Growth Hotel Investors · 10-K · For 12/31/97 · EX-99

Filed On 5/12/98   ·   SEC File 0-15347   ·   Accession Number 769129-98-5

Annual Report   ·   Form 10-K
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 10-K        Annual Report                                         31±   136K 
 2: EX-27       Financial Data Schedule                                2±     8K 
 3: EX-99       Miscellaneous Exhibit                                 10±    43K 

EX-99   ·   Miscellaneous Exhibit

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EXHIBIT 99(g) 

GROWTH HOTEL INVESTORS COMBINED FUND NO 1.

CONSOLIDATED FINANCIAL STATEMENTS 

AS OF DECEMBER 31, 1997, 1996 and 1995

GROWTH HOTEL INVESTORS COMBINED FUND NO 1.

December 31, 1997 

LIST OF CONSOLIDATED FINANCIAL STATEMENTS                                       

Independent Auditors' Report                                        

Statement of Net Liabilities in Liquidation - December 31, 1997     

Consolidated Balance Sheet - December 31, 1996                      

Consolidated Statements of Operations - Years ended December 31,    
1997, 1996 and 1995                                     

     Consolidated Statements of Partners' Capital (Deficit)/Net Liabilities in
  Liquidation - Years ended December 31, 1997, 1996 and 1995

Consolidated Statements of Cash Flows - Years ended December 31,    
1997, 1996 and 1995                                     

Notes to Consolidated Financial Statements                          

GROWTH HOTEL INVESTORS COMBINED FUND NO. 1. 

To the Partners                                                                 
Growth Hotel Investors Combined Fund No. 1,                                     
Greenville, South Carolina                                                      

Independent Auditors' Report

We have audited the accompanying consolidated statement of net liabilities in   
liquidation and the consolidated balance sheet of Growth Hotel Investors        
Combined Fund No. 1 (the "Partnership"), as of December 31, 1997 and 1996,      
respectively, and the related consolidated statements of operations, partners'  
capital and cash flows for each of the three years in the period ended December 
31, 1997.  These consolidated financial statements are the responsibility of the
Partnership's management.  Our responsibility is to express an opinion on these 
consolidated financial statements based on our audits.                          

We conducted our audits in accordance with generally accepted auditing          
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the consolidated financial statements are    
free of material misstatement.  An audit includes examining, on a test basis,   
evidence supporting the amounts and disclosures in the consolidated financial   
statements.  An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall     
consolidated financial statement presentation.  We believe that our audits      
provide a reasonable basis for our opinion.                                     

In our opinion, the consolidated financial statements referred to above present 
fairly, in all material respects, the consolidated financial position of Growth 
Hotel Investors Combined Fund No. 1, as of December 31, 1997 and 1996, and the  
results of its operations and its cash flows for each of the three years in the 
period ended December 31, 1997, in conformity with generally accepted accounting
principles.                                                                     

                                             /s/ Imowitz Koenig & Co., LLP
                                            Certified Public Accountants

New York, N.Y.                                                                  
March 30, 1998                                                                  

GROWTH HOTEL INVESTORS COMBINED FUND NO. 1

STATEMENT OF NET LIABILITIES IN LIQUIDATION 
(in thousands)
December 31, 1997 

Assets                                                                          
Cash and cash equivalents                                $ 153              

Liabilities                                                                     
Accounts payable                                           195              
Estimated costs during the period                                           
of liquidation                                            26            
                                             221
Net Liabilities in liquidation                             $ (68)               

See Accompanying Notes to Consolidated Financial Statements 

GROWTH HOTEL INVESTORS COMBINED FUND NO. 1

CONSOLIDATED BALANCE SHEET
(in thousands)

YEAR ENDED DECEMBER 31, 1996

Assets                                                                          
Cash and cash equivalents                              $  2,228               
Restricted cash                                             3             
Deferred costs and other assets                         1,108             
Investment properties                                                         
Land                                                  10,369            
Buildings and related personal property               79,891            
                                          90,260
Less accumulated depreciation                        (31,400)           
                                          58,860

Total assets                                      $ 62,199          

Liabilities and Partners' Equity                                                
Accounts payable and other liabilities               $  1,337             
Due to an affiliate of the joint venture                                  
partner                                               827         
Notes payable                                          40,185             
Total liabilities                                   42,349          

Minority interest in consolidated joint venture           (5,268)               

Partners' Equity:                                                               
GHI                                                       7,767               
GHI II                                                   17,351               

Total partners' equity                                   25,118               

Total liabilities and partners' equity                 $ 62,199               

See Accompanying Notes to Consolidated Financial Statements 

GROWTH HOTEL INVESTORS COMBINED FUND NO. 1

CONSOLIDATED STATEMENTS OF OPERATIONS 
(in thousands)

                                                YEARS ENDED DECEMBER 31,
                                               1997       1996      1995

Revenues:                                                                       
Hotel operations                              $ 18,222  $ 38,154    $ 36,934
Gain on sale of investment properties           58,044        --          --
Interest income                                    398       173         222
  Total revenues                                76,664    38,327      37,156

Expenses (including $2,714, $5,602 and                                          
$5,545 paid to an affiliate of the joint                                        
venture partner in 1997, 1996, and 1995)                                        

Hotel operations                                12,515    24,274      22,811
Interest                                         1,926     4,227       4,139
Depreciation                                     2,283     4,088       3,751
General and administrative                         230       269           9
  Total expenses                                16,954    32,858      30,710

Income before minority interest in                                              
joint venture's operations                      59,710     5,469       6,446

Minority interest in joint venture's operations      455       393         (76) 

Net income                                      $ 60,165  $  5,862    $  6,370  

See Accompanying Notes to Consolidated Financial Statements 

GROWTH HOTEL INVESTORS COMBINED FUND NO. 1

CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)/NET 
LIABILITIES IN LIQUIDATION
(in thousands)

YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995

                 Growth       Growth
                  Hotel        Hotel
                           Investors  Investors II   Total

Balance - December 31, 1994          $  8,487     $ 18,872    $ 27,359          
Net income                            2,021        4,349       6,370        
Cash distributions                   (2,355)      (5,067)     (7,422)       

Balance - December 31, 1995             8,153       18,154      26,307          
Net income                            1,851        4,011       5,862        
Cash distributions                   (2,237)      (4,814)     (7,051)       

Balance - December 31, 1996             7,767       17,351      25,118          
Net income                           18,440       41,725      60,165        
Cash distributions                  (26,207)     (59,154)    (85,361)       

Balance - December 31, 1997          $     --     $    (78)        (78)         

Adjustment to liquidation basis                                     10          

Net liabilities in liquidation                                $    (68)         

See Accompanying Notes to Consolidated Financial Statements 

GROWTH HOTEL INVESTORS COMBINED FUND NO. 1

CONSOLIDATED STATEMENTS OF CASH FLOWS 
(in thousands)

                                                                · Download Table


                                                        YEARS ENDED DECEMBER 31,   
                                                        1997       1996      1995  
                                                                                   
Cash flows from operating activities:                                              
Net income                                          $  60,165   $  5,862  $  6,370 
Adjustments to reconcile net income to net                                         
 cash provided by operating activities:                                            
   Depreciation and amortization                        2,297      4,201     3,916 
   Minority interest in joint venture's operations       (455)      (393)       76 
   Gain on sale of investment properties              (58,044)        --        -- 
   Change in operating assets and liabilities:                                     
     Deferred costs and other assets                      482       (122)      (20)
     Accounts payable, other liabilities and due                                   
      to an affiliate of the joint venture partner       (736)      (144)      412 

Net cash provided by operating activities               3,709      9,404    10,754 

Cash flows from investing activities:                                              
   Net proceeds from sale of investment properties    114,230         --        -- 
   Additions to real estate                            (2,721)    (2,860)   (3,154)
   Restricted cash decrease                                 3        567     1,418 

Net cash provided by (used in) investing activities   111,512     (2,293)   (1,736)

Cash flows from financing activities:                                              
   Notes payable principal payments                      (273)      (651)     (525)
   Due to affiliate                                      (818)        --        -- 
   Repayment of notes payable                         (39,911)        --        -- 
   Joint venture partner contributions                                             
     (distributions)                                    9,067       (838)     (367)
   Cash distributions to partners                     (85,361)    (7,051)   (7,422)

Net cash used in financing activities                (117,296)    (8,540)   (8,314)

(Decrease) Increase in Cash and Cash Equivalents       (2,075)    (1,429)      704 

Cash and cash equivalents at beginning of year          2,228      3,657     2,953 

Cash and cash equivalents at end of year            $     153   $  2,228  $  3,657 

Supplemental disclosure of cash flow information:                                  
 Interest paid in cash during the year              $   1,926   $  4,218  $  3,716 
<FN>                                                                               
          See Accompanying Notes to Consolidated Financial Statements              
</FN>                                                                              

GROWTH HOTEL INVESTORS COMBINED FUND NO. 1

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE A - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES                       

Organization                                                                    

Growth Hotel Investors, Combined Fund No. 1, (the "Partnership"), is a general  
partnership organized in 1986 under the laws of the State of California to      
acquire a majority interest in a joint venture, Hampton/GHI Associates No. 1,   
which was formed to acquire, manage and ultimately sell eighteen hotels which   
were franchised by Hampton Inns, Inc. ("Hampton"), a wholly owned subsidiary of 
Promus Hotels, Inc. ("Promus"). The properties owned by the joint venture were  
located in Alabama, Arkansas, Georgia, Michigan, North Carolina, South Carolina,
Tennessee and Texas.                                                            

The general partners are Growth Hotel Investors ("GHI") and Growth Hotel        
Investors II ("GHI II"); both are California limited partnerships which are     
affiliated through their general partners.                                      

On March 17, 1998, Insignia Financial Group, Inc. ("Insignia") entered into an  
agreement to merge its national residential property management operations, and 
its controlling interest in Insignia Properties Trust, with Apartment Investment
and Management Company ("AIMCO"), a publicly traded real estate investment      
trust.  The closing, which is anticipated to happen in the third quarter of     
1998, is subject to customary conditions, including government approvals and the
approval of Insignia's shareholders.  If the closing occurs, AIMCO will then    
control the General Partners of the Partnership.  It is anticipated, however,   
that the Partnership will be liquidated prior to the consummation of the AIMCO  
transaction.  In any event, it is not anticipated that this transaction will    
have a material effect on the Partnership.                                      

Cash is distributed first to the Partnership as a priority return on its        
invested capital prior to any distributions to Hampton.  Income before          
depreciation and amortization is allocated between the Partnership and Hampton  
in the same ratio as their respective cash distributions.  Depreciation and     
amortization are allocated on the basis of residual interests except for the    
expenses related to acquisition and loan fees paid by the Partnership which are 
allocated 100 percent to the Partnership.  The residual interests in Hampton/GHI
Associates No. 1 are 80 percent for the Partnership and 20 percent for Hampton. 

Except for Mountain Brook, all of the Partnership's properties were sold on June
24, 1997 to an unrelated third party, Equity Inns Partnership LP ("Equity       
Inns"), a Tennessee Limited Partnership.  Mountain Brook was sold on August 1,  
1997 to Equity Inns.                                                            

As a result of the decision to liquidate the Partnership, the Partnership       
changed its basis of accounting for its financial statements at December 31,    
1997 to the liquidation basis of accounting.  Consequently, assets have been    
valued at their estimated net realizable value and liabilities are presented at 
their estimated settlement amounts, including estimated costs associated with   
carrying out the liquidation.  The valuation of assets and liabilities          
necessarily requires many estimates and assumptions and there are substantial   
uncertainties in carrying out the liquidation.  The actual realization of assets
and settlement of liabilities could be higher or lower than amounts indicated   
and is based upon the Managing General Partner's estimates as of the date of the
financial statements.                                                           

The statement of net liabilities in liquidation as of December 31, 1997,        
includes approximately $26,000 of costs, net of income, that the Managing       
General Partner estimates will be incurred during the period of liquidation,    
based on the assumption that the liquidation process will be completed in 1998. 
These costs include anticipated legal fees and administrative expenses, net of  
estimated interest income from cash balances.  Because the realization of assets
and the settlement of liabilities is based on the Managing General Partner's    
best estimates, the liquidation period may be shorter than projected or it may  
be extended beyond the projected period.                                        

Principles of Consolidation                                                     

The consolidated financial statements include the accounts of the Partnership   
and its majority owned joint venture.  All significant intercompany transactions
and balances have been eliminated.  Losses in excess of capital contributions   
were allocated to the minority interest.  Pursuant to the terms of the          
Hampton/GHI Joint Venture Agreement, Hampton was obligated to contribute to     
Hampton/GHI an amount equal to the deficit of its tax capital account, which    
amount was in excess of the amount to be distributed to Hampton.  As a result,  
the Partnership set aside as a reserve the amount which otherwise would have    
been distributed to Hampton.  Hampton/GHI received such payment from Hampton for
its deficit restoration obligation on November 5, 1997 in the amount of         
approximately $9,067,000.                                                       

Use of Estimates                                                                

The preparation of financial statements in conformity with generally accepted   
accounting principles 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.                               

Advertising                                                                     

The Partnership expenses the costs of advertising as incurred.  Advertising     
expense, included in operating expenses, was approximately $983,111, $1,995,000 
and $1,911,000 for the years ended December 31, 1997, 1996 and 1995,            
respectively.                                                                   

Investment Properties                                                           

Investment properties are stated at cost.  Acquisition fees are capitalized as a
cost of real estate.  The Partnership records impairment losses on long-lived   
assets used in operations when events and circumstances indicate that the assets
might be impaired and the undiscounted cash flows estimated to be generated by  
those assets are less than the carrying amounts of those assets.                

Cash and Cash Equivalents                                                       

The Partnership considers all highly liquid investments with a maturity, when   
purchased, of three months or less to be cash equivalents.  At certain times,   
the amount of cash deposited at a bank may exceed the limit on insured deposits.

Depreciation                                                                    

Depreciation is computed using the straight-line method based on estimated      
useful lives ranging from 5 to 39 years.                                        

Deferred Costs                                                                  

Deferred costs represent financing costs, franchise fees and land lease cost.   
Financing costs were deferred and amortized, as interest expense, over the life 
of the related loans, which ranged from eight to ten years, or expensed, if     
financing was not obtained.  Franchise fees paid in connection with the         
acquisition of the hotels were deferred and amortized over the lives of the     
franchise agreements, which were twenty years.  Land lease costs paid in        
connection with the acquisition of certain hotels were deferred and amortized   
over the lives of the lease agreements, which were twenty years. At December 31,
1996, accumulated amortization of deferred costs totaled $350,000.  The fully   
amortized costs were written off during 1996.  Net deferred costs of $403,000   
for 1996, are included in deferred costs and other assets.  In connection with  
the sale of properties during 1997, all remaining deferred cost balances were   
written off.                                                                    

Net Income Allocation                                                           

Net income is allocated between GHI and GHI II based on the ratio of each       
partner's capital contribution to the Partnership.                              

Income Taxes                                                                    

Taxable income or loss of the Partnership is reported in the income tax returns 
of its partners.  Accordingly, no provision for income taxes is made in the     
financial statements of the Partnership.                                        

Reclassifications:                                                              

Certain reclassifications have been made to the 1996 and 1995 balances to       
conform to the 1997 presentation.                                               

NOTE B - RELATED PARTY TRANSACTIONS                                             

The Partnership has agreements with an affiliate of its joint venture partner,  
which provide for the management and operation of the joint venture properties  
and services provided under each property's franchise agreement.  Fees paid     
pursuant to these agreements are generally based on a percentage of gross       
revenues from operations of the property and were $2,714,000, $5,602,000 and    
$5,545,000 for the years ended December 31, 1997, 1996 and 1995, respectively.  

NOTE C - RESTRICTED CASH                                                        

Restricted cash at December 31, 1996, represents funds provided for and         
maintained by certain properties, pursuant to the related notes payable         
agreements, to meet future capital requirements and debt service payments.      

NOTE D - NOTES PAYABLE                                                          

Properties and improvements were pledged as collateral for the related notes    
payable. The notes carried interest at rates ranging from 7.63 percent to 10    
percent. The mortgages encumbered sixteen of the eighteen hotels that were owned
by the joint venture and were cross collateralized.  Amortization of deferred   
financing costs totaled $103,000 for the year ended December 31, 1996, and      
$124,000 for the year ended December 31, 1995.  The notes were payable monthly  
and matured beginning in July 1997, through August 1997.                        

The mortgages encumbering the Partnership's Hampton Inn-Mountain Brook and      
Hampton Inn-Northlake properties in the amounts of approximately $2,543,000 and 
$2,366,000, respectively, matured on August 1, 1996.  The Managing General      
Partner obtained an extension for these loans until August 1, 1997.  The        
mortgage encumbering the remaining properties in the Combined Fund in the amount
of approximately $35,276,000 matured on December 1, 1996.  The Managing General 
Partner obtained an extension for these loans until July 1, 1997.  Upon the sale
of the investment properties, as discussed in Note E, the mortgages were paid   
off.                                                                            

NOTE E - SALE OF PROPERTIES                                                     

On June 24, 1997, the Partnership sold 17 of its 18 investment properties,      
Hampton Inn-Memphis-I-40, Hampton Inn-Columbia West, Hampton Inn-Spartanburg,   
Hampton Inn-Little Rock, Hampton Inn-Amarillo, Hampton Inn-Greenville, Hampton  
Inn-Charleston, Hampton Inn-Memphis-Poplar, Hampton Inn-Greensboro, Hampton Inn-
Birmingham, Hampton Inn-Atlanta, Hampton Inn-Chapel Hill, Hampton Inn-Dallas,   
Hampton Inn-Nashville, Hampton Inn-San Antonio, Hampton Inn-Madison Heights,    
Hampton Inn-Northlake for a purchase price of approximately $107,576,000.  The  
investment properties were sold to an unrelated third party, Equity Inns        
Partnership, L.P., a Tennessee limited partnership. The properties were sold in 
accordance with the settlement of the class action lawsuit brought in connection
with the tender offer made by Devon Associates (see Note H - Tender Offers).    
The Partnership's final property, the Hampton Inn-Mountain Brook, was sold on   
August 1, 1997 for a sales price of $8,758,000.                                 

The aggregate sale price for all the properties was approximately $116,334,000. 
The Partnership received net proceeds, after satisfaction of outstanding        
indebtedness and closing costs, from the sale of its investment properties of   
approximately $74,312,000. The Partnership made distributions of approximately  
$85,361,000 to its partners from proceeds of the sale and operations.  It is    
anticipated that the Partnership will be dissolved during 1998 and the remaining
funds will be distributed to the partners.                                      

In connection with the sale of the Partnership's properties, the Partnership's  
joint venture partner, Hampton Inns, Inc. ("Hampton"), was to be distributed a  
portion of the net sale proceeds.  However, pursuant to the terms of the        
Hampton/GHI Joint Venture Agreement, Hampton was obligated to contribute to     
Hampton/GHI an amount equal to the deficit of its tax capital account, which    
amount was in excess of the amount to be distributed to Hampton.  As a result,  
the Partnership set aside as a reserve the amount which otherwise would have    
been distributed to Hampton.  Hampton/GHI received such payment from Hampton for
its deficit restoration obligation on November 5, 1997 in the amount of         
approximately $9,067,000.                                                       

The Partnership recognized a gain of approximately $58,044,000 due to the sale  
of the properties in which the Partnership had a controlling interest.          

NOTE F - ADJUSTMENT TO LIQUIDATION BASIS OF ACCOUNTING                          

At December 31, 1997, in accordance with the liquidation basis of accounting,   
assets were adjusted to their estimated net realizable value and liabilities    
were adjusted to their estimated settlement amount and include all estimated    
costs associated with carrying out the liquidation.  The net adjustment required
to convert to the liquidation basis of accounting was a decrease in net         
liabilities of approximately $10,000. The adjustments are summarized as follows:

                                               (Increase) Decrease
                                                in Net Liabilities
                                                (in thousands)
Adjustment to record estimated costs associated                                 
with the liquidation (Note A)                             $  (26)             

Adjustment of other assets and liabilities                     36               

Net decrease in net liabilities                            $   10               

Reconciliation of Investment Properties and Accumulated Depreciation:           

                       Year Ended December 31,
                     1997          1996         1995
Investment Properties                       (in thousands)                      

Balance at beginning of year    $  90,260     $ 87,400     $ 94,793             
Property improvements               2,721        2,860        3,154             
Sale of investment properties     (92,981)          --           --             
Retirement of assets                   --           --      (10,547)            

Balance at end of year          $      --     $ 90,260     $ 87,400             

Accumulated Depreciation                                                        

Balance at beginning of year    $  31,400     $ 27,313     $ 34,108             
Additions charged to expense        2,283        4,087        3,752             
Sale of investment properties     (33,683)          --           --             
Retirement of assets            $      --           --      (10,547)            

Balance at end of year          $      --     $ 31,400     $ 27,313             

The aggregate cost of the real estate for Federal income tax purposed at        
December 31, 1996 and 1995, respectively is approximately $100,824,000 and      
$97,964,000, respectively.  The accumulated depreciation taken for Federal      
income tax purposes at December 31, 1996 and 1995, is approximately $47,821,000 
and $43,650,000, respectively.                                                  

NOTE H - TENDER OFFERS                                                          

On February 15, 1996, Devon Associates ("Devon") offered to purchase up to      
21,000 and 15,000 limited partnership outstanding units (the "Units") of GHI II,
and GHI, respectively.  Devon Associates acquired 17,302 and 13,401 units, with 
respect to these offers, respectively.  The offer for the partnerships Units was
at a purchase price of $750 and $705, respectively, per unit, net to the seller 
in cash, without interest, upon the terms and conditions set forth in the offer 
to purchase.  Certain beneficial owners of Devon are affiliated with the general
partners of GHI II and GHI.  In addition, an affiliate of Insignia is both a    
shareholder in the general partner of Cayuga Associates, LP, the controlling    
general partner in Devon, and a limited partner in Devon.                       

Dates Referenced Herein   and   Documents Incorporated By Reference

This 10-K Filing		Date		Other Filings
		12/31/94
		12/31/95		10-K
		2/15/96		SC 14D1
		8/1/96
		12/1/96
		12/31/96		10-K
		6/24/97		8-K, 8-K/A
		7/1/97
		8/1/97
		11/5/97
For The Period Ended		12/31/97		NT 10-K
		3/17/98
		3/30/98
Filed On / Filed As Of		5/12/98
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