SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
( X ) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the Fiscal Year Ended September 30, 1996
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from ______________to ___________
Commission file number 0-11512
SUPER 8 ECONOMY LODGING IV, LTD.
(Exact name of registrant as specified in its charter)
California 94-2827163
------------------------------- ----------------------
(State or other jurisdiction of (I.R.S. Employer Iden-
incorporation or organization) tification No.)
2030 J Street, Sacramento, California 95814
---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (916) 442-9183
Securities registered pursuant to Section 12 (b) of the Act: None
Securities registered pursuant to Section 12 (g) of the Act:
UNITS OF LIMITED PARTNERSHIP INTEREST
-------------------------------------
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or such shorter period that the registrant
has been required to file such reports) and (2) has been subject to the filing
requirements for the past 90 days. Yes _x_ No ___
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K. [x]
State the aggregate market value of the voting stock held by non-affiliates
of the registrant.
Inapplicable.
DOCUMENTS INCORPORATED BY REFERENCE
NONE
- 1 -
PART I
Item 1. BUSINESS
--------
General Development of Business
- -------------------------------
Super 8 Economy Lodging IV, Ltd. (the "Partnership") is a limited
partnership which was organized under the Uniform Limited Partnership Act of
the State of California on February 5, 1982.
The Managing General Partner of the Partnership is Grotewohl Management
Services, Inc., a California corporation organized and wholly-owned by Philip
B. Grotewohl. The Associate General Partner is Robert J. Dana. The Associate
General Partner does not have general responsibility in connection with the
management of the business and affairs of the Partnership. The Managing
General Partner and the Associate General Partner are sometimes referred to
collectively as the "General Partners."
Through two public offerings of units of limited partnership interest in
the Partnership ("Units"), the Partnership sold 10,000 Units at a price of
$1,000 each.
The net proceeds of the offerings were expended for the acquisition and
development of properties located in Pleasanton, California and Santa Ana,
California. Motel operations commenced on October 4, 1983 at the Pleasanton
property and on February 19, 1985 at the Santa Ana property. The Partnership's
Pleasanton motel is operated pursuant to a franchise acquired from Super 8
Motels, Inc. under the name "Super 8 Motel." On April 30, 1992 the
Partnership sold the Santa Ana motel.
There is hereby incorporated by reference herein the information regarding
the Partnership's Pleasanton property contained in Part I, Item 2 of this
report under the caption "Properties."
Narrative Description of Business
- ---------------------------------
The Partnership's business is to operate its motel property and to engage
in any and all general business activities related or incidental thereto. The
Partnership's motel is operated pursuant to a franchise originally acquired
from Super 8 Motels, Inc. through Super 8 Management Corporation as a
subfranchisor, under the name "Super 8 Motel." The current subfranchisor is
Brown & Grotewohl.
Super 8 Motels, Inc. is a South Dakota corporation which was organized in
1972. Its first franchised motel commenced operation in 1974 and, as of October
31, 1996, a total of 1,464 franchised motels having an aggregate of 88,965
guest rooms were in operation. On April 30, 1993, Super 8 Motels, Inc. became
a wholly-owned subsidiary of Hospitality Franchise Systems, Inc ("HFS"). In
addition to Super 8 Motels, HFS is also the franchisor of hospitality
properties under the Howard Johnson, Ramada and Days Inn tradenames.
Motels franchised by Super 8 Motels, Inc. are budget motels in that they
offer room rates near the lower end of the room rate scale in each area in
which they are located. Such lower rates are made possible by the elimination
- 2 -
of certain features present in many higher-priced facilities, such as meeting
rooms and large lobbies; by not operating restaurants or cocktail lounges in
connection with the motels; and by utilizing uniform construction methods
(adapted only slightly to fit specific locales) which have been developed by
Super 8 Motels, Inc. and a standardized design which facilitates maintenance
and minimizes overhead expense.
Super 8 Motels offer accommodations at the upper end, in terms of
facilities and prices, of the budget segment of the lodging industry.
Generally, Super 8 Motels offer larger rooms and higher quality furniture and
furnishings than motels franchised under the tradenames Motel 6, Regal 8 and
E-Z 8. Rates in the Super 8 Motels tend to exceed those offered by the chains
mentioned above. By terms of the franchise agreement with Super 8 Motels, Inc.,
the Partnership pays monthly franchise fees equal to 4% of its gross room
revenues and contributes an additional 1% of its gross room revenues to a fund
administered by Super 8 Motels, Inc. to finance the national advertising
program. The Partnership has no equity or other interest in Super 8 Motels,
Inc.
Brown & Grotewohl (the "Manager"), a California general partnership which
is an affiliate of the Managing General Partner, directs the operation of the
Partnership's motel. The Manager supervises and directs the Partnership's
employees having direct responsibility for the operation of the motel,
establishes room rates, and directs the promotional activities of the
Partnership's employees. It directs the purchase of replacement equipment and
supplies, maintenance activity and the engagement or selection of all vendors,
suppliers and independent contractors. The motel staff, under the supervision
of the Manager, is responsible for, among other things, performing all service,
administrative and bookkeeping duties in connection with the motel, including
all collections and all disbursements to be paid out of funds generated by such
operations or otherwise supplied by the Partnership.
The Partnership employs (on a part-time basis) one secretarial employee,
four Partnership and motel administrative employees, one marketing employee,
and five accounting employees at its Sacramento, California office. Included
in the above list is David P. Grotewohl, son of Philip Grotewohl, whom the
Partnership employs as Director of Operations and as an attorney. Mark
Grotewohl, son of Philip Grotewohl, is employed as Director of Marketing. Julie
Grotewohl, daughter of Philip Grotewohl, was employed as the Regional Director
of Sales through August.
Pleasanton, California
- ----------------------
The Pleasanton motel, which consists of 102 guest rooms, commenced
operations on October 4, 1983. The average monthly occupancy rates and average
monthly room rates for the period from October 1, 1993 through September 30,
1996 are as follows:
- 3 -
AVERAGE OCCUPANCY RATE
1995 - 1994 - 1993 -
1996 1995 1994
------- ------- -------
October 79% 81% 71%
November 74% 69% 70%
December 61% 56% 61%
January 70% 63% 64%
February 71% 66% 69%
March 72% 75% 73%
April 72% 72% 67%
May 76% 78% 72%
June 88% 91% 79%
July 85% 86% 88%
August 91% 87% 87%
September 81% 81% 73%
------- ------- -------
Annual Average 77% 75% 73%
AVERAGE ROOM RATE
1995 - 1994 - 1993 -
1996 1995 1994
------- ------- -------
October $54.38 $50.53 $49.95
November $55.07 $50.26 $49.77
December $53.93 $49.56 $48.76
January $51.58 $50.12 $50.27
February $53.07 $49.80 $49.80
March $54.83 $49.99 $49.70
April $55.40 $51.89 $49.77
May $57.44 $52.06 $49.81
June $58.65 $51.48 $50.54
July $60.00 $52.95 $48.87
August $60.13 $55.28 $51.45
September $59.83 $53.53 $50.23
------- ------- -------
Annual Average $56.44 $51.62 $49.93
Patrons of the Partnership's Pleasanton motel are primarily commercial or
business travelers, and leisure business. The Pleasanton motel has no single
customer the loss of which would, in the opinion of the Managing General
Partner, have a material adverse effect on the motel's operations.
- 4 -
The following lodging facilities provide direct and indirect competition to
the Partnership's Pleasanton motel:
APPROXIMATE DISTANCE
NUMBER OF FROM PARTNERSHIP'S
FACILITY ROOMS MOTEL
-------- --------- --------------------
Sheraton Hotel 216 300 Yards
Marriott Courtyard 145 0.75 Mile
Best Western Dublin Park 230 1.0 Mile
Wyndom Hotel 171 1.5 Miles
Hilton Hotel 300 2.0 Miles
Holiday Inn 248 2.0 Miles
Springtown Inn 127 9.0 Miles
All Star Motel 102 9.0 Miles
Holiday Inn 124 10.0 Miles
As of December 12, 1996 the Partnership employed (on a full or part-time
basis) one manager, five desk clerks, one maintenance worker and ten
housekeeping and laundry employees at the Pleasanton motel.
Item 2. PROPERTIES
----------
On October 4, 1982, the Partnership acquired from Hopyard Associates, a
general partnership, a parcel of 2.037 acres of unimproved real property
located in Pleasanton, California.
The property is located immediately adjacent to Interstate Highway 580, on
the southeast quadrant of the Hopyard Road overpass approximately one mile east
of Interstate Highway 680 and approximately 40 miles east of San Francisco.
Construction of the 102 room motel commenced on October 18, 1982 and was
completed on October 4, 1983, at which point motel operations commenced.
Item 3. LEGAL PROCEEDINGS
-----------------
Inapplicable.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
---------------------------------------------------
Inapplicable.
- 5 -
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
---------------------------------------------------------------------
Market Information
- ------------------
The Units are not freely transferable and no public market for the Units
has developed or is expected to develop.
Holders
- -------
As of December 13, 1996 a total of 1,988 investors ("Limited Partners")
held Units in the Partnership.
Distributions
- -------------
Cash Available for Distribution is defined as the cash funds provided from
operations without deduction for depreciation, but after deducting cash funds
used to pay or provide for payment of debt service, capital improvements and
replacements and the operating expenses of the property, also less adequate
cash reserves for obligations of the Partnership for which there is no
provision.
Cash Available for Distribution shall be distributed quarterly in the
following manner:
(1) 90% to the Limited Partners
(2) 9% to the General Partners as a fee for managing the Partnership
(3) 1% to the General Partners on account of their Partnership interest.
Notwithstanding the foregoing, the General Partners shall receive no
distributions of Cash Available for Distribution until the Limited Partners
have received a cumulative 10% per annum return on their "Adjusted Capital
Contributions" (i.e., their original capital contributions, adjusted for
previous returns of capital or sale or refinancing proceeds). Inasmuch as the
Limited Partners have not received a cumulative 10% per annum return, the
General Partners have not received any share of the Cash Available for
Distribution since inception of the Partnership.
The proceeds from the sale or refinancing of properties not reinvested are
to be distributed first to the Limited Partners until they have received
cumulative payments from all distribution sources equal to 100% of their
original capital contribution and a cumulative 10% per annum return on their
Adjusted Capital Contributions. When the foregoing requirement has been
satisfied, any remaining funds from the sale or refinancing of properties will
be distributed 15% to the General Partners and 85% to the Limited Partners.
- 6 -
The following distributions (all from Cash Available for Distribution) were
made during the two most recent fiscal years:
Amount Amount
Distributed Distributed
Date Per Unit to General Partners
-------- ----------- -------------------
11/15/94 $13.65 - 0 -
02/15/95 $13.65 - 0 -
05/15/95 $13.65 - 0 -
08/15/95 $13.65 - 0 -
11/15/95 $13.65 - 0 -
02/15/96 $13.65 - 0 -
05/15/96 $16.00 - 0 -
08/15/96 $16.00 - 0 -
Item 6. SELECTED FINANCIAL DATA
-----------------------
Following are selected financial data of the Partnership for the fiscal
years ended September 30, 1996, 1995, 1994, 1993 and 1992. Due to the sale of
the Santa Ana motel on April 30, 1992, data for the 1992 fiscal year is not
comparable to any other fiscal year.
- 7 -
SUPER 8 ECONOMY LODGING IV, LTD
Item 6. Selected Financial Data
-----------------------
Years Ended September 30:
----------------------------------------------------------
1996 1995 1994 1993 1992
---------- ---------- ---------- ---------- ----------
Total income $1,686,738 $1,510,802 $1,415,308 $1,395,176 $1,871,469
Motel room income $1,613,817 $1,448,486 $1,354,227 $1,337,670 $1,757,132
Interest income $28,879 $22,379 $19,181 $18,138 $34,085
Other income:
Loss on sale of
Santa Ana Motel - - - - $(2,297,181)
Gain on sale of
Pleasanton land
parcel - - - $5,825 -
Net income (loss) $665,100 $513,436 $419,009 $386,643 $(2,314,004)
Per Partnership Unit:
Cash distributions:
Proceeds from sale
of Santa Ana Motel - - - - $57.11
Other $59.30 $54.60 $48.65 $40.00 $42.89
Net income (loss) $65.84 $50.83 $41.48 $38.28 $(229.09)
9/30/96 9/30/95 9/30/94 9/30/93 9/30/92
---------- ---------- ---------- ---------- ----------
Total assets $2,841,572 $2,769,469 $2,786,858 $2,864,030 $2,832,368
Long-term debt - - - - -
- 8 -
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
---------------------------------------------------------------
RESULTS OF OPERATIONS
- ---------------------
Liquidity
- ---------
The Partnership's current assets of $972,829 exceed its current liabilities
of $111,444 by $861,385. This amount exceeds the General Partners' cash reserve
target of $455,000. In the opinion of the General Partners, the Partnership's
Pleasanton motel provides adequate liquidity to satisfy the Partnership's
financial obligations.
The Partnership's primary source of liquidity is its gross revenues from
operations. As noted below, the Partnership has had a positive cash flow from
motel operations in each of the last three fiscal years. In addition, the
Partnership's equity in its Pleasanton motel, which is presently unencumbered,
would provide a potential source of liquidity through financing in the event
the Partnership's liquidity were impaired. There can be no assurance, however,
that the Partnership could borrow against such equity on favorable terms should
additional liquidity be required.
Capital Resources
- -----------------
The Partnership owns and operates one motel property, a 102-room lodging
facility located in Pleasanton, California.
The Partnership currently has no material commitments for capital
expenditures. Its motel property is in full operation, and no further property
acquisitions or extraordinary capital improvements are contemplated. Except as
described below, the General Partners are aware of no material trends or
changes with respect to the mix or relative cost of the Partnership's capital
resources. Working capital is expected to be generated by revenues from
operations.
During the fiscal year covered by this report, the Partnership spent
$56,278 ($33,120 of which was capitalized) on the refurbishment of its motel
and its furnishings. The capitalized items included $16,241 for replacement
guest room carpet, $11,148 for central office computers, $3,653 for a
replacement ice machine and $2,077 for furniture for the manager's apartment.
Included in the $23,158 amount not capitalized were expenditures for tub
repair, replacement guest room lamps and bed sets and televisions and
air-conditioning units, landscaping upgrades and parking lots repairs. The
Managing General Partner anticipates the expenditure of an amount approximately
equal to the 3% target during the next fiscal year on further refurbishment of
the Partnership's motel, such amount to be paid from operating cash flow or, if
operating cash flow is inadequate, from reserves.
New Accounting Standards
- ------------------------
SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of, requires the Partnership to disclose
information about potential impairment to the value of long-lived assets. The
Partnership is not required to adopt and does not currently plan to adopt SFAS
No. 121 until its fiscal year ending September 30, 1997. The Partnership does
not expect to make any disclosures about impairment of long-lived assets under
SFAS No. 121.
- 9 -
Results of Operation
- --------------------
Partnership's Combined Financial Results
- ----------------------------------------
The following is a comparison of combined results for the twelve-month
periods ending September 30, 1994, 1995 and 1996. Comparative revenue and
expense data is included in the financial statements found in Item 8.
The Partnership achieved a 29.5% increase in net income for the fiscal year
covered by this report as compared to the previous fiscal year. This result
was achieved by increasing total income $175,936 (or 11.6%) while limiting the
increase in expenses to $24,272 (or 2.4%). The revenue increase was due
primarily to increased guest room revenue which was the result of both improved
occupancy rates and average room rates.
The Partnership achieved a 22.5% increase in net income for the fiscal year
ended September 30, 1995 as compared to the previous fiscal year. This result
was achieved by increasing total income $95,494 (or 6.7% while keeping expenses
essentially unchanged. The revenue increase was due primarily to increased
guest room revenue which was the result of both improved occupancy rates and
average room rates.
Pleasanton, California Motel
- ----------------------------
The following is a comparison of operating results at the Partnership's
Pleasanton motel for the fiscal years 1994, 1995 and 1996:
AVERAGE AVERAGE
OCCUPANCY ROOM
PERIOD ENDED RATE RATE
------------------ --------- -------
September 30, 1994 72.8% $49.93
September 30, 1995 75.4% $51.62
September 30, 1996 76.6% $56.44
TOTAL
EXPENDITURES PARTNERSHIP
TOTAL AND DEBT CASH
PERIOD ENDED REVENUE SERVICE FLOW (1)
- ------------------ ---------- ------------ -----------
September 30, 1994 $1,415,309 $893,827 $521,482
September 30, 1995 $1,510,802 $947,078 $563,724
September 30, 1996 $1,686,738 $940,044 $746,694
(1) While cash flow from operations as it is used here is not an amount
found in the financial statements, this amount is the best indicator of the
annual change in the amount available, if any, for distribution to the Limited
Partners. This calculation is reconciled to the financial statements in the
following table.
- 10 -
Reconciliation of Partnership Cash Flow (included in the chart above) to
Net Income as shown on the Statements of Operations (in the financial
statements) is as follows:
1994 1995 1996
-------- -------- --------
Partnership Cash Flow $521,482 $563,724 $746,694
Net Additions to Fixed Assets 3,311 59,067 33,120
Depreciation and Amortization (105,784) (109,175) (114,714)
Other Items - (180) -
-------- -------- --------
Net Income $419,009 $513,436 $665,100
======== ======== ========
During the fiscal year covered by this report, the Partnership's Pleasanton
motel achieved a significant improvement in its average room rate and a slight
increase in its average occupancy rate. The motel replaced approximately 50%
of its low-rate discount business with guests in the leisure and corporate
market segments.
During the fiscal year ended September 30, 1995 as compared to the prior
fiscal year, the Partnership's Pleasanton motel achieved improvements in both
its occupancy rate and in its average room rate. While there was a very slight
reduction in corporate room nights sold, the average rate for corporate
business increased as to provide increased revenue from this market segment.
The leisure market segment increased in both room nights sold and in the
average rate paid.
During the fiscal year covered by this report as compared to the previous
fiscal year, the Partnership's Pleasanton motel achieved a $7,034 (or 0.7%)
decrease in expenditures notwithstanding increased occupancy. The motel
achieved reduced expenditures of $42,086 in renovations and replacements and
$5,250 in maintenance wages and salaries. The reductions were substantially
offset by increases of $15,149 in front desk wages and salaries, and in
proportionate increases in franchise and management fees which are a function
of guest room revenue.
During the fiscal year ended September 30, 1995 as compared to the previous
fiscal year, the Pleasanton motel's total expenditures and debt service
increased $53,251 or 6.0%. Motel operating expenses declined by $10,538 due to
the continued benefit from the cost-cutting program instituted by the Managing
General Partner in early calendar-1994. The increase in total expenditures and
debt service is associated with renovations and replacements, which increased
$54,621 on a comparative basis. The roof, washer and dryer replacements
previous referenced in the section captioned "Capital Requirements" are
infrequent expenditures. No similar expenditures are expected during the next
fiscal year.
- 11 -
Future Trends
- -------------
The General Partners anticipate that the Partnership will continue to
achieve favorable financial results. The General Partner's cost-cutting
program will remain in place, but the major comparative savings have been
realized. Future financial results will be dependent upon the economic climate
in the Pleasanton hospitality market. While the market is presently strong,
this area has been subjected to both favorable and unfavorable cyclical
business conditions. The General Partners expect the Partnership's occupancy
rate (and hence its revenues and profits) to benefit, in the long range, from
economic growth. The General Partners anticipate lower occupancy rates and
perhaps lower room rates in the event of an economic downturn.
The General Partners anticipate that, during the long range, any increase
in operating costs and expenses due to inflation will be met by an upward
adjustment in room rates. In the short range, however, competitive conditions
in the Partnership's market area may make such adjustments difficult or
impossible. The General Partners are unable to predict when improved
competitive conditions would make such adjustments possible.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
-------------------------------------------
See Financial Statements and Notes to Financial Statements at pages F-1
through F-11.
- 12 -
ANNUAL REPORT ON FORM 10-K
ITEM 8
FINANCIAL STATEMENTS
SUPER 8 ECONOMY LODGING IV, LTD.
SACRAMENTO, CALIFORNIA
SEPTEMBER 30, 1996
F-1
Item 8: Financial Statements
--------------------
SUPER 8 ECONOMY LODGING IV, LTD.
INDEX OF FINANCIAL STATEMENTS
Pages
-----
Financial Statements:
Independent Auditors' Report F-3
Balance Sheets, September 30, 1996 and 1995 F-4
Statements of Operations for the years ended
September 30, 1996, 1995 and 1994 F-5
Statements of Partners' Equity for the years ended
September 30, 1996, 1995 and 1994 F-6
Statements of Cash Flows for the years ended F-7 to
September 30, 1996, 1995 and 1994 F-8
Notes to Financial Statements F-9 to
F-11
Note: All schedules have been omitted since the required information is not
present or not present in amounts sufficient to require submission of the
schedule or because the information required is included in the financial
statements or notes thereto.
F-2
INDEPENDENT AUDITORS' REPORT
To the Partners
Super 8 Economy Lodging IV, Ltd.
We have audited the accompanying balance sheets of Super 8 Economy Lodging IV,
Ltd., a California limited partnership, as of September 30, 1996 and 1995 and
the related statements of operations, partners' equity and cash flows for each
of the three years in the period ended September 30, 1996. 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 audits 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 Super 8 Economy Lodging IV,
Ltd. as of September 30, 1996 and 1995 and the results of its operations and
its cash flows for each of the three years in the period ended September 30,
1996, in conformity with generally accepted accounting principles.
VOCKER KRISTOFFERSON AND CO.
December 3, 1996
San Mateo, California
F-3
SUPER 8 ECONOMY LODGING IV, LTD.
(A California Limited Partnership)
BALANCE SHEETS
September 30, 1996 and 1995
ASSETS
1996 1995
---------- ----------
Current Assets:
Cash and temporary investments (Notes 1 and 3) $ 938,477 $ 794,899
Accounts receivable 21,563 22,343
Prepaid expenses 12,789 11,934
---------- ----------
Total Current Assets 972,829 829,176
---------- ----------
Property and Equipment (Notes 2 and 6):
Land 799,311 799,311
Buildings 2,246,419 2,246,419
Furniture and equipment 530,321 528,479
---------- ----------
3,576,051 3,574,209
Accumulated depreciation (1,755,449) (1,672,013)
---------- ----------
Property and Equipment, Net 1,820,602 1,902,196
---------- ----------
Other Assets (Note 2):
Deposit of federal income taxes 48,141 38,097
---------- ----------
Total Assets $2,841,572 $2,769,469
========== ==========
LIABILITIES AND PARTNERS' EQUITY
Current Liabilities:
Accounts payable and accrued liabilities $ 106,979 $ 109,975
Due to related parties (Note 4) 4,465 1,466
---------- ----------
Total Liabilities 111,444 111,441
Partners' Equity:
General Partners (10,707) (17,358)
Limited Partners 2,740,835 2,675,386
---------- ----------
Total Partners' Equity 2,730,128 2,658,028
---------- ----------
Total Liabilities and Partners' Equity $2,841,572 $2,769,469
========== ==========
F-4
SUPER 8 ECONOMY LODGING IV, LTD.
(A California Limited Partnership)
STATEMENTS OF OPERATIONS
Years Ended September 30:
----------------------------------
1996 1995 1994
---------- ---------- ----------
Income:
Motel room $1,613,817 $1,448,486 $1,354,227
Telephone and vending 41,244 36,519 37,699
Interest 28,879 22,379 19,181
Other 2,798 3,418 4,201
---------- ---------- ----------
Total Income 1,686,738 1,510,802 1,415,308
---------- ---------- ----------
Expenses:
Motel operations (exclusive of depreciation
shown separately below) (Notes 4 and 5) 789,729 777,015 787,553
General and administrative (exclusive of
depreciation shown separately below
(Note 4) 34,302 36,760 33,331
Depreciation and amortization (Note 2) 114,714 109,175 105,784
Property management fees (Note 4) 82,893 74,416 69,631
---------- ---------- ----------
Total Expenses 1,021,638 997,366 996,299
---------- ---------- ----------
Net Income $ 665,100 $ 513,436 $ 419,009
========== ========== ==========
Net Income Allocable to General Partners $ 6,651 $ 5,134 $ 4,190
========== ========== ==========
Net Income Allocable to Limited Partners $ 658,449 $ 508,302 $ 414,819
========== ========== ==========
Net Income Per Partnership Unit (Note 1) $ 65.84 $ 50.83 $ 41.48
========== ========== ==========
Distributions to Limited Partners
Per Partnership Unit (Note 1) $ 59.30 $ 54.60 $ 48.65
========== ========== ==========
F-5
SUPER 8 ECONOMY LODGING IV, LTD.
(A California Limited Partnership)
STATEMENTS OF PARTNERS' EQUITY
Years Ended September 30:
----------------------------------
1996 1995 1994
---------- ---------- ----------
General Partners:
Balance at beginning of year $ (17,358) $ (22,492) $ (26,682)
Net income 6,651 5,134 4,190
---------- ---------- ----------
Balance at End of Year (10,707) (17,358) (22,492)
---------- ---------- ----------
Limited Partners:
Balance at beginning of year 2,675,386 2,713,084 2,784,765
Net income 658,449 508,302 414,819
Distributions to Limited Partners (593,000) (546,000) (486,500)
---------- ---------- ----------
Balance at End of Year 2,740,835 2,675,386 2,713,084
---------- ---------- ----------
Total Partners' Equity $2,730,128 $2,658,028 $2,690,592
========== ========== ==========
F-6
SUPER 8 ECONOMY LODGING IV, LTD.
(A California Limited Partnership)
STATEMENTS OF CASH FLOWS
Years Ended September 30:
----------------------------------
1996 1995 1994
---------- ---------- ----------
Cash Flows From Operating Activities:
Received from motel operations $1,658,578 $1,492,593 $1,407,648
Expended for motel operations and
general and administrative expenses (917,820) (877,067) (934,917)
Interest received 28,940 20,953 18,719
---------- ---------- ----------
Net Cash Provided by Operating Activities 769,698 636,479 491,450
---------- ---------- ----------
Cash Flows From Investing Activities:
Purchases of property and equipment (33,120) (60,317) (3,311)
Proceeds from sale of equipment - 1,250 -
---------- ---------- ----------
Net Cash Used by Investing Activities (33,120) (59,067) (3,311)
---------- ---------- ----------
Cash Flows From Financing Activities:
Distributions paid to limited partners (593,000) (546,000) (486,500)
---------- ---------- ----------
Net Cash Used by Financing Activities (593,000) (546,000) (486,500)
---------- ---------- ----------
Net Increase in Cash and Temporary
Investments 143,578 31,412 1,639
Cash and Temporary Investments:
Beginning of year 794,899 763,487 761,848
---------- ---------- ----------
End of Year $ 938,477 $ 794,899 $ 763,487
========== ========== ==========
F-7
SUPER 8 ECONOMY LODGING IV, LTD.
(A California Limited Partnership)
STATEMENTS OF CASH FLOWS (Continued)
Years Ended September 30:
----------------------------------
1996 1995 1994
---------- ---------- ----------
Reconciliation of Net Income to Net Cash
Provided by Operating Activities:
Net income $665,100 $513,436 $419,009
---------- ---------- ----------
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 114,714 109,175 105,784
Loss on disposition of property
and equipment - 1,430 -
(Increase) decrease in accounts receivable 780 2,745 11,059
Increase in prepaid expenses (855) (475) (1,630)
Increase in other assets (10,044) (5,006) (33,091)
Increase (decrease) in accounts payable
and accrued liabilities (2,996) 15,174 (9,952)
Increase in due to related parties 2,999 - 271
---------- ---------- ----------
Total Adjustments 104,598 123,043 72,441
---------- ---------- ----------
Net Cash Provided by
Operating Activities $769,698 $636,479 $491,450
========== ========== ==========
F-8
SUPER 8 ECONOMY LODGING IV, LTD.
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - THE PARTNERSHIP
- ------------------------
Super 8 Economy Lodging IV, Ltd., is a limited partnership organized under
California law on February 5, 1982, to acquire and operate motel properties in
Pleasanton and Santa Ana, California. The Pleasanton motel was opened in
October, 1983, and the Santa Ana motel was opened in February, 1985. The
Partnership grants credit to customers, substantially all of which are local
businesses in Pleasanton. The Santa Ana property was sold in April, 1992.
The Managing General Partner of the Partnership is Grotewohl Management
Services, Inc., the sole shareholder and officer of which is Philip B.
Grotewohl. The Associate General Partner of the Partnership is Robert J. Dana.
The net income or net loss of the Partnership is allocated 1% to the General
Partners and 99% to the Limited Partners. Net income (loss) and distributions
per partnership unit are based upon 10,000 units outstanding. All partnership
units are owned by the Limited Partners.
The Partnership agreement requires that the Partnership maintain reserves for
normal repairs, replacements, working capital and contingencies in an amount of
at least 5% of adjusted capital contributions. As of September 30, 1996, the
Partnership had a combined balance in cash and temporary investments of
$938,477, which was $483,477 in excess of the $455,000 required amount.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- ---------------------------------------------------
Items of Partnership income are passed through to the individual partners for
income tax purposes, along with any income tax credits. Therefore, no federal
or California income taxes are provided for in the financial statements of the
Partnership, except for a deposit of federal income taxes which is required of
partnerships with fiscal year ends other than a calendar year. The amount of
the deposit is based upon the taxable income of the partnership in the prior
year.
Property and equipment are recorded at cost. Depreciation and amortization are
computed using the following estimated useful lives and methods:
Description Methods Useful Lives
---------------------- ---------------------- ------------
Buildings 150% declining balance
and straight-line 10-25 years
Furniture and equipment 200% and 150% declining
balance and straight-line 3-7 years
Costs incurred in connection with maintenance and repair are charged to
expense. Major renewals and betterments that materially prolong the life of
assets are capitalized.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect certain reported amounts and disclosures. Accordingly, actual
results could differ from those estimates.
F-9
SUPER 8 ECONOMY LODGING IV, LTD.
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS(cONTINUED)
NOTE 3 - CASH AND TEMPORARY INVESTMENTS
- ---------------------------------------
Cash and temporary investments as of September 30, 1996 and 1995 consist of the
following:
1996 1995
--------- ---------
Cash in bank, non-interest bearing $ 26,184 $ 26,949
Money market accounts 512,293 567,950
Certificates of deposit 400,000 200,000
--------- ---------
Total Cash and Temporary Investments $938,477 $794,899
========= =========
Temporary investments are recorded at cost, which approximates market value.
The Partnership considers temporary investments and all highly liquid
marketable securities with original maturities of six months or less to be cash
equivalents for purposes of the statement of cash flows.
NOTE 4 - RELATED PARTY TRANSACTIONS
- -----------------------------------
FRANCHISE FEES
Super 8 Motels, Inc., now a wholly-owned subsidiary of Hospitality Franchise
Systems, Inc., is franchisor of all Super 8 Motels. The Partnership pays to
the franchisor monthly fees equal to 4% of the gross room revenues of the motel
and contributes an additional 1% of the gross room revenues to an advertising
fund administered by the franchisor. In return, the franchisor provides the
right to use the name "Super 8," a national institutional advertising program,
an advance room reservation system, and inspection services. These costs
($80,691 in 1996, $72,424 in 1995 and $67,631 in 1994) are included in motel
operations expense in the accompanying statements of operations. The
Partnership operates its motel property as a franchisee of Super 8 Motels, Inc.
through a sub-franchise agreement with Brown & Grotewohl, a California general
partnership, of which Grotewohl Management Services, Inc., (see Note 1) is a
50% owner. Under the sub-franchise agreement, Brown & Grotewohl earned 40% of
the above franchise fees, which amounted to $32,276, $28,970, and $27,052 in
1996, 1995 and 1994, respectively.
PROPERTY MANAGEMENT FEES
The General Partner, or its affiliates, handles the management of the motel
property of the Partnership. The fee for this service is 5% of the gross
revenues from Partnership operations as defined in the Partnership agreement,
and amounted to $82,893, $74,416, and $69,631 in 1996, 1995 and 1994,
respectively.
SUBORDINATED PARTNERSHIP MANAGEMENT FEES
During the Partnership's operational stage, the General Partners are to receive
9% of cash available for distribution for Partnership management services,
along with an additional 1% of cash available for distribution on account of
their interest in the profit and losses, subordinated, however, to receipt by
the Limited Partners of a 10% per annum cumulative pre-tax return on their
adjusted capital contributions. At September 30, 1996 the Limited Partners had
not received the 10% cumulative return, and as no Partnership management fees
are presently payable they are not reflected in these financial statements.
Management believes it is not likely that these fees will become payable in the
F-10
SUPER 8 ECONOMY LODGING IV, LTD.
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
NOTE 4 - RELATED PARTY TRANSACTIONS (Continued)
- -----------------------------------------------
future. This fee is payable only from cash funds provided from operations of
the Partnership, and may not be paid from the proceeds of sales or a
refinancing. As of September 30, 1996 the cumulative amount of these fees was
$431,993.
SUBORDINATED INCENTIVE DISTRIBUTIONS
Under the terms of the Partnership agreement, the General Partners are to
receive 15% of distributions of net proceeds from the sale or refinancing of
Partnership property remaining after distribution to the Limited Partners of
any portion thereof required to cause distributions to the Limited Partners
from all sources to be equal to their capital contributions plus a cumulative
10% per annum pre-tax return on their adjusted capital contributions.
EXPENSES SHARED BY THE PARTNERSHIP AND ITS AFFILIATES
There are certain expenses which are allocated between the Partnership and
affiliated Super 8 partnerships. These expenses, which are allocated based on
usage, are telephone, data processing, rent of the administrative office,
administrative salaries and duplication expenses. The expenses allocated to
the Partnership were approximately $113,000 in 1996, $110,000 in 1995 and
$104,000 in 1994 and are included in motel and restaurant operations and
general and administrative expenses in the accompanying statements of
operations. Included in administrative salaries are allocated amounts paid to
three employees who are related to Philip B. Grotewohl, the sole shareholder of
Grotewohl Management Services, Inc., a General Partner of the Partnership.
NOTE 5 - MOTEL OPERATING EXPENSES
- ---------------------------------
The following table summarizes the major components of motel operating expenses
for the years ended September 30, 1996, 1995 and 1994:
1996 1995 1994
---------- ---------- ----------
Salaries and related costs $308,314 $282,994 $298,050
Franchise and advertising fees 80,691 72,424 67,631
Utilities 66,664 70,349 70,875
Allocated costs, mainly indirect salaries 92,355 89,327 85,609
Repairs and minor renovations 23,158 38,047 40,432
Other operating expenses 218,547 223,874 224,956
---------- ---------- ----------
Total Motel Operating Expenses $789,729 $777,015 $787,553
========== ========== ==========
NOTE 6 - PROPERTY AND EQUIPMENT
- -------------------------------
The following is a summary of the accumulated depreciation of property and
equipment:
1996 1995
---------- ----------
Buildings $1,288,266 $1,206,339
Furniture and equipment 467,183 465,674
---------- ----------
Accumulated depreciation $1,755,449 $1,672,013
========== ==========
F-11
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
---------------------------------------------------------------
FINANCIAL DISCLOSURE
- --------------------
Inapplicable.
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
--------------------------------------------------
The original Managing General Partners of the Partnership were Dennis A.
Brown and Grotewohl Management Services, Inc., whose sole shareholder is Philip
B. Grotewohl. The original Associate General Partners were BWC Incorporated
and Robert J. Dana.
Upon Mr. Brown's death on February 25, 1988, Mr. Grotewohl, as president of
Grotewohl Management Services, Inc. and Mr. Dana elected to continue the
Partnership. BWC Incorporated was dissolved in 1989.
Grotewohl Management Services, Inc. was organized in 1981 to serve as a
general partner of limited partnerships to be formed for the purpose of
investing in Super 8 Motels.
Mr. Grotewohl, age 78, was an attorney-at-law and was engaged in the private
practice of law in San Mateo County, California, between 1967 and 1978. Since
1978, Mr. Grotewohl's principal occupation has been as a promoter and general
partner of Super 8 Motel limited partnerships.
Mr. Dana, age 68, was a registered representative of Brown, Brosche
Securities, Inc. between 1982 and his retirement in 1988. Between 1976 and
1982 he served as a registered representative of several other stock and
investment brokers. Mr. Dana has also served as marketing consultant for
various real estate limited partnerships and other direct participation
investment programs.
Item 11. EXECUTIVE COMPENSATION
----------------------
The following discussion contains certain information regarding aggregate
direct or indirect compensation paid or accrued by the Partnership during the
fiscal year ended September 30, 1996 to the General Partners and the Estate of
Dennis A. Brown, and/or their affiliates. Although Mr. Brown ceased to be a
general partner of the Partnership upon his death, his estate shares in certain
compensation otherwise payable to the General Partners and their affiliates.
Property Management Fees
- ------------------------
The Manager, a California general partnership which is owned equally by the
Estate of Dennis A. Brown and the Managing General Partner, is managing the
Partnership's motel. The fee for this service is 5% of the gross proceeds from
the operation of the motel. This compensation is in addition to the cost of
compensating the Partnership's employees and the cost of goods and services
acquired for the Partnership from independent contractors.
- 13 -
During the fiscal year covered by this report the Partnership accrued such
fees in the amount of $82,893, all of which were paid.
Franchise Fees and Advertising Fees
- -----------------------------------
The Partnership operates its motel as a franchisee of Super 8 Motels, Inc.,
through a sub-franchise obtained from Super 8 Management Corporation, a
corporation of which the Estate of Dennis A. Brown and Philip B. Grotewohl are
the sole shareholders. In March 1988 the shareholders of Super 8 Management
Corporation transferred their interests in the sub-franchise agreement to the
Manager. The Partnership, as franchisee, pays to the franchisor monthly
franchise fees equal to 4% of its gross room revenue and contributes 1% of its
gross room revenue to an advertising fund administered by the franchisor to
finance institutional advertising. The Manager is entitled to one-half of the
4% franchise fee.
The total of franchise fees accrued during the fiscal year covered by this
report was $64,553, of which $32,276 accrued to the Manager. All of the above
sums have been paid.
General Partners' Interest in Cash Available for Distribution
- -------------------------------------------------------------
At quarterly intervals, the total amount of the Partnership's Cash
Available for Distribution is determined at the discretion of the General
Partners. (See Item 5 above.) Distributions therefrom are made as follows:
(1) 90% of such distributions are paid to the Limited Partners; (2) 9%
thereof is paid to the General Partners as Partnership management fees; and
(3) 1% thereof is paid to the General Partners in accordance with their
interest in the income and losses of the Partnership.
Notwithstanding the foregoing, however, distributions of Cash Available for
Distribution to the General Partners which would otherwise be paid to the
General Partners are deferred and paid only after payment to the Limited
Partners of distributions of Cash Available for Distribution in an amount equal
to 10% per annum cumulative on their Adjusted Capital Contributions. During
the fiscal year covered by this report, $593,000 in distributions of Cash
Available for Distribution were paid to the Limited Partners. A total of
$431,993, representing the General Partners' Interest in Cash Available for
Distribution, has been deferred and remains unpaid since commencement of the
Partnership. The Limited Partners must receive $8,998,355 (calculated through
September 30, 1996) and $910,000 each year thereafter in additional
distributions before any of the accrued amounts will be paid to the General
Partners. Accordingly, the General Partners consider the payment of these
deferred amounts to be unlikely.
General Partner's Interest in Sale or Refinancing Proceeds
- ----------------------------------------------------------
The proceeds from the sale or refinancing of properties not reinvested are
to be distributed first to the Limited Partners until they have received
cumulative payments from all distribution sources equal to 100% of their
original capital contribution and a cumulative 10% per annum return on their
Adjusted Capital Contributions. When the foregoing requirement has been
satisfied, any remaining funds from the sale or refinancing of properties will
be distributed 15% to the General Partners and 85% to the Limited Partners.
No such distributions were paid or accrued for the account of the General
Partners during the fiscal year covered by this report.
- 14 -
Allocation of General Partners' Interest
- ----------------------------------------
Compensation to the General Partners and their affiliates in the form of
franchise fees and property management fees is allocated 1/3 each to the Estate
of Dennis A. Brown, the Managing General Partner and the Associate General
Partner.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
--------------------------------------------------------------
Security Ownership of Certain Beneficial Owners
- -----------------------------------------------
No person is known by the Partnership to be the beneficial owner of more
than 5% of the Units.
Security Ownership of Management
- --------------------------------
The General Partners do not beneficially own any Units.
Changes in Control
- ------------------
With the consent of all other General Partners and Limited Partners holding
more than 50% of the Units, a General Partner may designate a successor or
additional general partner, in each case with such participation in such
General Partner's interest as such General Partner and successor or additional
general partner 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
Partners, or may transfer his interest to an entity controlled by him;
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 will be effective only
after receipt by the Partnership of an opinion of 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.
The Limited Partners shall take no part in the management of the
Partnership's business; however, a majority in interest of the Limited
Partners, without the concurrence of the General Partners, shall have the right
to amend the Partnership Agreement, dissolve the Partnership, remove a General
Partner or any successor general partner, elect a new general partner or
general partners upon the removal, retirement, death, insanity, insolvency or
bankruptcy of a General Partner, and approve or disapprove the sale, exchange
or pledge in a single transaction of all or substantially all of the properties
acquired by the Partnership.
- 15 -
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
----------------------------------------------
Administrative Expenses Shared by the Partnership and its Affiliates
- --------------------------------------------------------------------
There are certain administrative expenses allocated between the Partnership and
affiliated Super 8 partnerships. These expenses, which are allocated based on
usage, are telephone, data processing, rent of administrative offices and
administrative salaries. The administrative expenses allocated to the
Partnership were approximately $113,000 in the fiscal year ended September 30,
1996 and are included in general and administrative expenses and motel and
restaurant operations expenses in the Partnership's financial statements.
Included in administrative salaries are allocated amounts paid to three
employee who are related to Philip B. Grotewohl, the sole shareholder of the
Managing General Partner.
- 16 -
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
---------------------------------------------------------------
(a) Documents filed as part of this report:
1. Financial Statements Included in Part II of this Report
Independent Auditors' Report
Balance Sheets, September 30, 1996 and 1995
Statement of Operations for the Years Ended September 30, 1996, 1995
and 1994
Statements of Partners' Equity for the Years Ended September 30, 1996,
1995 and 1994
Statements of Cash Flows for the Years Ended September 30, 1996, 1995
and 1994
Notes to Financial Statements
2. Financial Statement Schedules Included in Part IV of the Report
None
3. Exhibits
3. and 4. The Partnership Agreement is incorporated herein as an exhibit
from the annual report on Form 10-K for the fiscal year ended September
30, 1994
(b) Reports on Form 8-K:
Inapplicable
- 17 -
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
(Registrant) SUPER 8 ECONOMY LODGING IV, LTD.
--------------------------------
By (Signature and Title) /s/ Philip B. Grotewohl
------------------------
Philip B. Grotewohl,
President of Grotewohl Management
Services, Inc.,
Managing General Partner
Date: December 20, 1996
-----------------
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
By (Signature and Title) /s/ Philip B. Grotewohl
------------------------
Philip B. Grotewohl,
Chief executive officer,
chief financial officer,
chief accounting officer and sole
director of Grotewohl Management
Services, Inc., Managing General
Partner
Date: December 20, 1996
-----------------
- 18 -