<PAGE>
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF
SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED) JANUARY 11, 1996
-------------------------
HOST MARRIOTT CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 1-5664 53-0085950
(STATE OR OTHER JURISDICTION (COMMISSION FILE (I.R.S. EMPLOYER
OF INCORPORATION) NUMBER) IDENTIFICATION NUMBER)
10400 FERNWOOD ROAD, BETHESDA, MARYLAND 20817
(ADDRESS OF PRINCIPLE EXECUTIVE OFFICES) (ZIP CODE)
----------------------------
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (301) 380-9000
(FORMER NAME OR FORMER ADDRESS, IF CHANGED SINCE LAST REPORT.)
================================================================================
<PAGE>
FORM 8-K
ITEM 2. ACQUISITION OF ASSETS
On January 11, 1996, the Registrant announced that it has reached
agreements to acquire controlling interests in the San Diego Marriott Hotel and
Marina, two hotels in Mexico City and the Pittsburgh Hyatt, and to purchase the
Delta Meadowdale Hotel and Conference Centre in Toronto, Canada. A copy of the
news release is attached as an exhibit to this current report. Pursuant to Items
2 and 7 of Form 8-K, certain financial statements of the San Diego Marriott
Hotel and Marina and certain proforma financial information of Host Marriott
Corporation have been included in this Form 8-K.
ITEM 5. OTHER EVENTS
In conjunction with the press release announcing the items discussed
above, the Registrant announced that one 174 acre undeveloped land site would no
longer be developed into an office project over an extended time period, but has
decided to market the site for near term sale. As a result of this change in
strategy, management has determined to record a charge of $39 million, net of
taxes of $21 million, in the fourth quarter of 1995 to reduce the asset to its
estimated sales value.
On January 11, 1996, the Registrant also announced that it has filed a
registration statement with the Securities and Exchange Commission for the
public offering of approximately 25 million shares of the Registrant's common
stock. A copy of the news release announcing the filing is attached as an
exhibit to this current report.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
<TABLE>
<CAPTION>
Page
----
<S> <C>
(a)FINANCIAL STATEMENTS OF THE PACIFIC LANDMARK HOTEL, LTD. AND PACIFIC
GATEWAY, LTD.(San Diego Marriott Hotel and Marina)
Report of Independent Public Accountants................................. 3
Combined Balance Sheets as of December 31, 1994 and 1993................. 4
Combined Statements of Operations for the Years Ended December 31, 1994
and 1993................................................................ 5
Combined Statements of Partners' Capital (Deficit) for the Years Ended
December 31, 1994 and 1993.............................................. 6
Combined Statements of Cash Flows for the Years Ended December 31, 1994
and 1993................................................................ 7
Notes to Combined Financial Statements................................... 8
Combined Statements of Operations for the Thirty-six Weeks Ended
September 8, 1995 and September 9, 1994 (unaudited)..................... 15
Combined Balance Sheet as of September 30, 1995 (unaudited)..............
Combined Statements of Cash Flows for the Thirty-six Weeks Ended
September 8, 1995 and September 8, 1994 (unaudited)..................... 16
Notes to Financial Statements............................................ 17
(b)PRO FORMA CONDENSED CONSOLIDATED FINANCIAL DATA FOR HOST MARRIOTT
CORPORATION............................................................ 18
</TABLE>
(c) Exhibits
(99a) News Release dated January 11, 1996
(99b) News Release dated January 11, 1996
SIGNATURES
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 hereunto duly authorized.
HOST MARRIOTT CORPORATION
By: /s/ CHRISTOPHER G. TOWNSEND
---------------------------------------------
Christopher G. Townsend
Senior Vice President and Corporate Secretary
Date: January 17, 1996
2
<PAGE>
INDEPENDENT AUDITORS' REPORT
The General Partners
Pacific Landmark Hotel, Ltd. and Pacific Gateway, Ltd.:
We have audited the combined financial statements of Pacific Landmark Hotel,
Ltd. and Pacific Gateway, Ltd. (limited partnerships), as listed in the
accompanying index to financial statements. These combined financial statements
are the responsibility of the Partnerships' management. Our responsibility is
to express an opinion on these combined 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 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 combined financial statements referred to above present
fairly, in all material respects, the combined financial position of Pacific
Landmark Hotel, Ltd. and Pacific Gateway, Ltd. as of December 31, 1994 and
1993, and the results of their operations and their cash flows for each of the
years in the two-year period ended December 31, 1994, in conformity with
generally accepted accounting principles.
KPMG Peat Marwick LLP
San Diego, California
March 10, 1995, except as to note 6
to the combined financial statements,
which is as of January 5, 1996
3
<PAGE>
PACIFIC LANDMARK HOTEL, LTD.
AND PACIFIC GATEWAY, LTD.
(LIMITED PARTNERSHIPS)
COMBINED BALANCE SHEETS
DECEMBER 31, 1994 AND 1993
<TABLE>
<CAPTION>
1994 1993
------------- -------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents...................... $ 1,136,000 $ 227,000
Cash--restricted (note 2)...................... 6,016,000 3,821,000
Accounts receivable, less allowance for
doubtful accounts of $75,000 in 1994 and
$67,000 in 1993............................... 2,347,000 2,876,000
Inventories.................................... 550,000 690,000
Prepaid expenses and other..................... 61,000 81,000
------------- -------------
Total current assets............................. 10,110,000 7,695,000
Property and equipment, net (notes 3 and 4)...... 144,425,000 150,369,000
China, glassware, silver and linen............... 1,437,000 1,342,000
Other assets..................................... 70,000 70,000
------------- -------------
$ 156,042,000 $ 159,476,000
============= =============
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
Current liabilities:
Bank overdraft................................. $ -- $ 619,000
Accounts payable............................... 2,178,000 1,937,000
Accrued expenses............................... 1,664,000 1,933,000
Current portion, long-term debt payable to
third party (note 4).......................... 2,630,000 2,648,000
Current portion, due to affiliates of general
partners (note 5)............................. 3,773,000 1,967,000
Advance deposits............................... 992,000 949,000
------------- -------------
Total current liabilities........................ 11,237,000 10,053,000
Long-term debt payable to third party, net of
current portion (note 4)........................ 204,565,000 207,302,000
Long-term debt payable to a general partner and
an affiliate of the general partners (note 4)... 22,000,000 22,000,000
Accrued interest (note 4)........................ 32,323,000 30,609,000
Due to affiliates of general partners, net of
current portion (note 5)........................ 22,722,000 18,657,000
------------- -------------
Total liabilities................................ 292,847,000 288,621,000
Partners' capital (deficit)...................... (136,805,000) (129,145,000)
------------- -------------
Commitments and contingencies (note 7)
Total liabilities and partners' capital.......... $ 156,042,000 $ 159,476,000
============= =============
</TABLE>
See accompanying notes to combined financial statements.
4
<PAGE>
PACIFIC LANDMARK HOTEL, LTD.
AND PACIFIC GATEWAY, LTD.
(LIMITED PARTNERSHIPS)
COMBINED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1994 AND 1993
<TABLE>
<CAPTION>
1994 1993
----------- ------------
<S> <C> <C>
REVENUE............................................. $84,163,000 $ 82,693,000
----------- ------------
DEPARTMENTAL EXPENSES:
Cost of sales..................................... 12,012,000 11,788,000
Payroll and related expenses...................... 24,963,000 24,747,000
Other............................................. 4,387,000 4,780,000
----------- ------------
Total departmental expenses..................... 41,362,000 41,315,000
----------- ------------
Income from operating departments................... 42,801,000 41,378,000
----------- ------------
Undistributed operating expenses:
Related party management fees..................... 2,940,000 2,891,000
Related party administration and marketing fees... 1,050,000 1,032,000
Related party reimbursements...................... 3,523,000 3,786,000
Third-party....................................... 8,151,000 8,389,000
----------- ------------
15,664,000 16,098,000
----------- ------------
Income before fixed charges and interest
income......................................... 27,137,000 25,280,000
----------- ------------
FIXED CHARGES:
Property taxes.................................... 2,410,000 2,938,000
Leases (note 7a).................................. 4,948,000 4,801,000
Interest (including $4,309,000 and $3,868,000 in
1994 and 1993, respectively, relating to
affiliates)...................................... 19,995,000 20,680,000
Insurance......................................... 98,000 112,000
Depreciation and amortization..................... 7,547,000 7,790,000
----------- ------------
Total fixed charges............................. 34,998,000 36,321,000
----------- ------------
Loss before interest income......................... (7,861,000) (11,041,000)
Interest income..................................... 201,000 104,000
----------- ------------
Net loss........................................ $(7,660,000) $(10,937,000)
=========== ============
</TABLE>
See accompanying notes to combined financial statements.
5
<PAGE>
PACIFIC LANDMARK HOTEL, LTD.
AND PACIFIC GATEWAY, LTD.
(LIMITED PARTNERSHIPS)
COMBINED STATEMENTS OF PARTNERS' CAPITAL (DEFICIT)
YEARS ENDED DECEMBER 31, 1994 AND 1993
<TABLE>
<S> <C>
Balance (deficit), December 31, 1992............................ $(118,208,000)
Net loss........................................................ (10,937,000)
-------------
Balance (deficit), December 31, 1993............................ (129,145,000)
Net loss........................................................ (7,660,000)
-------------
Balance (deficit), December 31, 1994............................ $(136,805,000)
=============
</TABLE>
See accompanying notes to combined financial statements.
6
<PAGE>
PACIFIC LANDMARK HOTEL, LTD.
AND PACIFIC GATEWAY, LTD.
(LIMITED PARTNERSHIPS)
COMBINED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1994 AND 1993
<TABLE>
<CAPTION>
1994 1993
----------- ------------
<S> <C> <C>
Cash flows from operating activities:
Net loss.......................................... $(7,660,000) $(10,937,000)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization................... 7,547,000 7,790,000
Gain on retirement of fixed assets.............. (64,000) (32,000)
Changes in assets and liabilities:
(Increase) decrease in cash--restricted....... (2,195,000) 3,450,000
Decrease in accounts receivable, net.......... 529,000 496,000
Decrease in inventories....................... 140,000 40,000
Decrease in prepaid expenses and other
assets....................................... 20,000 443,000
Increase in china, glassware, silver and
linen........................................ (95,000) (159,000)
Increase in accounts payable.................. 241,000 19,000
Increase (decrease) in accrued expenses....... (269,000) 407,000
Increase in advance deposits.................. 43,000 288,000
Increase in accrued interest.................. 1,714,000 2,138,000
Increase in due to affiliates................. 5,871,000 4,078,000
----------- ------------
Net cash provided by operating activities....... 5,822,000 8,021,000
----------- ------------
Cash flows from investing activities:
Capital expenditures.............................. (1,603,000) (4,622,000)
Proceeds from sale of property and equipment...... 64,000 133,000
----------- ------------
Net cash used in investing activities........... (1,539,000) (4,489,000)
----------- ------------
Cash flows from financing activities:
Principal payments on long-term debt payable to
third party...................................... (2,755,000) (2,954,000)
Decrease in bank overdraft........................ (619,000) (457,000)
----------- ------------
Net cash used in financing activities........... (3,374,000) (3,411,000)
----------- ------------
Net increase in cash and cash equivalents........... 909,000 121,000
Cash and cash equivalents at beginning of year...... 227,000 106,000
----------- ------------
Cash and cash equivalents at end of year............ $ 1,136,000 227,000
=========== ============
Supplemental disclosure of cash flow information:
Cash paid for interest............................ $13,719,000 $ 14,250,000
=========== ============
</TABLE>
See accompanying notes to combined financial statements.
7
<PAGE>
PACIFIC LANDMARK HOTEL, LTD.
AND PACIFIC GATEWAY, LTD.
(LIMITED PARTNERSHIPS)
NOTES TO COMBINED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1994 AND 1993
(1) ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
Pacific Landmark Hotel, Ltd. (Landmark), a California limited partnership,
was formed on October 2, 1981 to develop, construct and own a 681-room hotel
(Tower I) and an adjacent Marina. Upon completion of construction, hotel
operations for Tower I commenced on March 15, 1984. On May 1, 1985, Landmark
completed construction of an $11 million conference center. The conference
center is adjacent to Tower I and provides additional meeting and exhibition
space for the hotel.
Pacific Gateway, Ltd. (Gateway), a California limited partnership, was formed
on February 28, 1984 to develop, construct and own a 683-room hotel (Tower II)
adjacent to Tower I. On December 15, 1987, construction was completed and the
hotel commenced operations (Landmark and Gateway are collectively referred to
as the "Partnerships" and Tower I, Tower II and the Marina are collectively
referred to as the "Hotel").
The Hotel is located near downtown San Diego, California, on bay front
property leased from the San Diego Unified Port District. The Partnerships have
entered into an agreement with Marriott International, Inc. (Marriott) to
operate and manage the Hotel (Note 5). Host Marriott Corporation, an affiliate
of Marriott, owns a 5% general partnership interest in the Partnerships. The
developer of the Hotel is the other general partner.
The combined financial statements include the Partnerships. The general
partners, through their affiliates, hold general and limited partnership
interests aggregating effectively 100% of the Partnerships. Significant
intercompany accounts and transactions have been eliminated in the combined
financial statements.
Inventories
Food, beverage and operating supplies inventories are stated at the lower of
cost or market. Food and beverage inventories are determined using the first-
in, first-out method. Operating supplies inventories are determined using the
average cost method.
Statements of Cash Flows
For purposes of the statements of cash flows, the Partnerships consider all
highly liquid debt instruments with an original maturity date of three months
or less to be cash equivalents.
China, Glassware, Silver and Linen
China, glassware and silver are stated at the lower of cost or market,
determined on the first-in, first-out method. The initial supply of linen has
been capitalized; subsequent replacements are expensed.
Property and Equipment and Depreciation
Property and equipment are stated at cost. Depreciation is computed using the
straight-line method over the estimated useful lives of the assets, which range
from five to 40 years.
Provision for Impairment Losses
Provision is made for impairment losses if estimated future operating cash
flows (undiscounted and without interest charges) over a long-term holding
period, plus estimated disposition proceeds (undiscounted), are less then
current book value. There was no such provision for 1994 or 1993.
8
<PAGE>
PACIFIC LANDMARK HOTEL, LTD.
AND PACIFIC GATEWAY, LTD.
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
Income Taxes
No provision for federal or state income taxes has been made in the
accompanying combined financial statements as the partners are individually
responsible for reporting income or loss based upon their respective share of
the Partnerships' income and expenses as reported for income tax purposes.
Partnership Allocations of Net Loss
According to the partnership agreements, net losses for Gateway are allocated
99% and 1% to general and limited partnership interests, respectively. Net
losses for Landmark are allocated 95% and 5% to general and limited partnership
interests, respectively.
Net Loss Per Unit
The Partnerships do not report net loss per unit as the partners' interests
are not represented by units.
Fiscal Year
The Partnerships' fiscal years end on December 31; however, the combined
financial statements include the Hotel's operations through the Friday closest
to December 31, in order to conform to the operator's fiscal year.
(2) RESTRICTED CASH
<TABLE>
<CAPTION>
1994 1993
---------- ----------
<S> <C> <C>
Cash reserved for payment of debt service (note 4).... $3,536,000 $3,001,000
Cash reserved for replacement of furniture, fixtures
and equipment........................................ 2,265,000 775,000
Cash reserved for payment of property taxes........... 215,000 45,000
---------- ----------
$6,016,000 $3,821,000
========== ==========
</TABLE>
In accordance with the partnership agreements and the terms of notes payable
to bank (Note 4), InterHotel Company, Ltd., a limited partner of the
Partnerships, has deposited approximately $6,500,000 with the lender to fund
debt service requirements.
(3) PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<CAPTION>
1994 1993
------------ ------------
<S> <C> <C>
Building................ $176,890,000 $176,113,000
Furniture, fixtures and
equipment.............. 19,638,000 19,029,000
Marina.................. 6,379,000 6,379,000
------------ ------------
202,907,000 201,521,000
Less accumulated
depreciation and
amortization........... (58,482,000) (51,152,000)
------------ ------------
$144,425,000 $150,369,000
============ ============
</TABLE>
Virtually all of the Partnerships' property and equipment is collateral for
notes payable (Note 4).
9
<PAGE>
PACIFIC LANDMARK HOTEL, LTD.
AND PACIFIC GATEWAY, LTD.
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(4) LONG-TERM DEBT
The following is a summary of long-term debt payable to third party:
<TABLE>
<CAPTION>
1994 1993
------------ ------------
<S> <C> <C>
Notes payable to bank with monthly payments
sufficient to fully amortize the unpaid principal
balance over 360 months with interest at the
lesser of the Eleventh District Average Cost of
Funds Index plus 2 1/2% or 11% per annum adjusted
monthly. At December 31, 1994, the effective
interest rate was approximately equal to 6.9%.
The monthly payment amount is adjusted annually.
Interest is accrued on the amount by which the
accrued interest on the entire unpaid balance of
the loan exceeds the interest paid. Upon sale or
refinancing, the bank may receive the greater of
the accrued deferred interest or a portion of the
net proceeds from sale or refinancing. Unpaid
principal is due in 1997. The notes are
collateralized by first deeds of trust on the
Partnerships' property and equipment and an
assignment of the joint operating agreement. The
Partnerships and the bank are currently in
discussions regarding differing interpretations
of certain sections of the loan modification
agreements regarding the mechanisms and timing of
access to restricted cash held as collateral by
the bank after October 1992 (Note 2). The
Partnerships have paid late charges of $512,000
which they are currently disputing............... $207,195,000 $209,950,000
Less current portion............................ (2,630,000) (2,648,000)
------------ ------------
Long-term portion............................... $204,565,000 $207,302,000
============ ============
</TABLE>
The following is a summary of long-term debt payable to a general partner and
an affiliate of the general partners:
<TABLE>
<CAPTION>
1994 1993
----------- -----------
<S> <C> <C>
Note payable to an entity originally established by an
affiliate of the developer-general partner. Principal
and interest from January 1993 through December 1997
accrue interest at 10% per annum compounded annually.
Unpaid principal and accrued interest are due in
December 1997. Minimum annual payments ranging from
$250,000 to $500,000 were to begin in 1993 and are to
be applied first to unpaid interest. No payments have
been made. The note is collateralized by second deeds
of trust on the Partnerships' property............... $10,000,000 $10,000,000
Notes payable to a general partner (Marriott
affiliate), with interest compounded annually at 10%
per annum with all principal and interest due in 1997
or upon refinancing, sale or other transfer of
interest. The notes are collateralized by third deeds
of trust on the Partnerships' property............... 12,000,000 12,000,000
----------- -----------
$22,000,000 $22,000,000
=========== ===========
</TABLE>
Long-term debt maturities, based on the effective interest rate at December
31, 1994, are as follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
------------------------
<S> <C>
1995.......................................................... $ 2,630,000
1996.......................................................... 2,811,000
1997.......................................................... 223,754,000
------------
$229,195,000
============
</TABLE>
10
<PAGE>
PACIFIC LANDMARK HOTEL, LTD.
AND PACIFIC GATEWAY, LTD.
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(5) RELATED PARTY TRANSACTIONS
In 1987, the Partnerships entered into management contracts with Marriott to
manage and operate Towers I and II. The initial terms of the contracts expire
in 2017 and automatically renew for three consecutive periods of ten years, and
give Marriott first right of refusal on any continued association with the
hotel subsequent to 2017. The agreements provide for annual compensation of 3
1/2% of gross revenue and 30% of available cash flow as defined. Management
fees paid to Marriott in 1994 and 1993 amounted to $2,940,000 and $2,891,000,
respectively.
In addition, during the course of normal operations various supplies,
services and other operating expenses are purchased from or provided by
Marriott and its affiliates.
Amounts included in due to affiliates of general partners at December 31,
1994 and 1993 are as follows:
<TABLE>
<CAPTION>
1994 1993
----------- -----------
<S> <C> <C>
Operational receivables and other................. $ (851,000) $(1,390,000)
Accrued interest on notes to affiliates........... 22,722,000 18,657,000
Accrued interest on unpaid administration fees to
developer-general partner........................ 528,000 284,000
Management, administration and marketing fees..... 4,096,000 3,073,000
----------- -----------
26,495,000 20,624,000
Less current portion.............................. (3,773,000) (1,967,000)
----------- -----------
$22,722,000 $18,657,000
=========== ===========
</TABLE>
Payments accrued or made to related parties and included in operations for
the years ended December 31, 1994 and 1993 are summarized as follows:
<TABLE>
<CAPTION>
1994 1993
---------- ----------
<S> <C> <C>
Management fees and reimbursements for operating costs
paid or accrued to Marriott or its affiliates........ $6,463,000 $6,677,000
Administration fees paid or accrued to the developer-
general partner or its affiliates.................... 840,000 826,000
Marketing fees paid or accrued to the developer-gen-
eral partner or its affiliates....................... 210,000 206,000
Remodeling fees paid to affiliate of the developer-
general partner...................................... 26,000 200,000
Interest on notes payable to affiliates............... 4,309,000 3,868,000
</TABLE>
Payments, not included in the above schedule, were made in 1994 and 1993 to
an affiliate of Marriott in order to purchase food, miscellaneous fixed assets
and other inventory.
(6) FAIR VALUE OF FINANCIAL INSTRUMENTS
The following disclosure includes estimated fair value information at
December 31, 1994 and 1993, as required by FASB Statement 107. Such
information, which pertains to the combined Partnerships' financial
instruments, is based on the requirements set forth in that statement and does
not purport to represent the aggregate net fair value of the Partnerships.
11
<PAGE>
PACIFIC LANDMARK HOTEL, LTD.
AND PACIFIC GATEWAY, LTD.
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
The following methods and assumptions were used by the Partnerships in
estimating such values:
. The fair values of the Partnerships' long-term debt payable to third
party, long-term debt payable to a general partner and an affiliate of
the general partners, accrued interest, and amounts due to affiliates of
general partners were determined based on the timing of future cash
flows, market interest rates, the relationship of the parties and the
nature of the financial instruments.
The estimated fair values of the combined Partnerships' long-term debt
payable to third party, long-term debt payable to a general partner and an
affiliate of the general partners, accrued interest and amounts due to
affiliates of general partners at December 31, 1994 and 1993 are as
follows:
<TABLE>
<CAPTION>
1994 1993
--------------------------------- -------------------------------------
CARRYING ESTIMATED CARRYING ESTIMATED
AMOUNT FAIR VALUE AMOUNT FAIR VALUE
------------ ------------ ------------ ------------
<S> <C> <C> <C>
$288,013,000 $189,134,000 $283,183,000 $190,149,000
</TABLE>
. For all other financial instruments, the carrying values reasonably
approximate fair values at December 31, 1994 and 1993.
(7) COMMITMENTS AND CONTINGENCIES
(a) Ground Lease Commitments
Landmark is the lessee in a long-term ground lease on which Tower I and the
Marina are located. Gateway has entered into a similar lease agreement for
Tower II. Both leases expire in April 2048 and require contingent rents based
on a percentage of gross income. Minimum annual rents in each of the next five
years and in the aggregate thereafter (through March 2007) are as follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, LANDMARK GATEWAY TOTAL
------------------------ ---------- ---------- -----------
<S> <C> <C> <C>
1995....................................... $ 600,000 $ 400,000 $ 1,000,000
1996....................................... 600,000 400,000 1,000,000
1997....................................... 600,000 400,000 1,000,000
1998....................................... 600,000 400,000 1,000,000
1999....................................... 600,000 400,000 1,000,000
Thereafter................................. 4,800,000 3,200,000 8,000,000
---------- ---------- -----------
Total.................................... $7,800,000 $5,200,000 $13,000,000
========== ========== ===========
</TABLE>
Minimum annual rent for the period April 2007 through April 2048 is to be at
least 75% of the average "percentage rental" paid, as defined, during the last
three accounting years of the previous rental period.
Rent expense was $4,948,000 and $4,801,000 in 1994 and 1993, respectively,
which included contingent rents of $3,948,000 and $3,801,000 in 1994 and 1993,
respectively.
(b) Litigation
In December 1992, the Partnerships filed a complaint against Marriott and
other defendants alleging, among other things, breach of contract and breach
of covenant of good faith and fair dealing. The defendants have filed a cross-
complaint for damages alleging breach of contract, defamation, and other
charges. Based in part on the
12
<PAGE>
PACIFIC LANDMARK HOTEL, LTD.
AND PACIFIC GATEWAY, LTD.
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONCLUDED)
advice of outside counsel, management does not believe that the cross-complaint
will have a material impact on the Partnerships' combined financial condition
or results of operations. Accordingly, no provision for any liability has been
made in the accompanying combined financial statements.
The Partnerships are involved in various other legal proceedings which are
routine litigation incident to their business. In the opinion of management of
the Partnerships, none of the other pending litigation will have a material
adverse effect upon the Partnerships' combined financial position or results of
operations.
13
<PAGE>
PACIFIC LANDMARK HOTEL, LTD AND PACIFIC GATEWAY, LTD
COMBINED BALANCE SHEET
(UNAUDITED, IN THOUSANDS)
<TABLE>
<CAPTION>
SEPTEMBER 8,
1995
------------
<S> <C>
ASSETS
Cash and cash equivalents..................................... $ 3,360
Cash--restricted.............................................. 9,632
Accounts receivable, less allowance for doubtful accounts..... 4,861
Inventories................................................... 480
Property and equipment, net................................... 140,535
China, glassware, silver and linen............................ 1,152
Other assets.................................................. 75
---------
$ 160,095
=========
LIABILITIES AND PARTNERS' DEFICIT
Accounts payable.............................................. $ 5,124
Accrued expenses.............................................. 1,843
Advance deposits.............................................. 977
Long-term debt................................................ 228,427
Accrued interest.............................................. 33,065
Due to affiliates of general partners......................... 30,139
Partners' deficit............................................. (139,480)
---------
$ 160,095
=========
</TABLE>
The accompanying notes are an integral part of these financial statements.
14
<PAGE>
PACIFIC LANDMARK HOTEL, LTD AND PACIFIC GATEWAY, LTD
COMBINED STATEMENTS OF OPERATIONS
(UNAUDITED, IN THOUSANDS)
<TABLE>
<CAPTION>
THIRTY-SIX WEEKS ENDED
-------------------------
SEPTEMBER 8, SEPTEMBER 9,
1995 1994
------------ ------------
<S> <C> <C>
REVENUES.......................................... $25,594 $22,793
------- -------
OPERATING COSTS AND EXPENSES
Interest........................................ 13,830 13,843
Depreciation and amortization................... 5,225 5,225
Ground rent..................................... 3,778 3,486
Property taxes.................................. 2,258 2,272
Base management fee............................. 2,160 2,074
Owner's marketing account and administration
fee............................................ 771 741
Equipment rent and other, net................... 246 253
------- -------
28,268 27,894
------- -------
NET LOSS.......................................... $(2,674) $(5,101)
======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
15
<PAGE>
PACIFIC LANDMARK HOTEL, LTD AND PACIFIC GATEWAY, LTD
COMBINED STATEMENTS OF CASH FLOWS
(UNAUDITED, IN THOUSANDS)
<TABLE>
<CAPTION>
THIRTY-SIX WEEKS ENDED
-------------------------
SEPTEMBER 8, SEPTEMBER 9,
1995 1994
------------ ------------
<S> <C> <C>
OPERATING ACTIVITIES
Net loss.............................................. $(2,674) $(5,101)
Noncash items......................................... 9,504 10,652
Changes in operating accounts......................... 1,113 670
------- -------
Cash provided by operating activities............... 7,943 6,221
------- -------
INVESTING ACTIVITIES
Additions to property and equipment................. (1,335) (1,222)
Change in restricted cash........................... (3,616) (1,660)
------- -------
Cash used in investing activities................... (4,951) (2,882)
------- -------
FINANCING ACTIVITIES
Principal payments on long-term debt................ (768) (2,127)
------- -------
INCREASE IN CASH AND CASH EQUIVALENTS................. 2,224 1,212
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD...... 1,136 227
------- -------
CASH AND CASH EQUIVALENTS AT END OF PERIOD............ $ 3,360 $ 1,439
======= =======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest.............................. $10,168 $ 9,008
======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
16
<PAGE>
PACIFIC LANDMARK HOTEL, LTD. AND
PACIFIC GATEWAY LTD. (LIMITED PARTNERSHIPS)
NOTES TO FINANCIAL STATEMENTS--(UNAUDITED)
1. The accompanying combined financial statements of the Pacific Landmark
Hotel, Ltd. and Pacific Gateway, Ltd., limited partnerships, (the
"Partnerships") have been prepared without audit. Certain information and
footnote disclosures normally included in financial statements presented in
accordance with generally accepted accounting principles have been omitted. The
Partnerships believe the disclosures made are adequate to make the information
presented not misleading. However, the financial statements should be read in
conjunction with the audited financial statements and notes thereto for the
fiscal years ended December 30, 1994 and December 31, 1993 included elsewhere
herein.
In the opinion of the Partnerships, the accompanying unaudited combined
financial statements reflect all adjustments (which include only normal
recurring adjustments) necessary to present fairly the financial position of
the Partnerships as of September 8, 1995 and the results of operations and cash
flows for the thirty-six weeks ended September 8, 1995 and September 9, 1994.
Interim results are not necessarily indicative of fiscal year performance
because of the impact of seasonal and short-term variations.
2. Revenues represent House Profit which reflects hotel operating results
less property-level expenses excluding depreciation, management fees, real and
personal property taxes, ground and equipment rent, insurance and certain other
costs which are classified as operating costs and expenses.
House profit generated by the Partnerships for the thirty-six weeks ended
September 8, 1995 and September 9, 1994 consists of (in thousands):
<TABLE>
<CAPTION>
THIRTY-SIX WEEKS ENDED
-------------------------
SEPTEMBER 8, SEPTEMBER 9,
1995 1994
------------ ------------
<S> <C> <C>
Sales
Rooms............................................... $37,554 $34,401
Food & Beverage..................................... 17,986 18,692
Other............................................... 6,180 6,169
------- -------
Total Hotel Sales................................. 61,720 59,262
------- -------
Department Costs
Rooms............................................... 7,507 7,458
Food & Beverage..................................... 13,496 14,049
Other............................................... 2,932 3,032
------- -------
Total Department Costs............................ 23,935 24,539
------- -------
Department Profit..................................... 37,785 34,723
Other Deductions...................................... 12,191 11,930
------- -------
House Profit.......................................... $25,594 $22,793
======= =======
</TABLE>
17
<PAGE>
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL DATA
The unaudited Pro Forma Condensed Consolidated Statements of Operations of the
Company reflect the following transactions for the thirty-six weeks ended
September 8, 1995 and the fiscal year ended December 30, 1994, as if such
transactions had been completed at the beginning of each period:
. 1995 acquisition of eight full-service hotel properties
. 1995 sale of one full-service hotel property
. 1995 sale/leaseback of 37 Courtyard properties
. 1995 sale of the Company's remaining four Fairfield Inns
. May 1995 Debt Offering (as defined below)
. December 1995 Debt Offering (as defined below)
. 1995 Special Dividend of Host Marriott Services Corporation
. 1995 writedown of one undeveloped land site
. Consummation of the Pending Acquisitions (as defined below)
. 1994 addition of 18 full-service hotel properties
. 1994 sale of 14 senior living communities
. 1994 sale of 26 Fairfield Inns
The unaudited Pro Forma Condensed Consolidated Balance Sheet of the Company
reflects the acquisition of four full-service properties during the fourth
quarter of 1995, the consummation of the Pending Acquisitions, the consummation
of the December 1995 Debt Offering, the fourth quarter 1995 writedown of one
undeveloped land site, and the consummation of the Special Dividend as if such
transactions had been completed on September 8, 1995.
During 1995, the Company acquired nine full-service hotel properties,
including four hotels during the fourth quarter of 1995, and sold one full-
service hotel property in the fourth quarter of 1995. The accompanying
Unaudited Pro Forma Condensed Consolidated Statements of Operations do not
reflect any pro forma adjustments related to the New York Vista Hotel (renamed
the Marriott World Trade Center) due to the suspension of hotel operations and
the renovation of the hotel as a result of extensive damage from an explosion
on February 26, 1993. Because the hotel did not resume full operations until
mid-1995, the historical operations of the hotel during the periods presented
are not meaningful.
The Company has also entered into agreements to acquire or purchase
controlling interests in three full-service hotel properties (the "Pending
Acquisitions"). During 1994, the Company added 18 full-service hotels to its
lodging portfolio (one of which was subsequently sold in 1995), including two
hotels for which a subsidiary of the Company provided 100% nonrecourse
financing to an affiliate of the Company for the acquisition of the hotels
(which the Company treats as owned for accounting purposes).
In May 1995, HMH Properties, Inc. ("HMH Properties"), an indirect wholly
owned subsidiary of the Company, issued $600 million of debt (the "Properties
Notes") to several initial purchasers (the "May 1995 Debt Offering"). The
Properties Notes were issued at par and carry a 9.5% interest rate with a final
maturity of May 2005. The net proceeds to the Company were used to defease, and
subsequently redeem, bonds which carried a weighted average interest rate of
10.4%, and to pay down a portion of the line of credit with Marriott
International. Additionally, the Company replaced its $630 million line of
credit with Marriott International with a new $225 million revolving line of
credit with Marriott International (the "New Line of Credit").
During 1994, the Company sold all 14 of its senior living communities and 26
of its 30 Fairfield Inns. During 1995, 37 of the Company's Courtyard properties
were sold to and leased back from the REIT, and the Company sold its four
remaining Fairfield Inns.
In December 1995, HMC Acquisition Properties, Inc. ("Acquisitions"), an
indirect wholly owned subsidiary of the Company, issued $350 million of 9%
senior notes (the "Acquisitions Notes") to several initial purchasers (the
"December 1995 Debt Offering"). The Acquisitions Notes were issued at par and
have a final
18
<PAGE>
maturity of December 2007. The proceeds were utilized to repay in full the $210
million of outstanding borrowings under, and terminate, Acquisitions' $230
million revolving credit facility (the "Revolver"), to acquire one full-service
hotel in the fourth quarter of 1995 and to finance future acquisitions of full-
service hotel properties, including two of the Pending Acquisitions.
The "Historical" column in the accompanying Pro Forma Condensed Consolidated
Statements of Operations excludes the results of the Operating Group, which are
considered discontinued operations.
The Pro Forma Condensed Consolidated Financial Data of the Company are
unaudited and presented for informational purposes only and may not reflect the
Company's future results of operations and financial position or what the
results of operations and financial position of the Company would have been had
such transactions occurred as of the dates indicated. The unaudited Pro Forma
Condensed Consolidated Financial Data and Notes thereto should be read in
conjunction with the Company's Consolidated Financial Statements and Notes
thereto and "Management's Discussion and Analysis of Results of Operations and
Financial Condition" previously filed with the Securities and Exchange
Commission.
19
<PAGE>
HOST MARRIOTT CORPORATION
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(IN MILLIONS)
<TABLE>
<CAPTION>
AS OF SEPTEMBER 8, 1995
---------------------------------
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ---------
ASSETS
<S> <C> <C> <C>
Property and Equipment........................ $2,700 $223 (A) $3,127
267 (B)
(3)(C)
(60)(D)
Investments in Affiliates..................... 209 (13)(B) 196
Accounts Receivable........................... 74 -- 74
Notes Receivable.............................. 40 -- 40
Other Assets.................................. 167 6 (B) 179
10 (E)
(4)(F)
Cash and Cash Equivalents..................... 211 (115)(A) 168
(53)(B)
3 (C)
340 (E)
(210)(F)
(8)(G)
------ ---- ------
$3,401 $383 $3,784
====== ==== ======
LIABILITIES AND SHAREHOLDERS' EQUITY
Debt
Debt carrying a company guarantee of
repayment.................................. $1,067 $350 (E) $1,207
(210)(F)
Debt not carrying a company guarantee of 858 98 (A) 1,162
repayment.................................. 206 (B)
------ ---- ------
1,925 444 2,369
Accounts Payable and Accrued Expenses......... 54 -- 54
Net Investment in Discontinued Operations..... 81 (81)(G) --
Deferred Income Taxes......................... 528 (21)(D) 506
(1)(F)
Other Liabilities............................. 143 10 (A) 154
1 (B)
------ ---- ------
Total Liabilities......................... 2,731 352 3,083
------ ---- ------
Shareholders' Equity
Convertible Preferred Stock................. 1 -- 1
Common Stock................................ 159 -- 159
Additional Paid-in Capital.................. 495 -- 495
Retained Earnings........................... 15 (39)(D) 46
(3)(F)
73 (G)
------ ---- ------
Total Shareholders' Equity................ 670 31 701
------ ---- ------
$3,401 $383 $3,784
====== ==== ======
</TABLE>
See Notes to Unaudited Pro Forma Condensed Consolidated Financial Data.
20
<PAGE>
HOST MARRIOTT CORPORATION
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
FIRST THREE QUARTERS 1995
---------------------------------------------
ACQUISITION
DISPOSITION & OTHER
HISTORICAL ADJUSTMENTS ADJUSTMENTS PRO FORMA
---------- ----------- ----------- ---------
<S> <C> <C> <C> <C>
Revenues
Hotels.......................... $ 315 $ (1)(H) $27 (I) $ 371
30 (J)
Other........................... 4 -- 1 (J) 5
----- ---- --- -----
319 (1) 58 376
----- ---- --- -----
Operating costs and expenses
Hotels.......................... 182 (1)(H) 15 (I) 224
10 (K) 18 (J)
Other........................... 19 -- -- 19
----- ---- --- -----
201 9 33 243
----- ---- --- -----
Operating profit.................. 118 (10) 25 133
Corporate expenses................ (26) -- -- (26)
Interest expense.................. (122) 4 (L) (3)(I) (142)
(12)(J)
3 (M)
(12)(N)
Interest income................... 18 -- -- 18
----- ---- --- -----
Loss from continuing operations
before income taxes and
extraordinary item............... (12) (6) 1 (17)
(Provision) benefit for income
taxes............................ (1) 2 (O) -- 1
----- ---- --- -----
Loss from continuing operations
before extraordinary item........ $ (13) $ (4) $ 1 $ (16)
===== ==== === =====
Loss per common share from
continuing operations............ $(.08) $(.10)
===== =====
Weighted average shares
outstanding...................... 157.9 157.9
===== =====
</TABLE>
See Notes to Unaudited Pro Forma Condensed Consolidated Financial Data.
21
<PAGE>
HOST MARRIOTT CORPORATION
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
FISCAL YEAR 1994
--------------------------------------------
ACQUISITION
DISPOSITION & OTHER
HISTORICAL ADJUSTMENTS ADJUSTMENTS PRO FORMA
---------- ----------- ----------- ---------
<S> <C> <C> <C> <C>
Revenues
Hotels.......................... $ 338 $(2)(H) $41 (I) $ 466
(10)(P) 38 (J)
61 (Q)
Other........................... 42 (14)(R) 2 (J) 30
----- --- --- -----
380 (26) 142 496
----- --- --- -----
Operating costs and expenses
Hotels.......................... 198 (1)(H) 23 (I) 297
27 (K) 23 (J)
(3)(P) 30 (Q)
Other........................... 30 (5)(R) -- 25
----- --- --- -----
228 18 76 322
----- --- --- -----
Operating profit.................. 152 (44) 66 174
Corporate expenses................ (32) -- -- (32)
Interest expense.................. (165) 34 (L) (5)(I) (179)
1 (R) (15)(J)
5 (M)
(31)(N)
(3)(Q)
Interest income................... 29 -- (5)(Q) 24
----- --- --- -----
Income (loss) from continuing
operations before income taxes
and extraordinary item........... (16) (9) 12 (13)
(Provision) benefit for income
taxes............................ 3 4 (O) (5)(O) 2
----- --- --- -----
Income (loss) from continuing
operations before extraordinary
item............................. $ (13) $(5) $ 7 $ (11)
===== === === =====
Income (loss) per common share
from continuing operations....... $(.09) $(.07)
===== =====
Weighted average shares
outstanding...................... 151.5 1.0 (S) 152.5
===== === =====
</TABLE>
See Notes to Unaudited Pro Forma Condensed Consolidated Financial Data.
22
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL DATA
A. Represents the adjustment to record the fourth quarter 1995 acquisition of
four full-service properties as follows:
--Record property and equipment of $223 million
--Record mortgage debt of $98 million (including $10 million provided by
Marriott International)
--Record advance to the Company of $10 million for one of the properties
from Marriott International, as manager
--Record the use of cash of $115 million for the remaining acquisition cost
B. Represents the adjustment to record the Pending Acquisitions as follows:
--Record property and equipment of $267 million
--Record the mortgage debt of $206 million for one full-service property
--Record the use of cash of $53 million for the acquisition cost
--Record the elimination of the prior investment of $13 million in a
partnership
--Record the property improvement escrow fund of $6 million for one full-
service property
--Record the minority interest of $1 million for the partner of the joint
venture acquiring one full-service property
C. Represents the adjustment to record the fourth quarter 1995 sale of a full-
service hotel property for net cash proceeds of $3 million. No adjustment
has been reflected in the accompanying Unaudited Pro Forma Condensed
Consolidated Statements of Operations due to the immateriality of the
operating results for this property.
D. Represents the adjustment to record the fourth quarter 1995 write down of
$39 million, net of taxes of $21 million, for one undeveloped land site. No
adjustment has been reflected in the accompanying Pro Forma Condensed
Consolidated Statements of Operations due to the unusual and non-recurring
nature of this write down.
E. Represents the adjustment to record the issuance of the Acquisitions Notes
as follows:
--Record the issuance of debt of $350 million
--Record the net cash proceeds of $340 million
--Record the deferred financing fees of $10 million
F. Represents the adjustment to record the repayment of the Revolver as
follows:
--Reduce debt by $210 million with available cash from the issuance of the
Acquisitions Notes
--Record the write-off of the deferred financing fees related to the
Revolver of $4 million before taxes and the related income tax impact of
$1 million
G. Represents the adjustment to record the Special Dividend by eliminating the
net investment in discontinued operations, adjusting shareholders' equity
and recording the payment of $8 million of the remaining expenses related to
the Special Dividend ($1 million of such expenses were paid prior to
September 8, 1995). The entry to record the Special Dividend is subject to
adjustment pursuant to finalization under the Distribution Agreement with
Host Marriott Services Corporation and certain other agreements.
H. Represents the adjustment to eliminate the revenues and the operating costs
for the 1995 sale of the four remaining Fairfield Inns.
I. Represents the adjustment to reflect the incremental increase in revenue,
operating costs and secured debt interest expense for the 1995 addition of
eight full-service properties, as if they were added at the beginning of the
applicable period. On February 26, 1993, an explosion caused damage to the
structure and interior of the New York Vista Hotel, as well as the adjoining
World Trade Center complex. As a result of the damage,
23
<PAGE>
all hotel operations were suspended and the hotel underwent extensive
renovation. Because the hotel did not resume full operations until mid-1995,
the historical operations of the hotel during the periods presented are not
meaningful and the accompanying Unaudited Pro Forma Condensed Consolidated
Statements of Operations do not reflect any adjustments related to the
hotel.
J. Represents the adjustment to record the revenue, operating costs and secured
debt interest expense for the Pending Acquisitions, including the impact of
the new management agreements that are expected to be entered into with the
manager and depreciation expense reflecting the Company's basis in the
assets.
K. Represents the net adjustment to eliminate the depreciation expense and
record the incremental lease expense for the 1995 sale/leaseback of the 37
Courtyard properties.
L. Represents the adjustment to reduce interest expense for the redemption of
senior notes of Host Marriott Hospitality, Inc. (the "Hospitality Notes")
with the net sales proceeds from the 26 Fairfield Inns, 14 senior living
communities and 21 Courtyard properties.
M. Represents the adjustment to reduce interest expense to reflect the decrease
in interest rates as a result of the issuance of the Properties Notes and
the decrease in commitment fees as a result of the New Line of Credit.
Extraordinary losses of approximately $17 million, after taxes, related to
the 1995 redemption of certain of the Hospitality Notes are not reflected in
the accompanying Unaudited Pro Forma Condensed Consolidated Statements of
Operations.
N. Represents the adjustment to interest expense to eliminate the interest
expense and related amortization of deferred financing fees for the
Revolver, and to record the interest expense and related amortization of
deferred financing fees as a result of the issuance of the Acquisitions
Notes.
O. Represents the income tax impact of pro forma adjustments at statutory
rates.
P. Represents the adjustment to eliminate the revenues and the operating costs
for the 26 Fairfield Inns sold during 1994.
Q. Represents the adjustment to reflect the incremental increase in revenue,
operating costs and the secured debt interest expense for the 1994 addition
of 18 full-service properties, mainly utilizing proceeds from the January
1994 issuance of common stock by the Company and the Revolver, and the
related decrease in interest income.
R. Represents the adjustments to eliminate the revenues, operating costs and
the secured debt interest expense for the 14 senior living communities sold
during 1994.
S. Represents the adjustment to increase the weighted average number of common
shares outstanding assuming the January 1994 issuance of common stock by the
Company occurred as of January 1, 1994.
24
<PAGE>
[HOST MARRIOTT LOGO & LETTERHEAD]
Exhibit 99a
Page 1 of 3
HOST MARRIOTT TO ACQUIRE CONTROLLING
INTERESTS IN $400 MILLION OF HOTELS
BETHESDA, MD., Jan. 11, 1996 -- Host Marriott Corporation today announced that
it has reached agreements to acquire controlling interests in the San Diego
Marriott Hotel and Marina, two hotels in Mexico City and the Pittsburgh Hyatt,
and to purchase the Delta Meadowvale Hotel and Conference Centre in Toronto,
Canada.
The 1,355-room San Diego Marriott Hotel and Marina is located on San Diego
Bay, adjacent to the Convention Center and Seaport Village in downtown San
Diego. The hotel consists of two towers, each comprising approximately 680
rooms, and a conference center. The first tower opened in 1984 and the second
tower in 1987. With 56 meeting rooms covering 103,000 square feet, the hotel and
conference center is the premiere business meeting hotel in downtown San Diego.
Only seven minutes from San Diego International Airport and within walking
distance of downtown San Diego's Gaslamp dining district and Horton Plaza
shopping mall, the hotel also offers activities at its 446-slip marina.
Host Marriott will invest approximately $13 million to increase its current
ownership position from five to 51 percent and become the managing general
partner of the partnership owning the hotel. Host Marriott said that the $225
million hotel, which is subject to a $206 million non-recourse mortgage,
generated approximately $25 million of Earnings Before Interest, Taxes,
Depreciation and Amortization (EBITDA) during 1995. Marriott International will
continue to manage the hotel.
Host Marriott said it also intends to enter into an agreement with Marriott
International and Grupo Situr to acquire two hotels in Mexico City -- the 600-
room Continental Plaza
<PAGE>
Exhibit 99a
Page 2 of 3
Aeropuerto Hotel, and a five star, 314-room hotel, overlooking Chapultepec Park
in the fashionable Polanco district of Mexico City, which is scheduled to open
in mid-1996. Both hotels will be managed by Marriott International.
The total consideration for both hotels is $133 million, of which Host
Marriott will contribute $56 million for a majority interest. Host
Marriott and Marriott International will receive a 12 percent first priority
return on their investment.
Terence C. Golden, president and chief executive officer, said, "We are
very excited about the potential for this investment. Mexico City is the number
one unserved market in the world for Marriott International and the most
frequently requested destination by business travelers in which Marriott does
not have a hotel. Both properties should benefit from this unmet demand and the
long-term impact from NAFTA."
The Continental Plaza Aeropuerto Hotel offers an unmatched location as the
only hotel connected to the Mexico City airport terminal. Its high visibility in
an irreplaceable location will make it a very profitable Marriott hotel. Host
Marriott said that the Aeropuerto hotel generated approximately $8.5 million of
EBITDA in 1995.
The five-star Polanco Hotel also is well located, close to the downtown
business center and walking distance to "high-end" retail and residential areas.
The hotel will be branded a JW Marriott, Marriott International's flagship
designation.
Additionally, Host Marriott has entered into a joint venture agreement with
Interstate Hotel Corporation to purchase the 400-room Pittsburgh Hyatt Regency
Hotel for $18.5 million. Host Marriott, which will have a 95 percent ownership
interest in the joint venture, will invest an additional $6.5 million to
renovate and convert the hotel into the Marriott system. Interstate will manage
the hotel under a Marriott franchise agreement.
<PAGE>
Exhibit 99a
Page 3 of 3
In another agreement, Host Marriott said it would acquire the 374-room
Delta hotel, located in the Meadowvale business park near the Toronto
International Airport, for $25 million. The company said that the hotel
generated approximately $3.1 million of EBITDA in 1995. Interstate will manage
the property for Host Marriott under a Delta Hotels marketing agreement. Mr.
Golden stated, "We expect this hotel to provide strong returns to Host Marriott
in 1996."
"We are seeing numerous additional acquisition opportunities as the
industry continues to strengthen and consolidate. We acquired four hotels for
$225 million in the fourth quarter of 1995, expect to close on the above five
hotels in the first quarter of 1996, and have several additional strong
investment opportunities that we are currently pursuing. There are still many
hotels in the hands of inadvertent owners, such as banks and insurance
companies, and in illiquid partnerships," said Mr. Golden.
The company also has instituted a program to aggressively liquidate certain
non-income producing assets and to reinvest the proceeds in the acquisition of
full service hotels. As a part of this program, it has decided to write-down the
174-acre Germantown land site it owns in Montgomery County, Maryland by $39
million (net of $21 million of taxes) and market it for sale. Marriott
Corporation purchased the site in the mid-1980s for a proposed new corporate
headquarters. However, due to company downsizing in the late 1980s and early
1990s, plans for a new corporate headquarters were dropped. More recently, Host
Marriott planned to develop the site into an office park over an extended time
period to recoup its investment. However, given the continuing weakness of the
real estate market in Montgomery County the company has made a decision to sell
the property.
Host Marriott Corporation is a lodging real estate company which currently
owns 90 properties operated primarily under Marriott brand names.
<PAGE>
Exhibit 99b
Page 1 of 1
[HOST MARRIOTT LOGO AND LETTERHEAD]
HOST MARRIOTT TO OFFER
25 MILLION SHARES OF COMMON STOCK
BETHESDA, MD, Jan. 11, 1996 -- Host Marriott Corporation said today that it has
filed a registration statement with the Securities and Exchange Commission for
the public offering by the company of approximately 25 million shares of its
common stock. Based on the closing price of the common stock of 11-5/8 on
Wednesday, January 10, the shares would have a combined market value of
approximately $291 million.
Net proceeds from the offering are expected to be used for the acquisition
of hotels or related assets. To the extent that they are not used for that
purpose, net proceeds are expected to be used for general corporate purposes.
The offering will be managed by Donaldson, Lufkin & Jenrette Securities
Corporation and co-managed by Goldman, Sachs & Co., Salomon Brothers Inc., Smith
Barney Inc., Montgomery Securities, and BT Securities Corporation.
Host Marriott Corporation is a lodging real estate company which currently
owns 90 properties primarily operated under Marriott brand names.
A registration statement relating to these securities has been filed with
the Securities and Exchange Commission but has not yet become effective. These
securities may not be sold nor may offers to buy be accepted prior to the time
the registration statement becomes effective.
This announcement shall not constitute an offer to sell or the
solicitation of an offer to buy, nor shall there be any sale of these securities
in any state in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such state.
