United States Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-Q
(Mark One)
X Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Quarterly Period Ended September 30, 1996
or
Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Transition period from ______ to ______
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 or Organization I.R.S. Employer Identification No.
3 World Financial Center, 29th Floor,
New York, NY Attn.: Andre Anderson 10285
Address of Principal Executive Offices Zip Code
(212) 526-3237
Registrant's Telephone Number, Including Area Code
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 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 ____
Balance Sheets
At September 30, At December 31,
1996 1995
Assets
Real estate, at cost:
Building $ 47,975,974 $ 47,975,974
Furniture, fixtures and equipment 3,025,682 2,623,827
Leasehold improvements 3,333,141 3,333,141
------------ ------------
54,334,797 53,932,942
Less accumulated depreciation and amortization (12,379,498) (11,006,481)
------------ ------------
41,955,299 42,926,461
Cash and cash equivalents 3,958,639 4,414,032
Restricted cash 347,599 187,464
Accounts receivable 1,418,335 992,941
Prepaid and other assets 512,296 374,304
------------ ------------
Total Assets $ 48,192,168 $ 48,895,202
============ ============
Liabilities and Partners' Capital
Liabilities:
Accounts payable and accrued liabilities $ 1,354,783 $ 1,309,672
Due to affiliates 2,542,804 2,400,138
Distribution payable 0 1,409,091
------------ ------------
Total Liabilities 3,897,587 5,118,901
------------ ------------
Partners' Capital (Deficit):
General Partner (1,073,378) (1,591,658)
Limited Partners (6,975,000 limited
partnership units authorized, issued
and outstanding) 45,367,959 45,367,959
------------ ------------
Total Partners' Capital 44,294,581 43,776,301
------------ ------------
Total Liabilities and Partners' Capital $ 48,192,168 $ 48,895,202
============ ============
Statement of Partners' Capital (Deficit)
For the nine months ended September 30, 1996
Limited General
Partners Partner Total
Balance at December 31, 1995 $ 45,367,959 $ (1,591,658) $ 43,776,301
Net income 0 518,280 518,280
------------ ------------ ------------
Balance at September 30, 1996 $ 45,367,959 $ (1,073,378) $ 44,294,581
============ ============ ============
Statements of Operations
Three months ended Nine months ended
September 30, September 30,
1996 1995 1996 1995
Hotel Revenues
Rooms $ 2,611,756 $ 2,470,556 $ 7,588,802 $ 6,763,980
Food and beverage 1,274,601 1,091,912 3,556,598 3,201,466
Telephone 171,081 148,061 500,108 465,967
Other 67,896 27,587 154,625 88,544
----------- ----------- ------------ ------------
Total Revenues 4,125,334 3,738,116 11,800,133 10,519,957
----------- ----------- ------------ ------------
Departmental Expenses
Rooms 718,586 607,316 2,070,511 1,834,906
Food and beverage 1,023,132 860,820 2,867,443 2,631,577
Telephone 87,116 85,877 269,027 248,321
Other 13,361 11,522 36,259 32,270
----------- ----------- ------------ ------------
Total Expenses 1,842,195 1,565,535 5,243,240 4,747,074
----------- ----------- ------------ ------------
Departmental Income 2,283,139 2,172,581 6,556,893 5,772,883
----------- ----------- ------------ ------------
Unallocated Partnership and Hotel Operating Expenses
Advertising and sales 156,863 136,757 447,400 414,010
General and administrative:
Hotel and other 584,347 517,416 1,779,552 1,514,842
Partnership 100,614 116,457 361,182 393,642
Utilities and maintenance 326,533 315,878 882,116 892,150
Ground rent 206,367 182,361 571,619 497,472
Management fees 138,181 130,946 386,794 321,112
Property taxes 101,058 99,339 295,587 286,961
Operating leases 24,218 13,220 63,033 87,222
Depreciation and amortization 464,394 436,479 1,373,017 1,296,778
----------- ----------- ------------ ------------
2,102,575 1,948,853 6,160,300 5,704,189
----------- ----------- ------------ ------------
Operating Income 180,564 223,728 396,593 68,694
----------- ----------- ------------ ------------
Other Income
Interest income 44,056 44,902 118,942 118,806
Other income 795 1,180 2,745 4,693
----------- ----------- ------------ ------------
44,851 46,082 121,687 123,499
----------- ----------- ------------ ------------
Net Income $ 225,415 $ 269,810 $ 518,280 $ 192,193
=========== =========== ============ ============
Net Income Allocated:
To the General Partner $ 225,415 $ 203,836 $ 518,280 $ 192,193
To the Limited Partners 0 65,974 0 0
----------- ----------- ------------ ------------
$ 225,415 $ 269,810 $ 518,280 $ 192,193
=========== =========== ============ ============
Per limited partnership
unit (6,975,000 outstanding) $ 0 $ .01 $ 0 $ 0
--- ----- --- ---
Statements of Cash Flows
For the nine months ended September 30, 1996 1995
Cash Flows From Operating Activities:
Net income $ 518,280 $ 192,193
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 1,373,017 1,296,778
Increase (decrease) in cash arising from
changes in operating assets and liabilities:
Restricted cash (561,990) (400,820)
Accounts receivable (425,394) (210,413)
Prepaid and other assets (137,992) (143,636)
Accounts payable and accrued liabilities 45,111 86,737
Due to affiliates 142,666 221,858
----------- -----------
Net cash provided by operating activities 953,698 1,042,697
----------- -----------
Cash Flows From Investing Activities:
Proceeds from restricted cash 401,855 383,670
Additions to real estate (401,855) (383,670)
----------- -----------
Net cash used for investing activities 0 0
----------- -----------
Cash Flows From Financing Activities:
Distributions (1,409,091) 0
----------- -----------
Net cash used for financing activities (1,409,091) 0
----------- -----------
Net increase (decrease) in cash and cash equivalents (455,393) 1,042,697
Cash and cash equivalents, beginning of period 4,414,032 2,797,178
----------- -----------
Cash and cash equivalents, end of period $ 3,958,639 $ 3,839,875
=========== ===========
Notes to the Financial Statements
The unaudited interim financial statements should be read in conjunction with
Manhattan Beach Hotel Partners L.P.'s (the "Partnership") annual 1995 audited
financial statements within Form 10-K.
The unaudited interim financial statements include all adjustments which are,
in the opinion of management, necessary to present a fair statement of
financial position as of September 30, 1996 and the results of operations and
cash flows for the nine months ended September 30, 1996 and 1995 and the
statement of partner's capital (deficit) for the nine months ended
September 30, 1996. Results of operations for the periods are not necessarily
indicative of the results to be expected for the full year.
The following significant event has occurred subsequent to fiscal year 1995,
which requires disclosure in this interim report per Regulation S-X, Rule
10-01, Paragraph (a)(5):
A lawsuit related to the replacement of the telephone system at the Radisson
Plaza Hotel and Golf Course ("the Hotel"), 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 (the "Court"), naming
the Partnership, among others, as a defendant. On November 7, 1994, the 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. On
February 16, 1996, CFMC filed an application with the Court for an extension
to file an appellant's opening brief. The Court granted the extension and
CFMC had until April 10, 1996 to file an opening brief to appeal the suit.
This matter has been successfully concluded since CFMC permitted the time
period for the filing of the opening brief to expire.
Part I, Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Liquidity and Capital Resources
The Hotel's operations improved during the first nine months of 1996
principally as a result of strengthening conditions in the Los Angeles Airport
hotel market and management's efforts to diversify the Hotel's customer base.
The Hotel is dependent primarily on business, group, contract and leisure
travel for its revenues. The improved profitability of the Hotel during the
first three quarters of the year, as compared with the same period in 1995, is
largely attributable to the 8.2% increase in the average room rate and the 3.2%
increase in the Hotel's average occupancy level, which were achieved as a
result of management's efforts to reduce the volume of airline contracts and
increase the number of business and group guests at higher rates.
At September 30, 1996, the Partnership had cash and cash equivalents of
$3,958,639, including cash held at the Hotel for working capital, compared to
$4,414,032 at December 31, 1995. The decrease is primarily due to the
distribution paid to limited partners on February 1, 1996. Such cash balances
are expected to be sufficient to meet the anticipated cash requirements for
operations of the Partnership. Restricted cash increased to $347,599 at
September 30, 1996, compared to $187,464 at December 31, 1995. The increase is
due to contributions to the account for furniture, fixtures and equipment
("FF&E reserve account") exceeding expenditures for the nine-month period.
Pursuant to the management agreement (the "Management Agreement") with
Manhattan Beach Management Company, an affiliate of Interstate Hotel
Corporation ("Interstate"), contributions to the FF&E reserve account will be
made over time to protect and maintain the value of the Hotel.
Accounts receivable increased to $1,418,335 at September 30, 1996, compared to
$992,941 at December 31, 1995. Accounts payable and accrued liabilities
increased to $1,354,783 at September 30, 1996, compared to $1,309,672 at
December 31, 1995. The changes in both accounts receivable and accounts
payable and accrued liabilities are due primarily to differences in the timing
of payments. Prepaid and other assets increased to $512,296 at September 30,
1996 from $374,304 at December 31, 1995, primarily due to the prepayment of
property liability insurance. Due to affiliates increased to $2,542,804 at
September 30, 1996 from $2,400,138 at December 31, 1995, primarily due to the
accrual of property management oversight fees for 1996.
In view of the recently improved operating results of the Hotel, coupled with
the strengthening hotel market, the General Partner has decided to begin
marketing the Hotel for sale. Over the last few months, the Partnership has
received several unsolicited offers from prospective buyers, including an all-
cash offer which, if consummated, would result in a distribution to limited
partners in excess of $3.45 per Unit, the year-end 1995 Net Asset Value. The
General Partner is currently in the process of retaining a nationally
recognized real estate firm to market the Hotel for sale. The goal is to
maximize the selling price of the Hotel and ultimately distribute the net sales
proceeds to limited partners. There can be no assurance that the Partnership's
marketing efforts will result in a sale of the Hotel, or that a sale, if
completed, will result in any particular level of net sales proceeds.
A distribution in the amount of $1,395,000 or $0.20 per Unit was paid to
limited partners on February 1, 1996. This distribution represented a one-time
distribution of 1995 annual cash flow and surplus Partnership reserves, and did
not indicate the reinstatement of regular cash distributions. The ability of
the Partnership to make future distributions is dependent upon various factors,
including the cash flow generated from Hotel operations, the adequacy of cash
reserves, and the outcome of the Partnership's marketing efforts. In the
future, these factors will be evaluated on an annual basis. There can be no
assurance that future cash flow will be sufficient to fund additional
distributions.
Results of Operations
For the three and nine-month periods ended September 30, 1996, the Partnership
had net income of $225,415 and $518,280, respectively, compared with net income
of $269,810 and $192,193, respectively, for the corresponding periods in 1995.
The improvement for the nine-month period in 1996 is due primarily to an
increase in Hotel Revenues, comprised of rooms, food and beverage, telephone
and other departmental income, which was partially offset by an increase in
unallocated Hotel and Partnership operating expenses including depreciation and
amortization.
For the three and nine-month periods ended September 30, 1996, the Hotel
generated departmental income of $2,283,139 and $6,556,893, respectively,
compared to $2,172,581 and $5,772,883 for the three and nine-month periods
ended September 30, 1995. The increase in departmental income for the 1996
periods is due to an increase in total Hotel Revenues as a result of higher
occupancy levels and room rates, and higher food and beverage, telephone and
other revenues, which was partially offset by an increase in departmental
expenses.
For the three and nine-month periods ended September 30, 1996, unallocated
Partnership and Hotel operating expenses, including depreciation, were
$2,102,575 and $6,160,300, respectively, compared to $1,948,853 and $5,704,189,
respectively, for the corresponding periods in 1995. The increases are
primarily due to higher Hotel general and administrative expenses. Also
contributing to the increases were higher ground rent, management fees,
advertising and sales expense, property insurance premiums and depreciation and
amortization. Ground rent, which is based on total revenues, increased due to
higher total revenues for the period. Management fees increased due to higher
gross sales on which Interstate receives a base percentage fee and higher
profits on which Interstate's incentive management fee is based. Depreciation
increased due to additions to furniture, fixings and equipment. For the nine-
month period, these increases were partially offset by decreases in Partnership
general and administrative expenses, utilities and maintenance costs and
operating leases. For the three-month period, the increases were partially
offset by a decrease in Partnership general and administrative expenses.
For the three and nine-month periods ended September 30, 1996, the Partnership
generated total other income of $44,851, and $121,687, respectively, largely
unchanged from $46,082 and $123,499, respectively, for the three and nine-month
periods ended September 30, 1995.
The following chart summarizes the Hotel's performance for the nine-month
period ended September 30 of the indicated years:
1996 1995 % Change
Average Occupancy 87.0% 84.3% 3.2%
Average Room Rate $ 83.76 $ 77.39 8.2%
Hotel Sales $ 11,800,133 $ 10,519,957 12.2%
Hotel House Profit $ 3,522,997 $ 3,042,214 15.8%
Part II Other Information
Item 1 Legal Proceedings.
A lawsuit related to the replacement of the telephone
system of the Property entitled Communication
Facility Management Corporation vs. Manhattan Beach
Hotel Partners, L.P., et al, was filed in June 1990
in Los Angeles Superior Court, naming the
Partnership, among others, as a defendant. On
November 7, 1994, the 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. On February 16, 1996, CFMC filed
an application with the Court for an extension to
file an appellant's opening brief. The Court granted
the extension and CFMC had until April 10, 1996 to
file an opening brief to appeal the suit. This matter
has been successfully concluded since CFMC permitted
the time period for the filing of the opening brief
to expire.
Items 2-5 Not applicable.
Item 6 Exhibits and reports on Form 8-K.
(a) Exhibits -
(27) Financial Data Schedule
(b) Reports on Form 8-K- No reports on Form 8-K were filed
during the quarter ended September 30, 1996.
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: November 14, 1996
BY: /s/Jeffrey C. Carter
President, Director and
Chief Financial Officer