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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 June 30, 2001
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 0-17660
METRIC PARTNERS
GROWTH SUITE INVESTORS, L.P.,
A CALIFORNIA LIMITED PARTNERSHIP
(Exact name of Registrant as specified in its charter)
CALIFORNIA 94-3050708
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(State or other jurisdiction of incorporation or (I.R.S. Employer Identification No.)
organization)
One California Street
San Francisco, California 94111-5415
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (415) 678-2000
(800) 347-6707 in all states
Indicate by check mark whether the registrant (1) has filed all the 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
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PART 1
FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited).
METRIC PARTNERS GROWTH SUITE INVESTORS, L.P.,
A CALIFORNIA LIMITED PARTNERSHIP
BALANCE SHEETS (UNAUDITED)
JUNE 30, DECEMBER 31,
2001 2000
----------------- ----------------
ASSETS
Cash and Cash Equivalents $ 2,271,000 $ 2,067,000
Restricted Cash 5,000,000 5,000,000
Accounts Receivable 80,000 214,000
----------------- ----------------
TOTAL ASSETS $ 7,351,000 $ 7,281,000
================= ================
LIABILITIES AND PARTNERS' EQUITY
Other Liabilities 21,000 61,000
----------------- ----------------
TOTAL LIABILITIES 21,000 61,000
----------------- ----------------
PARTNERS' EQUITY
General Partners (914,000) (914,000)
Limited Partners (59,929 Units Outstanding) 8,244,000 8,134,000
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TOTAL PARTNERS' EQUITY 7,330,000 7,220,000
----------------- ----------------
TOTAL LIABILITIES AND PARTNERS' EQUITY $ 7,351,000 $ 7,281,000
================= ================
See notes to financial statements (unaudited).
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METRIC PARTNERS GROWTH SUITE INVESTORS, L.P.,
A CALIFORNIA LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS (UNAUDITED)
FOR THE SIX MONTHS ENDED
JUNE 30,
-----------------------------------
2001 2000
--------------- -----------------
REVENUES:
Interest and Other 183,000 213,000
--------------- -----------------
Total Revenues 183,000 213,000
--------------- -----------------
EXPENSES:
General and Administrative 73,000 139,000
--------------- -----------------
Total Expenses 73,000 165,000
--------------- -----------------
INCOME (LOSS) BEFORE LOSS ON FORECLOSURE OF PROPERTY 110,000 48,000
Loss on Foreclosure of Property - Adjustment - 105,000
--------------- -----------------
NET INCOME $ 110,000 $ 153,000
=============== =================
NET INCOME (LOSS) PER LIMITED PARTNERSHIP ASSIGNEE UNIT:
Income before Loss on Foreclosure of Property $ 2 $
1
Loss on Foreclosure of property -Adjustment - 2
--------------- -----------------
NET INCOME (LOSS) $ 2 $ 3
=============== =================
See notes to financial statements (unaudited).
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METRIC PARTNERS GROWTH SUITE INVESTORS, L.P.,
A CALIFORNIA LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS (UNAUDITED)
FOR THE THREE MONTHS ENDED
JUNE 30,
-----------------------------------
2001 2000
--------------- -----------------
REVENUES:
Interest and Other 81,000 105,000
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Total Revenues 81,000 105,000
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EXPENSES:
General and Administrative 41,000 46,000
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Total Expenses 41,000 46,000
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INCOME (LOSS) BEFORE LOSS ON FORECLOSURE OF PROPERTY 40,000 59,000
Loss on Foreclosure of Property - Adjustment
- -
--------------- -----------------
NET INCOME $ 40,000 $ 59,000
=============== =================
NET INCOME (LOSS) PER LIMITED PARTNERSHIP ASSIGNEE UNIT:
Income before Loss on Foreclosure of Property $ 1 $ 1
Loss on Foreclosure of property -Adjustment - -
--------------- -----------------
NET INCOME (LOSS) $ 1 $ 1
=============== =================
See notes to financial statements (unaudited).
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METRIC PARTNERS GROWTH SUITE INVESTORS, L.P.,
A CALIFORNIA LIMITED PARTNERSHIP
STATEMENTS OF PARTNERS' EQUITY (UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 2001 AND 2000
GENERAL LIMITED
PARTNERS PARTNERS TOTAL
---------------- ---------------- ----------------
Balance, January 1, 2001 $ (914,000) $ 8,134,000 $ 7,220,000
Net Income (Loss) -- 110,000 110,000
---------------- ---------------- ----------------
Balance, June 30, 2001 $ (914,000) $ 8,244,000 $ 7,330,000
================ ================ ================
Balance, January 1, 2000 $ (914,000) $ 7,550,000 $ 6,636,000
Loss Before Foreclosure of Property
48,000 48,000
Foreclosure of Property -- 105,000 105,000
---------------- ---------------- ----------------
Balance, June 30, 2000 $ (914,000) $ 7,703,000 $ 6,789,000
================ ================ ================
See notes to financial statements (unaudited).
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METRIC PARTNERS GROWTH SUITE INVESTORS, L.P.,
A CALIFORNIA LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE SIX MONTHS ENDED
JUNE 30,
------------------------------------
2001 2000
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OPERATING ACTIVITIES
Net Income (Loss) $ 110,000 $ 153,000
Foreclosure of Property (105,000)
Adjustments to Reconcile Net Income (Loss) to Net Cash Provided (Used)
by Operating Activities:
Changes in Operating Assets and Liabilities:
Accounts Receivable 134,000 (16,000)
Accounts Payable, Accrued Expenses, and Other Liabilities (40,000) (664,000)
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Net Cash Provided (Used) by Operating Activities 204,000 (632,000)
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INVESTING ACTIVITIES
Cash Received from Sale of personal Property - 125,000
Costs Paid on Foreclosure of Property
- (19,000)
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Net Cash Provided by Investing Activities - 106,000
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INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 204,000 (526,000)
Cash and Cash Equivalents at Beginning of Period 2,067,000 1,875,000
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CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 2,271,000 $ 1,349,000
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SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest Paid in Cash During the Period $ - $ 255,000
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See notes to financial statements (unaudited).
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METRIC PARTNERS GROWTH SUITE INVESTORS, L.P.,
A CALIFORNIA LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1. REFERENCE TO THE 2000 AUDITED FINANCIAL STATEMENTS
These unaudited financial statements should be read in conjunction with the
Notes to Financial Statements included in the 2000 audited financial
statements.
The financial information contained herein reflects all normal and
recurring adjustments that are, in the opinion of management, necessary for
a fair presentation.
2. TRANSACTIONS WITH THE MANAGING GENERAL PARTNER AND AFFILIATES
In accordance with the Partnership Agreement, the Partnership is charged by
the Managing General Partner and Affiliates for services provided to the
Partnership. The Partnership was charged $11,000 in each of the six month
periods ended June 30, 2001 and 2000, for reimbursement of administrative
expenses.
As discussed in Note 2 to the 2000 audited financial statements, pursuant
to the Partnership Agreement, immediately prior to liquidation and if
certain distribution levels to the limited partners are not met, the
general partners may be obligated to return all or a portion of the
cumulative amounts received in distributions. At June 30, 2001 such amount
is approximately $914,000 and the Partnership believes circumstances will
be such that the general partners will be required to re-contribute this
amount.
3. NET INCOME PER LIMITED PARTNERSHIP ASSIGNEE UNIT
The net income per limited partnership assignee Unit is computed by
dividing the net income allocated to the limited partners by the number of
assignee Units outstanding. As of June 30, 2000, there were 59,932 limited
partnership assignee Units outstanding. On May 14, 2001, the Managing
General Partner accepted the abandonment by a limited partner of three
limited partnership assignee Units; therefore, as of June 30, 2001, there
were 59,929 Units outstanding.
4. RESTRICTED CASH
The $5,000,000 restricted cash balance represents the amount, which (as
discussed in Part II, Item 1) the Court enjoined the Partnership from
conveying, transferring, or otherwise disposing of.
5. LEGAL PROCEEDINGS
The Partnership is a plaintiff and counterclaim defendant in legal
proceedings relating to the management agreement at the Residence Inn -
Ontario, a defendant in legal proceedings seeking damages for alleged
failure to consummate a settlement of the Residence Inn - Ontario case, and
a plaintiff and defendant in other legal proceedings; see Part II, Item 1,
Legal Proceedings, for a detailed description of these matters.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
This Item should be read in conjunction with Financial Statements and other
Items contained elsewhere in this Report.
RESULTS OF OPERATIONS
During the six months ended June 30, 2001 and 2000, the Partnership had net
income of $110,000 and $153,000 respectively. Income for both periods consisted
primarily of interest income. As the partnership ceased hotel operations in
1999, expenses for both periods reflect legal fees and administrative expenses.
The net income for June 30, 2000 reflects an adjustment to the prior period loss
on foreclosure that increased net income by $105,000. The adjustment records the
realization of accounts receivable in excess of estimated collectible amounts as
of December 31, 1999.
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PARTNERSHIP LIQUIDITY AND CAPITAL RESOURCES
Second Quarter of 2001
As stated in the Statement of Cash Flows for the six months ended June 30, 2001,
cash was generated from interest income on Cash and Cash Equivalents, including
Restricted Cash balances, and the collection of outstanding receivables. Cash
was used to pay for legal and administrative expenses of the Partnership.
Second Quarter of 2000
As presented in the Statement of Cash Flows for the six months ended June 30,
2000, cash was used by operating activities, primarily for payment of the
deferred ground lease liability. Cash was provided by investing activities,
primarily from the receipt by the Partnership of the $125,000 proceeds from sale
of the personal property at the Residence Inn - Nashville.
Conclusion
As discussed in Note 8 of the 2000 audited financial statements, there is
substantial doubt regarding the Partnership's ability to continue as a going
concern.
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Metric Partners Growth Suite Investors, L.P. vs. Kenneth E. Nelson, The Nelson
Group, et al., San Francisco County Superior Court, Case No. 928065 (the "SF
Lawsuit"). [The lawsuits described below are related. Terms defined in the
description of one case may be used in the description of the other cases.]
This lawsuit related to disputes in connection with management of the
Partnership's Residence Inn - Ontario by an entity controlled by Kenneth E.
Nelson ("Nelson") from April 1988 to February 1991. In March 1993, the
Partnership and Nelson verbally agreed to settle the SF Lawsuit at a settlement
conference (the "SF Settlement"), whereby the Partnership would purchase, at a
discount, the land (the "Land") underlying the Hotel then leased by the
Partnership from Nashville Lodging Company ("NLC"), an entity controlled by
Nelson. Various disagreements between the Partnership and Nelson regarding the
SF Settlement arose after March 1993, and documents to effectuate the SF
Settlement were never executed. While the Court maintains jurisdiction to
supervise the SF Settlement, this action is no longer active.
Nashville Lodging Company vs. Metric Partners Growth Suite Investors, L.P. et
al., Circuit Court, State of Wisconsin, Case No. 94CV001212.
In February 1994, NLC served this lawsuit on the Partnership. NLC alleges fraud,
breach of settlement contract and breach of good faith and fair dealing and
seeks compensatory, punitive and exemplary damages in an unspecified amount for
the Partnership's failure to consummate the SF Settlement. In February 1994, the
Partnership filed an answer and requested that the Court stay the action pending
resolution of the SF Lawsuit including all appeals. The Court refused to stay
the action and discovery commenced. In February 1995, the Court determined that
the Partnership could be sued in Wisconsin but stayed the case until the
settlement of the SF Lawsuit has been finalized.
Orlando Residence Ltd. vs. 2300 Elm Hill Pike, Inc. and Nashville Lodging
Company vs. Metric Partners Growth Suite Investors, L.P., Chancery Court for
Davidson County, in Nashville, Tennessee, Case No. 94-1911-I ("Nashville Case
I").
Orlando Residence Inn Ltd. ("Orlando") filed this action against 2300 Elm Hill
Pike, Inc. ("2300") and NLC in the Davidson County Chancery Court to attempt to
execute a judgment against Nelson, NLC and 2300 in another action in Chancery
Court by subjecting the Land to sale. In May 1995, 2300 and NLC ("TP
Plaintiffs") filed a third-party complaint against the Partnership, alleging it
had refused to purchase the Land as required by the SF Settlement. TP Plaintiffs
demanded payment by the Partnership of 2300 and NLC's costs of defending the
case in which the
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judgment that Orlando was attempting to enforce had been obtained and
indemnification for any loss resulting from the claims of Orlando, among other
claims of damage.
In February 1996, the Court granted a motion filed by TP Plaintiffs for partial
summary judgment, ruling that the Partnership had breached the SF Settlement.
The action continues to determine damages and other issues. The Partnership does
not believe it breached the SF Settlement and will appeal this ruling at an
appropriate time. However, no assurance can be given that its appeal will be
successful.
In late October 1997, TP Plaintiffs filed a motion for an injunction to prohibit
the Partnership from distributing proceeds from the sale of the Residence Inns
owned by the Partnership, pending a final judgment in this case. A hearing on
this motion was held in February 1998 and the Court enjoined the Partnership
from conveying, transferring, distributing or otherwise disposing of its cash to
any extent which would leave less than $5 million available for payment of any
judgment obtained by TP Plaintiffs.
TP Plaintiffs filed an amended complaint against the Partnership in April 1998,
asserting, among other things, a bad faith breach of contract by the
Partnership. In May 1998, the Court granted a motion by the Partnership to
dismiss these bad faith allegations and to dismiss certain claims for specific
damages made by TP Plaintiffs, including attorneys' fees and the value of
Nelson's time relating to efforts to enforce the SF Settlement.
In late October 1998, TP Plaintiffs filed a second amended complaint, asserting
that a certain 1989 three-party agreement among NLC, the Partnership and the
holder of a mortgage on the Hotel and the Land entitles TP Plaintiffs to obtain
judgment for, among other things, the cost, including attorney's fees, of this
action and of Nelson's time and efforts on behalf of NLC in this action. In
November 1998, the Court granted a motion filed by the Partnership, dismissing
the claim of TP Plaintiffs to recover for the value of Nelson's time and efforts
on behalf of NLC in this and related litigation.
In December 1998, the Court granted a motion for partial summary judgment filed
by the Partnership, dismissing most of the remaining damage claims of TP
Plaintiffs, including claims for indemnification for any loss resulting from the
claims of Orlando. After these claims were dismissed, TP Plaintiffs amended
their damage claim to seek to recover the alleged differential between the price
that the Partnership agreed to pay for the Land and its alleged fair market
value. The amount of this claim is approximately $1.6 million. In addition, TP
Plaintiffs sought to recover attorneys' fees to enforce the SF Settlement.
In November 1999, the Partnership filed a motion for summary judgment seeking
dismissal of TP Plaintiffs' claim for attorneys' fees. This motion was granted
by the Court on February 25, 2000.
The Partnership filed a motion in February 2000 to disqualify the law firm
representing the TP Plaintiffs based on a conflict of interest that arose when a
partner of the Partnership's counsel with knowledge of this case left that firm
and joined the law firm representing TP Plaintiffs. As a result of the motion,
counsel for TP Plaintiffs filed a motion to withdraw as counsel in March 2000,
which motion was subsequently granted by the Court. New counsel for TP
Plaintiffs has been selected. On December 21, 2000, the TP Plaintiffs filed a
motion requesting that the Court reconsider its order of December 1998, granting
partial summary judgment to the Partnership. This motion was denied by the Court
on January 26, 2001. Trial has been scheduled for December 17-19, 2001.
Metric Partners Growth Suite Investors, L.P., vs. Nashville Lodging Co., 2300
Elm Hill Pike, Inc., Orlando Residence Ltd., and LaSalle National Bank, as
trustee under that certain pooling and servicing agreement, dated July 11, 1995
for the holders of the WHP Commercial Mortgage Pass Through Certificates, Series
1995C1 and Robert Holland, Trustee, Chancery Court for Davidson County, in
Nashville, Tennessee, Case No. 96-1405-III ("Nashville Case II").
The Partnership filed this action on May 3, 1996 to obtain, among other things,
a judicial determination of the rights and obligations of the Partnership and
NLC under the senior mortgage on the Hotel ("Senior Mortgage"), a note held by
NLC "wrapped around" the Senior Mortgage (the "Wrap Note") and the Lease as a
consequence of the Partnership's cure of certain defaults by NLC under the
Senior Mortgage. The Partnership believed that as a result of such a cure, it
became the direct obligor to the lender under the Senior Mortgage and that the
Wrap Note had been satisfied and the payments due under Lease reduced by $50,000
per year.
NLC and 2300 filed an answer in June, together with a counterclaim against the
Partnership. NLC and 2300 claimed damages from the Partnership and asked the
Court to permit acceleration of the Wrap Note and termination of the Lease. In
July 1996, the Partnership filed a motion for summary judgment in this case,
asking that the Court award the relief sought by it and that the Court dismiss
the counterclaim of NLC and 2300. At a hearing on this motion held in August
1996 the Court granted the Partnership's motion. The defendants appealed all
judgments for the Partnership in this case. The Partnership and the defendants
agreed on an attorneys' fee award to the Partnership of $60,000, but no payment
was expected until the defendants' appeal is resolved. Oral arguments regarding
this
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appeal were held in July 1998, and in September 1998 the appellate court
affirmed the judgments for the Partnership. Defendants moved for rehearing,
which was denied in early October 1998. Defendants then filed an application
with the Tennessee Supreme Court for permission to appeal the appellate court
decision. This application was denied by the Tennessee Supreme Court in early
March 1999. Subsequently, Defendants petitioned the Tennessee Supreme Court to
reconsider its denial. This petition was denied by the Tennessee Supreme Court
on May 10, 1999. The Partnership's $60,000 attorneys' fee award is now due and
owing by the defendants.
Kenneth E. Nelson and Nashville Lodging Co. vs. Metric Realty et al., Chancery
Court for Davidson County in Nashville, Tennessee, Case No. 97-2189-III (the
"Inducement Action").
In the second quarter of 1997, Nelson alleged that Metric Realty and GHI
Associates II, L.P., the Managing and Associate General Partners, respectively,
of the Partnership, and certain of Metric Realty's affiliates (the "Affiliates")
and certain former and current employees of Metric Realty or its affiliates (the
"Employees") had improperly induced the Partnership to breach the SF Settlement.
In June 1997, Nelson and NLC filed the Inducement Action in the Chancery Court
for Davidson County in Nashville, Tennessee (the "Chancery Court") against
Metric Realty, GHI Associates II, L.P., the Affiliates and certain of the
Employees (the "Inducement Action Defendants"), seeking unspecified
compensatory, treble and punitive damages for the alleged improper inducement of
breach of contract.
In June 1998 the Inducement Action Defendants filed a motion to dismiss the
complaint against the Employees and one of the Affiliates named in the action
based on lack of jurisdiction and against the remaining Affiliates based on
failure to state a claim. The Chancery Court in September 1998 dismissed the
complaint against all Affiliates but one and denied the remaining requests for
dismissal.
A motion for summary judgment to dismiss the action on the basis of the statute
of limitations was filed in January 1999 by the Inducement Action Defendants and
was argued at a hearing held in February 1999. In April 1999, the Court denied
the motion. Discovery is ongoing and the case has not been set for trial.
The Inducement Action Defendants filed a motion in February 2000 to disqualify
the law firm representing Nelson and NLC ("Nelson's Counsel") based on a
conflict of interest that arose when a partner of the Inducement Action
Defendants' counsel with knowledge of issues related to this case left that firm
and joined Nelson's Counsel. This motion was heard on March 6, 2000 and on April
15, 2000, the Court declined to rule on this motion to disqualify Nelson's
Counsel and instead referred the entire case to the Tennessee Chancellor who is
now presiding over Nashville Case I (see above). Subsequently, Nelson's Counsel
withdrew from the case and new counsel for Nelson and NLC was substituted.
Nelson and NLC filed a summary judgment motion seeking to bar the affirmative
defense of manager's privilege asserted by the Inducement Action Defendants. In
response to the motion, all of the remaining Inducement Action Defendants filed
a cross-motion for summary judgment, seeking dismissal of all claims on the
grounds that actions of the Inducement Action Defendants taken in connection
with the SF Settlement were privileged by virtue of the manager's privilege. On
October 13, 2000, the Court held a hearing on the parties' motions for summary
judgment. At the conclusion of the hearing, the Court orally denied the motion
of Nelson and NLC, and granted the cross-motion of the remaining Inducement
Action Defendants, dismissing all remaining claims. On November 28, 2000, Nelson
and NLC filed an appeal of the Court's action to the Tennessee Court of Appeals.
All appellate briefs have been filed and oral argument on the appeal will be
held on September 7, 2001.
The legal and other expenses of the Inducement Action Defendants in the
Inducement Action arising as a result of the allegations made by Nelson are
being paid by the Partnership pursuant to the indemnification provisions of the
Partnership's limited partnership agreement and subject to the conditions set
forth in those provisions.
Metric Partners Growth Suite Investors, L.P. vs. James Reuben et al., San
Francisco County Superior Court, Case No. 998214.
On September 30, 1998, the Partnership filed this lawsuit against James Reuben
and several law corporations of which he is or has been a member (the "Reuben
Defendants"), alleging breach of their professional obligations and fiduciary
duty as attorneys for the Partnership to adequately and competently represent
and advise the Partnership in connection with the SF Settlement. The Partnership
seeks unspecified damages from the Reuben Defendants arising from such breach.
The Reuben Defendants answered the complaint in January 1999. Discovery has yet
to commence and no trial date for this action has been set.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) No reports on Form 8-K were required to be filed during the period
covered by this Report.
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SIGNATURE
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.
METRIC PARTNERS GROWTH SUITE INVESTORS, L.P.,
a California Limited Partnership
By: Metric Realty
an Illinois general partnership
its Managing General Partner
By: SSR Realty Advisors, Inc.,
a Delaware corporation
its Managing General Partner
By: /s/ William A. Finelli
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William A. Finelli
Managing Director,
Principal Financial and Accounting Officer
of SSR Realty Advisors, Inc.
Date: August 14, 2001
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