UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1994
OR
[ ] TRANSITION PERIOD PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number: 33-17274
MANHATTAN BEACH HOTEL PARTNERS, L.P.
Exact name of registrant as specified in its charter
Delaware 95-4201183
State or other jurisdiction of incorporation I.R.S. Employer Identification No.
3 World Financial Center, 29th Floor, New York, New York 10285
Address of principal executive offices zip code
Registrant's telephone number, including area code: (212) 526-3237
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
DEPOSITARY 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 for 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
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 the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. (x)
Aggregate market value of the voting stock held by non-affiliates of the
registrant: Not applicable.
Documents Incorporated by Reference:
Portions of Parts I, II, III and IV are incorporated by reference to the
Partnership's Annual Report to Unitholders for the year ended December
31, 1994, filed as an exhibit under Item 14.
PART I
Item 1. Business
(a) General Development of Business.
Manhattan Beach Hotel Partners, L.P., formerly Shearson California Radisson
Plaza Partners, L.P. (see Item 10. "Certain Matters Involving Affiliates of
Manhattan Beach Commercial Properties III Inc."), a Delaware limited
partnership (the "Registrant" or the "Partnership"), was formed on September 8,
1987. The Partnership will continue until December 31, 2037 in accordance with
the terms of its Amended and Restated Agreement of Limited Partnership (the
"Partnership Agreement"), unless terminated earlier pursuant thereto. The
affairs of the Partnership are conducted by its general partner, Manhattan
Beach Commercial Properties III Inc., formerly Shearson Lehman Commercial
Properties III, Inc. (see Item 10. "Certain Matters Involving Affiliates of
Manhattan Beach Commercial Properties III Inc."), a Delaware corporation (the
"General Partner"), and an affiliate of Lehman Brothers Inc.
On November 4, 1987, an offering (the "Offering") of 6,975,000 depositary units
("Units"), representing assignments of limited partnership interests, at a
price of $10 per Unit commenced through Shearson Lehman Brothers Inc.
("Shearson"), an affiliate of the General Partner. The Offering closed on May
26, 1988, upon which date investors who subscribed for all 6,975,000 Units were
admitted as holders of Units ("Unitholders").
Manhattan Beach Commercial Properties III Depositary, Inc. (the "Assignor
Limited Partner"), formerly Shearson Lehman Commercial Properties III
Depositary, Inc. (see Item 10. "Certain Matters Involving Affiliates of
Manhattan Beach Commercial Properties III Inc."), is the record owner of the
limited partnership interests, but the Unitholders are entitled to all the
economic and other substantive rights and interests of the underlying limited
partnership interests and are entitled to direct any voting of such limited
partnership interests. A Unitholder, subject to certain conditions, may
convert his Units into limited partnership interests.
Purchase of the Property. The Partnership was formed to acquire, own, lease
and ultimately sell a leasehold interest in the Radisson Plaza Hotel and Golf
Course (the "Property" or the "Hotel"), a 384-room, 287,965 square foot
commercial hotel and nine-hole executive golf course located on a 26.3 acre
site in the City of Manhattan Beach, Los Angeles County, California (the
"City"). The Property was acquired for a purchase price of $56,500,000 on
December 1, 1987 from Manhattan Beach Hotel Properties, Ltd., a California
limited partnership (the "Seller"), which developed the Property and opened it
for occupancy in January 1987.
The Hotel is operated subject to a license agreement with Radisson Hotels
International, Inc. ("Radisson"). Information regarding Radisson is
incorporated by reference to Note 4 "Real Estate Investments" of the Notes to
the Financial Statements contained in the Partnership's Annual Report to
Unitholders for the year ended December 31, 1994, filed as an exhibit under
Item 14. The Hotel is operated under a management agreement (the "Management
Agreement") with Manhattan Beach Management Company, an affiliate of Interstate
Hotels Corporation ("Interstate"). Details regarding the Management Agreement
are incorporated by reference to Note 5 "Hotel Lease" of the Notes to the
Financial Statements contained in the Partnership's Annual Report to
Unitholders for the year ended December 31, 1994, filed as an exhibit under
Item 14. The golf course is operated under a long-term operating agreement
with Radisson Golf Course Company, Inc., an unaffiliated party.
Ground Lease. Information regarding the Ground Lease is incorporated by
reference to Note 4 "Real Estate Investments" of the Notes to the Financial
Statements contained in the Partnership's Annual Report to Unitholders for the
year ended December 31, 1994, filed as an exhibit under Item 14.
The Management Agreement and Hotel Leases. Incorporated by reference to Note 5
"Hotel Lease" of the Notes to the Financial Statements contained in the
Partnership's Annual Report to Unitholders for the year ended December 31,
1994, filed as an exhibit under Item 14.
(b) Financial Information About Industry Segments.
The Partnership's sole business is to own and operate the Property. All of the
Partnership's revenues, operating profit or loss and assets relate solely to
such industry segment.
(c) Narrative Description of Business.
The Partnership's principal objectives are to (i) provide quarterly cash
distributions, a portion of which are anticipated to be non-taxable due to
depreciation deductions, (ii) preserve and protect capital and (iii) achieve
long-term appreciation in the value of the Property for distribution upon sale.
There can be no assurance that any of such objectives will be achieved by the
Partnership.
Competition. Incorporated by reference to the section entitled Partnership
Update on page 3 of the Partnership's Annual Report to Unitholders for the year
ended December 31, 1994, filed as an exhibit under Item 14.
Information with respect to market conditions in the area where the
Partnership's Property is located is incorporated by reference to the sections
entitled Message to Investors and Partnership Update on pages 1 and 3,
respectively, of the Partnership's Annual Report to Unitholders for the year
ended December 31, 1994, filed as an exhibit under Item 14.
Employees. The Partnership's business is managed by the General Partner and
the Partnership has no employees. The current hotel staff and other personnel
are employees of Interstate. Information regarding Interstate is incorporated
by reference to Note 5 "Hotel Lease" of the Notes to Financial Statements
contained in the Partnership's Annual Report to Unitholders for the year ended
December 31, 1994, filed as an exhibit under Item 14.
Item 2. The Property
Incorporated by reference to Note 4 "Real Estate Investments" of the Notes to
Financial Statements and the section entitled Partnership Update on page 3 of
the Partnership's Annual Report to Unitholders for the year ended December 31,
1994, filed as an exhibit under Item 14.
Item 3. Legal Proceedings
Incorporated by reference to Note 7 "Litigation" of the Notes to Financial
Statements contained in the Partnership's Annual Report to Unitholders for the
year ended December 31, 1994, filed as an exhibit under Item 14.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of the Unitholders at a meeting or
otherwise during the fourth quarter of the fiscal year for which this report
has been filed.
PART II
Item 5. Market for the Partnership's Limited Partnership interests and
Security Holder Matters
(a) Market Information. The Partnership has issued no common stock. There is
no established public market in which the Units are currently traded.
(b) Holders. The number of Unitholders as of December 31, 1994 was 5,664.
(c) Dividends. No distributions were paid to Unitholders for the years ended
December 31, 1994 and 1993. Cumulative distributions paid to Unitholders since
the Partnership's inception total $2.04 per Unit. This amount includes $0.57
per Unit paid to class member Unitholders (the "Settlement Class") pursuant to
the settlement of class actions brought against Shearson, the Partnership and
other affiliated defendants (the "Settlement"). Such distributions were drawn
from the settlement fund (the "Settlement Fund") established to pay such
distributions to the Settlement Class. The Settlement Fund was exhausted with
the payment of the fourth quarter 1992 distribution. Additional information
about the Settlement is incorporated by reference to Note 7 "Litigation" of the
Notes to the Financial Statements contained in the Partnership's Annual Report
to Unitholders for the year ended December 31, 1994, filed as an exhibit under
Item 14.
No distributions were declared payable to the General Partner for the years
ended December 31, 1994 and 1993.
Future distributions will be dependent on the results of operations of the
Property and the level of net operating income available to the Partnership.
Item 6. Selected Financial Data
Incorporated by reference to the section entitled Financial Results Comparison
on page 4 of the Partnership's Annual Report to Unitholders for the year ended
December 31, 1994, filed as an exhibit under Item 14.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Liquidity and Capital Resources
The Hotel's operations continued to be impacted by weak conditions in the Los
Angeles hospitality market during 1994. The Hotel is dependent primarily on
business and leisure travel for its revenues. Therefore, the decline in
leisure travel to, and business activity in Los Angeles, particularly in the
aerospace and defense industries, resulted in reduced travel into the city,
which has adversely affected the performance of area hotels.
At December 31, 1994, Manhattan Beach Hotel Partners, L.P. (the "Partnership")
had cash and cash equivalents of $2,797,178, including cash held at the
Property for working capital. Cash increased by $613,768 from December 31,
1993, due to cash flow generated by operating activities which was partially
offset by expenditures for fixed asset additions and funding of the restricted
cash account. Such cash balances are expected to be sufficient to meet the
anticipated cash requirements for operations of the Partnership. Restricted
cash increased to $270,489 at December 31, 1994, compared to $0 at December 31,
1993. The increase in 1994 is due to contributions to the reserve exceeding
property improvements. Pursuant to the management agreement (the "Management
Agreement") with Manhattan Beach Management Company, an affiliate of
Interstate, contributions to the account for furniture, fixtures and equipment
("FF&E reserve account") will be made over time to protect and maintain the
value of the Partnership's Hotel.
Accounts Receivable increased to $906,721 at December 31, 1994 compared to
$565,945 at December 31, 1993. The increase is primarily attributable to the
timing of payments by Hotel customers. Accounts payable and accrued
liabilities decreased by $331,882 from December 31, 1993 to $1,291,771 at
December 31, 1994, primarily due to the final payment of a liability related to
the Hotel's self-insurance program. Due to affiliates increased to $2,121,394
at December 31, 1994 from $1,858,749 at December 31, 1993, primarily due to the
accrual of property management oversight fees for 1994.
Cash flow from operations was not sufficient in 1994 to pay a distribution from
operating cash flow. Future distributions will be dependent on the results of
operations of the Hotel and the level of cash flow available to the
Partnership.
Results of Operations
1994 versus 1993
For the year ended December 31, 1994, the Partnership had a net loss of
$245,012, compared to a net loss of $767,542 for the year ended December 31,
1993. The improvement in 1994 primarily is due to an increase in departmental
income, comprised of rooms, food and beverage, telephone and other departmental
income, which was partially offset by an increase in unallocated hotel
operating expenses.
For the year ended December 31, 1994, the Hotel generated departmental income
of $6,985,451 compared to $6,353,439, for the year ended December 31, 1993.
The 9.9% increase in departmental income in 1994 is due to a increase in total
Hotel revenues, primarily from room revenues, as well as decreased departmental
expenses for food and beverage and other costs.
For the year ended December 31, 1994, unallocated Hotel and Partnership
operating expenses, including depreciation, were $7,287,878 compared to
$7,154,595 for the corresponding period in 1993. The increase primarily is due
to an increase in Hotel general and administrative expenses, which is largely
attributable to an increase in insurance expense in 1994 relative to 1993 as a
result of an adjustment made in 1993 for the self-insured employee health
insurance program which was terminated in 1992. Also contributing to the
increase were higher costs for utilities and maintenance and increased Hotel
operating lease expenses.
Total other income for the year ended December 31, 1994 increased to $57,415
from $33,614 at December 31, 1993, primarily due to higher interest income and
no interest expense during 1994. The increase in interest income primarily is
due to higher cash balances and higher interest rates during the year. The
decrease in interest expense is due to the pay-off of a note payable due to the
Carlson Group.
The following charts summarize the Hotel's performance for the twelve months
ended December 31 of the indicated years.
Average Occupancy
1994 1993 Variance
85.5% 81.7% 3.8%
Average Room Rate
1994 1993 % Change
$70.02 $70.10 (0.1%)
Hotel Sales
1994 1993 % Change
$13,186,812 $12,996,520 1.5%
Hotel House Profit
1994 1993 % Change
$3,386,612 $2,538,312 33.4%
House profit is the Hotel's operating profit prior to payments made for certain
other items including property taxes, insurance, ground rent, equipment leases,
Partnership general and administrative expenses and the funding of the FF&E
reserve account.
Partnership Net Loss
1994 1993 % Change
($245,012) ($767,542) 68%
1993 versus 1992
For the year ended December 31, 1993, the Partnership had a net loss of
$767,542, compared to a net loss for the year ended December 31, 1992 of
$2,956,338. The improvement in 1993 primarily is due to a substantial decrease
in depreciation expense, and lower general and administrative expenses,
partially offset by a decline in other income.
For the year ended December 31, 1993, the Hotel generated departmental income
of $6,353,439 compared to $6,441,853, for the year ended December 31, 1992.
The 1.4% decline in departmental income in 1993 is due to a decline in total
Hotel revenues which is primarily attributable to a decline in food and
beverage revenues and other income.
For the year ended December 31, 1993, unallocated Hotel and Partnership
operating expenses, including depreciation, were $7,154,595 compared to
$9,749,423 for the corresponding period in 1992. The decrease is largely
attributable to a decline in depreciation expense due to various personal
property items being fully depreciated during 1992. Also contributing to the
decline were lower Partnership general and administrative expenses, which is
largely attributable to a one-time $116,949 adjustment recorded in the first
quarter of 1992 associated with the termination of the lease with KHE, the
former property operator. Additionally, Hotel and other general and
administrative expenses declined due to costs associated with the Hotel's
self-insured employee health insurance program which was terminated in 1992.
Total other income for the year ended December 31, 1993 decreased to $35,299,
from $340,298 at December 31, 1992, largely due to the recognition of income in
the first quarter of 1992 regarding the Hotel's liquor license fee, and the
receipt of a real estate tax refund in the amount of $170,144. Interest income
declined in 1993 due to lower interest rates on the Partnership's cash
balances.
Item 8. Financial Statements and Supplementary Data
Incorporated by reference to pages 5 to 11 of the Partnership's Annual Report
to Unitholders for the year ended December 31, 1994, filed as an exhibit under
Item 14 and Schedule III.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
PART III
Item 10. Directors and Executive Officers of the Registrant
The Partnership has no directors or executive officers. The affairs of the
Partnership are conducted through the General Partner. The names and ages of,
as well as the positions held by, the principal directors and officers of the
General Partner are set forth below. All directors of the General Partner will
serve until the next meeting of the stockholders of the General Partner. There
are no family relationships between any officers or directors.
Certain officers of the General Partner are now serving (or in the past have
served) as officers or directors of entities which act as general partners of a
number of real estate limited partnerships which have sought protection under
the provisions of the Federal Bankruptcy Code. The partnerships which have
filed bankruptcy petitions own real estate which has been adversely affected by
the economic conditions in the markets in which that real estate is located
and, consequently, the partnerships sought the protection of the bankruptcy
laws to protect the partnerships' assets from loss through foreclosure.
The Officers and/or Directors of the General Partner are as follows:
Name Age Office
Jeffrey C. Carter 49 President, Director and Chief Financial
Officer
Rocco F. Andriola 36 Director and Vice President
Jeffrey C. Carter is a Senior Vice President of Lehman Brothers in the
Diversified Asset Group. Mr. Carter joined Lehman Brothers in September 1988.
From 1972 to 1988, Mr. Carter held various positions with Helmsley-Spear
Hospitality Services, Inc. and Stephen W. Brener Associates, Inc. including
Director of Consulting Services at both firms. From 1982 through 1987, Mr.
Carter was President of Keystone Hospitality Services, an independent hotel
consulting and brokerage company. Mr. Carter received his B.S. degree in Hotel
Administration from Cornell University and an M.B.A. degree from Columbia
University.
Rocco F. Andriola is a Senior Vice President of Lehman Brothers in its
Diversified Asset Group. Since joining Lehman Brothers in 1986, Mr. Andriola
has been involved in a wide range of restructuring and asset management
activities involving real estate and other direct investment transactions.
From 1986-89, Mr. Andriola served as a Vice President in the Corporate
Transactions Group of Shearson Lehman Brothers' office of the general counsel.
Prior to joining Lehman Brothers, Mr. Andriola practiced corporate and
securities law at Donovan Leisure Newton & Irvine in New York. Mr. Andriola
received a B.A. degree from Fordham University, a J.D. degree from New York
University School of Law, and an LL.M degree in Corporate Law from New York
University's Graduate School of Law.
Certain Matters Involving Affiliates of Manhattan Beach Commercial Properties
III Inc.
On July 31, 1993 Shearson Lehman Brothers Inc. ("Shearson") sold
certain of its domestic retail brokerage and asset management businesses to
Smith Barney, Harris Upham & Co. Incorporated ("Smith Barney"). Subsequent to
this sale, Shearson changed its name to Lehman Brothers Inc. The transaction
did not affect the ownership of the Partnership's General Partner. However,
the assets acquired by Smith Barney included the name "Shearson."
Consequently, the Shearson Lehman Commercial Properties III, Inc. general
partner changed its name to Manhattan Beach Commercial Properties III Inc.,
Shearson Lehman Commercial Properties III Depositary, Inc, the Assignor Limited
Partner, changed its name to Manhattan Beach Commercial Properties III
Depositary, Inc. and the name of the Partnership was changed to Manhattan Beach
Hotel Partners, L.P. to delete any reference to "Shearson."
Item 11. Executive Compensation
All of the directors and executive officers of the General Partner are
employees of Lehman. They do not receive any salaries or other compensation
from the Partnership.
Item 12. Security Ownership of Certain Beneficial Owners and Management
To the knowledge of the General Partner, no person owns more than 5% of the
outstanding Units. No director or executive officer of the General Partner
owns any of the outstanding Units. No changes of control of the Partnership
occurred in 1994.
Item 13. Certain Relationships and Related Transactions
Incorporated by reference to Note 1 "Organization and Partnership Agreement"
and Note 3 "Transactions with Related Parties" of the Notes to Financial
Statements contained in the Partnership's Annual Report to Unitholders for the
year ended December 31, 1994, filed as an exhibit under Item 14.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a)(1) Financial Statements:
Report of Independent Accountants (1)
Balance Sheets - At December 31, 1994 and 1993 (1)
Statements of Operations - For the years ended
December 31, 1994, 1993 and 1992 (1)
Statements of Partners' Capital - For the years ended
December 31, 1994, 1993 and 1992 (1)
Statements of Cash Flows - For the years ended
December 31, 1994, 1993 and 1992 (1)
Notes to Financial Statements (1)
(1) Incorporated by reference to the Partnership's Annual Report to
Unitholders for the year ended December 31, 1994, which is filed as an
exhibit under Item 14.
(a)(2) Financial Statement Schedules: Independent Accountant's Report
on Schedule III and Schedule III - Real Estate and Accumulated
Depreciation.
(a)(3) Exhibits: See Exhibit Index contained herein.
(b)(3) Reports on Form 8-K: No reports on form 8-K were filed in the
fourth quarter of the calendar year 1994.
(c) See Exhibit Index contained herein.
Exhibit Index
Exhibit Number
3.1 Amended and Restated Agreement of Limited Partnership of the
Registrant, as amended (included as, and incorporated herein by
reference to, Exhibit 3.1 of the Registrant's 1988 Annual Report on
Form 10-K filed on May 17, 1989). Exhibit
10.1 Depositary Agreement between the Registrant and Shearson Lehman
Commercial Properties Depositary III Inc., as Assignor Limited Partner
(included as, and incorporated herein by reference to Exhibit 10.3 to
the Registration Statement*).
10.2 Purchase Agreement, as amended, relating to the acquisition of
the Registrant's hotel property (included as, and incorporated herein
by reference to Exhibit 10.4 to the Registration Statement*).
10.3 Hotel Sublease, as amended (included as, and incorporated
herein by reference to Exhibit 10.3 of the Registrant's 1988 Annual
Report on Form 10-K filed on May 17, 1989).
10.4 Hotel Ground Lease and Related Amendments (included as, and
incorporated herein by reference to Exhibit 10.6 to the Registration
Statement*).
10.5 Radisson License (included as, and incorporated herein by
reference to Exhibit 10.7 to the Registration Statement*).
10.6 License Agreement between Radisson Hotel Corporation and the
Registrant (included as, and incorporated herein by reference to
Exhibit 10.8 to the Registration Statement*).
10.7 Guaranty of the Sublease (included as, and incorporated herein
by reference to Exhibit 10.9 of the Registration Statement*).
10.8 Accounting Services Agreement between the Registrant and Boston
Safe Deposit and Trust Company (included as and incorporated
herein by reference to Exhibit 10.8 of the Registrant's 1988
Annual Report on Form 10-K filed May 17, 1989).
10.9 Investor Services Agreement between the Registrant and Boston
Safe Deposit and Trust Company (included as, and incorporated herein by
reference to the Registrant's 1988 Annual Report on Form 10-K filed May
17, 1989).
10.10 Sublease Agreement, dated October 2, 1989, between Manhattan
Beach Hotel Properties, Ltd., U.S. Hotel Properties Corporation, and
Horst Osterkamp, (collectively, the "Sublessor"), and Kentucky
Hospitality Employer, Inc., (the "Sublessee") (included as, and
incorporated herein by reference to the Registrant's 1989 Annual Report
on Form 10-K filed March 14, 1990.
10.11 Credit Agreement, dated September 1989, between the Registrant
and Carlson Hospitality Group, Inc. (included as, and incorporated
herein by reference to the Registrant's 1989 Annual Report on Form 10-K
filed March 14, 1990.
10.12 Management Agreement, dated January 3, 1991, between the
Registrant and Interstate Hotels Corporation incorporated herein by
reference to Exhibit 10.12 of the Registrant's Annual Report on Form
10-K for the year ended December 31, 1990.
10.13 Form of the Settlement Agreement dated August 27, 1990 between
the Partnership and class members incorporated herein by reference.
10.14 Management Agreement, dated January 3, 1992, between the
Registrant and Interstate Hotels Corporation incorporated herein by
reference to Exhibit 10.14 of the Registrant's Annual Report on Form
10-K for the year ended December 31, 1991.
13.1 Annual Report to the Unitholders for the year ended December
31, 1994. ------------------------------
- References to the "Registration Statement" are to the Registrant's
Registration Statement on Form S-11 (File No. 33-17274).
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.
MANHATTAN BEACH HOTEL PARTNERS, L.P.
BY: Manhattan Beach
Commercial Properties III Inc.
General Partner
Date: March 30, 1995
BY: s/Jeffrey C. Carter/
Name: Jeffrey C. Carter
Title: President, Director and
Chief Financial Officer
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.
MANHATTAN BEACH COMMERCIAL PROPERTIES III INC.
General Partner
Date: March 30, 1995
BY: s/Jeffrey C. Carter/
Name: Jeffrey C. Carter
Title: President, Director and
Chief Financial Officer
Date: March 30, 1995
BY: s/Rocco F. Andriola
Name: Rocco F. Andriola
Title: Director and Vice President
EXHIBIT 13.1
MANHATTAN BEACH HOTEL PARTNERS, L.P.
1994 ANNUAL REPORT
Manhattan Beach Hotel Partners, L.P. raised $69,750,000 during its offering
period in 1987 and 1988. The Partnership's operations are managed by its
General Partner, Manhattan Beach Commercial Properties III Inc., an affiliate
of Lehman Brothers Inc. In December 1987, the Partnership acquired the
Radisson Plaza Hotel and Golf Course, located in the City of Manhattan Beach,
Los Angeles County, California, three miles south of Los Angeles International
Airport.
The Radisson Plaza Hotel, which is managed by a subsidiary of Interstate Hotels
Corporation, is a 384-room full-service commercial hotel featuring resort-type
amenities including two restaurants, a swimming pool, health club and an
executive golf course. Located near area restaurants, retail malls, and movie
theaters, the Hotel also features shuttle service to the airport and Manhattan
Beach. The resort-like atmosphere at the Hotel combined with its location near
the airport and several large office complexes has made the Hotel a popular
destination for business and leisure travelers.
Property Highlights
1994 1993 % Change
___________________________________________________
Average Occupancy 85.5% 81.7% 4.7%
Average Room Rate $70.02 $70.10 (0.1%)
___________________________________________________
Administrative Inquiries Performance Inquiries/Form 10-Ks
Address Changes/Transfers The Shareholder Services Group
Service Data Corporation P.O. Box 1527
2424 South 130th Circle Boston, Massachusetts 02104-1527
Omaha, Nebraska 68144 Attn: Financial Communications
(800) 223-3464 (800) 223-3464
Contents
1 Message to Investors
3 Partnership Update
4 Financial Results Comparison
5 Financial Statements
8 Notes to Financial Statements
12 Report of Independent Accountants
Message to Investors
Presented for your review is the 1994 Annual Report for Manhattan Beach Hotel
Partners, L.P. (the "Partnership"). This report includes an overview of
hospitality industry conditions, an update on the operations of the Radisson
Plaza Hotel and Golf Course (the "Hotel"), and the Partnership's audited
financial statements for the year ended December 31, 1994.
Throughout 1994, local economic conditions continued to impact hotels in the
greater Los Angeles area, including the Partnership's Hotel. In an effort to
offset these problems, the General Partner is working closely with the hotel
manager to aggressively market the Hotel's services to diversify its customer
base and enhance operations. As a result of these efforts, the performance of
the Hotel improved during 1994. As of December 31, 1994, the Hotel's average
occupancy and room rate were 85.5% and $70.02, respectively, compared with
81.7% and $70.10, respectively, for 1993. While we are pleased with the
improvement in the Hotel's performance during 1994, it should be noted that in
order to improve overall profitability and ultimately resume cash distribution
payments to the Limited Partners, a substantial increase in the Hotel's average
room rate is necessary. We will continue our efforts, in conjunction with
Hotel management, to optimize operations and preserve the long-term value of
the property. In addition, the General Partner will continue to evaluate the
Partnership's cash requirements on a quarterly basis to determine when it may
be possible to reinstate cash distributions. Please refer to the Partnership
Update section on page 3 of this report.
National Market Overview
A general strengthening of national economic conditions, coupled with the
virtual absence of new hotel construction, induced modest improvement in the
United States hospitality industry during 1994, as evidenced by increases in
both occupancy levels and room rates. After lagging behind other sectors of
real estate for the last few years, U.S. hotels demonstrated renewed momentum
during 1994, brightening the long-term prognosis for the hospitality industry.
For the year ended December 31, 1994, market analysts Smith Travel Research
reported that average occupancy and daily room rates for U.S. hotels increased
to 65.2% and $63.63, respectively, compared with 63.1% and $61.30,
respectively, for 1993. Although the industry continues to experience regional
fluctuations in demand in certain market segments, the gap between supply and
demand is gradually narrowing as the existing supply of hotel rooms is slowly
being absorbed. According to projections by Coopers & Lybrand, a major public
accounting firm, this trend should continue, as total room inventory is
expected to remain flat throughout 1995 and 1996. While the overall
improvement is an encouraging sign for the future, it should be noted that the
recovery of the U.S. hospitality industry remains in the early stages, and it
is anticipated that operating challenges will persist for the foreseeable
future. Nevertheless, the long-term outlook for hotels across the country is
somewhat optimistic, and while the pace and scope of growth continues to vary
regionally from market to market, the hospitality industry nationwide is
expected to strengthen over the next several years.
BAR GRAPH: Comparing United States, Los Angeles Airport Market and
Radisson (the Property) average occupancy rates in 1993 and 1994. All average
occupancy rates disclosed in text.
BAR GRAPH: Comparing United States, Los Angeles Airport Market and Radisson
(the Property) average room rates in 1993 and 1994. All average room
rates disclosed in text.
The Los Angeles Market
The economic recovery throughout most areas of California has lagged behind
other regions of the country. However, after several years characterized by
recession, the California economy appears to have bottomed out, and many
regions of the state are beginning to gradually strengthen. Despite this
overall improvement, however, the local Los Angeles economy remained depressed
in 1994, and these conditions still continue to pose direct challenges to
hotels in most sections of Los Angeles as business, convention and leisure
travel to the
area remained relatively stagnant in 1994. Although hotels in
the downtown Los Angeles market were able to benefit somewhat from tourism
generated by the 1994 World Cup during the summer months, the residual business
for hotels in the Los Angeles Airport market, where the Partnership's Hotel is
located, was limited. As a result of these factors, the average occupancy and
room rates for Los Angeles hotels in the airport submarket at December 31, 1994
were 65.9% and $58.36, compared with 64.1% and $58.46, respectively, for 1993,
as reported by Smith Travel Research.
Summary
Given the continued strengthening of nationwide industry conditions during 1994
and into 1995, the potential exists for many of the nation's hotels to regain a
portion of their lost value. Although it is likely that operations at the
Partnership's Hotel may continue to be impacted by the imbalanced local market
conditions, the General Partner is encouraged by the overall improvement in
industry conditions, and is hopeful that a corresponding strengthening of
industry conditions for Los Angeles hotels will occur during 1995, thereby
increasing the prospect for higher operating profits and property values.
Looking forward, our focus will be on pursuing new techniques for enhancing
operations and improving the Hotel's market share. In addition, we will
continue to work closely with Hotel management in seeking to streamline
operations by minimizing expenses at both the Hotel and Partnership levels. We
will keep you informed of our progress in future investor reports.
Very truly yours,
Manhattan Beach Commercial Properties III Inc.
The General Partner
s/Jeffrey C. Carter/
Jeffrey C. Carter
President
March 30, 1995
Partnership Update
The Property
The Partnership's Radisson Plaza Hotel is a 384-room hotel located at 1400
Parkview Avenue on a 26.3 acre site in the City of Manhattan Beach, Los Angeles
County, California. It is conveniently located just two miles east of the
Pacific Ocean and three miles south of the Los Angeles International Airport.
The Hotel features a unique array of amenities to appeal to both business and
leisure travelers. Features include 17,200 square feet of conference and
banquet facilities, two restaurants and a lobby lounge and bar, a nine hole
executive golf course, a health club, a swimming pool and numerous nearby
shops, department stores and restaurants.
Property Improvements
Regular maintenance and capital improvements to the Hotel are an essential
component of our efforts to preserve the Hotel's long-term value and its
potential for appreciation. As you may recall, a soft-goods renovation was
completed on the majority of the Hotel's guest rooms in 1993. These upgrades
have enhanced the appeal of the Hotel to its guests, enabling the Hotel to
maintain market share. The soft-goods refurbishment of the guest rooms that
were not renovated is being considered for 1995.
Competition
The Partnership's Hotel faces substantial competition from other hotels in the
Los Angeles Airport Market. Nine hotels with a total of 6,305 rooms have been
identified that currently compete to varying degrees with the Radisson Plaza
Hotel, including the Los Angeles Airport Marriott, which is owned by a limited
partnership that was sponsored by an affiliate of the General Partner. In
addition, a new 122-room Summerfield Suites Hotel is currently under
construction in the Los Angeles Airport Market and is scheduled for opening in
March 1995. With the exception of this new competitor, it is expected that
few, if any, new hotels will be built in Los Angeles over the next few years.
There are numerous additional hotels in the vicinity, which are not considered
to be directly competitive with the Partnership's Hotel due to disparities in
markets served, quality of facilities, rate structure, location and/or lack of
affiliation with a major hotel chain.
Hotel Operating Results
While overall operating results for hotels in the Los Angeles Airport market
were mixed during 1994, the Partnership's Hotel posted an improvement over
1993. For the year ended December 31, 1994, total Hotel sales increased 1.5%
relative to 1993, due to the higher average occupancy levels achieved by the
Hotel during 1994. This improvement, coupled with a 6.7% decrease in expenses
for all departments, led to a 33.4% increase in the Hotel's house profit. As a
result, the Partnership's net loss declined by 68% in 1994 compared with 1993.
The Hotel's improved performance during 1994 reflects management's efforts to
reduce costs and diversify the Hotel's customer base, which will continue into
1995. Part of the strategy to change market mix and shift the ratio of group
and transient guests included a reduction in the volume of airline contracts
maintained by the Hotel. In addition, management remains committed to
providing quality service to the Hotel's guests. Client feedback during 1994
was extremely favorable, and approximately 93% of the Hotel's guests expressed
a willingness to return to the Hotel in the future. In addition to focusing on
client satisfaction and improving the Hotel's visibility among transient
travelers, we will continue to carefully monitor the balance between room rate
and occupancy to ensure that the Hotel's revenues and profits are maximized.
Financial Results Comparison
The following chart summarizes the financial results of the Hotel and
Partnership for the indicated years.
As reported in the
As reported by Interstate Partnership's Financial Statements
Total Total
Hotel House Partnership Partnership
Sales Profit* Income** Net Loss***
1993 $12,996,520 $2,538,312 $13,070,254 $(767,542)
1994 $13,186,812 $3,386,612 $13,244,227 $(245,012)
%
Change 1.5% 33.4% 1.3% 68%
* House profit is the Hotel's operating profit prior to the
payments made for certain other items including property taxes,
insurance, ground rent, equipment leases, Partnership general and
administrative expenses and the funding of the reserve account
established for furniture, fixtures and equipment.
** Total Partnership income includes Hotel revenues, interest
income and other income.
*** Partnership net loss consists of operating loss, interest
income and other income, less interest expense.
The Partnership's results of operations improved significantly in 1994 relative
to 1993, primarily due to an increase in total revenues and lower departmental
expenses, including rooms, food and beverage, telephone and other departments.
Please refer to the accompanying financial statements for more detail
concerning the Partnership's financial results.
Selected Financial Data
Selected Partnership financial data for the years ended December 31, 1994,
1993, 1992, 1991 and 1990 are shown below. This data should be read in
conjunction with the Partnership's financial statements included in this
report.
1994 1993 1992 1991 1990
Rental Income(1) $ - $ - $ - $ - $ 1,415,224
Departmental
Income(1) 6,985,451 6,353,439 6,441,853 6,588,024 $ -
Partnership
net loss (245,012) (767,542) (2,956,338) (4,072,561) (3,618,496)
Net loss
per limited
partnership
unit(2) (.03) (.09) (.36) (.50) (.44)
Cash
distributions
declared per
unit(3) - - .14 .20 .29
Total Assets
at December 31 48,366,331 48,680,580 49,853,208 52,366,837 56,093,436
(1) From the Partnership's inception through January 3, 1991,
rental income was recognized under net lease agreements with the original
tenants and Kentucky Hospitality Employer ("KHE"), the subsequent property
subtenant and a wholly-owned subsidiary of Radisson Hotels International.
Due to the termination of the KHE lease on January 3, 1991, the operating
results of the Property are now recognized directly on the Partnership's
income statement. As a result, the statements of operations for the years
following December 31, 1990 are not comparable with prior years.
(2) There are 6,975,000 units outstanding.
(3) Of the cash distributions declared in 1990, $.23 per unit were paid
from the Settlement Fund. For 1991 and 1992, all cash distributions were
paid from the Settlement Fund.
Balance Sheets December 31, 1994 and 1993
Financial Statements
Assets 1994 1993
Real estate, at cost (note 2):
Building $47,975,974 $47,975,974
Furniture, fixtures
and equipment 12,112,578 12,010,920
Leasehold
improvements 3,333,141 3,333,141
63,421,693 63,320,035
Less accumulated
depreciation and
amortization 19,410,825 17,730,553
44,010,868 45,589,482
Cash 2,797,178 2,183,410
Restricted cash 270,489 -
Accounts receivable 906,721 565,945
Prepaid and other assets 381,075 341,743
Total Assets $48,366,331 $48,680,580
Liabilities and Partners' Capital
Liabilities:
Accounts payable and
accrued liabilities $ 1,291,771 $ 1,623,653
Due to affiliates (note 3) 2,121,394 1,858,749
Total Liabilities 3,413,165 3,482,402
Partners' Capital (Deficit):
General Partner (1,809,793) (1,773,041)
Limited Partners
(6,975,000 limited
partnership units
authorized, issued
and outstanding) 46,762,959 46,971,219
Total Partners' Capital 44,953,166 45,198,178
Total Liabilities
and Partners' Capital $48,366,331 $48,680,580
Statement of Partners' Capital (Deficit)
For the years ended December 31, 1994, 1993 and 1992
Limited General Total
Partners' Partner's Partners'
Balance at
December 31, 1991 $50,136,517 $(1,214,459) $48,922,058
Net loss (2,512,887) (443,451) (2,956,338)
Balance at
December 31, 1992 47,623,630 (1,657,910) 45,965,720
Net loss (652,411) (115,131) (767,542)
Balance at
December 31, 1993 46,971,219 (1,773,041) 45,198,178
Net loss (208,260) (36,752) (245,012)
Balance at
December 31, 1994 $46,762,959 $(1,809,793) $44,953,166
Statements of Operations
For the years ended December 31, 1994, 1993 and 1992
Hotel Revenues 1994 1993 1992
Rooms (note 5) $ 8,301,912 $ 7,946,307 $ 7,870,415
Food and beverage 4,250,324 4,358,632 4,455,614
Telephone 485,629 412,017 436,134
Other 148,947 279,564 420,869
Total Revenues 13,186,812 12,996,520 13,183,032
Departmental Expenses
Rooms 2,356,431 2,356,764 2,329,429
Food and beverage 3,494,320 3,708,418 3,700,686
Telephone 314,893 344,880 359,650
Other 35,717 233,019 351,414
Total Expenses 6,201,361 6,643,081 6,741,179
Departmental income 6,985,451 6,353,439 6,441,853
Unallocated Partnership
and Hotel Operating
Expenses
Advertising and sales 596,360 690,698 694,821
General
and administrative:
Hotel and other 1,875,222 1,795,386 2,428,873
Partnership 455,690 492,387 628,106
Utilities and
maintenance 1,184,477 1,104,860 1,193,744
Ground rent (note 4) 623,457 619,458 568,841
Management fees (note 5) 304,261 302,037 272,431
Property taxes 417,494 429,215 418,718
Operating leases 150,645 85,259 134,596
Depreciation and
amortization 1,680,272 1,635,295 3,409,293
7,287,878 7,154,595 9,749,423
Operating loss (302,427) (801,156) (3,307,570)
Other Income (Expense)
Interest income 54,435 38,435 59,648
Other income, net (note 4) 2,980 35,299 340,298
Interest expense (note 4) - (40,120) (48,714)
57,415 33,614 351,232
Net Loss $ (245,012) $ (767,542) $(2,956,338)
Net Loss Allocated
To the General Partner $ (36,752) $ (115,131) $ (443,451)
To the Limited Partners (208,260) (652,411) (2,512,887)
$ (245,012) $ (767,542) $(2,956,338)
Net Loss
Per limited
partnership unit
(6,975,000
outstanding) $ (.03) $ (.09) $ (.36)
Statements of Cash Flows
For the years ended December 31, 1994, 1993 and 1992
Cash Flows from
Operating Activities: 1994 1993 1992
Net loss $ (245,012) $ (767,542) $(2,956,338)
Adjustments to
reconcile net loss
to net cash
provided by
operating activities:
Depreciation and
amortization 1,680,272 1,635,295 3,409,293
Increase (decrease)
in cash arising
from changes
in operating
assets and
liabilities:
Accounts
receivable (340,776) 538,359 (1,972)
Prepaid and
other assets (39,332) (37,479) 75,593
Accounts payable
and accrued
liabilities (331,882) (251,244) 264,602
Due to affiliates 262,645 214,734 245,865
Net cash
provided by
operating
activities 985,915 1,332,123 1,037,043
Cash Flows
from Investing
Activities:
Restricted cash, net (270,489) 314,985 (37,693)
Additions to
real estate (101,658) (571,012) (983,655)
Net cash used
for investing
activities (372,147) (256,027) (1,021,348)
Cash Flows from
Financing Activities:
Due to Radisson/
Carlson Group - (368,576) (67,758)
Net cash used
for financing
activities - (368,576) (67,758)
Net increase
(decrease) in cash 613,768 707,520 (52,063)
Cash at beginning
of period 2,183,410 1,475,890 1,527,953
Cash at end of period $ 2,797,178 $2,183,410 $ 1,475,890
Supplemental Disclosure
of Cash Flow
Information:
Cash paid during
the period for
interest $ - $ 40,120 $ 48,714
Notes to Financial Statements
December 31, 1994, 1993 and 1992
1. Organization and Partnership Agreement
Manhattan Beach Hotel Partners, L.P. (the "Partnership") formerly Shearson
California Radisson Plaza Partners, L.P. (see below), a Delaware limited
partnership, was organized on September 8, 1987 under the laws of the State of
Delaware for the purpose of acquiring, owning, leasing or operating, and
eventually selling the Radisson Plaza Hotel and Golf Course (the "Property").
The Partnership purchased the Property on December 1, 1987 for $56,500,000.
The Partnership will terminate on December 31, 2037, or earlier, in accordance
with the terms of the Partnership Agreement.
The general partner of the Partnership is Manhattan Beach Commercial Properties
III, Inc., (the "General Partner"), formerly Shearson Lehman Commercial
Properties III, Inc. (see below), a Delaware corporation and a wholly-owned
subsidiary of DA Group Holdings, Inc. (the "Group"), formerly Shearson Lehman
Brothers Group Inc. The original limited partner of the Partnership was
Shearson Lehman Commercial Properties Depositary III, Inc. (the "Assignor
Limited Partner"), a Delaware corporation and a wholly-owned subsidiary of the
Group.
On July 31, 1993, Shearson Lehman Brothers Inc. sold certain of its domestic
retail brokerage and asset management businesses to Smith Barney, Harris Upham
& Co. Incorporated ("Smith Barney"). Subsequent to the sale, Shearson changed
its name to Lehman Brothers Inc. ("Lehman"). The transaction did not affect
the ownership of the General Partner. However, the assets acquired by Smith
Barney included the name "Shearson." Consequently, effective October 21, 1993,
the Shearson Lehman Commercial Properties III, Inc. General Partner changed its
name to Manhattan Beach Commercial Properties III, Inc., and effective December
2, 1993, the Partnership changed its name to Manhattan Beach Hotel Partners,
L.P.
Prior to the admission of public investors as Limited Partners, the
Partnership's losses were allocated 99% to the Assignor Limited Partner and 1%
to the General Partner. Upon admission of public investors, the Assignor
Limited Partner assigned its rights of ownership to the purchasers of Limited
Partnership interests.
During the year ended December 31, 1988, the Partnership, on behalf of the
Assignor Limited Partner, sold 6,975,000 depositary units representing gross
capital contributions of $69,750,000. Net proceeds to the Partnership amounted
to approximately $62,937,000 after deduction of offering costs and selling
commissions. The proceeds of the public offering were utilized to pay off the
promissory note secured by the all-inclusive deed of trust.
Upon the admission of the Limited Partners, the following provisions of the
Partnership Agreement became effective.
Under the terms of the Partnership Agreement, the Partnership's net cash flow
from operations, as defined, will be distributed 99% to the Limited Partners
and 1% to the General Partner until the sum of the amounts distributed equals
the preferred return. The preferred return is a cumulative 12% return per
annum of the Limited Partners' adjusted capital contribution, as defined,
accruing on a cumulative but noncompounding basis. Thereafter, the
Partnership's cash flow from operations will be distributed 85% to the Limited
Partners and 15% to the General Partner.
In general, the Partnership Agreement provides that all income and gain will be
allocated first to those partners with negative capital accounts, as defined,
until no partner has a negative capital account; then 99% to the Limited
Partners and 1% to the General Partner to the extent the Limited Partners'
adjusted capital contributions exceed their capital accounts; then to the
General Partner to the extent it has received a 15% distribution of net cash
flow; then 99% to the Limited Partners and 1% to the General Partner until the
Limited Partners have been allocated an amount equal to the preferred return,
as defined; and then 85% to the Limited Partners and 15% to the General
Partner. In general, losses will be allocated 85% to Limited Partners and 15%
to the General Partner until the sum of cumulative losses equals the sum of
cumulative distributions, and then 99% to the Limited Partners and 1% to the
General Partner.
Net proceeds from a sale or refinancing of the Partnership's assets will be
distributed 99% to the Limited Partners and 1% to the General Partner until
each Limited Partner has received an amount equal to any unpaid cumulative
return and their unrecovered capital, as defined. Thereafter, such net
proceeds will be distributed 99% to the Limited Partners and 1% to the General
Partner until each Limited Partner's adjusted capital contribution equals zero.
In conjunction with the Settlement discussed in Note 7, any remaining net
proceeds will be allocated and distributed 95% to the Limited Partners and 5%
to the General Partner.
2. Significant Accounting Policies
Real Estate Depreciation. Real estate investments, which consist of a building
and furniture, fixtures and equipment, are recorded at the lower of cost less
accumulated depreciation, or net realizable value. Cost includes the initial
purchase price of the property plus closing costs, acquisition and legal fees
and capital improvements. Depreciation of the real property is computed using
the straight-line method based on the estimated useful life of 40 years.
Depreciation of the personal property is computed using the straight-line
method over an estimated useful life of five years. Leasehold improvements are
amortized over the remaining life of the ground lease using the straight-line
method.
When building and personal property are sold or otherwise disposed of, when
required, the asset account and related accumulated depreciation account are
relieved, and any gain or loss is included in operations.
The current estimated market value of the hotel real estate investments as of
December 31, 1994 has increased somewhat from prior years. The increase can be
attributed to a general strengthening of the economy nationally and the hotel
industry in particular. Although increased, the current market value remains
lower than what management expects over the longer-term holding period for
these investments. The hotel real estate investments will be carried at cost
less accumulated depreciation until management believes there is a permanent
impairment in value, in which case a provision to write down real estate to net
realizable value will be charged against income.
Income Taxes. No income tax provision (benefit) has been recorded on the books
of the Partnership, as the respective shares of taxable income (loss) are
reportable by the partners on their individual tax returns.
For income tax purposes, the admission of Public Limited Partners on May 26,
1988 to the Partnership was treated as a deemed sale of the Assignor Limited
Partner's interest in accordance with the provision of Section 708(b)(1)(B) of
the Internal Revenue Code. The carrying values of the assets and related
capital accounts have been increased by the Limited Partners' interest for tax
purposes. There has been no readjustment of the carrying values of the assets
for financial reporting purposes.
Concentration of Credit Risk. Financial instruments which potentially subject
the Partnership to a concentration of credit risk principally consist of cash
in excess of the financial institutions' insurance limits. The Partnership
invests available cash with high credit quality financial institutions.
Reclassifications. Certain prior year amounts have been reclassified in order
to conform to the current year's presentation.
3. Transactions with Related Parties
Per the terms of the Partnership Agreement, the General Partner is entitled to
receive a management oversight fee of $250,000 per year to cover costs incurred
and time expended by the General Partner in overseeing the operator of the
Property to ensure that operations and management are being conducted in the
best interests of the Partnership and in accordance with the lease or
management contract. For the years ended December 31, 1994, 1993 and 1992, a
management fee in the amount of $250,000 has been accrued, but remains unpaid.
During 1989, certain legal and accounting fees were paid by the General Partner
in connection with the restructuring of the lease (see Note 5). The costs have
been deemed to be reimbursable by the Partnership. The total amount owed to
the General Partner at December 31, 1994, 1993 and 1992 was $587,804.
Under the terms of the Partnership Agreement, the General Partner and its
affiliates provide ongoing administrative, accounting and investor relation
services to the Partnership. Costs of such services were $60,666, $79,663, and
$67,065 for the years ended December 31, 1994, 1993 and 1992, respectively.
Upon sale of the Property, the General Partner may receive a brokerage
commission equal to 3% of the sales price less any amounts payable as
commissions to unaffiliated third parties.
Cash. Cash reflected on the Partnership's balance sheet at December 31, 1994
was on deposit with an affiliate of the General Partner. Cash reflected on the
Partnership's balance sheet at December 31, 1993 was on deposit with an
unaffiliated party.
4. Real Estate Investments
On December 1, 1987, the Partnership acquired the Radisson Plaza Hotel and Golf
Course (the "Property"), a seven-story, 384-room, 287,965 square foot
commercial hotel and nine-hole executive golf course located on a 26.3 acre
site in the City of Manhattan Beach, Los Angeles County, California (the
"City"). A 166,382 square foot, 600-space parking garage is also part of the
Property. Construction of the Property was substantially completed in January
1987, and its final certificate of occupancy was issued on March 17, 1987. The
land upon which the Property is situated was leased to the seller by the City
pursuant to a ground lease (the "Ground Lease") entered into on March 1, 1983
for an initial term of 50 years. The term is renewable for successive periods
of 25 and 24 years.
Minimum ground lease payments for each of the next five years ending December
31, and thereafter, are as follows:
1995 $ 400,000
1996 400,000
1997 400,000
1998 400,000
1999 400,000
Thereafter 13,266,667
Total $15,266,667
In addition to the minimum ground lease payments, the lease provides for
additional rents based upon percentages, ranging from 2.5% to 6.25%, as applied
to the Hotel's various revenue. Percentage rent is only applicable to the
extent that the total of such percentages exceeds the minimum annual rent.
Such excess lease payments amounted to $223,457, $219,458 and $168,841 in 1994,
1993 and 1992, respectively.
The Property is operated subject to a license agreement with Radisson Hotels
International, Inc. ("Radisson"). Under the terms of a 1991 amended and
restated agreement, the Partnership reaffirmed its obligation to pay deferred
fees of $582,360, in 60 monthly payments of $9,706, commencing in January 1992.
As the agreement does not provide for interest, the payments have been
discounted using the Partnership's estimated cost of borrowing and charged
against other income. Additionally, the amendment reduces the license fees
from 6.5% to 4.25% of room revenue, effective June 15, 1991. In December of
1993 the Partnership executed an agreement with Radisson Hotels International
whereby the Partnership paid $292,000 to settle the remaining outstanding
balance of deferred fees.
The golf course is operated by a third party in accordance with an operating
lease agreement entered into on December 12, 1986 which the Partnership assumed
upon its purchase of the Hotel. The agreement has a term of 10 years and
provides for rents payable to the Partnership ranging from 2% to 5% of gross
revenues during the term of the agreement.
During 1993, the Partnership entered into third party operating lease
agreements for the parking garage and gift shop.
5. Hotel Lease
The Partnership entered into a management agreement with Manhattan Beach
Management Company (the "Management Company"), an affiliate of Interstate
Hotels Corporation, to manage and operate the hotel. The term of the agreement
commenced on January 3, 1991 and will continue through January 3, 1997. The
agreement provides for management fees of 1.75% of gross revenues with an
incentive fee calculated based upon a percentage, ranging from 10% to 17.5%, of
operating profits in excess of $1,500,000. The Partnership is responsible for
operating deficits and has committed to advance funds to the hotel so as to
maintain cash at $300,000.
6. Reconciliation of Financial Statement Net Loss and Partners' Capital to
Federal Income Tax Basis Net Loss and Partners' Capital
1994 1993 1992
Financial statement
net loss $ (245,012) $ (767,542) $ (2,956,338)
Tax basis depreciation
over financial
statement depreciation (1,158,551) (1,296,211) -
Excess financial
depreciation over
tax basis depreciation - - 543,193
Reversal of prior
year insurance accrual - (228,515) -
Other (99,769) (83,038) (80,311)
Federal income tax
basis net loss $(1,503,332) $(2,375,306) $ (2,493,456)
Financial statement
partners' capital $44,953,166 $45,198,178 $45,965,720
Current year
financial statement
net loss over
federal income
tax basis net loss (1,258,320) (1,607,764) 462,882
Cumulative financial
statement net loss
over federal income
tax basis net loss 6,594,694 8,202,458 7,739,576
Federal income tax
basis partners' capital $50,289,540 $51,792,872 $54,168,178
Because many types of transactions are susceptible to varying interpretations
under Federal and state income tax laws and regulations, the amounts reported
above may be subject to change at a later date upon final determination by the
taxing authorities.
7. Litigation
In May 1990, Shearson Lehman Hutton Inc. ("SLH"), the Partnership and the other
defendants affiliated with them, reached an agreement to settle three class
action lawsuits (the "Settlement") seeking damages or other relief allegedly
arising out of the formation of the Partnership and the sale of units in it.
The Settlement provided for a payment of $5.5 million by SLH into a fund (the
"Settlement Fund") which became the property of the settlement class (the
"Settlement Class") and was used to supplement distributions to the Settlement
Class over a period of three years and pay class action attorney fees, costs
and expenses of $1,442,450. Forty percent of the balance of the Settlement
Fund, which remained after the payment of attorney fees, costs and expenses,
was paid out as cash distributions for 1990, 35% was paid out for 1991, and the
remaining 25% was distributed in 1992. Additionally, the General Partner
agreed to give up two-thirds of its 15% interest in the proceeds from a sale of
the Property.
As a result of the removal of the Original Tenants as operators of the Property
and the termination of a number of equipment leasing arrangements previously
entered into by the Original Tenants, a lawsuit related to the replacement of
the telephone system has been filed naming the Partnership, among others, as a
defendant. The suit, entitled Communication Facility Management Corporation
(CFMC) vs. Manhattan Beach Hotel Partners, L.P., et al, was filed in June 1990
in Los Angeles Superior Court. On November 7, 1994 the Los Angeles Superior
Court executed a formal dismissal order. CFMC subsequently filed a motion to
vacate the dismissal which was denied by the court on February 28, 1995.
8. Self-insurance
Commencing January 3, 1991, the Hotel operator began providing a self-insurance
program of health coverage for its employees. The program was administered by
an outside party that processed the claims and submitted monthly statements to
the Hotel. Through a reinsurance liability insurance policy, the Hotel was
covered for claims in excess of approximately $20,000 per employee per year.
Included in the accompanying statements of operations is related expenses of
approximately $460,000 in 1992. The self-insurance program was terminated on
June 30, 1992 and was replaced with standard benefits coverage through a third
party provider. The Partnership has an obligation of $0 and $203,875 to the
Hotel operator at December 31, 1994 and 1993, respectively and is included in
accounts payable and accrued expenses on the accompanying balance sheet.
Report of Independent Accountants
To the Partners of Manhattan Beach Hotel Partners, L.P.:
We have audited the accompanying balance sheets of Manhattan Beach Hotel
Partners, L.P. (formerly Shearson California Radisson Plaza Partners, L.P.), a
Delaware limited partnership, as of December 31, 1994 and 1993, and the related
statements of operations, partners' capital (deficit) and cash flows for each
of the three years in the period ended December 31, 1994. 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 provides 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 Manhattan Beach Hotel
Partners, L.P. as of December 31, 1994 and 1993, and the results of its
operations and its cash flows for each of the years in the period ended
December 31, 1994 in conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Hartford, Connecticut
February 28, 1995
Report of Independent Accountants
To the Partners of
Manhattan Beach Hotel Partners, L.P.:
Our report on the financial statements of Manhattan Beach Hotel Partners, L.P.
(formerly Shearson California Radisson Plaza Partners, L.P.), a Delaware
Limited Partnership, has been incorporated by reference in this Form 10-K from
the Annual Report to Unitholders of Manhattan Beach Hotel Partners, L.P. for
the year ended December 31, 1994. In connection with our audit of such
financial statements, we have also audited the related financial statement
schedule listed in the index of this Form 10-K.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements as a whole, presents
fairly, in all material respects, the information required to be included
herein.
COOPERS & LYBRAND L.L.P.
Hartford, Connecticut
February 28, 1995
MANHATTAN BEACH HOTEL PARTNERS LIMITED PARTNERSHIP
Schedule III - Real Estate and Accumulated Depreciation
December 31, 1994
Cost Capitalized
Subsequent
Initial Cost to Partnership To Acquisition
Buildings and Buildings and
Description Encumbrances Land Improvements Improvements
Hotel Complex,
Manhattan
Beach, CA $ - $ - $56,500,000 $ 6,921,693
$ - $ - $56,500,000 $ 6,921,693
MANHATTAN BEACH HOTEL PARTNERS LIMITED PARTNERSHIP
Schedule III - Real Estate and Accumulated Depreciation (cont.)
December 31, 1994
Gross Amount at Which Carried at Close of Period
Buildings and Accumulated
Description Land Improvements Total Depreciation
Hotel Complex
Manhattan
Beach, CA $ - $63,421,693 $63,421,693 $19,410,825
$ - $63,421,693 $63,421,693 $19,410,825
(1) (2)
MANHATTAN BEACH HOTEL PARTNERS LIMITED PARTNERSHIP
Schedule III - Real Estate and Accumulated Depreciation
December 31, 1994
Life on which
Depreciation
in Latest
Date of Date Income Statements
Description Construction Acquired is Computed
Hotel Complex,
Manhattan
Beach, CA 1987 12/01/87 (3)
(1) The aggregate cost for financial reporting and Federal income tax purposes
is $64,284,152.
(2) The amount of accumulated depreciation for Federal income tax purposes is
$20,890,376.
(3) Buildings and improvements - 40 years; personal property - 5 years.
A reconciliation of the carrying amount of real estate and accumulated
depreciation for the years ended December 31, 1994, 1993 and 1992:
Real Estate investments: 1994 1993 1992
Beginning of year $63,320,035 $62,749,023 $61,765,368
Acquistions 101,658 571,012 983,655
End of year $63,421,693 $63,320,035 $62,749,023
Accumulated Depreciation:
Beginning of year $17,730,553 $16,095,571 $12,710,622
Depreciation expense 1,680,272 1,634,982 3,384,949
End of year $19,410,825 $17,730,553 $16,095,571