FORM 10-Q--QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
(As last amended in Rel. No. 312905, eff. 4/26/93.)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of The Securities
Exchange Act of 1934
For the quarterly period ended March 31, 1996
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period.........to.........
(Amended by Exchange Act Rel. No. 312905, eff. 4/26/93)
Commission file number 0-16491
GROWTH HOTEL INVESTORS II
(Exact name of registrant as specified in its charter)
California 94-2997382
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Insignia Financial Plaza
Greenville, South Carolina 29602
(Address of principal executive offices)
(864) 239-1000
(Issuer's phone number)
Indicate by check mark whether the Registrant (1) has filed all documents and
reports required to be filed by Section 13 or 15 (d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports ), and (2) has been subject to
such filing requirements for the past 90 days. Yes X . No .
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Investment Properties:
A description of the hotel properties in which the Partnership has an ownership
interest, together with occupancy and room rate data follows:
Average Average Daily
Occupancy Rate Room Rate
For Quarter Ended For Quarter Ended
March 31, March 31,
Name and Location 1996 1995 1996 1995
Growth Hotel Investors II:
Hampton Inn-Kansas City 75% 79% $ 57.24 $ 52.05
Kansas City, Missouri
Hampton Inn-Eden Prairie 68% 64% 57.73 54.74
Eden Prairie, Minnesota
Hampton Inn-Dublin 63% 65% 55.73 52.38
Dublin, Ohio
Hampton Inn-North Dallas 81% 79% 64.94 61.96
Addison, Texas
Hampton Inn-St. Louis 61% 64% 59.44 57.08
St. Louis, Missouri
Hampton Inn-Colorado Springs 74% 64% 45.38 41.10
Colorado Springs, Colorado
Growth Hotel Investors
Combined Fund No. 1:
Hampton Inn-Memphis I40 East 65% 71% 53.20 50.36
Memphis, Tennessee
Hampton Inn-Columbia-West 73% 82% 58.96 53.03
West Columbia, South Carolina
Hampton Inn-Spartanburg 54% 63% 51.61 46.23
Spartanburg, South Carolina
Hampton Inn-Little Rock, North 64% 72% 51.37 46.78
North Little Rock, Arkansas
Hampton Inn-Amarillo 59% 64% 49.70 46.68
Amarillo, Texas
Average Average Daily
Occupancy Rate Room Rate
For Quarter Ended For Quarter Ended
March 31, March 31,
Name and Location 1996 1995 1996 1995
Growth Hotel Investors
Combined Fund No. 1:
(continued)
Hampton Inn-Greenville 76% 77% $ 57.79 $ 51.92
Greenville, South Carolina
Hampton Inn-Charleston-Airport 74% 70% 53.57 52.76
North Charleston, South Carolina
Hampton Inn-Memphis-Poplar 79% 80% 67.95 63.00
Memphis, Tennessee
Hampton Inn-Greensboro 77% 85% 63.42 55.79
Greensboro, North Carolina
Hampton Inn-Birmingham 71% 80% 60.51 57.17
Birmingham, Alabama
Hampton Inn-Atlanta-Roswell 75% 81% 63.36 55.86
Roswell, Georgia
Hampton Inn-Chapel Hill 81% 81% 60.29 54.68
Chapel Hill, North Carolina
Hampton Inn-Dallas-Richardson 78% 71% 55.60 50.25
Richardson, Texas
Hampton Inn-Nashville- 67% 81% 64.66 59.20
Briley Parkway
Nashville, Tennessee
Hampton Inn-San Antonio-Northwest 54% 59% 55.87 56.28
San Antonio, Texas
Hampton Inn-Madison Heights 69% 63% 57.38 53.19
Madison Heights, Michigan
Hampton Inn-Mountain Brook 77% 68% 60.78 56.40
Birmingham, Alabama
Hampton Inn-Northlake 78% 77% 60.22 53.34
Atlanta, Georgia
The Partnership's net income for the three months ended March 31, 1996, was
approximately $1,486,000 as compared to $803,000 for the same period of 1995.
The increase in net income is attributable to an increase in hotel revenues due
to an overall room rate increase at the Partnership's investment properties
along with a decrease in mortgage interest due to the repayment of long-term
debt on its Hampton Inn - Dublin and Hampton Inn - Kansas City properties
during the fourth quarter of 1995. Partially offsetting these increases to
income were increases in hotel operating expenses, depreciation expense and
general and administrative expenses. Finally affecting the increase in net
income was a decrease in loss attributable to the minority interest to joint
venture partners.
As part of the ongoing business plan of the Partnership, the Managing General
Partner monitors the hotel market environment of its investment properties to
assess the feasibility of increasing rates, maintaining or increasing occupancy
levels and protecting the Partnership from increases in expenses. As part of
this plan, the Managing General Partner attempts to protect the Partnership
from the burden of inflation-related increases in expenses by increasing rates
and maintaining a high overall occupancy level. However, due to changing
market conditions, which can result in the use of concessions and room rate
reductions to offset softening market conditions, there is no guarantee that
the Managing General Partner will be able to sustain such a plan.
At March 31, 1996, the Partnership had unrestricted cash of $6,486,000 as
compared to $9,302,000 at March 31, 1995. Net cash provided by operating
activities increased due to the increase in net income discussed above along
with the Partnership incurring costs of $1,425,000 during the first quarter of
1995 in relation to a buyout agreement as discussed in "Item 1. Financial
Statements Note E". Net cash used in investing activities increased primarily
as a result of increases in deposits to restricted cash. Net cash used in
financing activities decreased primarily as a result of a difference in the
timing of payments of distributions from the Combined Fund to the Partnership.
The sufficiency of existing liquid assets to meet future liquidity and capital
expenditure requirements is directly related to the level of capital
expenditures required at the properties to adequately maintain the physical
assets and other operating needs of the Partnership. Such assets are currently
thought to be sufficient for any near-term needs of the Partnership. The
mortgage indebtedness of $49,935,000 includes mortgages with maturity dates
ranging from 1996 through 2016. A balloon payment on the mortgage encumbering
the Partnership's Hampton Inn - North Dallas property is due in December 1996
in the amount of approximately $2,927,000. The Partnership's consolidated
joint venture, the Combined Fund, has balloon payments due in August 1996 of
approximately $35,323,000. The Partnership's remaining properties have
balloon payments due in 1998 and 2016. The Managing General Partner is
currently evaluating the feasibility of selling all of the investment
properties (as discussed in further detail below) or the refinancing
opportunities. Future cash distributions will depend on the levels of cash
generated from operations, property sales, and the availability of cash
reserves. A cash distribution of approximately $865,000 was paid to the
partners in the first quarters of 1996 and 1995.
On February 15, 1996, Devon Associates, a New York general partnership,
commenced a tender offer (the "Offer") for up to 21,000 of the outstanding Units
at a purchase price of $750.00 per Unit. Due to the participation in the tender
offer by affiliates of NPI Realty, and the Managing General Partner's related,
existing and potential conflicts of interest, the Partnership, in its Schedule
14D-9 filed with Securities and Exchange Commission and sent to limited
partners, expressed no opinion and made no recommendation as to whether limited
partners should tender their Units pursuant to the Offer. The expiration of the
tender offers described above was midnight, New York time, on March 25, 1996.
See Items 2-4 of the Schedule 14D-9 of the Partnership, as filed with the
Commission on February 29, 1996, as amend by "Amendment No. 1" thereto, as filed
with the Commission on March 7, 1996, and as further amended by "Amendment No.
2" thereto, as filed with the Commission on March 14, 1996 and as further
amended by "Amendment No. 3" thereto filed with the Commission on March 18, 1996
(collectively, the "Schedule 14D-9"), for additional information with respect to
the Offer and the current and potential conflicts of interest of MRC-85, which
Items 2-4 are incorporated herein by reference. Devon Associates acquired
17,287 units with respect to this offer. See Part II - Item 1 - Legal
Proceedings.
On March 31, 1996, the Partnership received a letter advising that the
Partnership's and Growth Hotel Investors II ("GHI II") joint venture partner in
certain of the hotel properties was offering $147,000,000 in cash for all 28
hotel properties directly or indirectly owned by the Partnership and GHI II.
See "Amendment No. 2" to the Partnership's Statement on Schedule 14D-9, as filed
with the Commission on March 14, 1996, for a more complete description of this
offer, which "Amendment No. 2 is hereby incorporated by reference herein. By
the terms of the offer, the offer expired on March 31, 1996. The Managing
General Partner determined that before the offer could be recommended, if at
all, to the Partnership's limited partners further analysis of the hotel
properties and their value was needed. See Part II. Item 1 - Legal Proceedings
for information with respect to the marketing of the hotel properties for sale
in connection with the settlement of the actions arising out of the Devon
Associates tender offers.
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.
GROWTH HOTEL INVESTORS II
By: MONTGOMERY REALTY COMPANY 85,
its general partner
By: NPI REALTY MANAGEMENT CORP.
MANAGING GENERAL PARTNER
/s/William H. Jarrard, Jr.
President and Director
Date: May 17, 1996