Back to GetFilings.com
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 2001
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)
CALIFORNIA 94-3050708
-------------------------------- -------------------
(STATE OR OTHER JURISDICTION OF IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION) (I.R.S. EMPLOYER
1 CALIFORNIA STREET
SAN FRANCISCO, CALIFORNIA 94111-5415
--------------------------------------- -------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (Zip Code)
Registrant's telephone number, including area code: (415) 678-2000
(800) 347-6707 IN ALL STATES
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Limited Partnership Assignee Units
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
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 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]
No market for the Limited Partnership Assignee Units exists and therefore a
market value for such Units cannot be determined.
METRIC PARTNERS GROWTH SUITE INVESTORS, L.P.,
A CALIFORNIA LIMITED PARTNERSHIP
PART I
ITEM 1. BUSINESS.
Metric Partners Growth Suite Investors, L.P., a California Limited Partnership
(the "Partnership"), was organized in 1984 under the California Uniform Limited
Partnership Act. On April 1, 1997, Metric Holdings, Inc. and Metric Realty
Corp., the partners of the Managing General Partner, Metric Realty, were
involved in certain corporate transactions. Pursuant to these transactions, (i)
Metric Holdings, Inc. was merged into a newly-formed corporation known as SSR
Realty Advisors, Inc. ("SSR Realty"), which became the managing partner of
Metric Realty, and (ii) Metric Realty Corp. was merged into Metric Property
Management, Inc., a subsidiary of SSR Realty. Accordingly, the partners of
Metric Realty are now SSR Realty and Metric Property Management, Inc. After
consummation of these transactions, both partners of Metric Realty continue to
be wholly owned subsidiaries of Metropolitan Life Insurance Company, as were
both partners prior to the occurrence of such transactions. The associate
general partner of the Partnership is GHI Associates II, L.P., a California
Limited Partnership. The general partner of GHI Associates II is Metric Realty
and the limited partner is Prudential-Bache Properties, Inc.
The Partnership's Registration Statement filed pursuant to the Securities Act of
1933 (No. 33-8610) was declared effective by the Securities and Exchange
Commission on April 14, 1988. The Partnership marketed its securities pursuant
to its Prospectus dated April 14, 1988, which was thereafter supplemented
(hereinafter the "Prospectus"). This Prospectus was filed with the Securities
and Exchange Commission pursuant to Rule 424(b) of the Securities Act of 1933.
The principal business of the Partnership was to acquire, hold for investment,
manage and ultimately sell all-suite, extended stay hotels, which are operated
under franchise licenses from Residence Inn by Marriott, Inc. The Partnership is
a "closed" limited partnership real estate syndicate. For a further description
of the Partnership's business, see the sections entitled "Risk Factors" and
"Investment Objectives and Policies" in the Prospectus.
Beginning in April 1988, the Partnership offered $60,000,000 in Limited
Partnership Assignee Units. The offering was closed on June 30, 1989, with total
funding of $59,932,000. The net proceeds of the offering were used to purchase
ten hotel properties, which are described in Item 2. The acquisition activities
of the Partnership were completed on March 16, 1990, with the purchase of the
Residence Inn - Altamonte Springs. Since that time, the principal activity of
the Partnership has been managing its portfolio. As the Partnership's long-term
goal was to ultimately liquidate the portfolio, the markets where the hotels are
located were monitored on an ongoing basis for potential sales opportunities.
The Partnership entered into a purchase and sale agreement for the Residence
Inn-Atlanta (Perimeter West) with an unaffiliated buyer and sold the property on
October 3, 1995. In 1997, the Partnership marketed eight of the nine remaining
hotels for sale, and on December 30, 1997, the hotels were sold to an
unaffiliated buyer. The Partnership's last property, the Residence Inn --
Nashville, was sold through foreclosure on June 18, 1999, as further described
in Part II, Item 7.
Environmental site assessments were performed for each of the properties at the
time of property acquisition. No material adverse environmental conditions or
liabilities were identified at that time, nor were any identified during due
diligence conducted in conjunction with the sale of the Partnership's hotels. In
no case has the Partnership received notice that it is a potentially responsible
party with respect to an environmental clean-up site.
2
ITEM 2. PROPERTIES.
The following is a description of the hotel properties that the Partnership
owned:
NAME AND LOCATION ROOMS DATE OF PURCHASE DATE OF SALE
- ----------------- ----- ---------------- -------------
Residence Inn-Ontario 200 04/88 12/97
2025 East D Street, Ontario, California
Residence Inn-Fort Wayne 80 06/88 12/97
4919 Lima Road, Fort Wayne, Indiana
Residence Inn-Columbus East 80 06/88 12/97
2084 South Hamilton Road, Columbus, Ohio
Residence Inn-Indianapolis 88 06/88 12/97
3553 Founders Road, Indianapolis, Indiana
Residence Inn-Lexington 80 06/88 12/97
1080 Newtown Pike, Lexington, Kentucky
Residence Inn-Louisville 96 06/88 12/97
120 North Hurtsbourne Lane, Louisville, Kentucky
Residence Inn-Winston-Salem 88 06/88 12/97
7835 North Point Blvd., Winston-Salem, North
Carolina
Residence Inn-Nashville 168 05/89 6/99*
2300 Elm Hill Pike, Nashville, Tennessee
Residence Inn-Atlanta (Perimeter West) 128 10/89 10/95
6096 Barfield Road, Atlanta, Georgia
Residence Inn-Altamonte Springs 128 03/90 12/97
270 Douglas Avenue, Altamonte Springs, Florida
* Date of foreclosure.
ITEM 3. LEGAL PROCEEDINGS.
There are no material pending legal proceedings to which the Partnership is a
party or to which any of its assets are subject, except the following:
Metric Partners Growth Suite Investors, L.P. vs. Kenneth E. Nelson, The Nelson
Group, et al., San Francisco County Superior Court, Case No. 928065.
Nashville Lodging Company vs. Metric Partners Growth Suite Investors, L.P., et
al., Circuit Court, State of Wisconsin, Case No. 94CV001212.
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.
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.
3
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").
Metric Partners Growth Suite Investors, L.P. vs. James Reuben et al, San
Francisco County Superior Court, Case No. 998214.
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.
For information regarding these lawsuits, see Management's Discussion and
Analysis of Financial Condition and Results of Operations and Part II, Item 8,
Note 6 to the Financial Statements.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matter was submitted to a vote of security holders during the period covered
by this report.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The Limited Partnership Assignee Unit holders are entitled to certain
distributions as provided in the Partnership Agreement. From inception through
September 7, 1999, Assignee Unit holders have received distributions from
operations and sales ranging from $696 - $789 for each $1,000 limited
partnership assignee Unit, inclusive of $395 from sales proceeds. No market for
Limited Partnership Assignee Units exists, nor is one expected to develop.
As of December 31, 2001, the number of holders of Limited Partnership Assignee
Units was as follows:
TITLE OF CLASS NUMBER OF RECORD HOLDERS
-------------- ------------------------
Limited Partnership Assignee Units........... 4,260
4
ITEM 6. SELECTED FINANCIAL DATA.
The following represents selected financial data for Metric Partners Growth
Suite Investors, L.P., a California Limited Partnership, for each of the five
years in the period ended December 31, 2001. The data should be read in
conjunction with the Financial Statements included elsewhere herein.
FOR THE YEAR ENDED
DECEMBER 31
--------------------------------------------
2001(2) 2000 1999 1998 1997
------- ------ ------ ------ -------
(amounts in thousands except per unit data)
Total Revenues $ 294 $ 447 $2,566 $5,171 $26,193
====== ====== ====== ====== =======
Net Income (Loss):
Income (Loss) Before Gain on Sale or Loss on
Foreclosure of Properties 51 174 $474 $(423) $2,814
Loss on Foreclosure of Property - 410 (340) - -
Gain on Sale of Properties - - - 300 7,505
------ ------ ------ ------ -------
Net Income (Loss) $ 51 $ 584 $ 134 $ (123) $10,319
====== ====== ====== ====== =======
Net Income (Loss) per Limited Partnership Assignee
Unit(1):
Income (Loss) Before Gain on Sale or Loss on
Foreclosure of Properties $ 1 $ 3 $ 15 $ (7) $ 47
Gain (Loss) of Foreclosure of Property - 7 - - -
Gain on Sale of Properties - - - 5 120
------ ------ ------ ------ -------
Net Income (Loss) per Limited Partnership Assignee
Unit $ 1 $ 10 $ 15 $ (2) $ 167
====== ====== ====== ====== =======
Total Assets $7,302 $7,281 $7,374 $21,845 $60,636
====== ====== ====== ======= =======
Long Term Obligations:
Notes Payable $ - $ - $ - $8,292 $26,983
====== ====== ====== ====== =======
Cash Distributions per Limited Partnership Assignee
Unit $ - $ - $ 85 $ 288 $ 40
====== ====== ====== ====== =======
(1) $1,000 original contribution per limited partnership assignee Unit based
on 59,932 limited partnership Assignee Units outstanding during the
period.
(2) See discussion in Item 7 regarding future results of operations.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
Introduction
This Item should be read in conjunction with Financial Statements contained
elsewhere in this Report.
The Partnership sold eight of its nine remaining hotels in December 1997. The
remaining property, the Residence Inn -- Nashville (the "Hotel"), was sold
through foreclosure in June 1999. Accordingly, historical financial information
will not be representative of future results. Future results of operations will
be dependent on the consummation of the settlement agreement discussed in Note 9
to the Financial Statements, general and administrative expenses and interest
income, as well as the outcome of the legal proceedings discussed in Note 6 to
the Financial Statements.
5
RESULTS OF OPERATIONS
2001 Compared to 2000
Net income in 2001 was $51,000 compared to net income of $584,000 in the prior
year. Results for 2000 reflect a gain on foreclosure due to the collection of
accounts receivable in excess of amounts carried on the Partnership's financial
statements in 1999.
Interest income decreased in 2001 compared to 2000 due to lower interest rates.
General and administrative expenses, which include partnership management fees
and administrative costs, approximated the prior year levels in the aggregate. A
decline in legal expenses during 2001 was offset by payments for prior period
insurance premiums and sales tax assessments from escrow accounts established
with the foreclosure agreement.
2000 Compared to 1999
Net income in 2000 was $584,000 as compared to $134,000 in 1999 and reflects a
gain of $410,000 for an adjustment to the loss on foreclosure recorded in 1999.
The change reflects the absence of net income from hotel operations due to the
sale and transfer of hotel properties by the end of 1999. Hotel operations and
related interest income in 1999 contributed $474,000 to net income before
recognition of a $340,000 loss on a foreclosure.
Interest income decreased in 2000 on lower cash balances due to the distribution
made to partners in 1999. General and administrative expenses decreased in 2000
compared to 1999 primarily due to substantially lower legal expenses,
partnership management fees and administrative costs associated with the lack of
hotel operations and resolution of certain legal matters.
6
PARTNERSHIP LIQUIDITY AND CAPITAL RESOURCES
Introduction
As presented in the 2001 Statement of Cash Flows, cash was generated by
operating activities primarily from interest income earned on cash reserves and
the collection of outstanding receivables. The cash balances relate to
court-ordered reserves held until the resolution of litigation with third
parties. The receivable balances collected were in connection with certain
reserves held by Marriott pursuant to the sale of the remaining hotel
investments. The Partnership considers investments (primarily commercial paper)
with an original maturity date of less than three months at the time of purchase
to be cash equivalents. There were no cash equivalents at December 31, 2001.
As presented in the 2000 Statement of Cash Flows, cash was used by operating
activities primarily from interest income earned on cash reserves, the
collection of outstanding receivable balances, the payment of outstanding
liabilities and an adjustment to the loss on foreclosure recorded in 1999. The
cash balances relate to court-ordered reserves held until the resolution of
litigation with third parties. The receivable balances collected were in
connection with certain reserves held by Marriott pursuant to the sale of the
remaining hotel investments. The adjustment to the gain on foreclosure results
from the realization of $410,000 more than anticipated upon conclusion of
foreclosure proceedings commenced in 1999. There were no cash equivalents at
December 31, 2000.
At December 31, 2001, the Partnership's assets consisted of cash and restricted
cash of $2,302,000 and $5,000,000 respectively. These amounts are available to
provide for the ultimate resolution of the matters discussed below.
Additionally, it is expected that the general partners will be required to
recontribute all or a portion of the cumulative amounts received in
distributions of approximately $914,000. This amount would also be available as
a capital resource to provide for the capital needs of the Partnership. As
further discussed below, the Partnership is involved in several litigation
matters in connection with its former properties, which are still ongoing.
The former management company at the Residence Inn-Ontario, which is controlled
by Kenneth E. Nelson ("Nelson") defaulted on certain obligations under the
management agreement. In 1991, the Partnership terminated the management
agreement and initiated legal proceedings against the former management company.
The management company withheld $194,000 from property funds in unauthorized
management fees prior to relinquishing management of the property. The $194,000
was treated as a receivable in the Partnership's Financial Statements until 1996
when it was written off. As discussed in Note 7 to the Financial Statements, in
March 1993 the parties verbally agreed to settle the lawsuit (the "SF
Settlement"); however, difficulties arose in consummating the settlement. After
a hearing in May 1994, the Court ruled in June that in the settlement the
Partnership had agreed to purchase the land underlying the Residence
Inn-Nashville (the "Land") from Nashville Lodging Company ("NLC"), an affiliate
of Nelson, subject to a lis pendens on the Land.
Following this ruling, the Partnership attempted to negotiate and enter into a
settlement agreement and a land purchase agreement and related agreements (the
"Settlement Documents") among itself and Nelson and NLC and another Nelson
entity, 2300 Elm Hill Pike, Inc. ("2300"). These parties were not able to reach
agreement on all issues relating to the Settlement Documents.
In May 1991, legal proceedings were initiated against the Partnership and others
by Orlando Residence Ltd., ("Orlando"), holder of a promissory note issued by a
previous owner of the Residence Inn-Nashville (the "Hotel"). Orlando claimed the
sale of the Hotel to the Partnership by NLC was intended to defraud, hinder and
delay Orlando's recovery of the amount owed to it. The Partnership obtained a
summary judgement dismissing the case against it on September 15, 1993.
In July 1994, the Court in the case filed by Orlando ruled that the Hotel had
been fraudulently conveyed to NLC by 2300 in 1986 and voided the conveyance.
Judgements totaling more than $1,350,000 were subsequently entered by this Court
against Nelson, NLC and 2300. Based on this judgement, Orlando purchased the
Land at a judicial sale and became the landlord under the Lease. This judgement
was reversed in December 1996 and NLC asked the Court to return ownership of the
Land to it. However, the Court denied NLC's request.
In another action in Nashville, Tennessee, 2300 and NLC alleged that the
Partnership refused to purchase the Land as required by the SF Settlement and
demanded indemnification for all costs and losses of 2300 and NLC relating to
Orlando's claims. In February 1996, the Court in this action granted a motion
filed by 2300 and NLC for partial summary judgement, ruling that the Partnership
had breached the SF Settlement. The action continues to determine damages and
other issues. In February 1998, the Court enjoined the Partnership from
conveying, transferring, or
7
otherwise disposing of its cash to any extent which would leave less than $5
million available for payment of any judgment awarded to 2300 and NLC. The
Partnership does not believe it breached the SF Settlement.
In addition, GP Credit Co., LLC filed a 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. This action has not yet been served on any
defendant, to the knowledge of the Partnership and SSR.
See Item 8, Note 6 to the Financial Statements for more information about the
foregoing and other related proceedings.
On June 18, 1999, the Hotel, its contents and the land on which it is located,
which was under lease to the Partnership, were sold through foreclosure. Certain
difficulties arose in the course of and as a result of the foreclosure with
respect to the foreclosure proceedings, the allocation of net proceeds of the
personal property of the Hotel, and ownership of the net current assets held by
Marriott on behalf of the Partnership from the operations of the Hotel to the
date of foreclosure. In addition, while the Partnership believed that the ground
lease associated with the property would be terminated in the event of a
foreclosure, it was unclear which party was entitled to receipt of deferred
ground rents (including accrued interest thereon) owed by the Partnership at the
time of foreclosure. The issues were settled in February 2000 as described in
Note 3 to the Financial Statements.
Subsequent to the foreclosure, Marriott issued a notice requiring the
Partnership to pay a $1,415,000 termination fee computed as per the management
agreement, plus certain employee costs not specified in the amount. However,
Marriott and the lender subsequently entered into a management agreement for
Marriott's continued management of the property and Marriott has verbally
acknowledged that a termination fee is not due.
Internal Revenue Service regulations provide that, should 5% or more of the
outstanding assignee limited partnership units of a limited partnership be
traded via non-exempt transactions within a calendar year, the limited
partnership could be classified as a publicly-traded partnership for Federal tax
purposes, and could therefore be taxed as a corporation. Transfers that are
exempt from the above restrictions include transfers at death; transfers between
siblings, spouses, ancestors, or lineal descendants; and distributions from
qualified retirement plans.
In 1996, 1997, and again in 1998, the Managing General Partner suspended the
processing of most types of resale transactions, as the level of such resale
transactions reached 4.9% of the total number of outstanding Units for each of
those years. This action was taken to ensure that resale transactions did not
result in the termination of the Partnership for tax purposes, or cause the
Partnership to be classified as a publicly traded partnership or to be taxed as
a corporation.
On June 25, 1999, Gemisys, the Partnership's Servicing and Transfer Agent
notified the Managing General Partner that non-exempt trading representing
approximately 4.9% of the outstanding Units of the Partnership had been reached,
at which time the Managing General Partner again suspended processing of resale
transactions for the remainder of the calendar year. Unit holders were advised
of that suspension in accordance with Section 12.1 of the Partnership Agreement,
via a special communication dated June 25, 1999. All resale transaction
paperwork submitted subsequent to that date through the end of the year was
returned to the originator. Gemisys again began processing resale transactions
on January 3, 2000. During 2001 and 2000, resale transactions did not reach the
4.9% limit.
8
Conclusion
In view of the uncertainties in connection with the litigation relating to the
Hotel (as described in Note 6 to the Financial Statements) and the distributions
the General Partners will be obligated to return to the Partnership prior to its
liquidation, the Partnership no longer provides an estimated net asset value per
Assignee Unit. However, the Partnership is aware that some resale transactions
of Units have taken place in the informal secondary market. In this informal
market, transactions may or may not take place in any given time period and
occur at a price negotiated between the buyer and seller. The Partnership has no
knowledge concerning how a particular price may be determined. A total of 21
resale transactions were recorded on the books of the Partnership's transfer
agent between January 1, 2001 and December 31, 2001, reflecting prices ranging
from $1 to $100 per Unit, with a simple average price of $36.97. The
Partnership's knowledge of these transactions is based solely on the books and
records of its Transfer Agent.
As discussed in Item 8, Note 1 to the Financial Statements, there is substantial
doubt regarding the Partnership's ability to continue as a going concern. The
Partnership does not expect to receive any significant cash flow through
December 31, 2002.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not applicable.
9
ITEM 8. FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES.
METRIC PARTNERS GROWTH SUITE INVESTORS, L.P.,
A CALIFORNIA LIMITED PARTNERSHIP
TABLE OF CONTENTS
PAGE
Report of Independent Auditors......................................................... 11
Financial Statements:
Balance Sheets at December 31, 2001 and 2000........................................ 12
Statements of Income for the Years ended December 31, 2001, 2000 and 1999........... 13
Statements of Partners' Equity (Deficiency) for the Years ended December 31, 2001,
2000 and 1999....................................................................... 14
Statements of Cash Flows for the Years ended December 31, 2001, 2000 and 1999....... 15
Notes to Financial Statements....................................................... 16
Financial Statements and financial statement schedules not included have
been omitted because of the absence of conditions under which they are required
or because the information is included elsewhere in the Financial Statements.
10
REPORT OF INDEPENDENT AUDITORS
Metric Partners Growth Suite Investors, L.P., a California Limited Partnership:
We have audited the accompanying balance sheets of Metric Partners Growth
Suite Investors, L.P., a California Limited Partnership, (the "Partnership") as
of December 31, 2001 and 2000, and the related statements of income, partners'
equity (deficiency) and cash flows for each of the three years in the period
ended December 31, 2001. 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 auditing standards generally
accepted in the United States. 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 provide a reasonable basis
for our opinion.
In our opinion, the financial statements present fairly, in all material
respects, the financial position of Metric Partners Growth Suite Investors, L.P.
at December 31, 2001 and 2000, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 2001, in
conformity with accounting principles generally accepted in the United States.
The financial statements have been prepared assuming that the Partnership
will continue as a going concern. As more fully described in Note 6, the
Partnership is subject to ongoing litigation. The uncertainties relating to this
litigation raise substantial doubt about the Partnership's ability to continue
as a going concern. Management's plans in regard to this litigation are also
described in Note 6. The financial statements do not include any adjustments to
reflect the possible future effects on the recoverability and classification of
assets or the amounts or classifications of liabilities that may result from the
outcomes of these uncertainties.
Ernst & Young LLP
New York, New York
February 22, 2002
11
METRIC PARTNERS GROWTH SUITE INVESTORS, L.P.,
A CALIFORNIA LIMITED PARTNERSHIP
BALANCE SHEETS
ASSETS DECEMBER 31, DECEMBER 31,
2001 2000
------------ ------------
CASH AND CASH EQUIVALENTS ...................... $ 2,302,000 $ 2,067,000
RESTRICTED CASH ................................ 5,000,000 5,000,000
ACCOUNTS RECEIVABLE ............................ -- 214,000
----------- -----------
TOTAL ASSETS ................................... $ 7,302,000 $ 7,281,000
=========== ===========
LIABILITIES AND PARTNERS' EQUITY
OTHER LIABILITIES .............................. $ 31,000 $ 61,000
----------- -----------
COMMITMENTS AND CONTINGENCIES
PARTNERS' EQUITY (DEFICIENCY):
GENERAL PARTNERS ............................... (914,000) (914,000)
LIMITED PARTNERS (59,932 units outstanding) .... 8,185,000 8,134,000
----------- -----------
TOTAL PARTNERS' EQUITY ......................... 7,271,000 7,220,000
----------- -----------
TOTAL LIABILITIES AND PARTNERS' EQUITY ......... $ 7,302,000 $ 7,281,000
=========== ===========
See notes to financial statements.
12
METRIC PARTNERS GROWTH SUITE INVESTORS, L.P.,
A CALIFORNIA LIMITED PARTNERSHIP
STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
2001 2000 1999
----------- ----------- -----------
Hotel operations ...................................... $ -- $ -- $ 2,016,000
Interest and other .................................... 294,000 447,000 550,000
----------- ----------- -----------
Total revenues ........................................ 294,000 447,000 2,566,000
----------- ----------- -----------
EXPENSES
Hotel operations
Rooms ................................................. -- -- 463,000
Administrative ........................................ -- -- 324,000
Marketing ............................................. -- -- 199,000
Energy ................................................ -- -- 101,000
Repair and maintenance ................................ -- -- 99,000
Management fees ....................................... -- -- 63,000
Property taxes ........................................ -- -- 60,000
Other ................................................. -- -- 107,000
----------- ----------- -----------
Total hotel operations ................................ -- -- 1,416,000
Interest .............................................. -- 26,000 223,000
General and administrative (Including $22,000, $22,000
and $133,000 paid to the managing general partner and
affiliates in 2001, 2000 and 1999, respectively) 243,000 247,000 453,000
----------- ----------- -----------
Total expenses ........................................ 243,000 273,000 2,092,000
----------- ----------- -----------
INCOME BEFORE GAIN (LOSS) ON FORECLOSURE OF PROPERTIES 51,000 174,000 474,000
Gain (Loss) on foreclosure of property ................ -- 410,000 (340,000)
----------- ----------- -----------
NET INCOME ............................................ $ 51,000 $ 584,000 $ 134,000
=========== =========== ===========
NET INCOME PER LIMITED PARTNERSHIP ASSIGNEE UNIT:
Income before gain (loss) on foreclosure of properties $ 1 $ 3 $ 15
Gain (Loss) on foreclosure of property ................ -- 7 --
----------- ----------- -----------
NET INCOME ............................................ $ 1 $ 10 $ 15
=========== =========== ===========
CASH DISTRIBUTIONS PER LIMITED PARTNERSHIP ASSIGNEE UNIT $ -- $ -- $ 85
=========== =========== ===========
See notes to financial statements.
13
METRIC PARTNERS GROWTH SUITE INVESTORS, L.P.,
A CALIFORNIA LIMITED PARTNERSHIP
STATEMENTS OF PARTNERS' EQUITY (DEFICIENCY)
FOR THE YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
GENERAL LIMITED
PARTNER PARTNERS TOTAL
--------- ----------- ------------
BALANCE, January 1, 1999 ................................ $ -- $11,700,000 $ 11,700,000
(Loss) Income Before Loss on Foreclosure of Property .... (470,000) 944,000 474,000
Loss on Foreclosure of Properties ....................... (340,000) -- (340,000)
Cash Distributions ...................................... (104,000) (5,094,000) (5,198,000)
--------- ----------- ------------
BALANCE, DECEMBER 31, 1999 .............................. (914,000) 7,550,000 6,636,000
Income Before Gain on Foreclosure of Properties ......... -- 174,000 174,000
Gain on Foreclosure of Properties ....................... -- 410,000 410,000
--------- ----------- ------------
BALANCE, DECEMBER 31, 2000 .............................. (914,000) 8,134,000 7,220,000
Net Income .............................................. -- 51,000 51,000
--------- ----------- ------------
BALANCE, DECEMBER 31, 2001 .............................. (914,000) 8,185,000 7,271,000
========= =========== ============
See notes to financial statements.
14
METRIC PARTNERS GROWTH SUITE INVESTORS, L.P.,
A CALIFORNIA LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
2001 2000 1999
----------- ----------- -----------
OPERATING ACTIVITIES:
Net income ........................................... $ 51,000 $ 584,000 $ 134,000
Adjustments to reconcile net income (loss) to net cash
provided (used) by operating activities:
(Gain) loss on foreclosure of property ............ -- (410,000) 340,000
Changes in operating assets and liabilities:
Accounts receivable ............................ 214,000 285,000 (176,000)
Prepaid Expenses ............................... -- -- 109,000
Accounts payable, accrued expenses and other
liabilities .................................. (30,000) (677,000) (1,070,000)
----------- ----------- -----------
Net cash provided (used) by operating activities ..... 235,000 (218,000) (663,000)
----------- ----------- -----------
INVESTING ACTIVITIES:
Proceeds from sale of properties ..................... -- 410,000 --
Capital improvements ................................. -- -- (26,000)
Restricted cash ...................................... -- -- 353,000
Costs paid on foreclosure of property ................ -- -- (8,000)
----------- ----------- -----------
Net cash provided by investing activities ............ -- 410,000 319,000
----------- ----------- -----------
FINANCING ACTIVITIES:
Notes payable principal payments ..................... -- -- (68,000)
Cash distributions to partners ....................... -- -- (5,198,000)
----------- ----------- -----------
Cash used by financing activities .................... -- -- (5,266,000)
----------- ----------- -----------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS...... 235,000 192,000 (5,610,000)
Cash and cash equivalents at beginning of year ....... 2,067,000 1,875,000 7,485,000
----------- ----------- -----------
CASH AND CASH EQUIVALENTS AT END OF YEAR ............. $ 2,302,000 $ 2,067,000 $ 1,875,000
=========== =========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest paid in cash during the year ................ $ -- $ 255,000 $ 327,000
=========== =========== ===========
See notes to financial statements.
15
METRIC PARTNERS GROWTH SUITE INVESTORS, L.P.,
A CALIFORNIA LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2001
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization - Metric Partners Growth Suite Investors, L.P., a California
Limited Partnership (the "Partnership"), was organized under the laws of the
State of California to acquire, hold for investment, manage, and ultimately
sell, all-suite, extended stay hotels, which are a franchise of the Residence
Inn, by Marriott, Inc. The Managing General Partner is Metric Realty, an
Illinois general partnership. The Associate General Partner of the Partnership
is GHI Associates II, L.P., a California Limited Partnership, of which Metric
Realty is the general partner and Prudential-Bache Properties, Inc., a wholly
owned subsidiary of Prudential Securities Group Inc., is the limited partner.
Through March 31, 1997, Metric Realty was owned by Metric Holdings, Inc. and
Metric Realty Corp. Metric Realty Corp. was the Managing Partner of Metric
Realty. On April 1, 1997, Metric Holdings, Inc. and Metric Realty Corp., the
partners of the Managing General Partner, Metric Realty, were involved in
certain corporate transactions. Pursuant to these transactions, (i) Metric
Holdings, Inc. was merged into a newly formed corporation known as SSR Realty
Advisors, Inc. ("SSR Realty"), which became the managing partner of Metric
Realty, and (ii) Metric Realty Corp. was merged into Metric Property Management,
Inc., a subsidiary of SSR Realty. Accordingly, the partners of Metric Realty are
now SSR Realty and Metric Property Management, Inc. After consummation of these
transactions, both partners of Metric Realty continue to be wholly owned
individual subsidiaries of Metropolitan Life Insurance Company, as were both
partners prior to the occurrence of such transactions. The Partnership was
organized on June 28, 1984, and commenced operations on April 14, 1988. Capital
contributions of $59,932,000 ($1,000 per assignee Unit) were made by the limited
partners.
Basis of Presentation -- The financial statements of the Partnership have been
prepared on the accrual basis of accounting in accordance with accounting
principals generally accepted in the United States and assume that the
Partnership will continue as a going concern. The Partnership is subject to
ongoing litigation that is more fully described in Note 6. The uncertainties
relating to this litigation create substantial doubt about the Partnership's
ability to continue as a going concern. Management intends to vigorously defend
against this litigation. The financial statements do not include any adjustments
to reflect the possible future effects on the recoverability and classification
of assets or the amounts or classifications of liabilities that may result from
the outcome of those uncertainties.
Fair Value of Financial Instruments - The carrying amounts of cash and cash
equivalents, restricted cash and other liabilities, due to the short nature of
such items, approximate their fair value.
Use of Estimates - The preparation of the Financial Statements in conformity
with accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect the amounts reported in
the Financial Statements and accompanying notes. Actual results could differ
from those estimates.
Cash and Cash Equivalents - The Partnership considers all highly liquid
investments, primarily commercial paper, with an original maturity date of three
months or less at the time of purchase to be cash equivalents.
Restricted Cash - The $5,000,000 balance at December 31, 2001, and 2000 is the
amount which (as discussed in Note 6) the Court enjoined the Partnership from
conveying, transferring, or otherwise disposing of.
Credit Risk - Financial instruments, which potentially subject the Partnership
to concentrations of credit risk, include cash and cash equivalents and
restricted cash. The Partnership places its cash deposits and temporary cash
investments with creditworthy, high-quality financial institutions. The
concentration of such cash deposits and temporary cash investments is not deemed
to create a significant risk to the Partnership.
16
Gain on Sale of Properties - Sales are generally recorded at the close of escrow
or after title has been transferred to buyer and after appropriate payments have
been received and other criteria for gain recognition have been met.
Marketing - Marketing costs were expensed as incurred.
Net Income (Loss) Per Limited Partnership Assignee Unit - Net income per limited
partnership assignee Unit is computed by dividing net income allocated to the
limited partners by 59,932 assignee Units.
Income Taxes - No provision for Federal and state income taxes has been made in
the Financial Statements because income taxes are the obligation of the
partners.
Use of Estimates - The accompanying financial statements, which have been
prepared in accordance with accounting principals generally accepted in the
United States, require management to make estimates and assumptions that affect
the amounts reported in the financial statements and accompanying notes. Actual
results could differ from those estimates.
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 amounts are as follows:
2001 2000 1999
-------- -------- --------
Partnership management fees........... $ 22,000 $ 22,000 $ --
Reimbursement of expenses............. -- -- 133,000
-------- -------- --------
Total ..................... $ 22,000 $ 22,000 $133,000
======== ======== ========
Reimbursement of expenses includes expenses for partnership accounting,
professional services and investor services.
In accordance with the Partnership agreement, the general partners are allocated
their two percent continuing interest in the Partnership's net income or loss
and cash distributions. In addition, in 1994 the general partners were allocated
gross income of $245,000 in accordance with and calculated pursuant to the
Partnership Agreement. However, beginning in 1995 and through 1998, due to the
general partners' equity account balance, the Partnership adjusted and limited
the income allocation to the general partners to amounts equal to their two
percent continuing interest in cash distributions. 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
December 31, 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.
The general partners were allocated taxable gain and loss in accordance with the
Partnership Agreement.
17
3. ASSET TO BE DISPOSED OF AND FORECLOSURE OF PROPERTY
At December 31, 1998, the Partnership's remaining property, the Residence Inn --
Nashville (the "Hotel"), was classified as an asset to be disposed of and an
impairment provision, in the amount of $195,000, was recorded to reduce the
carrying value to the estimated fair value less estimated disposal costs. The
estimated fair value for this property was determined to be equivalent to the
estimated principal balance on the non-recourse mortgage note payable at the
expected date for the transfer of the property to the lender via deed in lieu of
foreclosure or through foreclosure as discussed in Note 4.
In deciding to sell or dispose of the property, the Partnership considered the
deterioration of the Nashville market, in conjunction with the substantial
capital improvements that would be required under the Marriott contract over the
next several years and which would be necessary for the hotel to remain
competitive.
On June 18, 1999, the improvements of the Hotel owned by the Partnership and the
land on which it is located, which was under lease to the Partnership, were sold
through foreclosure for $9,050,000, with net proceeds of approximately $450,000
after deduction of the outstanding principal and other costs. The Partnership
incurred a loss of $340,000 as a result of the foreclosure. The purchaser was
the holder of the mortgage note payable encumbering the Hotel (the "Lender").
The Partnership had been in default under the mortgage note payable since April
1998, when it did not pay the balloon mortgage payment due at that date. In the
foreclosure sale, the lessor on the ground lease also bid for the property. The
lessor filed suit against the foreclosure trustee, asserting that the trustee
denied him his alleged right to redeem the property by paying the debt through
the foreclosure. The suit was settled in a mediation meeting on February 29,
2000 as further discussed below.
With respect to the ground lease, on May 20, 1999, the lessor issued a letter
notifying the Partnership that it had terminated the ground lease as the
Partnership had defaulted under the terms of the mortgage note for the Hotel,
thereby violating a term of the ground lease agreement. However, the Lender took
the position that the ground lease was not terminated until June 18, 1999, when
it was terminated as a result of the foreclosure.
On February 29, 2000, a mediation meeting was held for the purposes of settling
the issues among the lender, the former lessor on the ground lease and the
Partnership. At that meeting, the parties agreed to the terms of a settlement
agreement ("Settlement") that was subsequently signed in March 2000. The
Settlement provided for (i) payment by the Partnership to the former lessor of
the ground lease, the $655,000 deferred ground rent liability (including
interest, which the Partnership earned on that amount until date of actual
payment) and (ii) collection of $125,000 by the Partnership representing its
share of proceeds from the sale of personal property. In addition, the parties
agreed that the Partnership is entitled to operations to the date of foreclosure
plus any cash and cash reserves held by Marriott pertaining to the Partnership's
ownership period to the date of foreclosure of the Hotel.
In March 2000 the Partnership paid $681,000 to the former lessor of the ground
lease representing the $655,000 mentioned above plus interest earned on the
$655,000 from date of foreclosure to date of payment. While the $655,000 was
reflected in the outstanding liabilities at December 31, 1999, the $26,000
interest expense was recorded in the first quarter of 2000. Also in March, the
Partnership received the $125,000 representing its proceeds from the sale of
personal property. Of this amount, $10,000 had been reflected in the 1999
audited financial statements and the remaining $115,000 was recorded in the
first quarter of 2000 as an adjustment to loss on foreclosure of property. The
$115,000 was reduced by $10,000 to $105,000 due to an increase in the expected
legal reimbursement due to Marriott pertaining to the new management agreement
for Marriott's continued management of the property subsequent to the
foreclosure.
In September 2000, pursuant to an agreement with Marriott with respect to the
Residence Inn -- Nashville, the Partnership received $306,000. This was recorded
net of related expenses of $1,000 in the third quarter of 2000 as an adjustment
to loss on foreclosure of property.
18
Subsequent to the foreclosure, Marriott issued a notice requiring the
Partnership to pay a $1,415,000 termination fee, computed as per the management
agreement, plus certain employee costs not specified in amount. However,
Marriott and the Lender subsequently entered into a management agreement for
Marriott's continued management of the property and Marriott has verbally
acknowledged that a termination fee is not due.
4. NOTES PAYABLE
The note payable on the Hotel became due on April 1, 1998, and a balloon payment
of $8,491,000 was due. The Partnership did not make the payment and has since
been in default. The Partnership was unable to negotiate an extension of the
loan with the lender. However, the lender entered into a six-month forbearance
agreement with the Partnership, while the Partnership was in negotiations for a
potential sale, in exchange for a principal reduction payment of $100,000 and
reimbursement of $20,000 to the lender for certain costs. In addition, the
Partnership made the regular monthly debt service payments through November 1,
1998, including payments to the tax impound account. At that time, however,
negotiations with a potential buyer, for a sale at a contract price equal to
approximately the outstanding note payable balance, had terminated and the buyer
had withdrawn its offer, as the title company was unable to issue acceptable
title insurance to the buyer with respect to the land on which the hotel is
built. The forbearance agreement had expired and the Partnership concluded that
permitting the lender to foreclose was in the best interest of the investors.
The Partnership discontinued the monthly debt service payments effective with
the payment due December 1, 1998. In January 1999, the lender contacted the
Partnership and it was agreed that the Partnership would make the monthly debt
service payments to cover the payments due December 1, 1998 through April 1,
1999, in exchange for the lender agreeing to work towards taking title to the
property via a deed in lieu of foreclosure and assuming the management contract
with Marriott (with Marriott's consent), thereby relieving the Partnership of a
potential obligation to pay approximately $1,400,000 in termination fees plus
other costs, and relief from the ground lease. Consequently, on February 5,
1999, the Partnership paid $265,000 to cover the monthly payments (including
impound) due through February 1, 1999. The Partnership has also paid the $88,000
due March 1, 1999 and April 1, 1999. On June 18, 1999 the lender foreclosed on
the property, as discussed in Note 3, and the payoff was settled. The
outstanding principal at the time of sale was $8,224,000. In the accompanying
financial statements, the adjusted balance was $8,207,000 after applying the
amount held in an impound by the lender.
5. MINIMUM FUTURE RENTAL COMMITMENTS
The Hotel was subject to a land lease that extended through May 25, 2049, with
an option to purchase the land. The annual payments on the lease were $100,000
plus additional payments equal to 1.8% of the Hotel's revenues. The 1.8%
additional payments requirement expired on April 15, 1998. The $100,000 annual
payment is due based upon the property achieving certain operating results and
any amounts not paid currently were accrued.
Rental expense (including the 1.8% of revenues through April 15, 1998) for this
lease was $46,000 in 1999.
19
6. 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 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.
20
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.
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 has been scheduled for September
16, 2002.
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 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.
21
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.
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.
Oral argument in this appeal was held on September 7, 2001, but no ruling has
yet been made.
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.
22
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.
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. This action has not yet been
served on any defendant, to the knowledge of the Partnership and SSR.
7. RECONCILIATION TO INCOME TAX METHOD OF ACCOUNTING
The differences between the method of accounting for income tax reporting and
the accrual method of accounting used in the Financial Statements are as
follows:
2001 2000 1999
----------- ----------- -----------
Net income (loss) -- Financial Statements ....... $ 51,000 $ 584,000 $ 134,000
Differences resulted from:
Loss on foreclosure of property .............. -- -- 129,000
Depreciation ................................. -- -- (220,000)
Other ........................................ -- -- (294,000)
----------- ----------- -----------
Net income (loss) -- income tax method .......... $ 51,000 $ 584,000 $ (251,000)
=========== =========== ===========
Taxable income (loss) per limited partnership
assignee unit.................................. $ 1 $ 10 $ (4)
=========== =========== ===========
Net assets and liabilities - Financial Statements $ 7,302,000 $ 7,220,000 $ 6,636,000
Cumulative differences resulted from:
Gain on sale of property ..................... -- -- --
Impairment provision for asset to be
disposed of ................................ -- -- --
Depreciation ................................. -- -- --
Interest ..................................... -- -- --
Other ........................................ -- -- --
----------- ----------- -----------
Net assets and liabilities - income tax method .. $ 7,302,000 $ 7,220,000 $ 6,636,000
=========== =========== ===========
23
8. SUMMARIZED QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
The following represents selected financial data for the Partnership, for the
two years ended December 31, 2001 and 2000. The data should be read in
conjunction with the financial statements included elsewhere herein.
For the Three Months Ended
2001 MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
----------- ----------- ------------ -----------
Total Revenues ................................ $ 102,000 $ 81,000 $ 66,000 $ 45,000
Total Expenses ................................ 32,000 41,000 35,000 135,000
----------- ----------- ----------- -----------
Net Income (Loss): ...................... $ 70,000 $ 40,000 $ 31,000 $ (90,000)
=========== =========== =========== ===========
Net Income (Loss) per Partnership Assignee
Unit(1):
Net Income (Loss) ....................... $ 1 $ 1 $ -- $ (1)
=========== =========== =========== ===========
Total Assets .................................. $ 7,332,000 $ 7,351,000 $ 7,387,000 $ 7,302,000
=========== =========== =========== ===========
Long Term Obligations:
Notes Payable ........................... $ -- $ -- $ -- $ --
=========== =========== =========== ===========
Cash Distributions per Limited Partnership
Assignee Unit ............................... $ -- $ -- $ -- $ --
=========== =========== =========== ===========
For the Three Months Ended
2000 MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
----------- ----------- ------------ ------------
Total Revenues ............................ $ 108,000 $ 105,000 $ 113,000 $ 121,000
Total Expenses ............................ 119,000 46,000 52,000 56,000
----------- ----------- ----------- -----------
Net Income (Loss):
Income (Loss) Before Gain on
Foreclosure of Property............ (11,000) 59,000 61,000 65,000
Gain on Foreclosure of Property ..... 105,000 -- 305,000 --
----------- ----------- ----------- -----------
Net Income (Loss) ......................... $ 94,000 $ 59,000 $ 366,000 $ 65,000
=========== =========== =========== ===========
Net Income (Loss) per Limited Partnership
Assignee Unit (1):
Income (Loss) Before Gain on
Foreclosure of Property $ -- $ 1 $ 1 $ 1
Gain on Foreclosure of Property ......... 2 -- 5 --
----------- ----------- ----------- -----------
Net Income (Loss) per Limited Partnership
Assignee Unit............................ $ 2 $ 1 $ 6 $ 1
=========== =========== =========== ===========
Total Assets .............................. $ 6,837,000 $ 6,855,000 $ 7,208,000 $ 7,281,000
=========== =========== =========== ===========
Long Term Obligations:
Notes Payable ....................... $ -- $ -- $ -- $ --
=========== =========== =========== ===========
Cash Distributions per Limited Partnership $ -- $ -- $ -- $ --
=========== =========== =========== ===========
Assignee Unit
(1) $1,000 original contribution per limited partnership Assignee Unit based on
59,932 limited partnership Assignee Units outstanding during the period.
24
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
25
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The Partnership has no directors or executive officers. For informational
purposes only, the following are the names and additional information relating
to the directors and executive officers of SSR Realty Advisors, Inc. ("SSR
Realty"), the managing partner of Metric Realty, the Managing General Partner of
the Partnership.
(a) DIRECTORS
THOMAS P. LYDON, JR.
Director, President and Chief Executive Officer, SSR Realty
Mr. Lydon age 53, has been President and Chief Executive Officer of SSR Realty,
or one of its predecessor companies since February 1995. From March 1997 through
its dissolution in early January 2000, he was also Chairman of the Board and
Chief Executive Officer of Metric Income Trust Series, Inc., a publicly-held
real estate investment trust, of which SSR Realty was the Advisor. Prior to
joining SSR Realty, Mr. Lydon was from April 1992, an Executive Vice President
of MBL Life Assurance Corporation ("MBL") (formerly Mutual Benefit Life
Insurance Company) chosen by the New Jersey Department of Insurance to oversee
and reorganize the real estate investment division of MBL. Mr. Lydon's
experience before joining MBL included serving as Executive Vice President and
Principal of Manhattan Capital Realty Corporation, an investment banking firm,
from 1990 to 1992; and as Senior Vice President of Unicorp American Corporation,
a real estate and banking firm, from 1985 to 1990. Mr. Lydon graduated from
Syracuse University with a Bachelor's Degree in Business Administration in 1970.
RICHARD S. DAVIS
Chairman of the Board, SSR Realty
Mr. Davis, age 56, was elected to his position with SSR Realty in November 2000.
He joined State Street Research and Management Company ("State Street"), a
subsidiary of Metropolitan Life Insurance Company ("MetLife"), in November 2000,
as Chairman of the Board, Chief Executive Officer and President. He also serves
as President and CEO of SSRM Holdings, Inc. a wholly owned subsidiary of
MetLife, which in turn serves as a holding company for several of MetLife's
investment management subsidiaries. Prior to joining State Street, Mr. Davis was
Senior Vice President, Fixed Income Investments for MetLife, responsible for the
firm's $110 billion fixed income portfolio. Prior to this, Mr. Davis spent 8
years at J.P. Morgan Securities and J.P. Morgan Investment Management, where his
responsibilities spanned from global fixed income sales management to client
business, risk management and product development for the firm's money
management division. He previously held successive management positions for 19
years at First Boston Corporation, where he was ultimately responsible for
leading sales, trading and research for all fixed income products. He holds a
Bachelor's degree from Georgetown University and a Master's Degree in Business
Administration from Columbia University.
(b) EXECUTIVE OFFICERS
WILLIAM A. FINELLI
Managing Director and Chief Financial Officer, SSR Realty
Mr. Finelli, age 44, has been Managing Director, and Vice President, Chief
Financial Officer and Treasurer of SSR Realty or one of its predecessor
companies since August 1995. He is responsible for overseeing the day to day
activity of the accounting, finance, legal, technology and valuation areas of
SSR Realty. Before he joined SSR Realty, Mr. Finelli served from November 1983
as a financial executive of MBL. His last position with MBL was Vice President -
Real Estate Accounting. Prior to his years at MBL, Mr. Finelli was with Ernst &
Young, a public accounting firm. Mr. Finelli graduated from Rutgers University
with a Bachelor's Degree in Accounting in 1979 and is a Certified Public
Accountant.
HERMAN H. HOWERTON
Managing Director and General Counsel, SSR Realty
Mr. Howerton, age 58, has served as General Counsel of SSR Realty or its
predecessor companies since 1988. From 1984 to 1988, he was employed by Fox
Capital Management Corporation ("FCMC") in various legal positions. He was
employed by Cushman & Wakefield in commercial leasing from 1983 to 1984. Prior
to that, from 1972 to 1982, Mr.
26
Howerton held various positions with Itel Corporation, including those of Vice
President-Administration and Vice President, General Counsel and Secretary. He
received a Bachelor of Arts Degree from California State University at Fresno in
1965 and a Juris Doctorate Degree from Harvard Law School in 1968. He is a
member of the State Bar of California.
JEFFREY B. ALLEN
Managing Director-Multi-Housing, SSR Realty
Mr. Allen, age 54, has been in charge of the Multi-Housing Operating Company of
SSR Realty since December 2001. He joined SSR in March 2001 as President of SSR
Development Partners LLC, (a subsidiary of SSR), a position in which he
continues. From 1999 until he joined SSR, Mr. Allen owned and operated his own
private development company in Southern California. From 1998 to 1999, he was a
partner at McGuire Partners, a Los Angeles-based private development company.
From 1995 to 1998, Mr. Allen was a senior executive at two NYSE listed
affiliates of Security Capital Group (Homestead Village Inc. and Archstone
Communities Trust) managing business units that developed, owned and/or managed
rental apartment units and extended-stay hotel rooms. From 1981 to 1995, Mr.
Allen was a Managing Partner of Paragon Group, a major national
developer/owner/manager of residential, commercial and industrial real estate.
He received a Masters Degree in business administration from Harvard University
Graduate School of Business and a Bachelor of Science Degree in civil
engineering from Cornell University. He is a licensed real estate broker in the
State of California and is a member of the National Multi-Housing Council, Urban
Land Institute, the Cornell University Real Estate Council and the Real Estate
Committee of the Southern California Biomedical Council.
ITEM 11. EXECUTIVE COMPENSATION.
The Partnership does not pay or employ any directors or officers. Compensation
to the directors and officers of SSR Realty, the managing partner of Metric
Realty (the managing general partner of the Partnership), is paid by SSR Realty
or its affiliates and is not related to the results of the Partnership.
The Partnership has not established any plans pursuant to which plan or non-plan
compensation has been paid or distributed during the last fiscal year or is
proposed to be paid or distributed in the future, nor has the Partnership issued
or established any options or rights relating to the acquisition of its
securities or any plan relating to such options or rights. However, SSR Realty
is expected to receive certain allocations, distributions and other amounts
pursuant to the Partnership's limited partnership agreement. In addition,
included in the expense reimbursements made to such general partner or
affiliates by the Partnership is an allocation for a portion of the compensation
(including employee benefit plans) paid to personnel rendering asset management
services to the Partnership.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
There is no person known to the Partnership who owns beneficially or of record
more than five percent of the voting securities of the Partnership. Neither the
Partnership's Managing General Partner nor affiliates of the Partnership's
Managing General Partner have contributed capital to the Partnership.
The Partnership is a limited partnership and has no officers or directors. The
Managing General Partner has discretionary control over most of the decisions
made by or for the Partnership in accordance with the terms of the Partnership
Agreement. Each of the directors and officers of the managing partner of the
Partnership's Managing General Partner, and all of these individuals as a group,
own less than one percent of the Partnership's voting securities.
There are no arrangements known to the Partnership, the operations of which may,
at a subsequent date, result in a change in control of the Partnership.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
None; except that the Partnership in 2001 paid and in 2002 will pay expense
reimbursements to Metric Realty for services provided to the Partnership. See
the Prospectus filed pursuant to Rule 424(b) of the Securities Act of 1933,
which is incorporated by reference herein, and Note 2 to the Financial
Statements in Item 8. All of the individuals listed in Item 10 above are
officers and employees of and receive compensation from SSR Realty or an
affiliate.
27
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) 1., 2. and 3. See Item 8 of Form 10-K for Financial Statements for the
Partnership, Notes thereto, and Financial Statement Schedules. (A table of
contents to Financial Statements and Financial Statement Schedules is
included in Item 8 and incorporated herein by reference.)
(b) No reports on Form 8-K were required to be filed during the last quarter
of the period covered by this Report.
(c) Financial Statement Schedules, if required by Regulation S-K, are included
in Item 8.
28
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
REGISTRANT
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/ Thomas P. Lydon, Jr.
-------------------------------------
Thomas P. Lydon, Jr.
President and Chief Executive Officer,
SSR Realty Advisors, Inc.
Date: March 30, 2002
------------------------------------
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the date indicated.
By: /s/ William A. Finelli By: /s/ Richard S. Davis
------------------------------------- -----------------------------------------------
William A. Finelli Richard S. Davis
Managing Director and Chief Financial Chairman of the Board, SSR Realty Advisors, Inc.
Officer, SSR Realty Advisors, Inc.
By: /s/ Thomas P. Lydon, Jr.
--------------------------------------
Thomas P. Lydon
Director, SSR Realty Advisors, Inc.
Date: March 30, 2002
-----------------------------------
29
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
REGISTRANT
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:
---------------------------------------
Thomas P. Lydon, Jr.
President and Chief Executive Officer,
SSR Realty Advisors, Inc.
Date: March 30, 2002
-------------------------------------
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the date indicated.
By: By:
------------------------------------- -----------------------------------------------
William A. Finelli Richard S. Davis
Managing Director and Chief Financial Chairman of the Board, SSR Realty Advisors, Inc.
Officer, SSR Realty Advisors, Inc.
By:
--------------------------------------
Thomas P. Lydon
Director, SSR Realty Advisors, Inc.
Date: March 30, 2002
-----------------------------------