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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended September 11, 1998 Commission File No. 333-55807
HOST MARRIOTT, L.P.
10400 Fernwood Road
Bethesda, Maryland 20817
(301) 380-9000
Delaware 53-0085950
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(State of Incorporation) (I.R.S. Employer
Identification Number)
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, and (2) has been subject to such filing requirements
for the past 90 days.
Yes No X
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Units outstanding
Class at November 9, 1998
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Units of Limited
Partnership Interest 100
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HOST MARRIOTT, L.P.
INDEX
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Page No.
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Part I. FINANCIAL INFORMATION (Unaudited):
Balance Sheets - September 11, 1998 and
June 19, 1998 3
Notes to Condensed Consolidated Financial Statements 4
Part II. OTHER INFORMATION AND SIGNATURE 6
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HOST MARRIOTT, L.P.
BALANCE SHEET
ASSETS
<TABLE>
<CAPTION>
SEPTEMBER 11, JUNE 19,
1998 1998
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(UNAUDITED)
<S> <C> <C>
Cash..................................................... $ -- $ --
===== =====
PARTNERS' CAPITAL
General partner.......................................... $ 1 $ 1
Limited partner.......................................... 99 99
----- -----
100 100
Less: subscription receivable............................ (100) (100)
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$ -- $ --
===== =====
</TABLE>
The accompanying notes are an integral part of this balance sheet.
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HOST MARRIOTT, L.P.
NOTES TO BALANCE SHEET
SEPTEMBER 11, AND JUNE 19, 1998
NOTE 1. ORGANIZATION
On April 16, 1998, the Board of Directors of Host Marriott Corporation
("Host Marriott") approved a plan to restructure Host Marriott's current
business operations through the spin-off of Host Marriott's senior living
business ("SLC") and the contribution of Host Marriott's hotels and certain
other assets and liabilities to a newly formed Delaware limited partnership,
Host Marriott, L.P. (the "Operating Partnership"), whose sole general partner
will be HMC Merger Corporation, a newly formed Maryland corporation into which
Host Marriott Corporation, a Delaware corporation will be merged subsequent to
the contribution. HMC Merger Corporation (to be renamed "Host Marriott
Corporation"), expects to qualify as a REIT and will be the general partner of
the Operating Partnership. Host Marriott's contribution of its hotels and
certain assets and liabilities to the Operating Partnership (the
"Contribution") in exchange for units of limited partnership interests in the
Operating Partnership will be accounted for at Host Marriott's historical
basis.
The accompanying balance sheets of the Operating Partnership includes its
accounts as of September 11, and June 19, 1998. The assets and liabilities of
the Host Marriott Hotels will be included in the Contribution by Host Marriott
to the Operating Partnership in connection with its planned conversion to a
REIT (the "REIT Conversion"), anticipated to become effective January 1, 1999.
In June 1998, as part of the REIT Conversion, the Operating Partnership
filed a preliminary Prospectus/Consent Solicitation with the Securities and
Exchange Commission. This Prospectus/Consent Solicitation Statement describes
a proposal whereby the Operating Partnership will acquire by merger (the
"Mergers") eight public limited partnerships (the "Partnerships") that own or
control 24 full-service hotels in which Host Marriott or its subsidiaries are
general partners. As more fully described in the Prospectus/Consent
Solicitation Statement, limited partners of those Partnerships that
participate in the Mergers will receive OP Units, and may at their election,
exchange such OP Units for unsecured notes due December 15, 2005 issued by the
Operating Partnership ("Notes") or common shares of the REIT.
However, the consummation of the REIT Conversion is subject to significant
contingencies that are outside the control of Host Marriott, including final
Board of Directors approval, consents of shareholders, partners, bondholders,
lenders and ground lessors of Host Marriott, its affiliates and other third
parties. Accordingly, there can be no assurance that the REIT Conversion or
the Contribution will be completed.
On April 20, 1998, Host Marriott and certain of its subsidiaries filed a
shelf registration on Form S-3 (the "Shelf Registration") with the Securities
and Exchange Commission for $2.5 billion in securities, which may include
debt, equity or a combination thereof. Host Marriott anticipates that any net
proceeds from the sale of offered securities will be used for refinancing of
Host Marriott's indebtedness, potential future acquisitions and general
corporate purposes.
On August 5, 1998, HMH Properties, Inc. ("HMH Properties"), an indirect
wholly-owned subsidiary of Host Marriott, which owns 61 of Host Marriott's
hotels, purchased substantially all of its (i) $600 million in 9 1/2% senior
notes due 2005, (ii) $350 million in 9% senior notes due 2007 and (iii) $600
million in 8 7/8% senior notes due 2007 (collectively, the "Old Senior
Notes"). Concurrently with each offer to purchase, HMH Properties solicited
consents (the "1998 Consent Solicitations") from registered holders of the Old
Senior Notes to certain amendments to eliminate or modify substantially all of
the restrictive covenants and certain other provisions contained in the
indentures pursuant to which the Old Senior Notes were issued. HMH Properties
simultaneously utilized the Shelf Registration to issue an aggregate of $1.7
billion in senior notes (the "New Senior Notes"). The New Senior Notes were
issued in two series, $500 million of 7 7/8 Series A notes due in 2005 and
$1.2 billion of 7 7/8 Series B notes due in 2008. The 1998 Consent
Solicitations facilitated the merger
4
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of HMC Capital Resources Holdings Corporation ("Capital Resources"), a wholly-
owned subsidiary of the Company, with and into HMH Properties. Capital
Resources, the owner of eight of Host Marriott's hotel properties, was the
obligor under the $500 million credit facility (the "Old Credit Facility").
In conjunction with the issuance of the New Senior Notes, HMH Properties
entered into a $1.25 billion credit facility (the "New Credit Facility") with
a group of commercial banks. The New Credit Facility will initially have a
three year term with two one year extension options. Borrowings under the New
Credit Facility generally bear interest at the Eurodollar rate plus 1.75%. The
interest rate and commitment fee (currently 0.35% on the unused portion of the
New Credit Facility) fluctuate based on certain financial ratios.
The New Credit Facility and the indenture under which the New Senior Notes
were issued contain covenants restricting the ability of HMH Properties and
certain of its subsidiaries to incur indebtedness, grant liens on their
assets, acquire or sell assets or make investments in other entities, and make
distributions to equityholders of HMH Properties, Host Marriott, and
(following the REIT Conversion) the Operating Partnership and Host REIT.
Following the REIT Conversion, the New Credit Facility permits the Operating
Partnership to make distributions to holders of OP Units, including Host REIT,
in an aggregate amount for every four fiscal quarters equal to the greater of
(i) 85% of adjusted funds from operations plus the net proceeds of equity
offerings and (ii) the minimum amount necessary to permit Host REIT to
maintain its status as a REIT and to satisfy certain other requirements,
provided that no specified default or event of default has occurred under the
New Credit Facility and is continuing. The New Credit Facility also permits
the Operating Partnership to make distributions to Host REIT sufficient to
enable Host REIT to make the E&P Distribution.
Following the REIT Conversion, the indenture permits the Operating
Partnership to make distributions to holders of OP Units, including Host REIT,
in amounts equal to the greater of (i) 95% of FFO plus net proceeds of equity
offerings (provided that no event of default under the indenture has occurred
and is continuing and the Operating Partnership is able to incur debt under
the applicable indenture covenants) or (ii) an amount sufficient to permit
Host REIT to maintain its status as a REIT and satisfy certain other
requirements (provided that no event of default under the indenture has
occurred and is continuing and the Operating Partnership has a consolidated
debt to adjusted total assets ratio that is less than a specified level). The
indenture also permits the Operating Partnership to make distributions to Host
REIT sufficient to enable Host REIT to make the E&P Distribution.
The New Credit Facility and the New Senior Notes also contain certain
financial covenants relating to, among other things, maintaining certain
levels of tangible net worth and certain ratios of EBITDA to interest and
fixed charges, total debt to EBITDA, unencumbered assets to unsecured debt,
and secured debt to total debt.
The New Credit Facility replaces the Company's Old Credit Facility. The net
proceeds from the offering and borrowings under the New Credit Facility were
used by Host Marriott to purchase substantially all of the Old Senior Notes to
repay amounts outstanding under the Old Credit Facility and to make bond
premium and consent payments totaling approximately $175 million. These costs,
along with the write-off of deferred financing fees of approximately $52
million related to the Old Senior Notes and the Old Credit Facility, were
recorded as a pre-tax extraordinary loss on the extinguishment of debt in the
third quarter of 1998. The New Senior Notes and the New Credit Facility are
guaranteed by Host Marriott and its wholly owned subsidiary, Host Marriott
Hospitality, Inc. and certain subsidiaries of HMH Properties and are secured
by pledges of equity interests in certain subsidiaries of HMH Properties.
5
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits:
None.
b. Reports on Form 8-K:
None.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Host Marriott, L.P.
By: HMC Real Estate L.L.C.,
as general partner of
Host Marriott, L.P.
November 20, 1998 /s/ Donald D. Olinger
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Date Donald D. Olinger
Vice President and
Chief Accounting Officer
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM HOST
MARRIOTT LP'S BALANCE SHEETS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0001061937
<NAME> HOST MARRIOTT LP
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JUN-19-1998
<PERIOD-END> SEP-11-1998
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 0
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 100
<OTHER-SE> (100)
<TOTAL-LIABILITY-AND-EQUITY> 0
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
