<PAGE> 1
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A1
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): September 20, 1995
<TABLE>
<S> <C>
Commission File Number: 1-6828 Commission File Number: 1-7959
STARWOOD LODGING STARWOOD LODGING CORPORATION
TRUST
(Exact name of registrant as specified in its charter)
(Exact name of registrant as specified in its charter)
Maryland
Maryland (State or other jurisdiction
(State or other jurisdiction of incorporation or organization)
of incorporation or organization)
52-1193298
52-0901263 (I.R.S. employer identification no.)
(I.R.S. employer identification no.)
11845 W. Olympic Blvd., Suite 560
11845 W. Olympic Blvd., Suite 550 Los Angeles, California 90064
Los Angeles, California 90064 (Address of principal executive
(Address of principal executive offices, including zip code)
offices, including zip code)
(310) 575-3900
(310) 575-3900 (Registrant's telephone number,
(Registrant's telephone number, including area code)
including area code)
(Former name or former address,
(Former name or former address, if changed since last report)
if changed since last report)
</TABLE>
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<PAGE> 2
The undersigned Registrants hereby amend the following items, the
financial statements, Pro Forma Financial Information and Exhibits of their
Form 8-K/A dated September 20, 1995 as set forth in the pages attached hereto:
==============================================================================
Item 7 of the Joint Current Report on Form 8-KA dated September 20,
1995 filed by Starwood Lodging Trust and Starwood Lodging Corporation is hereby
amended to read in its entirety as follows:
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) Financial Statements of Businesses Acquired. See Index to
Financial Statements (page F-1).
(b) Pro Forma Financial Information. See Index to Financial
Statements (page F-1).
<PAGE> 3
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
each registrant has duly caused this report to be signed on its behalf by the
undersigned, thereto duly authorized.
<TABLE>
<S> <C>
STARWOOD LODGING TRUST STARWOOD LODGING CORPORATION
By: /s/ Ronald C. Brown By: /s/ Kenneth J. Biehl
____________________________ ___________________________________
Ronald C. Brown Kenneth J. Biehl
Vice President and Vice President and Principal
Chief Financial Officer Financial and Accounting Officer
</TABLE>
Date: December 1, 1995
<PAGE> 4
INDEX TO FINANCIAL STATEMENTS
STARWOOD LODGING TRUST AND STARWOOD LODGING
CORPORATION -- PRO FORMA
<TABLE>
<S> <C>
Combined and Separate Statements of Operations for the nine months ended September 30, 1995
and the year ended December 31, 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-2
Notes to Pro Forma Statements of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . F-9
DORAL INN
Reports of Independent Auditors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-12
Balance Sheet as of December 31, 1994 and 1993 . . . . . . . . . . . . . . . . . . . . . . . . . . F-13
Statements of Operations for the years ended December 31, 1994, 1993 and 1992 . . . . . . . . . . . F-14
Statements of Division Account for the years ended December 31, 1994, 1993 and 1992 . . . . . . . . F-16
Statements of Cash Flows for the years ended December 31, 1994, 1993 and 1992 . . . . . . . . . . . F-17
Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-19
</TABLE>
F-1
<PAGE> 5
STARWOOD LODGING TRUST AND
STARWOOD LODGING CORPORATION
PRO FORMA COMBINED AND
SEPARATE STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995
AND THE YEAR ENDED DECEMBER 31, 1994
(UNAUDITED)
Effective January 1, 1995, Starwood Lodging Trust (the "Trust") and
Starwood Lodging Corporation (the "Corporation") consummated the previously
announced reorganization (the "Reorganization") with Starwood Capital Group,
L.P. and its affiliates (collectively "Starwood Capital"). On July 6, 1995,
the Trust and the Corporation completed a public offering (the "Offering") of
11,787,500 paired shares. Net proceeds from the Offering of approximately
$252.1 million together with proceeds from a financing facility and cash on
hand were used as follows: approximately $206.5 million was used to repay
existing indebtedness, including $10 million which was used by Realty to
purchase the first trust deed on Operating's Milwaukee hotel, and approximately
$53.8 million was used for the acquisition of the 462-room Sheraton Colony
Square in Atlanta, Georgia and the 224-room Embassy Suites in Tempe, Arizona.
On September 20, 1995, the Companies acquired the Doral Inn in New York, New
York for $43.3 million.
Due to the impact of the Offering and the acquisitions of properties
acquired, the historical results of operations and earnings per share are not
indicative of future results of operations and earnings per share. The
following Unaudited Combined and Separate Pro Forma Statements of Operations
for the nine months ended September 30, 1995 and for the year ended December
31, 1994 give effect to the Reorganization; the Offering and the related
acquisitions of the Sheraton Colony Square in Atlanta, Georgia, the Embassy
Suites in Tempe, Arizona, and the Omni Europa in Chapel Hill, North Carolina;
and the acquisition of the Doral Inn in New York, New York as of the beginning
of the period presented and exclude the results from properties sold in 1994.
The pro forma information is based upon historical information and does not
purport to present what actual results would have been had such transactions,
in fact, occurred at the beginning of each period presented, or to project
results for any future period.
F-2
<PAGE> 6
STARWOOD LODGING TRUST AND STARWOOD LODGING CORPORATION
UNAUDITED COMBINED PRO FORMA STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995
<TABLE>
<CAPTION>
Historical Pro Forma
Starwood Starwood
Lodging Acquired Pro Forma Lodging
Combined Properties Doral Inn Adjustments Combined
------------ ------------ ----------- ----------- -----------
(A) (C) (D)
<S> <C> <C> <C> <C> <C>
REVENUE
Hotel . . . . . . . . . . . . . . . . $81,951,000 $14,854,000 $13,312,000 $110,117,000
Gaming . . . . . . . . . . . . . . . . 20,375,000 20,375,000
Interest from mortgage and other notes 8,004,000 8,004,000
Rents from leased hotel properties . . 608,000 608,000
Other income . . . . . . . . . . . . . 1,334,000 1,334,000
Gain (loss) on sales of hotel assets . (125,000) (125,000)
----------- ----------- ----------- ------------ ------------
112,147,000 14,854,000 13,312,000 140,313,000
----------- ----------- ----------- ------------ ------------
EXPENSES
Hotel operations . . . . . . . . . . . 56,232,000 10,285,000 11,362,000 (1,248,000) (E) 76,631,000
Gaming operations . . . . . . . . . . 18,351,000 18,351,000
Interest . . . . . . . . . . . . . . . 11,198,000 3,219,000 (13,909,000) (F) 3,083,000
2,575,000 (F)
Depreciation and amortization . . . . . 10,182,000 3,465,000 3,192,000 16,839,000
Administrative and operating . . . . . 3,836,000 10,000 (E) 3,846,000
----------- ----------- ----------- ------------ ------------
99,799,000 13,750,000 17,773,000 (12,572,000) 118,750,000
----------- ----------- ----------- ------------ ------------
Income (loss) before minority interest 12,348,000 $1,104,000 $(4,461,000) $12,572,000 21,563,000
Minority interest in Partnerships (H) 5,398,000 =========== =========== ============ 6,488,000
----------- ------------
Income from continuing operations . . . $6,950,000 $15,075,000
=========== ============
Income from continuing operations
per paired share (I) . . . . . . . . $1.17 $1.09
=========== ============
</TABLE>
See accompanying notes to the pro forma statements of operations.
F-3
<PAGE> 7
STARWOOD LODGING TRUST
UNAUDITED COMBINED PRO FORMA STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995
<TABLE>
<CAPTION>
Historical
Starwood Pro Forma
Lodging Acquired Starwood
Trust Properties Doral Inn Pro Forma Lodging
(A) (C) (D) Adjustments Trust
----------- ---------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C>
REVENUE
Rents from Corporation . . . . . . . . $18,287,000 $ $ $4,566,000 (J) $22,853,000
Interest from Corporation . . . . . . 2,629,000 3,412,000 (K) 6,041,000
Interest from mortgage and other notes 7,915,000 7,915,000
Rents from leased hotel properties . . 608,000 608,000
Other income . . . . . . . . . . . . . 461,000 461,000
Gain (loss) on sales of hotel assets . (125,000) (125,000)
----------- ---------- ---------- ---------- -----------
29,775,000 7,978,000 37,753,000
----------- ---------- ---------- ---------- -----------
EXPENSES
Interest - other . . . . . . . . . . . 10,534,000 (10,108,000)(F) 3,001,000
2,575,000 (F)
Depreciation and amortization . . . . . 6,260,000 1,483,000 7,743,000
Administrative and operating . . . . . 1,178,000 1,178,000
----------- ---------- ---------- ---------- -----------
17,972,000 1,483,000 (7,533,000) 11,922,000
----------- ---------- ---------- ---------- -----------
Income (loss) before minority interest 11,803,000 $1,483,000 $ 15,511,000 25,831,000
========== ========== ==========
Minority interest in Partnerships (H) 4,957,000 7,772,000
----------- -----------
Income from continuing operations . . . $6,846,000 $18,059,000
=========== ===========
Income from continuing operations
per paired share (I) . . . . . . . . $1.15 $1.31
=========== ===========
</TABLE>
See accompanying notes to the pro forma statements of operations.
F-4
<PAGE> 8
STARWOOD LODGING CORPORATION
UNAUDITED COMBINED PRO FORMA STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995
<TABLE>
<CAPTION>
Historical Pro Forma
Starwood Starwood
Lodging Acquired Pro Forma Lodging
Corporation Properties Doral Inn Adjustments Corporation
----------- ----------- ----------- ----------- ------------
(A) (C) (D)
<S> <C> <C> <C> <C> <C>
REVENUE
Hotel . . . . . . . . . . . . . . . . $81,951,000 $14,854,000 $13,312,000 $ $110,117,000
Gaming . . . . . . . . . . . . . . . . 20,375,000 20,375,000
Interest from mortgage and other notes 89,000 89,000
Other income . . . . . . . . . . . . . 873,000 873,000
------------ ----------- ----------- ----------- ------------
103,288,000 14,854,000 13,312,000 131,454,000
------------ ----------- ----------- ----------- ------------
EXPENSES
Hotel operations . . . . . . . . . . . 56,232,000 10,285,000 11,362,000 (1,248,000) (E) 76,631,000
Gaming operations . . . . . . . . . . 18,351,000 18,351,000
Rent - Trust . . . . . . . . . . . . . 18,287,000 4,566,000 (J) 22,853,000
Interest - Trust . . . . . . . . . . . 2,629,000 3,412,000 (K) 6,041,000
Interest - other . . . . . . . . . . . 664,000 3,219,000 (3,801,000) (F) 82,000
Depreciation and amortization . . . . . 3,922,000 1,982,000 3,192,000 9,096,000
Administrative and operating . . . . . 2,658,000 10,000 (E) 2,668,000
------------ ----------- ----------- ----------- ------------
102,743,000 12,267,000 17,773,000 2,939,000 135,722,000
------------ ----------- ----------- ----------- ------------
Income (loss) before minority interest 545,000 $2,587,000 $(4,461,000) $(2,939,000) (4,268,000)
=========== =========== ===========
Minority interest in Partnerships (H) 441,000 (1,284,000)
------------ -----------
Net income (loss) . . . . . . . . . . $104,000 $(2,984,000)
============ ===========
Net income (loss) per paired share . . $0.02 $(0.22)
============ ===========
</TABLE>
See accompanying notes to the pro forma statements of operations.
F-5
<PAGE> 9
STARWOOD LODGING TRUST AND STARWOOD LODGING CORPORATION
UNAUDITED COMBINED PRO FORMA STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1994
<TABLE>
<CAPTION>
Historical Pro Forma
Starwood Starwood
Lodging Starwood Acquired Pro Forma Lodging
Combined Capital Properties Doral Inn Adjustments Combined
---------- ----------- ---------- ---------- ----------- ----------
(A) (B) (C) (D)
<S> <C> <C> <C> <C> <C> <C>
REVENUE
Hotel . . . . . . . . . . . . . $82,668,000 $16,467,000 $26,632,00 $19,459,000 $ $145,226,000
Gaming . . . . . . . . . . . . . 27,981,000 27,981,000
Interest from mortgage and
other notes . . . . . . . . . 1,554,000 8,496,000 10,050,000
Rents from leased hotel properties
and income from joint ventures 927,000 927,000
Other income . . . . . . . . . . 411,000 411,000
Gain (loss) on sales of hotel
assets . . . . . . . . . . . . . 456,000 456,000
----------- ----------- ---------- ----------- ------------ ------------
113,997,000 24,963,000 26,632,00 19,459,000 185,051,000
----------- ----------- ---------- ----------- ------------ ------------
EXPENSES
Hotel operations . . . . . . . . 60,829,000 12,751,000 19,503,00 15,051,000 (3,359,000) (E) 104,775,000
Gaming operations . . . . . . . 24,454,000 24,454,000
Interest . . . . . . . . . . . . 17,606,000 3,834,000 875,00 6,479,000 (28,707,000) (F) 4,047,000
3,960,000 (F)
Depreciation and amortization . . 8,161,000 2,496,000 6,253,00 4,256,000 1,220,000 (G) 22,386,000
Administrative and operating . . 4,203,000 286,000 (E) 4,489,000
Shareholder litigation expense . 2,648,000 2,648,000
Provision for losses . . . . . . 759,000 759,000
----------- ----------- ---------- ----------- ------------ ------------
118,660,000 19,081,000 26,631,00 25,786,000 (26,600,000) 163,558,000
----------- ----------- ---------- ----------- ------------ ------------
Income before minority interest (4,663,000) $ 5,882,000 $1,000 $(6,327,000) $26,600,000 21,493,000
Minority interest in =========== ========== =========== ============
Partnerships (H) . . . . . . . 6,467,000
----------- ------------
Net income (loss) . . . . . . . $(4,663,000) $15,026,000
=========== ============
Net income per paired share (I) $(2.31) $1.09
=========== ============
</TABLE>
See accompanying notes to the pro forma statements of operations.
F-6
<PAGE> 10
STARWOOD LODGING TRUST
UNAUDITED COMBINED PRO FORMA STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1994
<TABLE>
<CAPTION>
Historical Pro Forma
Starwood Starwood
Lodging Starwood Acquired Pro Forma Lodging
Trust Capital Properties Doral Inn Adjustments Trust
---------- ---------- ----------- ---------- ----------- -----------
(A) (B) (C) (D)
<S> <C> <C> <C> <C> <C> <C>
REVENUE
Rents from Corporation . . . . . $16,906,000 $ $ $ $8,589,000 (J) $25,495,000
Interest from Corporation . . . 1,730,000 5,889,000 (K) 7,619,000
Interest from mortgage and
other notes . . . . . . . . . 1,512,000 8,496,000 10,008,000
Rents from leased hotel properties
and income from joint ventures 927,000 927,000
Other income . . . . . . . . . . 164,000 164,000
Gain (loss) on sales of hotel
assets . . . . . . . . . . . . 432,000 432,000
----------- ---------- ----------- ---------- ----------- -----------
21,671,000 8,496,000 14,478,000 44,645,000
----------- ---------- ----------- ---------- ----------- -----------
EXPENSES
Interest - other . . . . . . . . 16,265,000 3,834,000 875,000 (20,974,000)(F) 3,960,000
3,960,000 (F)
Depreciation and amortization . . 5,205,000 1,270,000 2,791,000 610,000 (G) 9,876,000
Administrative and operating . . 1,583,000 1,583,000
Shareholder litigation expense . 1,324,000 1,324,000
Provision for losses . . . . . . 759,000 759,000
----------- ---------- ----------- ---------- ----------- -----------
25,136,000 5,104,000 3,666,000 (16,404,000) 17,502,000
----------- ---------- ----------- ---------- ----------- -----------
Income before minority interest (3,465,000) $3,392,000 $(3,666,000) $ $30,822,000 27,143,000
========== =========== ========== ===========
Minority interest in
Partnerships (H) . . . . . . . 8,167,000
----------- -----------
Net income (loss) . . . . . . . $(3,465,000) $18,976,000
=========== ===========
Net income per paired share (I) $(1.71) $1.37
=========== ===========
</TABLE>
See accompanying notes to the pro forma statements of operations.
F-7
<PAGE> 11
STARWOOD LODGING CORPORATION
UNAUDITED COMBINED PRO FORMA STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1994
<TABLE>
<CAPTION>
Historical Pro Forma
Starwood Starwood
Lodging Starwood Acquired Pro Forma Lodging
Corporation Capital Properties Doral Inn Adjustments Corporation
----------- ----------- ----------- ----------- ------------ -----------
(A) (B) (C) (D)
<S> <C> <C> <C> <C> <C> <C>
REVENUE
Hotel . . . . . . . . . . . . . $82,668,000 $16,467,000 $26,632,000 $19,459,000 $ $145,226,000
Gaming . . . . . . . . . . . . . 27,981,000 27,981,000
Interest from mortgage and
other notes . . . . . . . . . 42,000 42,000
Other income . . . . . . . . . . 247,000 247,000
Gain (loss) on sales of hotel
assets . . . . . . . . . . . . 24,000 24,000
----------- ----------- ----------- ----------- ------------ -----------
110,962,000 16,467,000 26,632,000 19,459,000 173,520,000
----------- ----------- ----------- ----------- ------------ -----------
EXPENSES
Hotel operations . . . . . . . . 60,829,000 12,751,000 19,503,000 15,051,000 (3,359,000)(E) 104,775,000
Gaming operations . . . . . . . 24,454,000 24,454,000
Rent - Trust . . . . . . . . . . 16,906,000 8,589,000 (J) 25,495,000
Interest - Trust . . . . . . . . 1,730,000 5,889,000 (K) 7,619,000
Interest - other . . . . . . . . 1,341,000 6,479,000 (7,733,000)(F) 87,000
Depreciation and amortization . . 2,956,000 1,226,000 3,462,000 4,256,000 610,000 (G) 12,510,000
Administrative and operating . . 2,620,000 286,000 (E) 2,906,000
Shareholder litigation expense . 1,324,000 1,324,000
----------- ----------- ----------- ----------- ------------ -----------
112,160,000 13,977,000 22,965,000 25,786,000 4,282,000 179,170,000
----------- ----------- ----------- ----------- ------------ -----------
Income before minority interest (1,198,000) $2,490,000 $3,667,000 $(6,327,000) $(4,282,000) (5,650,000)
=========== =========== =========== ============
Minority interest in
Partnerships (H) . . . . . . . (1,700,000)
----------- -----------
Net income (loss) . . . . . . . $(1,198,000) $(3,950,000)
=========== ===========
Net income per paired share (I) $(0.59) $(0.29)
=========== ===========
</TABLE>
See accompanying notes to the pro forma statements of operations.
F-8
<PAGE> 12
STARWOOD LODGING TRUST AND
STARWOOD LODGING CORPORATION
NOTES TO THE UNAUDITED COMBINED AND
SEPARATE PRO FORMA STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995
AND THE YEAR ENDED DECEMBER 31, 1994
NOTE 1. BASIS OF PRESENTATION
The Trust and the Corporation (collectively, "the Companies") have unilateral
control of SLT Realty Limited Partnership ("Realty") and SLC Operating Limited
Partnership ("Operating" and, together with Realty the "Partnerships"),
respectively, and therefore, the historical financial statements of Realty and
Operating are consolidated with those of the Trust and the Corporation. Unless
the context otherwise requires, all references herein to the "Companies" refer
to the Trust and the Corporation, and all references to the "Trust" and the
"Corporation" include the Trust and the Corporation and those entities
respectively owned or controlled by the Trust or the Corporation, including
Realty and Operating.
NOTE 2. PRO FORMA ADJUSTMENTS
(A) Reflects the historical statements of operations of the Companies.
Operations for properties sold or pending sale are not considered
material to the pro forma presentation.
(B) Reflects the pro forma statements of operations (reflecting Starwood's
cost basis) of the assets and liabilities contributed by Starwood
Capital in the Reorganization. For additional information regarding
the Reorganization, please see Item 7. (Financial Statements, Pro Forma
Financial Information and Exhibits) of the Company's Form 8-K as
amended dated January 31, 1995, which is incorporated herein by
Reference. Listed below are the effects each contributed hotel had on
the combined pro forma statement of operations:
<TABLE>
<CAPTION>
For the Twelve Months Ended 12/31/94
---------------------------------------------------------
Doubletree
Capitol Hill French Quarters Rancho Harvey
Suites Suites Bernardo Wichita Total
------------ --------------- ----------- --------- ----------
<S> <C> <C> <C> <C> <C>
Hotel Revenues . . . . . . . . . . . . . . . . $3,484,000 $5,247,000 $3,753,000 $3,983,000 $16,467,000
Hotel Expenses . . . . . . . . . . . . . . . . 2,228,000 3,789,000 2,795,000 3,939,000 12,751,000
Depreciation Expense . . . . . . . . . . . . . 556,000 858,000 481,000 601,000 2,496,000
---------- ---------- ---------- ---------- -----------
Income (loss) before Minority Interest . . . . $ 700,000 $ 600,000 $ 477,000 $ (557,000) $ 1,220,000
========== ========== ========== ========== ===========
</TABLE>
(C) Reflects the pro forma statements of operations (reflecting the
Companies' cost basis) of the properties acquired in connection with
the Offering. For additional information regarding the Offering,
please see pages F-1 through F-140 (Financial Statements and
Financial Statement Schedules) of the Company's Form S-2 as amended
dated June 29, 1995 which are incorporated herein by reference. Listed
below are the effects each acquired hotel had on the combined pro
forma statements of operations:
<TABLE>
<CAPTION>
For the Nine Months Ended 9/30/95
-------------------------------------------------------------
Omni Sheraton Embassy Suites
Chapel Hill Colony Square Tempe Total
------------ --------------- -------------- ----------
<S> <C> <C> <C> <C>
Hotel Revenues . . . . . . . . . . . . . . . . $1,265,000 $9,557,000 $4,032,000 $14,854,000
Hotel Expenses . . . . . . . . . . . . . . . . 887,000 7,127,000 2,271,000 10,285,000
Depreciation Expense . . . . . . . . . . . . . 163,000 2,073,000 1,229,000 3,465,000
---------- ---------- ---------- -----------
Income (loss) before Minority Interest . . . . $ 215,000 $ 357,000 $ 532,000 $ 1,104,000
========== ========== ========== ===========
</TABLE>
<TABLE>
<CAPTION>
For the Twelve Months Ended 12/31/94
-------------------------------------------------------------
Omni Sheraton Embassy Suites
Chapel Hill Colony Square Tempe Total
------------ --------------- -------------- -----------
<S> <C> <C> <C> <C>
Hotel Revenues . . . . . . . . . . . . . . . . $4,407,000 $16,200,000 $6,025,000 $26,632,000
Hotel Expenses . . . . . . . . . . . . . . . . 3,024,000 12,656,000 3,823,000 19,503,000
Depreciation Expense . . . . . . . . . . . . . 884,000 3,363,000 2,006,000 6,253,000
---------- ----------- ---------- -----------
Income (loss) before Minority Interest . . . . $ 499,000 $ 181,000 $ 196,000 $ 876,000
========== =========== ========== ===========
</TABLE>
(D) Reflects the pro forma statements of operations of the Doral Inn. On
September 20, 1995, Realty purchased land for $3 million and mortgage
notes receivable secured by the Doral Inn for $40.3 million. Realty
also entered into a long-term lease agreement with SBK Delaware Realty
Holdings, L.L.C. ("SBK"), the owners of the Doral Inn, to lease the
land for $240,000 per year. Simultaneously, Operating entered into a
long-term lease agreement with SBK to lease the land and the building
for $240,000 per year, plus the debt service on the mortgage held by
Realty. The agreement with Operating also allows for management fees
to be paid by Operating to SBK. Realty has the option of acquiring
the building for the value of the mortgage note plus $400,000 after
ten years. It is management's intention to exercise that option.
Accordingly, Operating has recorded the transaction as an accounting
purchase.
F-9
<PAGE> 13
Additional information related to the property is as follows:
<TABLE>
<CAPTION>
For the Twelve Months Ending
----------------------------
1994 1993 1992
------ ------ ------
<S> <C> <C> <C>
Average occupancy rate 80% 76% 79%
Average room rate $89.92 $89.12 $96.47
------ ------ ------
Revenue per available room $71.94 $67.73 $76.21
------ ------ ------
</TABLE>
(E) The Corporation intends to operate all of the Companies' hotels and
terminate existing third party management contracts for all properties
at the earliest practicable date. Accordingly, certain costs directly
attributable to existing third party management contracts included in
the pro forma statements of operations have been eliminated. Such
cost savings are reflected in the pro forma statements of operations
as if such contracts had been canceled as of the beginning of the
periods presented. Listed below are the hotels on which third party
management contracts have been or are anticipated to be terminated and
the related management and other fees incurred in each period.
<TABLE>
<CAPTION>
Fees Paid (1)
----------------------------
12 Months 9 Months
Ended Ended
12/31/94 9/30/95 Status
--------- --------- ------------------
<S> <C> <C> <C>
Hotel
-----
Holiday Inn - Albany, GA . . . . $160,000 $ 9,000 Terminated
Best Western - Columbus, OH . . . 156,000 33,000 Cancelable in 1995
Best Western - Savannah, GA . . . 109,000 21,000 Cancelable in 1995
Radisson - Gainesville, FL . . . 149,000 19,000 Cancelable in 1996
Park Central - Dallas, TX . . . . 342,000 34,000 Terminated
Capital Hill - Washington, DC . . 143,000 43,000 Cancelable in 1995
French Quarter - Lexington, KY . 432,000 21,000 Terminated
Doubletree - Rancho Bernardo, CA 237,000 67,000 Terminated
Colony Square - Atlanta, GA . . . 624,000 139,000 Terminated
Omni - Chapel Hill, NC . . . . . 92,000 23,000 Terminated
Embassy Suites - Tempe, AZ . . . 284,000 406,000 Terminated
Doral Inn - New York, NY . . . . 631,000 433,000 Cancelable in 1995
--------- ---------
3,359,000 1,248,000
========= =========
</TABLE>
- ------------------
(1) Fees include base and incentive management fees as well as accounting
fee chargebacks and other corporate costs.
Pro Forma administrative and operating expenses reflect (i) increases
in operating expenses resulting principally from additional corporate
office personnel and (ii) decreases in operating expenses resulting
form a decrease in director's and officers' liability insurance. Such
cost adjustments are reflected in the pro forma statements of
operations as follows:
<TABLE>
<CAPTION>
Administrative and
Operating Expenses
--------------------------
12 Months 9 Months
Ended Ended
12/31/94 9/30/95
--------- --------
<S> <C> <C>
Additional personnel costs and corporate travel . . . $486,000 $97,000
Decrease in directors' and officers' liability
insurance . . . . . . . . . . . . . . . . . . . . . . (200,000) (87,000)
-------- -------
$286,000 $10,000
======== =======
</TABLE>
F-10
<PAGE> 14
(F) Reflects the elimination of historical and pro forma interest expense
related to the debt repaid from the proceeds of the Offering and the
addition of interest expense on pro forma amounts outstanding
calculated as follows:
<TABLE>
<CAPTION>
Nine Months Ending 9/30/95 Twelve Months Ending 12/31/94
--------------------------------------- -----------------------------------------
Trust Corporation Combined Trust Corporation Combined
---------- ----------- ------------ ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Interest on GSI note $ 82,000 $ 82,000 $ 87,000 $ 87,000
Interest expense on amount outstanding
under lines of credit (subsequent to
offering) $ 383,000 383,000 $ 383,000 - 383,000
Interest expense relating to
acquisition of the Doral Inn (1) 2,083,000 2,083,000 2,870,000 - 2,870,000
Interest expense relating to
additional draw down on line (2) 535,000 535,000 707,000 - 707,000
---------- --------- ---------- ---------- --------- ----------
Total Interest Expense - pro forma $3,001,000 $ 82,000 $3,083,000 $3,960,000 $ 87,000 $4,047,000
========== ========= ========== ========== ========= ==========
(1) Assumes draw down of $39.6 million on January 1, 1995 and 1994 to purchase the Doral Inn
(2) Assumes draw down of $9.8 million on January 1, 1995 and 1994 to reflect actual draw down in 3rd quarter 1995
</TABLE>
(G) Reflects the amortization of organization costs related to the
formation of the Partnerships over a five-year period.
(H) Reflects Starwood Capital's minority interest in the income of the
Partnerships.
(I) Net income (loss) per paired share has been computed using the
weighted average number of paired shares and equivalent paired shares
outstanding. All paired share information has been adjusted to
reflect a one-for-six reverse split effective June 12, 1995.
(J) Reflects pro forma adjustment for rents on the following hotels
contributed by Starwood Capital in the Reorganization and hotels and
land acquired by the Companies in 1995. The hotel leases between the
Trust and the Corporation provide for annual base or minimum rents
plus contingent or percentage rents based on the gross revenue of the
properties and are accounted for as operating leases.
<TABLE>
<CAPTION>
Hotel Date Contributed/Acquired
--------------------------------------- -------------------------
<S> <C>
Capital Hill - Washington, DC . . . . . January 1, 1995
French Quarter - Lexington, KY . . . . January 1, 1995
Doubletree - Rancho Bernardo, CA . . . January 1, 1995
Harvey - Wichita, KS . . . . . . . . . January 1, 1995
Omni - Chapel Hill, NC . . . . . . . . April 6, 1995
Colony Square - Atlanta, GA . . . . . . July 24, 1995
Embassy Suites - Tempe, AZ . . . . . . July 27, 1995
Doral Inn - New York, NY . . . . . . . September 20, 1995
</TABLE>
(K) Reflects interest on the notes payable from the Corporation to the
Trust at 9.5% for the note secured by the leasehold interest in the
Doral property, prime plus 3% for notes secured by the Milwaukee
property and prime plus 2% for unsecured notes.
F-11
<PAGE> 15
INDEPENDENT AUDITORS' REPORT
To the Shareholders of
Carol Management Corporation
d/b/a Doral Inn
We have audited the accompanying balance sheets of Doral Inn (the "Hotel"), a
division of Carol Management Corporation ("CMC") (Note 8) as of December 31,
1994 and 1993, and the related statements of operations, division account and
cash flows for each of the three years in the period ended December 31, 1994.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these 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 financial statements referred to above present fairly, in
all material respects, the financial position of Doral Inn, a division of Carol
Management Corporation as of December 31, 1994 and 1993, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1994, in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Hotel will continue as a going concern. As discussed in Note 7 to the
financial statements, the first mortgagee has instituted an action to foreclose
on the Hotel property, and the Hotel has suffered recurring losses. These
conditions raise substantial doubt about the Hotel's ability to continue as a
going concern. Management's plans with regard to these matters are also
described in Note 7. The financial statements do not include any adjustments
that might result from the outcome of these uncertainties.
DAVID BERNDON & CO. LLP
New York, New York
April 4, 1995
F-12
<PAGE> 16
DORAL INN
(A DIVISION OF CAROL MANAGEMENT CORPORATION (NOTE 8))
BALANCE SHEET
<TABLE>
<CAPTION>
December 31,
---------------------------------
1994 1993
----------- -----------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents (Note 2) . . . . . . $ 949,577 $
Trade accounts receivable, less allowance
for doubtful accounts of $150,000 at
December 31, 1994, and $111,000 at
December 31, 1993 . . . . . . . . . . . . . 1,832,452 1,828,267
Inventories . . . . . . . . . . . . . . . . . 80,036 45,860
Prepaid real estate taxes . . . . . . . . . . 809,657 814,354
Prepaid expenses and other receivables . . . . 292,656 128,703
Due from related parties (Note 3(c)) . . . . . 239,241 264,040
----------- -----------
TOTAL CURRENT ASSETS 4,203,619 3,081,224
PROPERTY AND EQUIPMENT - AT
COST, LESS ACCUMULATED
DEPRECIATION (Notes 4 and 5) . . . . . . . . 9,935,740 10,057,198
----------- -----------
$14,139,359 $13,138,422
=========== ===========
LIABILITIES AND DIVISION
ACCOUNT
-----------------------------------------------
CURRENT LIABILITIES:
Mortgage payable (Note 5) . . . . . . . . . . $47,722,700 $47,722,700
Bank overdraft . . . . . . . . . . . . . . . . 3,265
Accounts payable . . . . . . . . . . . . . . . 745,501 728,401
Accrued mortgage interest (Note 5) . . . . . . 6,002,474 2,137,136
Accrued expenses . . . . . . . . . . . . . . . 875,866 791,526
Due to related party (Note 3(c)) . . . . . . . 2,004,296 1,410,069
----------- -----------
TOTAL CURRENT LIABILITIES 57,350,837 52,793,097
TENANTS' SECURITY DEPOSITS . . . . . . . . . . 63,078 66,681
ADVANCE DEPOSITS . . . . . . . . . . . . . . . 53,194 84,682
----------- -----------
TOTAL LIABILITIES 57,467,109 52,944,460
COMMITMENTS AND
CONTINGENCIES (Notes 3(b), 5,
6, 7 and 8)
DIVISION ACCOUNT ((Exhibit C) . . . . . . . . (43,327,750) (39,806,038)
----------- -----------
$14,139,359 $13,138,422
=========== ===========
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
F-13
<PAGE> 17
DORAL INN
(A DIVISION OF CAROL MANAGEMENT CORPORATION (NOTE 8))
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Nine Months Ended
September 30, Year Ended December 31,
----------------------------- ------------------------------------------------
1995 1994 1994 1993 1992
----------- ----------- ----------- ----------- -----------
(unaudited)
<S> <C> <C> <C> <C> <C>
REVENUES:
Rooms . . . . . . . . . . . . $12,397,298 $12,146,196 $17,150,216 $16,064,257 $18,074,329
Telephone . . . . . . . . . . 787,980 763,776 1,053,427 971,965 1,250,175
Rental and other income . . . 833,963 943,655 1,255,576 1,276,650 1,263,038
----------- ----------- ----------- ----------- -----------
TOTAL REVENUES 14,019,241 13,853,627 19,459,219 18,312,872 20,587,542
----------- ----------- ----------- ----------- -----------
COST OF SALES AND
OTHER OPERATING
EXPENSES:
Distributed operating expenses:
Rooms . . . . . . . . . . . . 5,097,901 5,065,072 7,044,519 6,710,061 6,790,490
Telephone . . . . . . . . . . 472,566 410,174 570,364 530,741 631,975
----------- ----------- ----------- ----------- -----------
Total distributed
operating expenses 5,570,467 5,475,246 7,614,883 7,240,802 7,422,465
----------- ----------- ----------- ----------- -----------
OPERATING DEPARTMENT
INCOME 8,998,774 8,378,381 11,844,336 11,072,070 13,165,077
----------- ----------- ----------- ----------- -----------
Undistributed operating
expenses
Administrative and general . . 1,780,889 1,290,568 2,018,609 1,852,705 2,007,933
Marketing . . . . . . . . . . 864,770 796,045 1,085,042 810,845 1,069,855
Property operations and
maintenance . . . . . . . . 789,576 828,722 1,097,703 1,126,786 1,282,711
Energy costs . . . . . . . . . 569,868 501,074 604,215 653,482 570,768
----------- ----------- ----------- ----------- -----------
Total undistributed
operating expenses 4,005,108 3,416,409 4,805,569 4,443,818 4,931,267
----------- ----------- ----------- ----------- -----------
</TABLE>
(Continued)
F-14
<PAGE> 18
DORAL INN
(A DIVISION OF CAROL MANAGEMENT CORPORATION (NOTE 8))
STATEMENTS OF OPERATIONS
(Continued)
<TABLE>
<CAPTION>
Nine Months Ended
September 30, Year Ended December 31,
----------------------------- -------------------------------------------------
1995 1994 1994 1993 1992
----------- ----------- ----------- ----------- ------------
(unaudited)
<S> <C> <C> <C> <C> <C>
INCOME BEFORE
MANAGEMENT FEE, FIXED
CHARGES AND RECEIVER
EXPENSES . . . . . . . . . . 4,443,671 4,961,972 7,038,767 6,628,252 8,233,810
MANAGEMENT FEE
(Note 3(b)) . . . . . . . . 436,172 449,634 631,075 595,168 668,370
----------- ----------- ----------- ---------- ---------
INCOME BEFORE FIXED
CHARGES AND RECEIVER
EXPENSES . . . . . . . . . . 4,007,499 4,512,338 6,407,692 6,033,084 7,565,440
----------- ----------- ----------- ---------- ---------
FIXED CHARGES:
Rent, taxes and insurance . . 1,441,894 1,425,751 1,900,267 1,921,910 1,783,763
Interest expense (Note 5) . . 4,859,529 4,827,372 6,478,937 5,077,019 4,830,015
Amortization of mortgage
costs . . . . . . . . . . . 128,385 168,861
Depreciation . . . . . . . . . 691,300 799,510 1,066,014 1,201,436 1,429,301
----------- ----------- ----------- ---------- ---------
TOTAL FIXED CHARGES 6,992,723 7,052,033 9,445,218 8,328,750 8,211,940
----------- ----------- ----------- ---------- ---------
RECEIVER EXPENSES
(Note 5(b)) . . . . . . . . 419,551 438,864 528,744 72,989
----------- ----------- ----------- ---------- ---------
NET (LOSS) $(3,404,775) $(2,979,159) $(3,566,270) $(2,368,655) $(646,500)
=========== =========== =========== =========== =========
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
F-15
<PAGE> 19
DORAL INN
(A DIVISION OF CAROL MANAGEMENT CORPORATION (NOTE 8))
STATEMENTS OF DIVISION ACCOUNT
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------------------
1994 1993 1992
------------ ------------ ------------
<S> <C> <C> <C>
DIVISION ACCOUNT -
BEGINNING OF PERIOD . . . . . . . . . . . . $(39,806,038) $(36,188,109) $(34,224,095)
Contributions (distributions) -
Carol Management Corp . . . . . . . . . . . 44,558 (1,249,274) (1,317,514)
Net (loss) (Exhibit B) . . . . . . . . . . . . (3,566,270) (2,368,655) (646,500)
------------ ------------ ------------
DIVISION ACCOUNT -
END OF PERIOD . . . . . . . . . . . . . . . $(43,327,750) $(39,806,038) $(36,188,109)
============ ============ ============
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
F-16
<PAGE> 20
DORAL INN
(A DIVISION OF CAROL MANAGEMENT CORPORATION (NOTE 8))
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Nine Months Ended
September 30, Year Ended December 31,
----------------------------- ---------------------------------------------
1995 1994 1994 1993 1992
------------- ------------ ----------- ------------ -----------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM
OPERATING ACTIVITIES:
Net (loss) . . . . . . . . . . . . . $(3,404,775) $(2,979,159) $(3,566,270) $(2,368,655) $ (646,500)
Adjustments to reconcile net
(loss) to net cash provided by
operating activities:
Depreciation and amortization . . . . 691,300 799,510 1,066,014 1,329,821 1,598,162
Provision for bad debts . . . . . . . 117,088 21,035 133,468 138,330 95,951
Changes in assets and liabilities:
(Increase) decrease in:
Accounts receivable . . . . . . . . (874,353) (88,035) (137,653) (202,263) 725,572
Inventories . . . . . . . . . . . . (3,857) (14,914) (34,176) 18,986 103,958
Prepaid real estate taxes . . . . . 403,008 420,239 4,697 (27,637) (64,832)
Prepaid expenses and other
receivables . . . . . . . . . . . (45,792) (155,828) (163,953) (3,898) 8,262
Increase (decrease) in:
Accounts payable . . . . . . . . . . 318,939 (30,879) 17,100 269,705 (642,733)
Accrued expenses . . . . . . . . . . 5,172,050 3,338,194 3,949,678 1,594,982 (279,019)
Advance deposits . . . . . . . . . . (45,651) (31,488) 84,682
Tenants' security deposits . . . . . (3,603) (3,603)
Due to related party . . . . . . . . 4,861 429,362 594,227 574,899 788,323
---------- ---------- ----------- ----------- ---------
NET CASH PROVIDED BY
OPERATING ACTIVITIES . . . . . . . . 2,378,469 1,690,271 1,828,041 1,408,952 1,687,144
---------- ---------- ----------- ----------- ----------
CASH FLOWS FROM
INVESTING ACTIVITIES:
Capital expenditures . . . . . . . . (2,218,893) (508,223) (944,556) (53,639) (51,409)
Due from related parties . . . . . . (3,912) 24,799 (19,474) 13,334
Cash not transferred from
predecessors . . . . . . . . . . . (173,960) (11,012)
---------- ---------- ---------- ---------- ----------
NET CASH (USED IN)
INVESTING ACTIVITIES . . . . . . . . (2,396,765) (519,235) (919,757) (73,113) (38,075)
---------- ---------- ---------- ---------- ---------
</TABLE>
(Continued)
F-17
<PAGE> 21
DORAL INN
(A DIVISION OF CAROL MANAGEMENT CORPORATION (NOTE 8))
STATEMENTS OF CASH FLOWS
(Continued)
<TABLE>
<CAPTION>
Nine Months Ended
September 30, Year Ended December 31,
--------------------------- -----------------------------------------------
1995 1994 1994 1993 1992
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM
FINANCING ACTIVITIES:
Proceeds of bank overdraft . . . . . (3,265) (3,265) 3,265
Due to related party . . . . . . . . 6,702 (51,713)
Contributions (distributions)
- Carol Management Corp . . . . . (15,665) (71,442) 44,558 (1,249,274) (1,317,514)
Decrease in long-term debt . . . . . (109,109) (149,629)
Decrease in capital lease
obligations . . . . . . . . . . . (25,916) (87,452)
---------- ---------- ---------- ---------- ----------
NET CASH (USED IN)
PROVIDED BY FINANCING
ACTIVITIES . . . . . . . . . . . . . (15,665) (68,005) 41,293 (1,381,034) (1,606,308)
---------- ---------- ---------- ---------- ----------
NET (DECREASE) INCREASE
IN CASH AND CASH
EQUIVALENTS . . . . . . . . . . . . (33,961) 1,103,031 949,577 (45,195) 42,761
---------- ---------- ---------- ---------- ----------
CASH AND CASH
EQUIVALENTS -
BEGINNING OF PERIOD . . . . . . . . 949,577 -- 45,195 2,434
---------- ---------- ---------- ---------- ----------
CASH AND CASH
EQUIVALENTS -
END OF PERIOD . . . . . . . . . . . $ 915,616 $1,103,031 $ 949,577 $ $ 45,195
========== ========== ========== ========== ==========
SUPPLEMENTAL
DISCLOSURE OF CASH
FLOW INFORMATION:
Cash paid for interest . . . . . . . $ 647,794 $1,641,825 $2,613,599 $3,329,487 $5,034,191
========== ========== ========== ========== ==========
</TABLE>
NOTE: In connection with the acquisition of the Hotel, the carrying
value of the fixed assets was increased by approximately
$31 million to reflect the new cost basis.
The accompanying notes to financial statements are an integral part of these
statements.
F-18
<PAGE> 22
DORAL INN
(A DIVISION OF CAROL MANAGEMENT CORPORATION (NOTE 8))
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Organization
The Doral Inn (the "Hotel") is an operating division of Carol
Management Corporation ("CMC") and has no separate legal status or
existence. The accompanying financial statements include all the
assets and liabilities relating to the operations of the Hotel.
(b) Inventories
Inventories, consisting of linen and guest supplies, are stated at the
lower cost (first-in, first-out) or market.
(c) Property and Equipment
Land, building and improvements and furniture, fixtures and equipment
are stated at cost less accumulated depreciation. The building,
aggregating $1,350,000 is stated based on January 1, 1969 appraisal
for estate purposes, which, net of depreciation, did not differ
significantly from estimated cost. The net book value at December 31,
1994 amounted to approximately $200,000.
Building, building improvements, and furniture, fixtures and equipment
are depreciated on the straight-line and declining- balance methods
over estimated useful lives of the respective assets, as follows:
<TABLE>
<S> <C>
Building 40 years
Building improvements 5 to 20 years
Furniture, fixtures and equipment 5 to 7 years
</TABLE>
(d) Income Taxes
For income tax purposes, the Hotel's operations are combined with
those of other divisions of CMC. Any applicable tax expense or
credits which may result from filing income tax returns will inure to
CMC and have not been reflected in the accompanying financial
statements.
(e) Deferred Mortgage Costs
F-19
<PAGE> 23
Costs incurred in connection with obtaining a mortgage are amortized
over the term of the mortgage.
(f) Cash and Cash Equivalents
The Hotel considers all highly liquid investments with an original
maturity of three months or less to be cash equivalents.
NOTE 2 - CONCENTRATION OF CREDIT RISK
At December 31, 1994, the Hotel had a significant concentration of
cash and cash equivalents with one financial institution.
NOTE 3 - RELATED PARTY TRANSACTIONS
(a) The Hotel participates in transactions with other division or
affiliates of CMC. Balances due to/from affiliates at December 31,
1994 and 1993 were noninterest bearing, are payable within one year
and represent expenses paid by or on behalf of the Hotel.
(b) In 1994, 1993 and 1992, Doral Hotels and Resorts Management
Company ("DHRMC") (an affiliate) charged the Hotel a management fee,
pursuant to a ten-year agreement dated June 1, 1988, of 3.25% of gross
revenues.
(c) Balances due to/from related parties are summarized as follows:
<TABLE>
<CAPTION>
December 31,
-----------------------------
1994 1993
---------- ----------
<S> <C> <C>
Due from:
Tuscany Operating Company $ 69,358 $ 97,471
Doral Park Avenue Hotel 123,703 111,157
Other 46,180 55,412
---------- ----------
Due from related parties $ 239,241 $ 264,040
========== ==========
Due to DHRMC $2,004,296 $1,410,069
========== ==========
</TABLE>
F-20
<PAGE> 24
NOTE 4 - PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<CAPTION>
December 31,
------------------------------
1994 1993
----------- -----------
<S> <C> <C>
Land $ 2,275,000 $ 2,275,000
Building and improvements 15,969,058 15,386,618
Furniture, fixtures
and equipment 4,403,291 4,304,244
Construction-in-progress 287,765 24,696
----------- -----------
22,935,114 21,990,558
Less, accumulated depreciation 12,999,374 11,933,360
----------- -----------
$ 9,935,740 $10,057,198
=========== ===========
</TABLE>
NOTE 5 - MORTGAGES PAYABLE
Mortgages payable are summarized as follows:
<TABLE>
<CAPTION>
December 31,
------------------------------
1994 1993
----------- -----------
<S> <C> <C>
First mortgage - The Mutual
Life Insurance Company (a) $29,722,700 $29,722,700
Second mortgage - Bankers
Trust Company (b) 18,000,000 18,000,000
----------- -----------
$47,722,700 $47,722,700
=========== ===========
</TABLE>
(a) Pursuant to the mortgage terms, the mortgage matured on
September 1, 1993 and bore interest at 12.5% per annum payable
monthly. Monthly payments of $323,879 were required to be
applied first to interest and the balance to reduction of
principal. Unpaid interest at December 31, 1994 and 1993
amounted to $4,199,724 and $1,843,886, respectively.
(b) Pursuant to the mortgage terms, the second mortgage notes
matured on September 1, 1993. Interest-only payments were due
monthly at a per annum rate either at the prime rate plus
.375% (as defined), CD rate (as defined), or LIBO rate plus
1.65% (as defined), as selected by the borrower in accordance
with the terms of the note. Unpaid interest at December 31,
1994 and 1993 amounted to $1,802,750 and $293,250,
respectively.
As additional security for these loans, CMC assigned its
rights to the Hotel's leases, rents and other income.
On November 22, 1993, the first mortgagee instituted an action
to foreclose on its security interest in the property and to
apply for the
F-21
<PAGE> 25
appointment of a receiver to operate the property as a result
of the mortgagor's alleged default in the payment of
principal, interest, late charges, and other charges which
became due and payable on September 1, 1993. Subsequent to
September 1, 1993, interest has accrued at the rate of 15% per
annum. On November 24, 1993, the United States District
Court, Southern District of New York, ordered the appointment
of a receiver to operate the property. Currently, this
foreclosure action is still pending while the property is
being operated by the receiver. Pursuant to a court order,
the Hotel is required to pay a monthly fee to the receiver
which amounted to $40,000 per month through May 24, 1994 and
$30,000 per month thereafter. The total fee for the years
ended December 31, 1994 and 1993 amounted to approximately
$407,000 and $49,000, respectively. In addition, the Hotel
incurred approximately $122,000 and $24,000 other receiver
related expenses for the years ended December 31, 1994 and
1993, respectively, and these above-mentioned amounts are
included in the caption "Receiver Expenses" in the
accompanying statements of operations.
NOTE 6 - PENSION PLAN
The Hotel makes contributions, along with many other employers, to
union-sponsored multiemployer pension plans, based on the number of
hours worked by employees covered under union contracts. The
Multiemployer Pension Plan Amendments Act of 1989 imposes certain
liabilities upon employers associated with multiemployer plans who
withdraw from such a plan or upon termination of said plan. The Hotel
has not received information form the plan's administrator to
determine its share of unfunded vested benefits, if any. The Hotel
has not undertaken to terminate, withdraw or partially withdraw from
the plans. Contributions to the multiemployer plans during the years
ended December 31, 1994, 1993 and 1992 amounted to $305,625, $298,545
and $213,770, respectively.
NOTE 7 - GOING CONCERNS
As discussed in Note 5, the first mortgage has instituted an action to
foreclose on its security interest in the property and the second
mortgage has also matured. In addition, the Hotel has suffered
recurring losses and has had a working capital deficiency over the
past few years. These conditions raise substantial doubt about the
Hotel's ability to continue as a going concern, which is dependent
upon the resolution of a satisfactory agreement with its lenders with
regard to the debt mentioned above. Management's plans include the
restructuring or refinancing of the mortgage agreements or selling the
Hotel. The accompanying financial statements do not include any
adjustments that might be necessary should management be unable to
successfully accomplish these plans.
F-22
<PAGE> 26
NOTE 8 - SUBSEQUENT EVENT
In February 1995, CMC transferred the Hotel to a newly created entity,
SBK Realty Holdings LLC ("SBK"). In exchange CMC received a 99%
interest in SBK and a related entity received a 1% interest.
F-23
