UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

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, 2004

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 0-17660

METRIC PARTNERS
GROWTH SUITE INVESTORS, L.P.,

a California Limited Partnership
(Exact name of Registrant as specified in its charter)

     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     

     Indicate by checkmark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes       No  X 

Table of Contents

PART 1
FINANCIAL INFORMATION

Item 1. Financial Statements.

METRIC PARTNERS GROWTH SUITE INVESTORS, L.P.,
a California Limited Partnership

BALANCE SHEETS

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METRIC PARTNERS GROWTH SUITE INVESTORS, L.P.,
a California Limited Partnership

STATEMENTS OF OPERATIONS (UNAUDITED)

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)

See notes to financial statements (unaudited).

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METRIC PARTNERS GROWTH SUITE INVESTORS, L.P.,
a California Limited Partnership

STATEMENT OF PARTNERS’ EQUITY (DEFICIENCY)(UNAUDITED)
For the Nine Months Ended September 30, 2004

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)

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 2003 Audited Financial Statements

These unaudited financial statements should be read in conjunction with the Notes to Financial Statements included in the 2003 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.

There is a substantial doubt regarding the Partnership’s ability to continue as a going concern.

2.

Transactions with the Managing General Partner and Affiliates

In accordance with the Partnership Agreement, Metric Partners Growth Suite Investors, L.P., (“the Partnership”) is charged by the Managing General Partner and Affiliates for services provided to the Partnership. The Partnership was charged $17,000 for reimbursement of administrative expenses in each of the nine month periods ended September 30, 2004 and 2003.

As discussed in Note 2 to the 2003 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 September 30, 2004 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 (Loss) Per Limited Partnership Assignee Unit

The net income (loss) per limited partnership assignee Unit is computed by dividing the net income allocated to the limited partners by 59,919 assignee 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 nine months ended September 30, 2004 and 2003, the Partnership had a net (loss) income of $(67,000) and $16,000, respectively. Revenues for 2004 consisted solely of interest income. Revenues for 2003 consisted primarily of a $525,000 settlement payment received by the Partnership on June 6, 2003. Legal and administrative expenses in the first nine months of 2003 were higher than the comparable period in 2004 primarily as a result of responses to a tender offer for a majority of the Partnership’s Units and consent solicitations made in May 2003.

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Partnership Liquidity and Capital Resources

Third Quarter of 2004

As stated in the Statement of Cash Flows for the nine months ended September 30, 2004, cash was generated from interest income on Cash and Cash Equivalents as well as Restricted Cash balances. Cash was used to pay for legal and administrative expenses of the Partnership.

Third Quarter of 2003

As stated in the Statement of Cash Flows for the nine months ended September 30, 2003, cash was generated from the settlement payment and from interest income on Cash and Cash Equivalents as well as Restricted Cash balances. Cash was used to pay for legal and administrative expenses of the Partnership.

Conclusion

As discussed in Note 1 to the 2003 audited financial statements, there is substantial doubt regarding the Partnership’s ability to continue as a going concern.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Not applicable.

Item 4. Controls and Procedures

(a) Evaluation of Disclosure Controls and Procedures. As of the end of the period covered by this report as required by paragraph (b) of Rule 13a-15 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the Partnership carried out an evaluation, with the participation of the Chief Executive Officer and Chief Financial Officer of Metric Realty, the Managing General Partner of the Partnership, of the effectiveness of the Partnership’s disclosure controls and procedures (as such term is defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act). Based on such evaluation, such officers have concluded that, as of such date, the Partnership’s disclosure controls and procedures are effective in alerting them on a timely basis to information relating to the Partnership required to be disclosed by the Partnership in the reports that it files or submits under the Exchange Act.

(b) Changes in Internal Controls. There have not been any changes in the Partnership’s internal control over financial reporting that occurred during the Partnership’s last fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Partnership’s internal control over financial reporting.

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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. 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. The case has been dismissed by the Court.

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 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 Partnership does not believe it breached the SF Settlement.

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.

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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.

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.

The trial of the claim of the TP Plaintiffs remaining in this case, scheduled for December 17, 2001, was postponed to February 11, 2002. Trial did start on this date, but on February 13, 2002, the Judge declared a mistrial as a result of events unrelated to this action. A new trial was scheduled for September 16, 2002.

On April 5, 2002, TP Plaintiffs filed a motion for leave to amend their complaint to allege damages resulting from alleged interference by the Partnership with NLC’s efforts to sell the Land and to compute NLC’s “benefit of bargain” damages as of the date of the trial, rather than the date of the breach of the SF Settlement. On May 3, 2002 the Partnership filed a response to the motion denying the allegations of the proposed amendment and seeking a ruling barring the filing of the amended complaint. The Court denied the motion on May 29, 2002.

On September 3, 2002, the TP Plaintiffs and the Partnership signed and the Court entered an agreed final order under which the TP Plaintiffs waived their sole remaining damage claims. All other damage claims asserted by the TP Plaintiffs in the case had been dismissed by prior orders of the Court. The effect of the order is a final judgment of no damages for the TP Plaintiffs. The agreed final order was proposed by the TP Plaintiffs, who filed a notice of appeal of the final judgment with the Tennessee Court of the Appeals. In connection with this appeal, the Partnership sought to have the judgment upheld, but in the event the Court of Appeals overturned the lower Court rulings in favor of the Partnership and remanded the case to the lower Court, the Partnership also sought reversal of the lower court ruling that the Partnership breached the SF Settlement. The parties filed briefs with the Tennessee Court of Appeals and oral argument on the issues on appeal was held on January 8, 2004.

On June 30, 2004, the Court of Appeals of Tennessee (the “Court of Appeals”) ruled in favor of the Partnership, affirming the decision of the Chancery Court in all respects. Thus, the judgment that the TP Plaintiffs are entitled to receive no damages from the Partnership has been affirmed. The TP Plaintiffs moved for a rehearing by the Court of Appeals on July 9, 2004, which motion was denied on July 21, 2004. The TP Plaintiffs filed an application for permission to appeal to the Tennessee Supreme Court on September 20, 2004. The Partnership filed a response to the application on October 6, 2004.

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 appeal were held in July 1998, and in September 1998 the appellate court affirmed the judgments for the

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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.

GP Credit Co., LLC vs. Metric Partners Growth Suite Investors, L.P., Metric Realty, SSR Realty Advisors, Inc. et al, San Francisco County Superior Court, Case No. CGC-02-403301.

On January 10, 2001, GP Credit Co., LLC (“GP”) filed this purported class action against the Partnership and Metric Realty, SSR Realty Advisors, Inc. (“SSR”) and certain of SSR’s affiliates and current and former employees (collectively, the “SSR Parties”) and a class of all limited partners of the Partnership (the “LPs”) alleging, among other things, that the SSR Parties fraudulently caused GSI to distribute $16.8 million to the LPs. GP, which claims to have purchased a claim owned by NLC, is demanding general and punitive damages against the Partnership and the SSR Parties and damages from the LPs with regard to the portion of this $16.8 million distribution received by each LP. Process was served on all non-LP defendants in March and April 2002 and answers have been filed on behalf of all non-LP defendants. A Court status conference previously scheduled for August 27, 2004 has been continued to January 14, 2005.

Item 6. Exhibits

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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

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