
separate entity to be valued with a specific business establishment.
EXPOSURE TIME AND MARKETING PERIOD
Based upon our investigations, we believe that a marketing and exposure period
of less than 12 months is reasonably appropriate.
<PAGE>
APPRAISAL DEVELOPMENT AND REPORTING PROCESS
The scope of this appraisal involves the systematic research and analysis
necessary to reach a value conclusion for the hotel. The initial step was to
inspect the subject, general market area, and neighborhood. Market research
included the assembly of data from public records, real estate specialists,
governmental entities, real estate publications, as well as owners/investors,
management and hotel managers at similar and comparable properties.
Information from the market area was collected and studied in order to define
the character, composition and the propensity for change in the subject trade
area. This information was analyzed to determine the influences which will
impact the surrounding market area and the value of the subject property.
After analyzing the macro-environment, research was conducted relevant to the
valuation process, including gathering income, expense, capitalization rate,
and discount rate data; comparable improved sales; real estate tax, zoning,
and flood plain data and any other information pertinent to the valuation of
the subject property. This information was reviewed, confirmed when
necessary, and analyzed through the approaches to value.
The competitive hotel market was analyzed. Management of most of the
competitive hotel properties were interviewed. Improved sale comparables were
all analyzed, and where possible were confirmed with either the buyer, the
seller or a knowledgeable third party.
Applicability of Approaches: The Income Capitalization Approach was deemed
the most applicable method to estimate market value for the subject. The
Sales Comparison Approach was utilized to provide an additional point of
reference. The Cost Approach has not been completed. Due to the age of the
subject, significant depreciation exists, which is difficult and subjective to
quantify. In addition, the Cost Approach does not reflect the reasoning or
approach taken by an investor for a property of this age and type.
HISTORY OF THE SUBJECT
According to public records, the subject is owned by Signature X Limited.
According to management, the property was constructed by the current owners in
1987. There have been no recorded transfers of the subject since opening.
Additionally, there are no current agreements for sale, options, or listings
of the subject as of the date of the appraisal.
COMPETENCY OF THE APPRAISERS
U S Realty Consultants, Inc. has performed numerous appraisals and reviews of
appraisals on income producing properties such as the subject. Competency has
been established in both the property type and geographical area of the
subject either through previous engagements or through current research of
germane market trends.
REGIONAL ANALYSIS
Projections indicate that growth in Cincinnati population, household income,
and retail sales should continue. All of these factors and the solid economic
outlook for the area bode well for the prospects of long-term economic growth.
<PAGE>
NEIGHBORHOOD ANALYSIS
The subject's surrounding land uses are generally complimentary to the
subject's use. The highly developed commercial market, as well as the
proximity to the highway, provide a strong level of infrastructure to support
the hotel.
SITE AND IMPROVEMENT ANALYSIS
The hotel site contains approximately 3.223 acres and is somewhat flag shaped.
The site is near street grade level with Chester Road and has limited
visibility to I-75 but easy access. The subject is located in a GB District
(General Business) within Sharonville. The subject is considered to be a
legally conforming land use. According to flood map community panel
#390-236-0001 C, the site is located in a Zone C, an area of minimal
flooding. The subject contains 130 guest rooms which are considered to be in
average condition.
COMPETITIVE LODGING MARKET ANALYSIS
Existing Competitive Supply: Based on our research, we have identified a
current competitive hotel supply with a total of 2,457 guest rooms in fourteen
lodging facilities (including the subject). The properties are considered
competitive due primarily to their location near the Sharon Road exit of I-75.
Historical Lodging Demand: Based on information compiled by Smith Travel
Research, and supported by our own interviews with management of the
competitive properties, we have estimated historical market occupancy levels
and average daily rates.
<TABLE>
<CAPTION>
Table 1
Historical Market Occupancy and ADR
______________________________________________________________________________
<S> <C> <C> <C>
Year 1993 1994 1995
Estimated Market Occupancy 60% 65% 65%
Estimated Market ADR $57.00 $53.00 $56.50
</TABLE>
Source: Smith Travel Research and local market interviews. Figures rounded
to nearest occupancy point and $.50. Some variances in hotels reporting to
STR may occur.
<PAGE>
COMPETITIVE POSITION OF SUBJECT PROPERTY
We have assessed the projected competitive position of the subject property as
it compares to the defined competitive lodging supply. Table 2 presents the
historical occupancy and ADR for the subject.
<TABLE>
<CAPTION>
Table 2
Historical Subject Occupancy and ADR
______________________________________________________________________________
<S> <C> <C> <C>
Year 1993 1994 1995
Subject Occupancy 53.5% 56.8% 55.6%
Subject ADR $50.19 $53.13 $54.18
</TABLE>
Source: Signature Inns
Estimated Occupancy and Average Daily Rate: Based upon the condition of the
property, discussion with the property and competitive general managers, and
historical and projected occupancy and ADR market trends, we project the
subject will achieve a stabilized occupancy of 56% at an ADR of $55.00. The
occupancy reflects a slight increase in rooms occupied, based upon the
historical occupancies, the conversion of the Howard Johnson to a Comfort Inn
and the Ramada Inn to a Woodfield Suites, opening of the new Extended Stay
America, and construction on I-71 south of the I-275.
HIGHEST AND BEST USE
There is no alternative, economically feasible use that could justify removal
of the existing improvements at this time. Therefore, the highest and best
use of the subject, as improved, is the continued use as a limited service
hotel. The highest and best use, as vacant, is for development of an economy
limited-service hotel.
INCOME CAPITALIZATION APPROACH
Historical financial statements for years 1993 through 1995 were provided by
Signature Inns. During the period, the subject's overall financial
performance has improved. The income before reserves has varied from $378,183
in 1993 to $503,866 in 1994 and $421,231 in 1995. Top line revenue increased
from $1,274,079 in 1993 to $1,429,504 in 1995, which is slightly below the
1994 level of $1,431,960. Departmental expenses demonstrated an increase as a
percentage of total revenue between 1993 and 1995 from 27% to 28.4%, while
undistributed expenses showed a decrease from 38.8% to 37.8%.
We have compared the operating performance of the subject to a 17-property
portfolio of Signature Inns, as well as industry standards from the Host
Report 1994, published by Arthur Anderson and Smith Travel Research, and
Trends Report 1994, published by PKF Consulting. We have utilized the
standards for mid-priced, limited-service properties.
Stabilized Operating Statement: A projected stabilized operating statement in
1996 dollars is presented on the following page. The estimated cash flow was
used to estimate the subject property's market value by direct capitalization.
Valuation Analysis: In developing a capitalization rate for income-producing
real estate, factors such as the quality and durability of the estimated
income stream were analyzed. We have analyzed current yields and
capitalization rates as tracked by the Korpacz Investor Survey, a widely
utilized barometer of investment parameters, as well as USRC's internal
investment survey. The Korpacz survey indicated a capitalization rate for
limited-service hotels in the range of 8% to 18% with an average of 12.53%.
<PAGE>
<TABLE>
<CAPTION>
STABILIZED OPERATING STATEMENT
SIGNATURE INN - CINCINNATI NORTH
1996 DOLLARS
<S> <C> <C> <C> <C>
OCCUPANCY/ADR 56% at $55.00
PER OCC.
AMOUNT RATIO AMT\RM ROOM
REVENUES:
ROOMS $1,461,000 95.3% $11,238 $54.98
TELEPHONE 34,544 2.3% 266 1.30
RENTALS & OTHER INCOME 38,000 2.5% 292 1.43
_________ _____ ______ _____
TOTAL REVENUE $1,533,544 100.0% $11,796 $57.71
DEPARTMENTAL EXPENSES: (1)
ROOMS $387,165 26.5% $2,978 $14.57
TELEPHONE 29,362 85.0% 226 1.11
_______ _____ _____ _____
TOTAL DEPARTMENTAL EXPENSES $416,527 27.2% $3,204 $15.68
TOTAL OPERATED INCOME $1,117,000 72.8% $8,592 $42.04
UNDISTRIBUTED EXPENSES:
ADMINISTRATIVE & GENERAL $188,500 12.3% $1,450 $7.09
MANAGEMENT FEE 61,342 4.0% 472 2.31
MARKETING 78,000 5.1% 600 2.94
FRANCHISE FEES 58,440 3.8% 450 2.20
PROPERTY OPERATION & MAINT. 91,000 5.9% 700 3.42
ENERGY 78,000 5.1% 600 2.94
_______ _____ _____ ____
TOTAL $555,282 36.2% $4,271 $20.90
INCOME BEFORE FIXED CHARGES $562,000 36.6% $4,321 $21.14
FIXED CHARGES:
REAL ESTATE & PROPERTY TAXES $52,000 3.4% $400 $1.96
BUILDING & CONTENTS INSURANCE 39,000 2.5% 300 1.47
TOTAL FIXED CHARGES $91,000 5.9% $700 $3.42
INCOME BEFORE RESERVE $471,000 30.7% $3,621 $17.72
RESERVE FOR REPLACEMENT $61,342 4.0% $472 $2.31
_______ _____ _____ _____
INCOME BEFORE
OTHER DEDUCTIONS (2) $410,000 26.7% $3,154 $15.41
</TABLE>
<PAGE>
NOTES:
(1) Each departmental expense ratio is based on the department's
estimated revenue and does not add to the total departmental expense ratio.
(2) Income before other fixed charges such as interest, amortization,
depreciation, and income taxes.
Note: This statement is based upon a room inventory of: 130
THIS STATEMENT SHOULD BE READ SUBJECT TO THE COMMENTS CONTAINED IN
THE ATTACHED REPORT
Based on the aforementioned analysis, we have estimated that a direct
capitalization rate of 12.25% is appropriate to convert the stabilized net
operating income into an indication of market value. The result of this
procedure, using the market-driven capitalization rate of 12.25% is presented
in the following calculation.
$410,000 net operating income / 12.25% capitalization rate = $3,346,939
or
$3,300,000 (rounded)
Based on the above analyses, we estimate that the market value of the fee
simple estate of the going concern of the subject property via the Income
Capitalization Approach (including the contributory value of the FF&E) as of
February 29, 1996 is:
Three Million Three Hundred Thousand Dollars
$3,300,000
SALES COMPARISON APPROACH
Two techniques were utilized in this valuation approach. First, a Linear
Regression Analysis is presented to demonstrate that sale price is a function
of income. Next, an Effective Rooms Revenue Multiplier is developed, which
adjusts the sale prices of the comparables based on differences in rooms
revenue. A total of 63 hotel sales were utilized as comparable data. Based
upon a regression analysis of the data, regression formulas were developed.
Linear Regression Analysis: Based on this information, REVPAR is a
significant variable driving the value of hotels. Although differences in
physical characteristics exist, they only affect value to the extent that they
affect room rates and revenue. The regression formula for the subject
indicates a value of $4,000,000.
Net income per room is also a significant variable driving the value of
hotels. Although differences in physical characteristics exist, they only
affect value to the extent that they affect room rates, revenue, and expenses.
The regression formula for the subject indicates a value of $3,400,000.
Effective Rooms Revenue: The ERRM is a factor derived by dividing the sales
price of the comparable sale by the rooms revenue (number of guest rooms
available annually multiplied by the average daily room rate times the
occupancy factor). As with the above approach, room revenue projections for
the first full year after purchase were utilized to reflect the buyer's
anticipation of rooms revenues at the time of purchase.
The mean of the comparable sales' ERRM is 2.68 while the they ranged between
1.10 and 4.15. To supplement this information, we have turned to USRC's
internal study that was performed in the Spring of 1995. This survey
indicated ERRMs ranging from 1 to 5, with an average of 2.7. The average of
this survey generally supports the average of the reported sales.
<PAGE>
The ERRM was applied to the rooms revenue estimate from the stabilized year of
our analysis. Based on the foregoing analysis, and in consideration of the
historical and projected performance of the subject, we have estimated an ERRM
of 2.5 to be most appropriate for the subject. Applying this range to the
effective room revenue estimate during the first year after the date of
valuation yields the following:
$1,461,000 rooms revenue X 2.5 ERRM = $3,652,500
Rounded to $3,700,000
Correlation of Sales Comparison Approach: An analysis of the correlation
coefficient (R squared, or a measure of reliability), indicated the greatest
correlation (.874) for the net income per room analysis. Accordingly, we have
relied most heavily on this analysis, with the ERRM as an additional point of
reference. It is our opinion that the market value of the going concern of
the fee simple estate, as indicated by the Sales Comparison Approach, in the
subject (including the contributory value of the furniture, fixtures, and
equipment), as of February 29, 1996, is:
Three Million Four Hundred Thousand Dollars
$3,400,000
RECONCILIATION
Two of the traditional approaches to value -- Income Capitalization Approach
and the Sales Comparison Approach -- were used to estimate the market value of
the subject property. These two approaches represent alternative ways of
viewing market phenomena.
We have relied most heavily on the value estimate produced by the Income
Capitalization Approach. The Sales Comparison Approach provides additional
support for the conclusion. Subject to all conditions and explanations
contained in this report, it is our opinion that the market value of the fee
simple interest of the going concern in the 130-room subject (including the
contributory value of the existing furniture, fixtures, and equipment),
expressed in terms of financial arrangements equivalent to cash, as of
February 29, 1996, is:
THREE MILLION THREE HUNDRED THOUSAND DOLLARS
$3,300,000
The contributory value of the FF&E, based upon this analysis, included in the
estimated value of the property, is $455,000, or rounded to $460,000.
CERTIFICATOIN
We certify to the best of our knowledge and belief
* The statements of fact contained in this report are true and correct.
* The reported analyses, opinions, and conclusions are limited only by the
reported assumptions and limiting conditions, and are our personal, unbiased
professional analyses, opinions, and conclusions.
<PAGE>
* We have no present or prospective interest in the property that is the
subject of this report, and we have no personal interest or bias with respect
to the parties involved.
* This appraisal assignment was not based on a requested minimum
valuation, a specific valuation, or the approval of a loan.
* Our compensation is not contingent upon the reporting of a predetermined
value or direction in value that favors the cause of the client, the amount of
the value estimate, the attainment of a stipulated result, or the occurrence
of a subsequent event.
* Our analyses, opinions, and conclusions were developed, and this report
has been prepared, in conformity with the Uniform Standards of Professional
Appraisal Practice.
* We certify that, to the best of our knowledge and belief, the reported
analyses, opinions and conclusions were developed, and this report has been
prepared in conformity with the requirements of the Code of Professional
Ethics and the Standards of Professional Appraisal Practice of the Appraisal
Institute.
* We certify that the use of this report is subject to the requirements of
the Appraisal Institute relating to review by its duly authorized
representatives.
* As of the date of this report, James A. Powers, MAI, has completed the
requirements of the continuing education program of the Appraisal Institute
* Travis D. Ray has made a personal inspection of the property that is the
subject of this report. James A. Powers and Jeffrey H. Walker have not
inspected the property.
* No one other than the undersigned provided significant professional
assistance to the person(s) signing this report.
_________________________________ ________________________________
James A. Powers, MAI, CRE Jeffrey H. Walker, CHSE
Ohio General Appraiser #381516
________________________________
Travis D. Ray
<PAGE>
COMPANY PROFILE
______________________________________________________________________________
U S Realty Consultants, Inc. (Usrc) was originally formed in January of 1983
as a Columbus-based firm specializing in commercial real estate appraisal and
market analysis. With regional offices located in Atlanta, Georgia and
Chicago, Illinois, Usrc has now grown to be one of the premier real estate
appraisal and consulting practices in the United States.
As we continue our phenomenal growth, our professionals continue to be
involved in literally hundreds of assignments annually, involving millions of
dollars of real estate. Our practice now includes three major areas of
services to the real estate industry: Hospitality and Resort Industry
Services, Golf and Country Club Services, and Real Estate Appraisal Services.
* Hospitality and Resort Industry Services - Evolving from a diversified
background of hospitality and resort market analysts, appraisers, and
operational specialists, Usrc has established a hospitality and resort
consulting practice second to none. Our professionally-trained hoteliers,
resort, and golf course specialists, all having achieved outstanding academic
credentials, have over forty combined years of industry experience. However,
our constant involvement in the consulting and appraising of hotels, motels,
restaurants, resorts, and golf courses have enabled us to be current with, as
well as adaptive to, the ever-changing dynamics of the industry. As a result,
our professionals combine current and in-depth industry experience with strong
analytical and communication skills to yield practical and effective results
tailored to the specific engagement, thus providing our clients the best in
hospitality and resort consulting services.
* Real Estate Appraisal Services - Usrc is unique in that it was part of a
movement to pioneer the development of a national real estate appraisal
practice. We specialize in the valuation of real estate portfolios, which are
disbursed both geographically and by property type. Our valuation expertise
is in commercial real estate with emphasis on office, industrial, retail,
mixed-use, hotel, resort, golf course, other special-use, and multifamily
projects. These characteristics qualify us as one of the leading appraisal
organizations in the nation.
* Golf and Country Club Services - Usrc has recently developed a
burgeoning practice devoted to golf-related and recreational facilities. The
services offered under this practice include valuation and consultation for
private country clubs, daily-fee golf courses, surrounding residential
development, and resort destinations.
The rapid expansion of Usrc's experience and capabilities closely parallels
the growth and ever-changing requirements of the clients we serve. The Firm's
emphasis on programs of professional learning ensure that industry
requirements are being met by our people. Clients become the beneficiaries of
this continually expanding knowledge. Many Usrc individuals also serve on
senior committees of national and state professional societies and
associations, enabling them to stay current with developing trends in the
profession and to participate in framing new rules and standards.
<PAGE>
Usrc's clients benefit from the advantage of working with a local firm, yet
have access to the experience and much of the resources of a national firm.
With 20 professional staff members -five holding the coveted designation,
Member of the Appraisal Institute (MAI) -and five specifically trained in the
analysis of hotels, restaurants, resorts, and golf courses - and growing, we
are determined to provide the "quality client service" that our customers
expect.
U S Realty Consultants, Inc., with over 55 combined years of real estate
valuation experience, serves many of the nation's most prominent pension
funds, investment managers and advisors, life insurance companies, financial
institutions, and governmental agencies providing quality appraisal and
litigation support services in relation to their real estate needs.
Some of the more significant marketplaces in which Usrc holds experience and
important local market knowledge include:
<TABLE>
<S> <C> <C>
Albuquerque Fort Worth Portland, OR
Aspen Houston Providence
Atlanta Indianapolis Raleigh
Austin Kansas City Sacramento
Birmingham Los Angeles San Diego
Boston Louisville San Francisco
Charlotte Minneapolis San Jose
Chicago Milwaukee Seattle
Cincinnati Nashville St. Louis
Cleveland New Orleans Tampa
Colorado Springs Oakland Toledo
Columbus Orlando Toronto, Ontario
Dallas Philadelphia Washington, D.C.
Dayton Phoenix West Palm Beach
Denver Pittsburgh Wilmington
Des Moines Portland, ME Caribbean
Detroit
</TABLE>
<PAGE>
SELECT LIST OF
INSTITUTIONAL REAL ESTATE
APPRAISAL CLIENTS
_____________________________________________________________________________
Governmental Agencies
_____________________
Resolution Trust Corporation
Department of Justice
Federal Deposit Insurance Corporation
Pension Funds
_____________
California Public Employees' Retirement System
Police and Fireman's Disability and
Pension Fund of Ohio
Public Employees' Retirement
Association of Colorado
School Employees Retirement System of Ohio
State Teachers' Retirement System of Ohio
V.I.B. (Dutch Pension Fund)
Investment Managers/Advisors
____________________________
Alex. Brown Kleinwort Benson Realty Advisors
AMB Institutional Realty Advisors
Balcor Management Services
Financial Security Assurance, Inc.
Greystone Realty Advisors
Goldman, Sachs and Company
Holiday Corporation
Jacques and Kurdziel (represent Dutch Pension Fund)
J.P. Morgan Investment Management, Inc.
Karsten Realty Advisors
LandG Realty Advisors
Meyer Asset Management, Inc.
MIG Realty Advisors, Inc.
Paine Webber
Schroder Real Estate Associates
SBC Asset Management, Inc.
WF Advisors, Inc.
The Yarmouth Group, Inc.
Law Firms
_________
Baker and Hostetler
Benesch, Friedlander, Coplan and Aronoff
Bricker and Eckler
Climaco, Climaco, Seminatore,
Lefkowitz and Garofoli Co.
Connelly, Soutar and Jackson
Frost and Jacobs
Holt, Ney, Zatcoff and Wasserman
Isaac, Brant, Ledman and Becker
McNamee, Hosea, Jernigan and Scott
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo P.C.
Rendigs, Fry, Kiely and Dennis
Smith and Hale
Squire, Sanders and Dempsey
Teaford, Rich, Coffman and Wheeler
Testa, Hurwitz and Thibeault
Wesp and Osterkamp
<PAGE>
Financial Institutions
______________________
Bank of America
Bank of Boston
Bank of Nova Scotia
Bank One Trust
Bank Texas
Chemical Bank
Citicorp Real Estate
Continental Bank
Diamond Savings and Loan Association
Fifth Third Bank
First Interstate Bank
First National Bank of Chicago
First Republic Bank of Dallas
First Wisconsin National Bank
Fleet National Bank
Gill Savings Association
Great Atlantic Savings Bank
Huntington National Bank
INB Mortgage Corporation
Michigan National Bank
Mitsubishi Bank
National City Bank
NationsBank
Savings of America
Security Pacific
Star Bank
Wachovia Bank and Trust Company
Wells Fargo Real Estate Group
Life Insurance Companies
________________________
Lincoln National Life
Metropolitan Life Insurance
Minnesota Mutual Life Insurance Company
Mutual Benefits Life
New York Life Insurance Company
The Principal Financial Group
Travelers Realty Investment Company
<PAGE>
PROFESSIONAL
STAFF
QUALIFICATIONS
______________________________________________________________________________
JAMES A.POWERS, MAI, CRE
PRESIDENT
James Powers is the founder and President of U S Realty Consultants, Inc.,
overseeing the company from its inception in 1983. Mr. Powers in now actively
involved in the valuation of all income-producing property types, including
multi-property portfolio appraisal. In addition, he is called upon to provide
expert witness testimony in courts throughout the country. Mr. Powers is a
specialist in the securitization of real estate through Real Estate Investment
Trusts.
Mr. Powers received his MAI designation from the Appraisal Institute in 1974,
and is a Certified General Appraiser in the State of Ohio.
Education
_________
Bachelor of Science (Major: Engineering), United States
Military Academy, West Point, New York, 1960
Instructor, Lecturer, Real Estate Appraisal
and Investment Topic
Chairman, Education Committee, Columbus Board of
Realtors, 1971 - 1972
Professional Affiliations
_________________________
Member, Counselors of Real Estate
Appraisal Institute
Director, Ohio Chapter 1988
Society of Real Estate Appraisers:
Past President, Columbus Chapter 1978 - 1979
American Society of Appraisers:
Past President, Columbus Chapter 1974 - 1975
National Association Review Appraisers
National Association of Real Estate Boards
Ohio Association of Real Estate Boards
Columbus Board of Realtors
Real Estate Securities and Syndications Institute
National Association Corporate Real Estate Executives
Past Chairman, St. Ann's Hospital Board of Trustees,
during the Concept and Implementation Phase of the
Hospital's relocation and redevelopment.
<PAGE>
ROBERT J. FEELEY, MAI
VICE PRESIDENT
Robert J. Feeley, MAI is Vice President of U S Realty Consultants, Inc.. He
joined the firm in January, 1984 shortly after the firm's inception in 1983.
Mr. Feeley's experience includes appraisal and portfolio analysis of
investment-grade real estate, valuation of participating debt instruments,
appraisal services for asset valuation and loan underwriting of FSLIC- and
FDIC-insured institutions, and third-party appraisal reviews.
Mr. Feeley has extensive experience in the appraisal of both CBD and suburban
office buildings, apartments, office/warehouse, hotel, retail centers ranging
from neighborhood centers to regional malls, marinas and mixed-use properties.
He has been a member of the Appraisal Institute since 1993.
Education
_________
Bachelor of Science, The Ohio State University, 1979
Master of Business Administration with emphasis in real estate, The Ohio State
University, 1983
Various Seminars and Programs sponsored by:
The Appraisal Institute
The Society of Real Estate Appraisers
Delegate to the 1988 and 1989 Young Advisory Council of the Society of Real
Estate Appraisers
Professional Affiliations
_________________________
Appraisal Institute
State Certification
___________________
Mr. Feeley holds certification as a General Real Estate Appraiser in the
following states:
State of Indiana, July 1992
State of Kentucky, June 1993
State of Ohio, July 1991
<PAGE>
JEFFREY H. WALKER, CHSE
DIRECTOR
HOSPITALITY
DEVELOPMENT
Jeffrey Walker joined the firm in 1992, serving as Director of Hospitality
Development. Mr. Walker's previous experience includes various hotel and
restaurant positions. Most recently he served as Director of Sales and
Marketing with Hyatt Hotels Corporation, where he received the "Hyatt Director
of Sales of the Year" award in 1991.
Mr. Walker is now involved in consulting work for lenders, owners, developers
and operators. His areas of specialization include hotel marketing
consulting, operational review, market study and analysis, yield management,
and advertising and public relations support for hotels.
Education
_________
Bachelor of Science, James Madison University, 1985
Completed credit requirements for the following AI courses:
1A1 Real Estate Appraisal Principles
Various Seminars and Programs sponsored by:
The Appraisal Institute
The Ohio Hotel and Motel Association
The Ohio Restaurant Association
Professional Affiliations
_________________________
Ohio Hotel and Motel Association, Allied Board of
Directors
Columbus Hotel and Motel Association, member
Hotel Sales and Marketing Association, International,
member
Greater Washington (D.C.) Society of Association
Executives, 1988-92
<PAGE>
TRAVIS RAY, ASSOCIATE
Travis Ray currently serves as an associate with the firm. He joined USRC in
the Summer of 1994 after receiving his Bachelor of Science degree from the
School of Hotel Administration at Cornell University. His concentration was
in Real Estate and Development. Although Mr. Ray's emphasis is in hospitality
related properties, he has been actively involved in the valuation of other
income-producing property types. Among the other property types he has been
involved with include regional malls, nursing homes, offices, and apartments.
Education
________
Bachelor of Science (Major: Hotel Administration), Cornell University, 1994
PROFESSIONAL AFFILIATIONS
_________________________
Columbus Hotel/Motel Association
Cornell Society of Hotelmen
<PAGE>
STANDARD CONDITIONS
The following Standard Conditions apply to real estate appraisals by U S
Realty Consultants, Inc. Appraisals are performed and written reports are
prepared by, or under the supervision of members of the Appraisal Institute in
accordance with the Institute's Standards of Professional Practice and Code of
Professional Ethics.
No opinion is rendered as to property title, which is assumed to be good and
marketable. Unless otherwise stated, no consideration is given to liens or
encumbrances against the property. Sketches, maps, photos, or other graphic
aids included in appraisal reports are intended to assist the reader in ready
identification and visualization of the property and are not intended for
technical purposes.
Appraisal reports may contain prospective financial information, estimates, or
opinions to represent the appraisers' view of reasonable expectations at a
particular point in time, but such information, estimates, or opinions are not
offered as predictions or as assurances that a particular level of income or
profit will be achieved, that events will occur, or that a particular price
will be offered or accepted. Actual results achieved during the period
covered by our prospective financial analyses will vary from those described
in our report, and the variations may be material.
It is assumed that legal engineering, or other professional advice, as may be
required, has been or will be obtained from professional sources and that the
appraisal report will not be used for guidance in legal or technical matters
such as, but not limited to, the existence of encroachments or easements or
other discrepancies affecting the legal description of the property. It is
assumed that there are no concealed or dubious conditions of the subsoil or
subsurface waters including water table and flood plain, unless otherwise
noted. We further assume no regulations of any government entity control or
restrict the use of the property unless specifically referred to in the
report. It is assumed that the property will not operate in violation of any
applicable government regulations, codes, ordinances, or statutes.
In the absence of competent technical advice to the contrary, it is assumed
that the property being appraised is not adversely affected by concealed or
unapparent hazards such as, but not limited to, asbestos, hazardous or
contaminated substances, toxic waste, or radioactivity.
The report and the final estimate of value and prospective financial analyses
included in it are intended for the information of the person or persons to
whom they are addressed, solely for the purposes stated, and should not be
relied upon for any other purpose. Permission will be granted only upon
meeting certain conditions.
Information furnished by others is presumed to be reliable, and where so
specified in the report, has been verified; but no responsibility, whether
legal or otherwise, is assumed for its accuracy, and it cannot be guaranteed
as being certain. No single item of information was completely relied upon to
the exclusion of other information.
<PAGE>
Appraisal assignments are accepted with the understanding that there is no
obligation to furnish services after completion of the original assignment.
If the need for subsequent services related to an appraisal assignment (for
example, testimony, updates, conferences, reprint or copy services) is
contemplated, special arrangements acceptable to U S Realty Consultants, Inc.
must be made in advance.
No significant change is assumed in the supply and demand patterns indicated
in the report. The appraisal assumes market conditions as observed as of the
current date of our market research stated in the letter of transmittal.
These market conditions are believed to be correct; however, the appraisers
assume no liability should market conditions materially change because of
unusual or unforeseen circumstances.
The valuation applies only to the property described and for the purpose so
stated and should not be used for any other purpose. Any allocation of total
price between land and the improvements as shown is invalidated if used
separately or in conjunction with any other report.
Neither the report nor any portions thereof (especially any conclusions as to
value, the identity of the appraisers or U S Realty Consultants, Inc, or any
reference to the Appraisal Institute or the MAI designation) shall be
disseminated to the public through public relations media, news media, sales
media or any other public means of communication without the prior written
consent and approval of the appraisers and U S Realty Consultants, Inc.
The date of the valuation to which the value estimate conclusions apply is set
forth in the letter of transmittal and within the body of the report. The
values are based on the purchasing power of the United States dollar as of
that date.
It should be specifically noted by any prospective mortgagee that the
appraisal assumes that the property will be competently managed, leased, and
maintained. by financially sound owners over the expected period of ownership.
This appraisal engagement does not entail an evaluation of management's or
owner's effectiveness, nor are we responsible for future marketing efforts and
other management or ownership actions upon which actual results will depend.
The Americans with Disabilities Act (ADA") became effective January 26, 1992.
We will not be responsible for conducting a specific compliance survey and
analysis of this property to determine whether or not it is in conformity with
the various detailed requirements of the ADA. It is possible that a
compliance survey of the property, together with a detailed analysis of the
requirements of the ADA, could reveal that the property is not in compliance
with one or more of the requirements of the Act. If so, this fact could have
a negative effect upon the value of the property. Since we will have no
direct evidence relating to this issue, we will not be considering possible
noncompliance with the requirements of ADA in estimating the value of the
property.
It is strongly recommended that the reader should rely upon only authorized
copies of this report. Authorized copies are printed on recycled grey paper
and contain original U S Realty Consultants, Inc. letterhead. Our letterhead
is printed with grey ink on an evenly shaded grey background. All original
signatures are in blue ink. Any copy that does not have the above is
unauthorized and may have been altered. If the reader is uncertain as to the
authenticity of this report, please contact U S Realty Consultants, Inc. at
(614) 221-9494.
<PAGE>
SPECIAL CONDITIONS
It is assumed that qualified professional hospitality management with
demonstrated expertise in management of hotels operating in the market will
operate the subject. It is assumed that adequate funds will be available for
upkeep and repair of the facility.
It is assumed that the subject will continue to operate as a Signature Inn or
similar chain affiliation with access to a reservation system. We have
assumed that competent and efficient management of the hotel will be in place.
We have assumed that a strong marketing effort will be put forth by the
management of the motel.
Historical revenues and expenses of the subject have been provided by
Signature Inns. We have used these unaudited financial statements in
developing our bases for the prospective financial analysis contained in the
Income Capitalization Approach. We based our analysis on 1993 through 1995
year end financial statements. All financial information provided to us is
assumed to be accurate, and we bear no responsibility for inaccuracies that
may exist.
We have not been provided with a detailed environmental assessment of the
subject. During our inspection, there were no visible signs of contamination
at the property that would indicate possible environmental hazards.
U S Realty Consultants, Inc. has no expertise in evaluation of environmental
hazards, and therefore expresses no independent opinion as to the existence
thereof. If environmental hazards, such as asbestos or other forms of
contamination of the ground or improvements are subsequently found to exist,
the negative impact on the estimate of market value for the property could be
substantial.
<PAGE>
SUMMARY REPORT
OF A COMPLETE APPRAISAL
of the
Signature Inn - Florence
30 Cavalier Court
Florence, Kentucky
as of
February 28, 1996
FOR
Mr. Mark Carney
Vice President
Signature Inn X Limited
One Parkwood Crossing
250 East 96th Street
Suite 450
Indianapolis, Indiana 46240
<PAGE>
March 11, 1996
Mr. Mark Carney
Vice President
Signature Inn X Limited
One Parkwood Crossing
250 East 96th Street, Suite 450
Indianapolis, Indiana 46240
RE: Signature Inn - Turfway
Florence, KY
Dear Mr. Carney:
In accordance with the engagement letter dated February 16, 1996, we have
appraised the property referenced above. The purpose of this appraisal is to
estimate the market value of the going concern of the fee simple estate in the
subject, including the furniture, fixtures, and equipment component. The
effective date of the value estimate is February 28, 1996, and the appraisal
is based upon market conditions as observed on this same date.
Subject to all conditions and explanations contained in this report, it is our
opinion that the market value of the fee simple interest of the going concern
in the subject (including the contributory value of the existing furniture,
fixtures, and equipment), as of February 28, 1996, is:
THREE MILLION EIGHT HUNDRED THOUSAND DOLLARS
$3,800,000
Your attention is called to the Standard and Special Conditions and
Certification which follow. This complete appraisal is communicated in a
short, summary report format. A more descriptive summary report will follow.
This appraisal process and reporting format conforms to the guidelines
stipulated by the Appraisal Institute and the Uniform Standards of
Professional Appraisal Practice.
Respectfully submitted,
U S REALTY CONSULTANTS, INC.
_______________________________ _________________________________
James A. Powers, MAI, CRE Robert J. Feeley, MAI
President Vice President
Indiana General Appraiser No. CG69201473
_______________________________
Jeffrey H. Walker, CHSE
Director of Hospitality Development
<PAGE>
PROPERTY IDENTIFICATION
The subject consists of a 125-unit, limited-service Signature Inn hotel. The
property is located at 30 Cavalier Court, Florence, Boone County, Kentucky. A
legal description has been provided and is maintained in our
files.
PURPOSE AND FUNCTION OF THE APPRAISAL
The purpose of the appraisal is to estimate the as is market value of the
going concern of the fee simple estate in the subject, including furniture,
fixtures and equipment (FF&E), subject to the Uniform Standards of
Professional Appraisal Practice (USPAP), and Title XI (and amendments) of the
Financial Institution Reform Recovery and Enforcement Act of 1989 and 1994
(FIRREA). This report is to be used as an information tool to assist the
limited partners regarding the possible acquisition of the property by the
general partner.
LEGAL INTEREST APPRAISED
The legal interest appraised herein is the fee simple estate in the land and
improvements.
EFFECTIVE DATE OF VALUATION
The appraisal is based upon market conditions as of February 28, 1996, the
current date of our market research and property inspection.
DEFINITION OF VALUE
Market value is defined in the Uniform Standards of Professional Practice,
1995 Edition as follows:
"The most probable price which a property should bring in a competitive
and open market under all conditions requisite to a fair sale, the buyer and
seller each acting prudently and knowledgeably, and assuming the price is not
affected by undue stimulus. Implicit in this definition is the consummation
of a sale as of a specified date and the passing of title from seller to buyer
under conditions whereby:
1. Buyer and seller are typically motivated;
2. Both parties are well informed or well advised, and acting in what
they consider their own best interests;
3. A reasonable time is allowed for exposure in the open market;
4. Payment is made in terms of cash in United States dollars or in
terms of financial arrangements comparable thereto; and
5. The price represents the normal consideration for the property
sold unaffected by special or creative financing or sales concessions granted
by anyone associated with the sale."
The definition of going-concern value is as follows:
The value created by a proven property operation; considered as a
separate entity to be valued with a specific business establishment.
<PAGE>
EXPOSURE TIME AND MARKETING PERIOD
Based upon our investigations, we believe that a marketing and exposure period
of less than 12 months is reasonably appropriate.
APPRAISAL DEVELOPMENT AND REPORTING PROCESS
The scope of this appraisal involves the systematic research and analysis
necessary to reach a value conclusion for the hotel. The initial step was to
inspect the subject, general market area, and neighborhood. Market research
included the assembly of data from public records, real estate specialists,
governmental entities, real estate publications, as well as owners/investors,
management and hotel managers at similar and comparable properties.
Information from the market area was collected and studied in order to define
the character, composition and the propensity for change in the subject trade
area. This information was analyzed to determine the influences which will
impact the surrounding market area and the value of the subject property.
After analyzing the macro-environment, research was conducted relevant to the
valuation process, including gathering income, expense, capitalization rate,
and discount rate data; comparable improved sales; real estate tax, zoning,
and flood plain data and any other information pertinent to the valuation of
the subject property. This information was reviewed, confirmed when
necessary, and analyzed through the approaches to value.
The competitive hotel market was analyzed. Management of most of the
competitive hotel properties were interviewed. Improved sale comparables were
all analyzed, and where possible were confirmed with either the buyer, the
seller or a knowledgeable third party.
Applicability of Approaches: The Income Capitalization Approach was deemed
the most applicable method to estimate market value for the subject. The
Sales Comparison Approach was utilized to provide an additional point of
reference. The Cost Approach has not been completed. Due to the age of the
subject, significant depreciation exists, which is difficult and subjective to
quantify. In addition, the Cost Approach does not reflect the reasoning or
approach taken by an investor for a property of this age and type.
HISTORY OF THE SUBJECT
According to public records, the subject is owned by Signature X Limited.
According to management, the property was constructed by the current owners in
1987. There have been no recorded transfers of the subject since opening.
Additionally, there are no current agreements for sale, options, or listings
of the subject as of the date of the appraisal.
COMPETENCY OF THE APPRAISERS
U S Realty Consultants, Inc. has performed numerous appraisals and reviews of
appraisals on income producing properties such as the subject. Competency has
been established in both the property type and geographical area of the
subject either through previous engagements or through current research of
germane market trends.
<PAGE>
REGIONAL ANALYSIS
Projections indicate that growth in Cincinnati population, household income,
and retail sales should continue. All of these factors and the solid economic
outlook for the area bode well for the prospects of long-term economic growth.
NEIGHBORHOOD ANALYSIS
The subject's surrounding land uses are generally complimentary to the
subject's use. The highly developed commercial office and retail market, as
well as the proximity to the highway, provide a strong level of infrastructure
to support the hotel.
SITE AND IMPROVEMENT ANALYSIS
The hotel site contains approximately 3.738 acres and is irregular in shape.
The site is near street grade level with Cavalier Court and has execellent
visibility to I-75 and easy access. The subject is located in a O2 (office)
and PD (planned development) district within Florence. The subject is
considered to be a legally conforming land use. According to flood map
community panel #2100-130-00 B, the site is located in Zone C, an area of
minimal flooding. The subject contains 125 guest rooms which are considered
to be in average condition.
COMPETITIVE LODGING MARKET ANALYSIS
Existing Competitive Supply: Based on our research, we have identified a
current competitive hotel supply with a total of 2,180 guest rooms in fourteen
lodging facilities (including the subject). The properties are considered
competitive due primarily to their location near the Turfway exit off I-75.
Historical Lodging Demand: Based on information compiled by Smith Travel
Research, and supported by our own interviews with management of the
competitive properties, we have estimated historical market occupancy levels
and average daily rates.
<TABLE>
<CAPTION>
Table 1
Historical Market Occupancy and ADR
______________________________________________________________________________
<S> <C> <C> <C>
Year 1993 1994 1995
Estimated Market Occupancy 70% 63% 64%
Estimated Market ADR $57.50 $53.00 $55.00
</TABLE>
Source: Smith Travel Research and local market interviews. Figures rounded
to nearest occupancy point and $.50. Some variances in hotels reporting to
STR may occur.
<PAGE>
COMPETITIVE POSITION OF SUBJECT PROPERTY
We have assessed the projected competitive position of the subject property as
it compares to the defined competitive lodging supply. Table 2 presents the
historical occupancy and ADR for the subject.
<TABLE>
<CAPTION>
Table 2
Historical Subject Occupancy and ADR
______________________________________________________________________________
<S> <C> <C> <C>
Year 1993 1994 1995
Subject Occupancy 63.5% 66.2% 67.3%
Subject ADR $46.63 $48.88 $51.63
Source: Signature Inns
Estimated Occupancy and Average Daily Rate: Based upon the condition of the
property, discussion with the property and competitive general managers, and
historical and projected occupancy and ADR market trends, we project the
subject will achieve a stabilized occupancy of 68% at an ADR of $53.00. The
occupancy reflects an increase in rooms occupied, based upon the historical
trand, and growing retail market and the existing room supply.
HIGHEST AND BEST USE
There is no alternative, economically feasible use that could justify removal
of the existing improvements at this time. Therefore, the highest and best
use of the subject, as improved, is the continued use as a limited service
hotel. The highest and best use, as vacant, is for development of an economy
limited-service hotel.
INCOME CAPITALIZATION APPROACH
Historical financial statements for years 1993 through 1995 were provided by
Signature Inns. During the period, the subject's overall financial
performance has improved. The income before reserves increased from $414,434
in 1993 to $485,805 in 1995. Top line revenue increased from $1,350,812 in
1993 to $1,585,279 in 1995. Departmental expenses demonstrated an increase as
a percentage of total revenue between 1993 and 1995 from 26.8% to 27.9%, while
undistributed expenses showed a decrease from 39.1% to 38.2%.
We have compared the operating performance of the subject to a 17-property
portfolio of Signature Inns, as well as industry standards from the Host
Report 1994, published by Arthur Anderson and Smith Travel Research, and
Trends Report 1994, published by PKF Consulting. We have utilized the
standards for mid-priced, limited-service properties.
Stabilized Operating Statement: A projected stabilized operating statement in
1996 dollars is presented on the following page. The estimated cash flow was
used to estimate the subject property's market value by direct capitalization.
Valuation Analysis: In developing a capitalization rate for income-producing
real estate, factors such as the quality and durability of the estimated
income stream were analyzed. We have analyzed current yields and
capitalization rates as tracked by the Korpacz Investor Survey, a widely
utilized barometer of investment parameters, as well as USRC's internal
investment survey. The Korpacz survey indicated a capitalization rate for
limited-service hotels in the range of 8% to 18% with an average of 12.53%.
<PAGE>
</TABLE>
<TABLE>
<CAPTION>
STABILIZED OPERATING STATEMENT
SIGNATURE INN - TURFWAY
1996 DOLLARS
<S> <C> <C> <C> <C>
OCCUPANCY/ADR 68% at $53.00
PER OCC.
AMOUNT RATIO AMT\RM ROOM
REVENUES:
ROOMS $1,644,000 95.2% $13,152 $52.99
TELEPHONE 40,333 2.3% 323 1.30
RENTALS & OTHER INCOME 42,000 2.4% 336 1.35
_________ ______ _______ ______
TOTAL REVENUE $1,726,333 100.0% $13,811 $55.64
DEPARTMENTAL EXPENSES: (1)
ROOMS $435,660 26.5% $3,485 $14.04
TELEPHONE 34,283 85.0% 274 1.11
_______ _____ _____ _____
TOTAL DEPARTMENTAL EXPENSES $469,943 27.2% $3,760 $15.15
TOTAL OPERATED INCOME $1,256,000 72.8% $10,048 $40.50
UNDISTRIBUTED EXPENSES:
ADMINISTRATIVE & GENERAL $218,750 12.7% $1,750 $7.05
MANAGEMENT FEE 69,053 4.0% 552 2.23
MARKETING 81,250 4.7% 650 2.62
FRANCHISE FEES 65,760 3.8% 526 2.12
PROPERTY OPERATION & MAINT. 118,750 6.9% 950 3.83
ENERGY 87,500 5.1% 700 2.82
_______ _____ _____ ____
TOTAL $641,063 37.1% $5,129 $20.66
INCOME BEFORE FIXED CHARGES $615,000 35.6% $4,919 $19.83
FIXED CHARGES:
REAL ESTATE & PROPERTY TAXES $40,000 2.3% $320 $1.29
BUILDING & CONTENTS INSURANCE 40,625 2.4% 325 1.31
TOTAL FIXED CHARGES $80,625 4.7% $645 $2.60
INCOME BEFORE RESERVE $534,000 30.9% $4,274 $17.23
RESERVE FOR REPLACEMENT $69,053 4.0% $552 $2.23
_______ ____ ______ _____
INCOME BEFORE OTHER DEDUCTIONS
(2) $465,000 26.9% $3,720 $15.01
</TABLE>
NOTES:
(1) Each departmental expense ratio is based on the department's
estimated revenue and does not add to the total departmental expense ratio.
(2) Income before other fixed charges such as interest, amortization,
depreciation, and income taxes.
Note: This statement is based upon a room inventory of: 125
<PAGE>
THIS STATEMENT SHOULD BE READ SUBJECT TO THE COMMENTS CONTAINED IN
THE ATTACHED REPORT
Based on the aforementioned analysis, we have estimated that a direct
capitalization rate of 12.25% is appropriate to convert the stabilized net
operating income into an indication of market value. The result of this
procedure, using the market-driven capitalization rate of 12.25% is presented
in the following calculation.
$465,000 net operating income / 12.25% capitalization rate = $3,795,918
or
$3,800,000 (rounded)
Based on the above analyses, we estimate that the market value of the fee
simple estate of the going concern of the subject property via the Income
Capitalization Approach (including the contributory value of the FF&E) as of
February 28, 1996 is:
Three Million Eight Hundred Thousand Dollars
$3,800,000
SALES COMPARISON APPROACH
Two techniques were utilized in this valuation approach. First, a Linear
Regression Analysis is presented to demonstrate that sale price is a function
of income. Next, an Effective Rooms Revenue Multiplier is developed, which
adjusts the sale prices of the comparables based on differences in rooms
revenue. A total of 63 hotel sales were utilized as comparable data. Based
upon a regression analysis of the data, regression formulas were developed.
Linear Regression Analysis: Based on this information, REVPAR is a
significant variable driving the value of hotels. Although differences in
physical characteristics exist, they only affect value to the extent that they
affect room rates and revenue. The regression formula for the subject
indicated a value of $4,700,000.
Net income per room is also a significant variable driving the value of
hotels. Although differences in physical characteristics exist, they only
affect value to the extent that they affect room rates, revenue, and expenses.
The regression formula for the subject indicated a value of $3,800,000.
Effective Rooms Revenue: The ERRM is a factor derived by dividing the sales
price of the comparable sale by the rooms revenue (number of guest rooms
available annually multiplied by the average daily room rate times the
occupancy factor). As with the above approach, room revenue projections for
the first stabilized year were utilized to reflect the buyer's anticipation of
rooms revenues at the time of purchase.
The mean of the comparable sales' ERRM is 2.68 while the they ranged between
1.10 and 4.15. To supplement this information, we have turned to USRC's
internal study that was performed in the Spring of 1995. This survey
indicated ERRMs ranging from 1 to 5, with an average of 2.7. The average of
this survey generally supports the average of the reported sales.
<PAGE>
The ERRM was applied to the rooms revenue estimate from the first stabilized
year of our analysis. Based on the foregoing analysis, and in consideration
of the historical and projected performance of the subject, we have estimated
an ERRM of 2.5 to be most appropriate for the subject. Applying this range to
the effective room revenue estimate during the first stabilized year yields
the following:
$1,644,000 rooms revenue X 2.5 ERRM = $4,110,000
Rounded to $4,100,000
Correlation of Sales Comparison Approach: An analysis of the correlation
coefficient (R squared, or a measure of reliability), indicated the greatest
correlation (.874) for the net income per room analysis. Accordingly, we have
relied most heavily on this analysis, with the ERRM as an additional point of
reference. It is our opinion that the market value of the going concern of
the fee simple estate, as indicated by the Sales Comparison Approach, in the
subject (including the contributory value of the furniture, fixtures, and
equipment), as of February 28, 1996, is:
Three Million Eight Hundred Thousand Dollars
$3,800,000
RECONCILIATION
Two of the traditional approaches to value -- Income Capitalization Approach
and the Sales Comparison Approach -- were used to estimate the market value of
the subject property. These two approaches represent alternative ways of
viewing market phenomena.
We have relied most heavily on the value estimate produced by the Income
Capitalization Approach. The Sales Comparison Approach provides additional
support for the conclusion. Subject to all conditions and explanations
contained in this report, it is our opinion that the market value of the fee
simple interest of the going concern in the 130-room subject (including the
contributory value of the existing furniture, fixtures, and equipment),
expressed in terms of financial arrangements equivalent to cash, as of
February 28, 1996, is:
THREE MILLION EIGHT HUNDRED THOUSAND DOLLARS
$3,800,000
The contributory value of the FF&E, based upon this analysis, included in the
estimated value of the property, is $437,500, or rounded to $440,000.
<PAGE>
CERTIFICATOIN
We certify to the best of our knowledge and belief
* The statements of fact contained in this report are true and correct.
* The reported analyses, opinions, and conclusions are limited only by the
reported assumptions and limiting conditions, and are our personal, unbiased
professional analyses, opinions, and conclusions.
* We have no present or prospective interest in the property that is the
subject of this report, and we have no personal interest or bias with respect
to the parties involved.
* This appraisal assignment was not based on a requested minimum
valuation, a specific valuation, or the approval of a loan.
* Our compensation is not contingent upon the reporting of a predetermined
value or direction in value that favors the cause of the client, the amount of
the value estimate, the attainment of a stipulated result, or the occurrence
of a subsequent event.
* Our analyses, opinions, and conclusions were developed, and this report
has been prepared, in conformity with the Uniform Standards of Professional
Appraisal Practice.
* We certify that, to the best of our knowledge and belief, the reported
analyses, opinions and conclusions were developed, and this report has been
prepared in conformity with the requirements of the Code of Professional
Ethics and the Standards of Professional Appraisal Practice of the Appraisal
Institute.
* We certify that the use of this report is subject to the requirements of
the Appraisal Institute relating to review by its duly authorized
representatives.
* As of the date of this report, James A. Powers, MAI, and Robert J.
Feeley, MAI have completed the requirements of the continuing education
program of the Appraisal Institute
* Travis D. Ray has made a personal inspection of the property that is the
subject of this report. James A. Powers, Robert J. Feeley and Jeffrey H.
Walker have not inspected the property.
* No one other than the undersigned provided significant professional
assistance to the person(s) signing this report.
_________________________________ __________________________________
James A. Powers, MAI, CRE Robert J. Feeley, MAI
Kentucky General Appraiser #000935
_________________________________ __________________________________
Jeffrey H. Walker, CHSE Travis D. Ray
<PAGE>
COMPANY PROFILE
_____________________________________________________________________________
U S Realty Consultants, Inc. (Usrc) was originally formed in January of 1983
as a Columbus-based firm specializing in commercial real estate appraisal and
market analysis. With regional offices located in Atlanta, Georgia and
Chicago, Illinois, Usrc has now grown to be one of the premier real estate
appraisal and consulting practices in the United States.
As we continue our phenomenal growth, our professionals continue to be
involved in literally hundreds of assignments annually, involving millions of
dollars of real estate. Our practice now includes three major areas of
services to the real estate industry: Hospitality and Resort Industry
Services, Golf and Country Club Services, and Real Estate Appraisal Services.
* Hospitality and Resort Industry Services - Evolving from a diversified
background of hospitality and resort market analysts, appraisers, and
operational specialists, Usrc has established a hospitality and resort
consulting practice second to none. Our professionally-trained hoteliers,
resort, and golf course specialists, all having achieved outstanding academic
credentials, have over forty combined years of industry experience. However,
our constant involvement in the consulting and appraising of hotels, motels,
restaurants, resorts, and golf courses have enabled us to be current with, as
well as adaptive to, the ever-changing dynamics of the industry. As a result,
our professionals combine current and in-depth industry experience with strong
analytical and communication skills to yield practical and effective results
tailored to the specific engagement, thus providing our clients the best in
hospitality and resort consulting services.
* Real Estate Appraisal Services - Usrc is unique in that it was part of a
movement to pioneer the development of a national real estate appraisal
practice. We specialize in the valuation of real estate portfolios, which are
disbursed both geographically and by property type. Our valuation expertise
is in commercial real estate with emphasis on office, industrial, retail,
mixed-use, hotel, resort, golf course, other special-use, and multifamily
projects. These characteristics qualify us as one of the leading appraisal
organizations in the nation.
* Golf and Country Club Services - Usrc has recently developed a
burgeoning practice devoted to golf-related and recreational facilities. The
services offered under this practice include valuation and consultation for
private country clubs, daily-fee golf courses, surrounding residential
development, and resort destinations.
The rapid expansion of Usrc's experience and capabilities closely parallels
the growth and ever-changing requirements of the clients we serve. The Firm's
emphasis on programs of professional learning ensure that industry
requirements are being met by our people. Clients become the beneficiaries of
this continually expanding knowledge. Many Usrc individuals also serve on
senior committees of national and state professional societies and
associations, enabling them to stay current with developing trends in the
profession and to participate in framing new rules and standards.
Usrc's clients benefit from the advantage of working with a local firm, yet
have access to the experience and much of the resources of a national firm.
With 20 professional staff members -five holding the coveted designation,
Member of the Appraisal Institute (MAI) -and five specifically trained in the
analysis of hotels, restaurants, resorts, and golf courses - and growing, we
are determined to provide the "quality client service" that our customers
expect.
<PAGE>
U S Realty Consultants, Inc., with over 55 combined years of real estate
valuation experience, serves many of the nation's most prominent pension
funds, investment managers and advisors, life insurance companies, financial
institutions, and governmental agencies providing quality appraisal and
litigation support services in relation to their real estate needs.
Some of the more significant marketplaces in which Usrc holds experience and
important local market knowledge include:
<TABLE>
<S> <C> <C>
Albuquerque Fort Worth Portland, OR
Aspen Houston Providence
Atlanta Indianapolis Raleigh
Austin Kansas City Sacramento
Birmingham Los Angeles San Diego
Boston Louisville San Francisco
Charlotte Minneapolis San Jose
Chicago Milwaukee Seattle
Cincinnati Nashville St. Louis
Cleveland New Orleans Tampa
Colorado Springs Oakland Toledo
Columbus Orlando Toronto, Ontario
Dallas Philadelphia Washington, D.C.
Dayton Phoenix West Palm Beach
Denver Pittsburgh Wilmington
Des Moines Portland, ME Caribbean
Detroit
</TABLE>
<PAGE>
SELECT LIST OF
INSTITUTIONAL REAL ESTATE
APPRAISAL CLIENTS
_____________________________________________________________________________
Governmental Agencies
_____________________
Resolution Trust Corporation
Department of Justice
Federal Deposit Insurance Corporation
Pension Funds
_____________
California Public Employees' Retirement System
Police and Fireman's Disability and
Pension Fund of Ohio
Public Employees' Retirement
Association of Colorado
School Employees Retirement System of Ohio
State Teachers' Retirement System of Ohio
V.I.B. (Dutch Pension Fund)
Investment Managers/Advisors
____________________________
Alex. Brown Kleinwort Benson Realty Advisors
AMB Institutional Realty Advisors
Balcor Management Services
Financial Security Assurance, Inc.
Greystone Realty Advisors
Goldman, Sachs and Company
Holiday Corporation
Jacques and Kurdziel (represent Dutch Pension Fund)
J.P. Morgan Investment Management, Inc.
Karsten Realty Advisors
LandG Realty Advisors
Meyer Asset Management, Inc.
MIG Realty Advisors, Inc.
Paine Webber
Schroder Real Estate Associates
SBC Asset Management, Inc.
WF Advisors, Inc.
The Yarmouth Group, Inc.
Law Firms
_________
Baker and Hostetler
Benesch, Friedlander, Coplan and Aronoff
Bricker and Eckler
Climaco, Climaco, Seminatore,
Lefkowitz and Garofoli Co.
Connelly, Soutar and Jackson
Frost and Jacobs
Holt, Ney, Zatcoff and Wasserman
Isaac, Brant, Ledman and Becker
McNamee, Hosea, Jernigan and Scott
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo P.C.
Rendigs, Fry, Kiely and Dennis
Smith and Hale
Squire, Sanders and Dempsey
Teaford, Rich, Coffman and Wheeler
Testa, Hurwitz and Thibeault
Wesp and Osterkamp
<PAGE>
Financial Institutions
______________________
Bank of America
Bank of Boston
Bank of Nova Scotia
Bank One Trust
Bank Texas
Chemical Bank
Citicorp Real Estate
Continental Bank
Diamond Savings and Loan Association
Fifth Third Bank
First Interstate Bank
First National Bank of Chicago
First Republic Bank of Dallas
First Wisconsin National Bank
Fleet National Bank
Gill Savings Association
Great Atlantic Savings Bank
Huntington National Bank
INB Mortgage Corporation
Michigan National Bank
Mitsubishi Bank
National City Bank
NationsBank
Savings of America
Security Pacific
Star Bank
Wachovia Bank and Trust Company
Wells Fargo Real Estate Group
Life Insurance Companies
________________________
Lincoln National Life
Metropolitan Life Insurance
Minnesota Mutual Life Insurance Company
Mutual Benefits Life
New York Life Insurance Company
The Principal Financial Group
Travelers Realty Investment Company
<PAGE>
PROFESSIONAL
STAFF
QUALIFICATIONS
_______________________________________________________________________________
JAMES A.POWERS, MAI, CRE
PRESIDENT
James Powers is the founder and President of U S Realty Consultants, Inc.,
overseeing the company from its inception in 1983. Mr. Powers in now actively
involved in the valuation of all income-producing property types, including
multi-property portfolio appraisal. In addition, he is called upon to provide
expert witness testimony in courts throughout the country. Mr. Powers is a
specialist in the securitization of real estate through Real Estate Investment
Trusts.
Mr. Powers received his MAI designation from the Appraisal Institute in 1974,
and is a Certified General Appraiser in the State of Ohio.
Education
_________
Bachelor of Science (Major: Engineering), United States
Military Academy, West Point, New York, 1960
Instructor, Lecturer, Real Estate Appraisal
and Investment Topic
Chairman, Education Committee, Columbus Board of
Realtors, 1971 - 1972
Professional Affiliations
_________________________
Member, Counselors of Real Estate
Appraisal Institute
Director, Ohio Chapter 1988
Society of Real Estate Appraisers:
Past President, Columbus Chapter 1978 - 1979
American Society of Appraisers:
Past President, Columbus Chapter 1974 - 1975
National Association Review Appraisers
National Association of Real Estate Boards
Ohio Association of Real Estate Boards
Columbus Board of Realtors
Real Estate Securities and Syndications Institute
National Association Corporate Real Estate Executives
Past Chairman, St. Ann's Hospital Board of Trustees,
during the Concept and Implementation Phase of the
Hospital's relocation and redevelopment.
<PAGE>
ROBERT J. FEELEY, MAI
VICE PRESIDENT
Robert J. Feeley, MAI is Vice President of U S Realty Consultants, Inc.. He
joined the firm in January, 1984 shortly after the firm's inception in 1983.
Mr. Feeley's experience includes appraisal and portfolio analysis of
investment-grade real estate, valuation of participating debt instruments,
appraisal services for asset valuation and loan underwriting of FSLIC- and
FDIC-insured institutions, and third-party appraisal reviews.
Mr. Feeley has extensive experience in the appraisal of both CBD and suburban
office buildings, apartments, office/warehouse, hotel, retail centers ranging
from neighborhood centers to regional malls, marinas and mixed-use properties.
He has been a member of the Appraisal Institute since 1993.
Education
_________
Bachelor of Science, The Ohio State University, 1979
Master of Business Administration with emphasis in real estate, The Ohio State
University, 1983
Various Seminars and Programs sponsored by:
The Appraisal Institute
The Society of Real Estate Appraisers
Delegate to the 1988 and 1989 Young Advisory Council of the Society of Real
Estate Appraisers
Professional Affiliations
_________________________
Appraisal Institute
State Certification
___________________
Mr. Feeley holds certification as a General Real Estate Appraiser in the
following states:
State of Indiana, July 1992
State of Kentucky, June 1993
State of Ohio, July 1991
<PAGE>
JEFFREY H. WALKER, CHSE
DIRECTOR
HOSPITALITY
DEVELOPMENT
Jeffrey Walker joined the firm in 1992, serving as Director of Hospitality
Development. Mr. Walker's previous experience includes various hotel and
restaurant positions. Most recently he served as Director of Sales and
Marketing with Hyatt Hotels Corporation, where he received the "Hyatt Director
of Sales of the Year" award in 1991.
Mr. Walker is now involved in consulting work for lenders, owners, developers
and operators. His areas of specialization include hotel marketing
consulting, operational review, market study and analysis, yield management,
and advertising and public relations support for hotels.
Education
_________
Bachelor of Science, James Madison University, 1985
Completed credit requirements for the following AI courses:
1A1 Real Estate Appraisal Principles
Various Seminars and Programs sponsored by:
The Appraisal Institute
The Ohio Hotel and Motel Association
The Ohio Restaurant Association
Professional Affiliations
_________________________
Ohio Hotel and Motel Association, Allied Board of
Directors
Columbus Hotel and Motel Association, member
Hotel Sales and Marketing Association, International,
member
Greater Washington (D.C.) Society of Association
Executives, 1988-92
<PAGE>
TRAVIS RAY, ASSOCIATE
Travis Ray currently serves as an associate with the firm. He joined USRC in
the Summer of 1994 after receiving his Bachelor of Science degree from the
School of Hotel Administration at Cornell University. His concentration was
in Real Estate and Development. Although Mr. Ray's emphasis is in hospitality
related properties, he has been actively involved in the valuation and
evaluation of other income-producing property types. Among the other property
types he has been involved with include regional malls, nursing homes,
offices, and apartments.
Education
________
Bachelor of Science (Major: Hotel Administration), Cornell University, 1994
PROFESSIONAL AFFILIATIONS
_________________________
Columbus Hotel/Motel Association
Cornell Society of Hotelmen
<PAGE>
STANDARD CONDITIONS
The following Standard Conditions apply to real estate appraisals by U S
Realty Consultants, Inc. Appraisals are performed and written reports are
prepared by, or under the supervision of members of the Appraisal Institute in
accordance with the Institute's Standards of Professional Practice and Code of
Professional Ethics.
No opinion is rendered as to property title, which is assumed to be good and
marketable. Unless otherwise stated, no consideration is given to liens or
encumbrances against the property. Sketches, maps, photos, or other graphic
aids included in appraisal reports are intended to assist the reader in ready
identification and visualization of the property and are not intended for
technical purposes.
Appraisal reports may contain prospective financial information, estimates, or
opinions to represent the appraisers' view of reasonable expectations at a
particular point in time, but such information, estimates, or opinions are not
offered as predictions or as assurances that a particular level of income or
profit will be achieved, that events will occur, or that a particular price
will be offered or accepted. Actual results achieved during the period
covered by our prospective financial analyses will vary from those described
in our report, and the variations may be material.
It is assumed that legal engineering, or other professional advice, as may be
required, has been or will be obtained from professional sources and that the
appraisal report will not be used for guidance in legal or technical matters
such as, but not limited to, the existence of encroachments or easements or
other discrepancies affecting the legal description of the property. It is
assumed that there are no concealed or dubious conditions of the subsoil or
subsurface waters including water table and flood plain, unless otherwise
noted. We further assume no regulations of any government entity control or
restrict the use of the property unless specifically referred to in the
report. It is assumed that the property will not operate in violation of any
applicable government regulations, codes, ordinances, or statutes.
In the absence of competent technical advice to the contrary, it is assumed
that the property being appraised is not adversely affected by concealed or
unapparent hazards such as, but not limited to, asbestos, hazardous or
contaminated substances, toxic waste, or radioactivity.
The report and the final estimate of value and prospective financial analyses
included in it are intended for the information of the person or persons to
whom they are addressed, solely for the purposes stated, and should not be
relied upon for any other purpose. Permission will be granted only upon
meeting certain conditions.
Information furnished by others is presumed to be reliable, and where so
specified in the report, has been verified; but no responsibility, whether
legal or otherwise, is assumed for its accuracy, and it cannot be guaranteed
as being certain. No single item of information was completely relied upon to
the exclusion of other information.
<PAGE>
Appraisal assignments are accepted with the understanding that there is no
obligation to furnish services after completion of the original assignment.
If the need for subsequent services related to an appraisal assignment (for
example, testimony, updates, conferences, reprint or copy services) is
contemplated, special arrangements acceptable to U S Realty Consultants, Inc.
must be made in advance.
No significant change is assumed in the supply and demand patterns indicated
in the report. The appraisal assumes market conditions as observed as of the
current date of our market research stated in the letter of transmittal.
These market conditions are believed to be correct; however, the appraisers
assume no liability should market conditions materially change because of
unusual or unforeseen circumstances.
The valuation applies only to the property described and for the purpose so
stated and should not be used for any other purpose. Any allocation of total
price between land and the improvements as shown is invalidated if used
separately or in conjunction with any other report.
Neither the report nor any portions thereof (especially any conclusions as to
value, the identity of the appraisers or U S Realty Consultants, Inc, or any
reference to the Appraisal Institute or the MAI designation) shall be
disseminated to the public through public relations media, news media, sales
media or any other public means of communication without the prior written
consent and approval of the appraisers and U S Realty Consultants, Inc.
The date of the valuation to which the value estimate conclusions apply is set
forth in the letter of transmittal and within the body of the report. The
values are based on the purchasing power of the United States dollar as of
that date.
It should be specifically noted by any prospective mortgagee that the
appraisal assumes that the property will be competently managed, leased, and
maintained. by financially sound owners over the expected period of ownership.
This appraisal engagement does not entail an evaluation of management's or
owner's effectiveness, nor are we responsible for future marketing efforts and
other management or ownership actions upon which actual results will depend.
The Americans with Disabilities Act (ADA") became effective January 26, 1992.
We will not be responsible for conducting a specific compliance survey and
analysis of this property to determine whether or not it is in conformity with
the various detailed requirements of the ADA. It is possible that a
compliance survey of the property, together with a detailed analysis of the
requirements of the ADA, could reveal that the property is not in compliance
with one or more of the requirements of the Act. If so, this fact could have
a negative effect upon the value of the property. Since we will have no
direct evidence relating to this issue, we will not be considering possible
noncompliance with the requirements of ADA in estimating the value of the
property.
It is strongly recommended that the reader should rely upon only authorized
copies of this report. Authorized copies are printed on recycled grey paper
and contain original U S Realty Consultants, Inc. letterhead. Our letterhead
is printed with grey ink on an evenly shaded grey background. All original
signatures are in blue ink. Any copy that does not have the above is
unauthorized and may have been altered. If the reader is uncertain as to the
authenticity of this report, please contact U S Realty Consultants, Inc. at
(614) 221-9494.
<PAGE>
SPECIAL CONDITIONS
It is assumed that qualified professional hospitality management with
demonstrated expertise in management of hotels operating in the market will
operate the subject. It is assumed that adequate funds will be available for
upkeep and repair of the facility.
It is assumed that the subject will continue to operate as a Signature Inn or
similar chain affiliation with access to a reservation system. We have
assumed that competent and efficient management of the hotel will be in place.
We have assumed that a strong marketing effort will be put forth by the
management of the motel.
Historical revenues and expenses of the subject have been provided by
Signature Inns. We have used these unaudited financial statements in
developing our bases for the prospective financial analysis contained in the
Income Capitalization Approach. We based our analysis on 1993 through 1995
year end financial statements. All financial information provided to us is
assumed to be accurate, and we bear no responsibility for inaccuracies that
may exist.
We have not been provided with a detailed environmental assessment of the
subject. During our inspection, there were no visible signs of contamination
at the property that would indicate possible environmental hazards.
U S Realty Consultants, Inc. has no expertise in evaluation of environmental
hazards, and therefore expresses no independent opinion as to the existence
thereof. If environmental hazards, such as asbestos or other forms of
contamination of the ground or improvements are subsequently found to exist,
the negative impact on the estimate of market value for the property could be
substantial.
<PAGE>
EXHIBIT E
---------
CONSENT RESOLUTIONS OF LIMITED PARTNERS
Having received the requisite number of Irrevocable Consents from the
Limited Partners of the Signature X Ltd. Limited Partnership (the
"Partnership") pursuant to the Solicitation Statement and Information
Statement (the "Statement") to which this Exhibit is attached, incorporated
and made a part thereof, the following consent resolutions hereby are accepted
and agreed to by SIGNATURE INNS, INC. ("SII") in its capacity as attorney-in-
fact for and on behalf of the Limited Partners of the Partnership pursuant to
the Power of Attorney set forth under Section 17.01 of the Amended Certificate
and Agreement of Limited Partnership dated June 15, 1988, as amended (the
"Partnership Agreement"):
1. Under Section 14.01 of the Partnership Agreement, the Limited
Partners, by a Majority Vote, have a right to approve or disapprove the sale
or exchange of all or substantially all of the Hotel Property. SII has
proposed to purchase the Hotel Property. A detailed description of the Sale
and the effects thereof is set forth in Section IV. of the Statement.
Accordingly, the Limited Partners hereby resolve as follows:
RESOLVED, that the Partnership be, and it hereby is, authorized
to sell, transfer and convey an undivided eighty-five percent (85%)
interest in the real estate, fixtures, improvements and tangible
personal property which comprise the Partnership's hotel facility
located at I-75 and Sharonville Road, Sharonville, Ohio, and the
Partnership's hotel facility located at I-75/71 and Turfway Road,
Florence, Kentucky, as more fully described in Section IV. of the
Statement, to SII in exchange for a purchase price of Six Million
Thirty-Five Thousand and 00/100 Dollars ($6,035,000.00), which
purchase price shall include the assumption of indebtedness secured
by the Hotel Properties, and pursuant to the terms of the Real Estate
Purchase Agreements substantially in the form described in Section IV.
of the Statement, and that the cash proceeds of such sale be
distributed to the Limited Partners in accordance with Section 8.02
of the Partnership Agreement, as amended by these Resolutions.
FURTHER RESOLVED, that SII and its officers and directors be
and hereby are authorized and directed to take all action necessary
or desirable to effectuate and consummate the Sale, including,
without implied limitation, executing and delivering the Real
Estate Purchase Agreement and executing, delivering and, where
appropriate, recording all contracts, deeds, vendor's affidavits,
closing statements, bills of sale and all other necessary or
desirable documents in connection with the Sale and to facilitate
and to effectuate the intents and purposes of these Resolutions.
<PAGE>
2. Under Section 14.01 of the Partnership Agreement, the Limited
Partners, by a Majority Vote, have a right to amend the Partnership Agreement.
The terms of the Sale require that certain amendments be made to the
Partnership Agreement. A detailed description of these amendments and the
purposes for which they will be made is set forth in Section V. of the
Statement. Accordingly, the Limited Partners hereby resolve as follows:
RESOLVED, that Section 7.06 of the Partnership Agreement
be and hereby is amended as provided in that certain Amendment
to Amended Certificate and Agreement of Limited Partnership of
Signature X Ltd. Limited Partnership (the "Amendment") by adding
new language which provides that in the case of a sale of an
undivided fractional interest in the partnership property by the
Partnership to SII which undivided fractional interest is equal
to the aggregate units of limited partnership interests in the
Partnership owned by all Limited Partners (as a group), the gain
or loss on the sale of such undivided fractional interest shall
be allocated entirely to the Limited Partners (as a group),
provided that (a) the Limited Partners (as a group), receive all
distributable cash sale proceeds resulting from that sale, and
(b) SII receives the distribution of the remaining undivided
fractional interest in the partnership property as a distribution
in kind in connection with the dissolution and termination of the
Partnership in accordance with Article XVIII of the Partnership
Agreement.
FURTHER RESOLVED, that Section 8.02 of the Partnership
Agreement be and hereby is amended as provided in the Amendment
by adding new language which provides that in the event of any
sale of an undivided fractional interest in the partnership
property by the Partnership to SII which undivided fractional
interest is equal to the aggregate units of limited partnership
interests in the Partnership owned by all Limited Partners
(as a group), all net proceeds of such sale shall be allocated
and distributed to the Limited Partners (as a group), and SII
shall not receive any allocation or distribution of any such
cash but shall receive a distribution in kind of the remaining
undivided fractional interest in the partnership property
represented by SII's interest in the Partnership in connection
with the dissolution and termination of the Partnership in
accordance with Article XVIII of the Partnership Agreement.
<PAGE>
3. Under Section 14.01 of the Partnership Agreement, the Limited
Partners, by a Majority Vote, have a right to dissolve the Partnership. Upon
the consummation of the Sale of the Hotel Property to SII, the Partnership
will dissolve, terminate and make final distributions to its Limited Partners.
A detailed description of the process by which the dissolution will take place
is set forth in Section VI. of the Statement. Accordingly, the Limited
Partners hereby resolve as follows:
RESOLVED, that the Partnership shall be dissolved and
terminated pursuant to Indiana Code Section 23-16-9-1(a)(2) and
Section 18.01(e) of the Partnership Agreement upon the disposition
of all of the assets of the Partnership.
FURTHER RESOLVED, that SII, as the General Partner of the
Partnership, shall, upon such disposition, wind up the affairs
of the Partnership in accordance with Indiana Code Section
23-16-9-3 and shall follow the requirements of Article XIX of
the Partnership Agreement concerning dissolution, termination
and liquidation of the Partnership, including the payment of
debts and liabilities of the Partnership in the order of priority
provided by law (Indiana Code Section 23-16-9-4).
FURTHER RESOLVED, that in accordance with Section 19.03
of Article XIX of the Partnership Agreement, each of the Limited
Partners of the Partnership shall be furnished with a Liquidation
Statement which describes the disposition of the assets and
liabilities of the Partnership and otherwise reports to them with
respect to the liquidation of the Partnership. In addition, the
Limited Partners shall be provided with a notice that the Partnership
has been dissolved and that a Certificate of Cancellation of the
Partnership has been or will be filed/recorded in accordance with
applicable law.
FURTHER RESOLVED, that the officers of SII be and hereby are
authorized and directed to execute and file/record any and all
documents necessary or desirable in connection with the dissolution,
termination or liquidation of the Partnership, including, without
implied limitation, the Certificate of Cancellation of the
Partnership. The officers of SII shall also be authorized and
directed to execute and file/record documents on behalf of the
Limited Partners of the Partnership pursuant to the authority
provided under the Power of Attorney set forth under Section 17.01
of the Partnership Agreement, including, without implied limitation,
the authority under Section 17.01(c) to execute documents which may
be required to effect the dissolution and termination of the
Partnership.
<PAGE>
4. Capitalized terms used herein but not specifically defined herein
each have the meanings ascribed to those terms in the Statement.
IN WITNESS WHEREOF, the undersigned hereby executes these Consent
Resolutions of Limited Partners as of the ___ day of _______________, 1996.
LIMITED PARTNERS:
By: SIGNATURE INNS, INC.,
Attorney-In-Fact
By:_________________________________
A Duly Authorized Officer
ATTEST:
By:_______________________________
A Duly Authorized Officer
<PAGE>
EXHIBIT F
AMENDMENT
TO
AMENDED CERTIFICATE AND
AGREEMENT OF LIMITED PARTNERSHIP
OF
SIGNATURE X LTD. LIMITED PARTNERSHIP
THIS AMENDMENT is made and entered into effective this ___day of
__________, 1996, by and between SIGNATURE INNS, INC., an Indiana Corporation
whose address is 250 East 96th Street, Suite 450, Indianapolis, Indiana 46240,
in its capacity as General Partner of Signature X Ltd. Limited Partnership
(the "Partnership"), and SIGNATURE INNS, INC., in its capacity as attorney-
in-fact for and on behalf of the Limited Partners of the Partnership pursuant to
the Power of Attorney set forth under Section 17.01 of the Amended Certificate
and Agreement of Limited Partnership dated June 15, 1988, and recorded with
the Marion County Recorder's Office on June 15, 1988, as Doc. No. 880084374,
as amended on April 15, 1988, by documents recorded with the Marion County
Recorder's Office on April 15, 1988, as Doc. No. 880034298, and by the filing
of a Certificate of Limited Partnership under the Indiana Revised Uniform
Limited Partnership Act (the "Act") on July 1, 1988 (hereinafter collectively
referred to as the "Amended Certificate and Agreement").
Preliminary Statement
---------------------
In order to facilitate and effectuate the sale of the Partnership's real
estate, improvements, furniture, furnishings, equipment and tangible personal
property which comprise the Partnership's hotel facility located at I-75 and
Sharonville Road, Sharonville, Ohio, and the Partnership's hotel facility
located at I-75/71 and Turfway Road, Florence, Kentucky, to Signature Inns,
Inc., the General Partner of the Partnership, the following revisions,
deletions and additions to the Partnership's Amended Certificate and Agreement
have been determined to be necessary.
NOW, THEREFORE, in consideration of the foregoing, and after a favorable
Majority Vote by the Limited Partners in support of all of the following
amendments, the Amended Certificate and Agreement of the Partnership shall be
and hereby is further amended as follows:
Amendments
----------
1. Section 7.06 of the Amended Certificate and Agreement shall be and
hereby is amended by deleting that Section in its entirety and by inserting
the following revised Section 7.06 in lieu thereof:
<PAGE>
Section 7.06. Gain or Loss on Sale of Partnership Property.
The gain or loss on sale of Partnership Property will be allocated
among the Partners so that the capital accounts of the Partners as
determined under Section 6.07 will equal the sale proceeds
distributable to the Partners as determined under Section 8.02 and
Section 8.03. In the case of a sale of an undivided fractional
interest in Partnership Property by the Partnership to the General
Partner which undivided fractional interest is equal to the
aggregate Units of limited partnership interests in the Partnership
owned by all Limited Partners (as a group), the gain or loss on the
sale of such undivided fractional interest in Partnership Property
shall be allocated entirely to the Limited Partners (as a group);
provided that (a) the Limited Partners (as a group) shall receive
all distributable cash proceeds resulting from the sale of such
undivided fractional interest, and (b) the General Partner shall
receive the distribution of the remaining undivided fractional
interest in the Partnership Property as a distribution in kind in
connection with the dissolution and termination of the Partnership
in accordance with Article XVIII hereof.
2. Subparagraph (b)(i) of Section 8.02 of the Amended Certificate and
Agreement shall be and hereby is amended by deleting that Section in its
entirety and by inserting the following revised Subparagraph (b)(i) of Section
8.02 in lieu thereof:
(i) Subject to the provisions of Subparagraph (b)(ii)
hereof, the Sale or Refinancing Proceeds shall be allocated
eighty-five percent (85%) to the Limited Partners based upon
their percentage interest in the Partnership during the fiscal
year and fifteen percent (15%) to the General Partner.
3. Subparagraph (b)(ii) of Section 8.02 of the Amended Certificate
and Agreement shall be and hereby is amended by deleting that Section in its
entirety and by inserting the following revised subparagraph (b)(ii) of
Section 8.02 in lieu thereof:
(ii) In the event of any sale of an undivided fractional
interest in Partnership Property by the Partnership to the General
Partner which undivided fractional interest is equal to the
aggregate Units of limited partnership interests in the Partnership
owned by all Limited Partners (as a group), all net proceeds of
the sale of such undivided fractional interest shall be allocated
and distributed to the Limited Partners (as a group), and the
General Partner shall not receive any allocation or distribution
of any such cash. Rather, the General Partner shall receive a
distribution in kind of the remaining undivided fractional interest
in the Partnership Property equal to the General Partner's interest
in the Partnership which distribution will occur in connection with
the dissolution and termination of the Partnership in accordance
with Article XVIII hereof.
4. All terms used in this Amendment shall have the same meanings as
provided in the Partnership Agreement. Except as specifically amended above,
the Amended Certificate and Agreement of The Partnership shall remain in full
force and effect.
<PAGE>
IN WITNESS WHEREOF, the undersigned hereby executes this Amendment to
the Amended Certificate and Agreement as of the date indicated above.
GENERAL PARTNER:
SIGNATURE INNS, INC.
By:_________________________________
A Duly Authorized Officer
ATTEST:
By:_______________________________
A Duly Authorized Officer
State of Indiana )
)SS:
County of Marion )
SUBSCRIBED AND SWORN to before me, a Notary Public in and for said
County and State this _______ day of ____________. 1996.
_________________________________
Notary Public
_________________________________
(Printed Signature)
My Commission Expires: My County of Residence:
_____________________ _____________________
LIMITED PARTNERS:
By: SIGNATURE INNS, INC.,
Attorney-In-Fact
By:_________________________________
A Duly Authorized Officer
ATTEST:
By:_______________________________
A Duly Authorized Officer
<PAGE>
State of Indiana )
)SS:
County of Marion )
SUBSCRIBED AND SWORN to before me, a Notary Public in and for said
County and State this _______ day of ____________. 1996.
_________________________________
Notary Public
_________________________________
(Printed Signature)
My Commission Expires: My County of Residence:
_____________________ _____________________
<PAGE>
SCHEDULE 13E-3
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Rule 13e-3 Transaction Statement
(Pursuant to Section 13(e) of the Securities Exchange Act of 1934 and
Rule 13e-3 (Section 240.13e-3) thereunder)
[Amendment No. ______________]
SIGNATURE X LTD. LIMITED PARTNERSHIP
------------------------------------
(Name of the Issuer)
SIGNATURE X LTD. LIMITED PARTNERSHIP
------------------------------------
(Name of the Person(s) Filing Statement)
UNITS OF LIMITED PARTNERSHIP INTERESTS
--------------------------------------
(Title of Class of Securities)
NONE
--------------------------------------
(CUSIP Number of Class of Securities)
Thomas N. Eckerle, Esq., Suite 1800, One Indiana Square,
Indianapolis, Indiana 46240
(317) 634-9777
--------------------------------------------------------
(Name, Address and Telephone Number of Person Authorized to Receive
Notices and Communications on Behalf of Person(s) Filing Statement)
This statement is filed in connection with (check the appropriate box):
a. [x] The filing of solicitation materials or an information
statement subject to Regulation 14A.
b. [ ] The filing of a registration statement under the Securities
Act of 1933.
c. [ ] A tender offer.
d. [ ] None of the above.
Check the following box if the soliciting materials or information statement
referred to in checking box (a) are preliminary copies: [x]
<TABLE>
Calculation of Filing Fee
<S> <C>
Transaction valuation* Amount of filing fee
$6,035,000 $1,207.00
</TABLE>
[ ] Check box if any part of the fees is offset as provided by Rule
0-11(a)(20) and identify the filing with which the offsetting fee was previously
paid. Identify the previous filing by registration statement number, or the
Form or Schedule and the Date of its filing.
<PAGE>
Amount previously paid:_______________________
Form or Registration No.:_____________________
Filing Party:_______________________
Date Filed:_________________________
<F1>
______________
* $6,035,000 is the total consideration to be received by the
Limited Partners under the transaction being proposed by the
General Partner.
</F1>
Preliminary Statement
The Rule 13e-3 transaction with respect to which this Rule 13e-3
Transaction Statement is filed involves a transaction subject to Regulation
14A. The information contained in the Solicitation and Information Statement
filed by Signature X Ltd. Limited Partnership with the Securities and Exchange
Commission on July 17, 1996, pursuant to Regulation 14A is hereby incorporated
by reference into this Rule 13e-3 Transaction Statement and is attached hereto
as Exhibit A. A Cross-Reference Sheet showing the location of information in
the Solicitation and Information Statement required to be included in response
to items of this Rule 13e-3 Transaction Statement is attached hereto as
Exhibit C.
Item 1. Issuer and Class of Securities Subject to the Transaction.
(a) The issuer of the class of securities subject to the Rule 13e-3
transaction is Signature X LTD. Limited Partnership, 250 E. 96th Street, Suite
450 Indianapolis, Indiana 46240 (Telephone (317) 581-1111). Signature X LTD.
Limited Partnership shall hereinafter be referred to as the "Issuer" or the
"Partnership".
(b) The exact title of the securities subject to the Rule 13e-3 transaction
is "Units of Limited Partnership Interests." The Limited Partnership Interest
are divided into Units representing an investment of $10,000. There are
currently 364 Units issued and outstanding being held by 386 holders of
record.
(c) The information required to be disclosed in this Item 1 is hereby
incorporated by reference to Section XVII, page 32, of the Issuer's
Solicitation and Information Statement, which is attached hereto as Exhibit A.
(d) The information required to be disclosed in this Item 1 is hereby
incorporated by reference to Section XII, page 28, of the Issuer's
Solicitation and Information Statement, which is attached hereto as Exhibit A.
(e) Not applicable.
(f) Not applicable.
<PAGE>
Item 2. Identity and Background.
The Issuer is the person filing this statement and is the issuer of the
Units of Limited Partnership Interests which are the subject of this Rule
13e-3 transaction. Signature Inns, Inc., an Indiana corporation (the "General
Partner") has its executive offices located at 250 E. 96th Street, Suite 450
Indianapolis, Indiana 46240. The information required by General Instruction C
of Schedule 13E-3 regarding the General Partner of the Issuer and each
executive officer and director of the General Partner is hereby incorporated
by reference to the Proxy Statement filed by the General Partner on April 12,
1996, a copy of which is attached hereto as Exhibit B. None of executive
officers or directors of the General Partner during the last 5 years has been
convicted in a criminal proceeding nor has any such person during the last 5
years been a party to a civil proceeding of a judicial or administrative body
of competent jurisdiction and as a result of such proceeding was or is subject
to a judgment, decree or final order enjoining further violations of, or
prohibiting activities subject to, federal or state securities laws or finding
any violation of such laws. All executive officers and directors of the
General Partner are citizens of the United States.
Item 3. Past Contracts, Transactions or Negotiations.
There are no contracts, negotiations or transactions requiring
disclosure pursuant to this item.
Item 4. Terms of the Transaction.
(a) The information required to be disclosed under this item is hereby
incorporated by reference to Section IV, pp. 10-16, of the Issuer's
Solicitation and Information Statement, which is attached hereto as Exhibit A.
(b) Not applicable.
Item 5. Plans or Proposals of the Issuer or Affiliate.
(a) The information required to be disclosed under this item is hereby
incorporated by reference to Section II, p. 7; Section IV, pp. 10-16; Section
V, pp. 16-17; and Section VI, pp. 17-19, of the Issuer's Solicitation and
Information Statement, which is attached hereto as Exhibit A.
(b) The information required to be disclosed under this item is hereby
incorporated by reference to Section II, pp. 2-7; and Section IV, pp. 10-16, of
the Issuer's Solicitation and Information Statement, which is attached hereto
as Exhibit A.
(c) Not applicable.
(d) Not applicable.
(e) Not applicable.
(f) The proposed Rule 13e-3 transaction will not cause the Units of Limited
Partnership to become eligible for termination of registration pursuant to
Section 12g-4 of the Securities Exchange Act of 1934. The Units were eligible
for such termination of registration upon the amendment of Rule 12g-4,
effective May 9, 1996. The Partnership filed Form 15 electing to terminate
the registration of the Units on July 17, 1996, and such termination shall
become effective 90 days after such filing.
(g) Not applicable.
<PAGE>
Item 6. Source and Amounts of Funds or Other Consideration.
(a) The information required to be disclosed in this of item is hereby
incorporated by reference to Section II, page 7, of the Issuer's Solicitation
and Information Statement, which is attached hereto as Exhibit A.
(b) The information required to be disclosed in this of item is hereby
incorporated by reference to Section II, page 5, of the Issuer's Solicitation
and Information Statement, which is attached hereto as Exhibit A.
(c) Not applicable.
(d) Not applicable.
Item 7. Purposes, Alternatives, Reasons and Effects.
The information required to be disclosed in this item is hereby
incorporated by reference to Section II, pp. 2-4; and Section X, pp. 24-26, of
the Issuer's Solicitation and Information Statement, which is attached hereto
as Exhibit A.
Item 8. Fairness of the Transaction.
(a) The Issuer reasonably believes that the proposed Rule 13e-3 transaction
is fair to the Limited Partners of the Issuer.
(b) The information required to be disclosed in this paragraph (b) of Item 8
is hereby incorporated by reference from Section II, pp. 5-6, of the Issuer's
Solicitation and Information Statement, which is attached hereto as Exhibit A.
(c) Under Section 1.13 and 14.01 of the Partnership Agreement of the Issuer,
the affirmative vote or written consent of Limited Partners then holding of
record more than 50% of the outstanding Units of the Partnership is required
to approve the proposed transaction.
(d) Upon approval of the Rule 13e-3 transaction by the limited partners of
the Issuer, the General Partner shall select and engage on behalf of the
Issuer independent legal counsel to represent the Issuer with respect to the
terms (other than price) of the Purchase Agreement and related documents and
the consummation of the transaction.
(e) Not applicable.
(f) Not applicable.
Item 9. Reports, Opinions, Appraisals and Certain Negotiations.
The information required to be disclosed by this item is hereby
incorporated by reference to Section XV, pp. 29-30, and Exhibits C and D of
the Issuer's Solicitation and Information Statement, which is attached hereto
as Exhibit A.
<PAGE>
Item 10. Interest in Securities of Issuer.
(a) Ten (10) Units of Limited Partnership Interests, constituting
approximately 2.75% of the issued and outstanding Units, are currently owned
by the General Partner. No Units are currently owned by any pension, profit
sharing or similar plan of the issuer or the General Partner, or any affiliate
of either, or any executive officer or director of the General Partner.
(b) Not applicable.
Item 11. Contracts, Arrangements or Understandings with Respect to
the Issuer's Securities.
The information required to be disclosed by this item is hereby
incorporated by reference to Section XVI, pp. 31-32, of the Issuer's
Solicitation and Information Statement, which is attached hereto as Exhibit A.
Item 12. Present Intention and Recommendation of Certain Persons
with Regard to the Transaction.
(a) The General Partner does not intend to vote the 10 Units of Limited
Partnership Interest which it holds. No executive officer or director of the
Issuer nor any executive officer, director or affiliate of the General Partner
is a holder of any Unit of Limited Partnership Interest. Accordingly, there
are no statements of present intention with respect to the voting intentions
of such persons.
(b) To the knowledge of the Issuer each director of the General Partner has
voted in support of the proposed Rule 13e-3 transaction.
Item 13. Other Provisions of the Transaction.
(a) Under the Indiana Revised Uniform Limited Partnership Act no appraisal
or dissenters' rights are provided to Limited Partners. No such appraisal or
dissenters' rights are provided by the Amended Certificate and Agreement of
Limited Partnership of the Issuer and none are being accorded voluntarily by
the Issuer in connection with the Rule 13e-3 transaction.
(b) Not applicable.
(c) Not applicable.
Item 14. Financial Information.
The information required to be disclosed by this item is hereby
incorporated by reference to Section VII, p. 20; Section XII, p. 28; Section
XIII, pp. 28-29; and Section XVIII, pp. 32-33, and Exhibits A and B of the
Issuer's Solicitation and Information Statement, which is attached hereto as
Exhibit A.
<PAGE>
Item 15. Persons and Assets Employed, Retained or Utilized.
(a) No officer or employee of Issuer has been or is proposed to be employed,
availed of or utilized by the Issuer or an affiliate in connection with this
Rule 13e-3 transaction. Information regarding the proposed Rule 13e-3
transaction required to be disclosed under this item is hereby incorporated
from Section IV, pp. 10-16, of Issuer's Solicitation and Information Statement,
which is attached hereto as Exhibit A.
(b) Consents may be solicited by directors, officers or employees of the
General Partner without additional compensation in connection with the Rule
13e-3 transaction.
Item 16. Additional Information.
Not applicable.
Item 17. Index to Exhibits
Exhibit A: Issuer's Solicitation and Information Statement dated
_______, 1996
Exhibit B: Signature Inns, Inc., Proxy Statement dated April 12, 1996
Exhibit C: Cross-Reference Sheet
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and
correct.
_______________________________________
(Date)
_______________________________________
(Signature)
_______________________________________
(Name and Title)
<PAGE>
IRREVOCABLE CONSENT OF LIMITED PARTNER OF
SIGNATURE X LTD. LIMITED PARTNERSHIP
In accordance with Section 14.04(b) of the Amended Certificate and
Agreement of Limited Partnership dated June 15, 1988, as amended (the
"Partnership Agreement"), the undersigned, a Limited Partner(s) of Signature X
Ltd. Limited Partnership (the "Partnership") HEREBY IRREVOCABLY CONSENT(S) to
the following transactions, amendments, events and other matters:
* The Sale/Purchase Transaction Between the Partnership,
as Seller, and Signature Inns, Inc. ("SII"), as Buyer,
as more fully described in Section IV of the Solicitation
and Information Statement Regarding Proposed Sale of
Partnership Assets and Other Matters (the "Statement"),
and as set forth in the form of Consent Resolutions of
Limited Partners which is attached to the Statement as
Exhibit E and incorporated herein and by this reference
made a part hereof;
* The Amendments to the Partnership Agreement in the form
of the Amendments attached hereto as Exhibit F, which
Amendments are incorporated herein and by this reference
made a part of hereof. The Amendments are more fully
described in Section V of the Statement, and they are
referred to in the form of Consent Resolutions of Limited
Partners attached to this Statement as Exhibit E, which
Resolutions also are incorporated herein and by this
reference made a part hereof;
* The Dissolution, Termination, Liquidation and Winding-Up
of the Partnership, as more fully described in Section VI
of the Statement and as set forth in the form of Consent
Resolutions of Limited Partners which is attached to the
Statement as Exhibit E and incorporated herein and by this
reference made a part hereof; and,
* All other matters described in the form of Consent
Resolutions of Limited Partners attached to the Statement
as Exhibit E and incorporated herein and by this reference
made a part hereof.
Limited Partner(s) Must Sign Below
Date_______________________ ______________________________________
Signature of Limited Partner
Date_______________________ ______________________________________
Signature of Limited Partner
NOTE: Each individual owner of a Unit must sign above. If the owner is a
corporation, partnership or other entity, a representative must sign, and the
names of the entity and representative must be printed in the following
blanks: Name of Entity _____________________ Name of Representative
________________________.
<PAGE>
PLEASE PLACE THIS CONSENT IN THE ENCLOSED POSTAGE PAID YELLOW ENVELOPE AND
MAIL IT SO THAT IT IS RECEIVED NO LATER THAN ________________, 1996.
See opposite side of this page for important additional instructions.
Additional Instructions:
1. By signing this Consent, you are consenting to all transactions
listed in the foregoing * subparagraphs of this Consent. You
are not permitted to pick and choose among them.
2. By signing this Consent, you are authorizing SII, as general
partner, to rely on your consent as a valid, binding, irrevocable
consent until February 28, 1997 and to proceed with and close the
transactions listed in the foregoing * subparagraphs above on or
before that date. You agree that you will not at any time before
February 28, 1997, attempt to revoke, modify or renounce this
Consent in any way.
3. By placing your signature on this Consent, you shall be deemed to
have given your consent for all purposes, and any mark, strike,
alteration, addition, deletion or other revision to this Consent
made by you will be ignored as being of no legal effect.
4. By signing this Consent you are acknowledging receipt of the Statement.
5. This Consent must be returned to the General Partner by August ___,
1996 (the "Deadline"). The General Partner may, in its discretion,
extend the Deadline.
<PAGE>
July 18, 1996
Securities and Exchange Commission
Division of Corporate Finance
Washington, DC 20549
Re: Signature X Ltd. Limited Partnership; File No. 33-14003
Solicitation and Information Statement
Gentlemen:
Pursuant to Regulation 14a-6(a), we are transmitting herewith for
electronic filing with the Commission the preliminary Solicitation and
Information Statement (the "Statement") intended to be used by Signature X
Ltd. Limited Partnership (the "Partnership") for the solicitation of consents
from limited partners of the Partnership in connection with a proposal by
Signature Inns, Inc., the general partner of the Partnership, to purchase an
undivided 85% interest in the Partnership's hotel properties, to dissolve and
liquidate the Partnership, and certain other matters. The Statement has been
prepared in accordance with Regulation 14a-5 and Schedule 14A. The filing fee
of $125.00 was deposited to the Commission's lock box account with Mellon Bank
on July 16, 1996.
In addition to the Statement, we are also transmitting herewith, as
additional solicitation material, the transmittal letter intended to be mailed
to each limited partner of the Partnership by John D. Bontreger, Chief
Executive Officer of Signature Inns, Inc., the general partner of the
Partnership.
The Partnership intends to distribute the transmittal letter, the
Statement, and all the exhibits thereto, to its limited partners on or about
August 7, 1996.
The Partnership is also filing electronically on this date, as a
separate EDGAR submission, a Rule 13e-3 Transaction Statement prepared in
accordance with Regulation 13e-3 and Schedule 13E-3.
The Commission is requested to contact the undersigned in accordance
with the information contained in the EDGAR submission header with any
comments or other communications concerning this filing.
Very truly yours,
Thomas N. Eckerle
TNE/CMF/mlh
Attachments
<PAGE>
_____________, 1996
Limited Partner
Signature VII Ltd.
Anywhere, USA
Dear Limited Partner:
Signature X Ltd. Limited Partnership (the "Partnership") was organized
originally on September 19, 1986. Although the financial performance of the
Partnership has not matched our expectations, the Partnership has operated
its two hotels in accordance with Signature Inn's guiding principle of
providing first-class service to its hotel Guests on a consistent basis.
Your investment in the Partnership always has been and will continue to
be illiquid. Currently, there is no ready market for the resale of your
unit(s) of limited partnership interest, and it is not likely that a market
for your unit(s) ever will develop. Moreover, there are a number of
restrictions on transferability of your unit(s) contained in the Partnership
Agreement. Accordingly, absent a sale of all or substantially all of the
Partnership's properties, your investment will remain illiquid.
For some time now, management of Signature Inns, Inc., the general partner
of the Partnership, has studied and reviewed various possible methods by
which the limited partners in its affiliated limited partnership programs
could cash out their investments in these partnerships at an optimal time and
at an optimum price. Essentially, the general partner has searched for an
"exit vehicle," if you will, which could transport and deliver to the limited
partners full, final and fair value for their investments in the partnerships.
The general partner believes that it may now be in a position to provide
such an exit vehicle for the limited partners of each of its affiliated
partnerships. As you likely are aware, Signature Inns, Inc. has resolved
successfully the financial difficulties and uncertainties which it has faced
in the past several years. It is now in the position to attempt to enter the
capital markets to seek equity capital with which to purchase at fair market
value the equity interests of its affiliated partnership in their hotel
properties.
Management of the general partner believes that operating trends in the
hotel industry and values of hotel properties are approaching cyclical peaks.
We believe that there now exists a window of opportunity for the general
partner to acquire funds with which to purchase properties of its affiliated
limited partnerships and, in so doing, provide a mechanism for the limited
partners of those partnerships to cash out their investments.
<PAGE>
Therefore, the general partner is proposing to purchase the Partnership's
hotel properties at fair market value, as supported by an independent,
experienced and qualified appraiser. The general partner is also proposing
that, following completion of the sale/purchase transactions, the net
proceeds of sale, together with all other available Partnership cash, be
distributed to the limited partners and that the Partnership be liquidated,
dissolved and its affairs completely wound-up. Finally, in conjunction with
those matters, the general partner is proposing certain required amendments
to the Partnership Agreement.
As the appraised value of the hotels is less than the Partnership's debt
obligations, the general partner is also offering a concession of the amount it
will accept as payment on the $2,377,061 Partnership note obligation payable to
the general partner. The general partner will reduce the note by approximate-
ly $1,279,000 so as to provide a total per unit distribution to the Limited
Partners of $2,000, including distributions from other liquidated business
assets of the Partnership.
None of these proposed transactions and events can occur or be consummated
unless and until limited partners holding a majority of the units of limited
partnership interests in the Partnership first provide their written consent
to the transactions and other matters. We are asking that you, as a limited
partner of the Partnership, provide your consent. To do so, all you need to
do is to complete, sign and return the yellow consent form.
In order to provide you with the information necessary for you to decide
whether to support the general partner's proposals, we are enclosing a
"Solicitation and Information Statement Regarding Proposed Sale of Partner-
ship Assets and Other Matters" ("Statement"). You should read the Statement
carefully. You should also discuss the general partner's proposals with your
tax consultant and with your other professional advisors.
You are urged to sign the enclosed Irrevocable Consent of Limited Partner
(Yellow Consent Form) and return it to us in the enclosed self-addressed,
stamped yellow envelope so that it is received no later than August ___, 1996.
Should you have any questions in regard to the general partner's
proposals, you may call Marty Brew, Treasurer/Controller, at (317) 581-1111.
Very truly yours,
John D. Bontreger,
President, Signature Inns, Inc.
General Partner of Signature X Ltd.
Limited Partnership
P.S. Substantially similar proposals are being made to the limited partners
of all of the other limited partnerships and joint ventures affiliated
with the General Partner.
