<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): June 28, 1996
<TABLE>
<CAPTION>
Commission File Number: 1-6828 Commission File Number: 1-7959
STARWOOD LODGING STARWOOD LODGING
TRUST CORPORATION
(Exact name of registrant as specified in its charter) (Exact name of registrant as specified in its charter)
<S> <C>
Maryland Maryland
(State or other jurisdiction (State or other jurisdiction
of incorporation or organization) of incorporation or organization)
52-0901263 52-1193298
(I.R.S. employer identification no.) (I.R.S. employer identification no.)
11835 W. Olympic Blvd., Suite 695 11835 W. Olympic Blvd., Suite 675
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)
</TABLE>
<PAGE> 2
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On July 3, 1996, Starwood Lodging Trust (the "Trust") and Starwood
Lodging Corporation (the "Corporation", and collectively the "Companies")
announced that they had entered into an agreement to acquire nine mid- and
upscale, full-service hotels from Hotels of Distinction Ventures, Inc. for an
aggregate purchase price of $135 million in cash. The portfolio consists of the
257-room Marque in Atlanta, Georgia; the 247-room Sheraton in Needham,
Massachusetts; the 198-room Embassy Suites in Palm Desert, California; the
297-room Embassy Suites in St. Louis, Missouri; the 215-room Hotel Park in
Tucson, Arizona; the 254-room Sheraton Metrodome in Minneapolis, Minnesota; the
422-room Arlington Park Hilton in Arlington Heights, Illinois; the 224-room
Hilton Hotel in Allentown, Pennsylvania; and the 293-room Radisson Marque in
Winston-Salem, North Carolina (collectively, the "HOD Portfolio"). The Companies
expect to complete the acquisition of the HOD portfolio in August, 1996.
On May 14, 1996, the Companies announced that they had entered into
an agreement to acquire a portfolio of eight upscale and luxury full-service
hotels including: the 290-room Ritz Carlton in Philadelphia, Pennsylvania; the
373-room Ritz Carlton in Kansas City, Missouri; the 347-room Westin Hotel in
Waltham, Massachusetts; the 370-room Doubletree Hotel at Concourse in Atlanta,
Georgia; the 739-room Doubletree Hotel LAX in Los Angeles, California; the
450-room Doubletree Hotel at Horton Plaza in San Diego, California; the 321-room
Doubletree Grand Hotel at Mall of America, Bloomington, Minnesota; and the
251-room Sheraton Ft. Lauderdale Airport Hotel in Dania, Florida (collectively,
the "Teachers Portfolio"), from Teachers Insurance and Annuity Association for
an aggregate purchase price of approximately $309 million in cash. The
transaction is expected to be completed in August, 1996.
In addition to the two portfolios disscussed above, the Companies
have acquired, or intend to acquire, the following properties (the "Other
Acquisitions").
On April 23, 1996, the Companies announced that they had entered
into an agreement to purchase the 294-room Marriott Forrestal Village Hotel in
Princeton, New Jersey for approximately $20 million in cash. The Companies
expect to complete the acquisition in July 1996.
On April 24, 1996, the Companies completed the acquisition of the
308-room Clarion hotel, located at the San Francisco Airport, in San Francisco,
California, for approximately $30.5 million in cash.
On March 25, 1996, the Companies acquired the 257-room Midland
Hotel, located in Chicago, Illinois, for $21.5 million in cash.
On February 26, 1996, the Companies entered into an agreement to
purchase the debt and equity in the 251-room Doubletree Guest Suites Hotel and
the 175-room Days Inn, both located at the Philadelphia Airport in Philadelphia,
Pennsylvania for cash of $21.1 million and $1.8
<PAGE> 3
million of partnership units. The Companies completed the acquisition of the
Doubletree Guest Suites Hotel on June 1, 1996 and completed the acquisition of
the Days Inn on June 28, 1996.
The Companies intend to fund the respective purchase prices of the
pending acquisitions in part with the net proceeds of a public offering of the
Companies' equity securities. The Companies expect to obtain the remainder of
the respective purchase prices by drawing on a new line of credit facility,
which the Companies are currently negotiating.
Completion of the acquisitions pending as of the date hereof is
subject to the satisfaction of certain conditions. No assurance can be given
that all or any of the pending acquisitions will be completed.
This Current Report on Form 8-K contains statements which
constitute forward looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. Those statements appear in a number
of places in this Report and include statements regarding the intent, belief or
current expectations of the Companies, its Trustees, Directors or its officers
with respect to the finalization of the terms of, or the consummation of, the
acquisitions described in this Report and the Companies' financing plans or
strategies. Prospective investors are cautioned that any such forward looking
statements involve risks and uncertainties, and that actual results may differ
materially from those in the forward looking statements as a result of various
factors, including without limitation, uncertainties relating to real estate
investments and the financing thereof, as more specifically described in the
Companies' Current Report on Form 8-K dated May 16, 1996 and other filings with
the Securities and Exchange Commission.
A copy of the press releases, relating to the HOD Portfolio and the
Teachers Portfolio, are filed as exhibits to this report on Form 8-K.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED. In addition to the
consummation of the acquisitions of each of the Teachers
Portfolio and the HOD Portfolio reflecting a significant
impact on an individual basis, consummation of the
acquisition of the Teachers Portfolio becoming probable
reflects a significant, cumulative, aggregate impact of
individually acquired insignificant assets since the
Registrants' most recently filed financial statements. See
Index to Financial Statements (page F-1).
(b) PRO FORMA FINANCIAL INFORMATION. In addition to the
consummation of the acquisitions of each of the Teachers
Portfolio and the HOD Portfolio reflecting a significant
impact on an individual basis, consummation of the
acquisition of the Teachers Portfolio becoming probable
reflects a significant, cumulative, aggregate impact of
individually acquired insignificant assets since the
Registrants' most recently filed financial statements. See
Index to Financial Statements (page F-1).
EXHIBITS.
23.1 Independent accountants consent
23.2 Independent accountants consent
99.1 Form of press release dated May 14, 1996
99.2 Form of press release dated July 3, 1996
<PAGE> 4
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.
STARWOOD LODGING TRUST STARWOOD LODGING CORPORATION
By: /s/ Ronald C. Brown By: /s/ Alan M. Schnaid
__________________________ ________________________________
Ronald C. Brown Alan M. Schnaid
Vice President and Corporate Controller
Chief Financial Officer Principal Accounting Officer
Date: July 15, 1996
<PAGE> 5
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
STARWOOD LODGING TRUST AND STARWOOD LODGING
CORPORATION -- PRO FORMA
Unaudited Combined and Separate Pro Forma Balance Sheets at March 31, 1996.................................................. F-3
Notes to the Unaudited Combined and Separate Pro Forma Balance Sheets at March 31, 1996..................................... F-6
Unaudited Combined and Separate Pro Forma Statements of Operations for the three months ended March 31, 1996 and for
the year ended December 31, 1995.......................................................................................... F-10
Notes to the Unaudited Combined and Separate Pro Forma Statements of Operations ............................................ F-16
HOTELS OF DISTINCTION PORTFOLIO COMBINED FINANCIAL STATEMENTS
Report of Independent Accountants........................................................................................... F-24
Combined Balance Sheet as of December 31, 1994 and 1995, and as of March 31, 1996........................................... F-25
Combined Statement of Operations for the Years Ended December 31, 1994 and 1995, and for the Three Months
Ended March 31, 1996 and 1995............................................................................................. F-26
Combined Statement of Changes in Owners' Equity for the Years Ended December 31, 1994 and 1995
and Three Months Ended March 31, 1996..................................................................................... F-27
Combined Statement of Cash Flows for the Years Ended December 31, 1994 and 1995 and the Three Months
Ended March 31, 1996 and 1995............................................................................................. F-28
Notes to the Combined Financial Statements.................................................................................. F-29
Combining Balance Sheet as of March 31, 1996................................................................................ F-38
Combining Statement of Operations for the Three Months Ended March 31, 1995 and 1996........................................ F-39
Combining Balance Sheet as of December 31, 1995 and 1994.................................................................... F-41
Combining Statement of Operations for the Year Ended December 31, 1995 and 1994............................................. F-43
DOUBLETREE HOTEL LOS ANGELES AIRPORT
Report of Independent Public Accountants.................................................................................... F-45
Statement of Net Assets of Hotel Operations at March 31, 1996 and 1995, and at December 31, 1995,
1994 and 1993............................................................................................................. F-46
Statement of Hotel Operating Revenue and Expenses for the Three Months Ended March 31, 1996 and
1995, For the Year Ended December 31, 1995 and 1994 and for the Period Ended December 31, 1993............................ F-47
Statement of Hotel Cash Flows for the Three Months Ended March 31, 1996 and 1995, For the Year
Ended December 31, 1995 and 1994 and for the Period Ended December 31, 1993............................................... F-48
Notes to Financial Statements at December 31, 1995.......................................................................... F-49
DOUBLETREE CONCOURSE HOTEL
Report of Independent Public Accountants.................................................................................... F-56
Statement of Net Assets of Hotel Operations at March 31, 1996 and 1995, and
at December 31, 1995 and 1994............................................................................................. F-57
Statement of Hotel Operating Revenue and Expenses for the Three Months Ended March 31, 1996 and
1995, for the Year Ended December 31, 1995 and for the Period Ended December 31, 1994..................................... F-58
Statement of Hotel Cash Flows for the Three Months Ended March 31, 1996 and 1995, For the Year
Ended December 31, 1995 and for the Period Ended December 31, 1994........................................................ F-59
Notes to Financial Statements at December 31, 1995........................................................................... F-60
Report of Independent Public Accountants..................................................................................... F-65
Historical Summary of Gross Revenue and Direct Operating Expenses for the year ended
December 31, 1993.......................................................................................................... F-66
Notes to Historical Summary of Gross Revenue and Direct Operating Expenses................................................... F-67
DOUBLETREE GRAND HOTEL AT MALL OF AMERICA
Report of Independent Public Accountants..................................................................................... F-68
Statement of Net Assets of Hotel Operations at March 31, 1996 and 1995, and at December 31, 1995,
1994 and 1993.............................................................................................................. F-69
Statement of Hotel Operating Revenue and Expenses for the Three Months Ended March 31, 1996 and
1995, and for the Year Ended December 31, 1995, 1994 and 1993.............................................................. F-70
Statement of Hotel Cash Flows for the Three Months Ended March 31, 1996 and 1995, and for the Year
Ended December 31, 1995, 1994 and 1993..................................................................................... F-71
Notes to Financial Statements at December 31, 1995........................................................................... F-72
</TABLE>
F-1
<PAGE> 6
<TABLE>
<S> <C>
THE RITZ-CARLTON, KANSAS CITY
Report of Independent Public Accountants.................................................................................... F-77
Statement of Net Assets of Hotel Operations at March 31, 1996 and 1995, and at December 31, 1995
and 1994.................................................................................................................. F-78
Statement of Hotel Operating Revenue and Expenses for the Three Months Ended March 31, 1996 and
1995, for the Year Ended December 31, 1995 and for the Period Ended December 31, 1994..................................... F-79
Statement of Hotel Cash Flows for the Three Months Ended March 31, 1996 and 1995, for the Year
Ended December 31, 1995 and for the Period Ended December 31, 1994........................................................ F-80
Notes to Financial Statements at December 31, 1995.......................................................................... F-81
Report of Independent Public Accountants.................................................................................... F-86
Historical Summaries of Gross Revenue and Direct Operating Expenses for the Year Ended
December 31, 1993......................................................................................................... F-87
Notes to Historical Summary of Gross Revenue and Direct Operating Expenses.................................................. F-88
WESTIN - WALTHAM HOTEL
Report of Independent Public Accountants.................................................................................... F-89
Statement of Net Assets of Hotel Operations at March 31, 1996 and 1995, and at December 31, 1995,
1994 and 1993............................................................................................................. F-90
Statement of Hotel Operating Revenue and Expenses for the Three Months Ended March 31, 1996 and
1995, for the Year Ended December 31, 1995 and 1994 and for the Period Ended December 31, 1993............................ F-91
Statement of Hotel Cash Flows for the Three Months Ended March 31, 1996 and 1995, for the Year
Ended December 31, 1995 and 1994 and for the Period Ended December 31, 1993............................................... F-92
Notes to Financial Statements at December 31, 1995.......................................................................... F-93
DOUBLETREE HOTEL - HORTON PLAZA
Report of Independent Public Accountants.................................................................................... F-100
Balance Sheet as of March 31, 1996 and 1995, and as of December 31, 1995, 1994 and 1993..................................... F-101
Statement of Operations and Partners' Capital for the Three Months Ended March 31, 1996 and 1995,
and for the Years Ended December 31, 1995, 1994 and 1993.................................................................. F-102
Statement of Cash Flows for the Three Months Ended March 31, 1996 and 1995, and For the Year
Ended December 31, 1995, 1994 and 1993.................................................................................... F-103
Notes to Financial Statements at December 31, 1995.......................................................................... F-104
RITZ CARLTON - PHILADELPHIA
Report of Independent Public Accountants.................................................................................... F-111
Historical Summaries of Gross Revenue and Direct Operating Expenses for the Three Months Ended
March 31, 1996 and 1995, and the Years Ended December 31, 1995 and 1994................................................... F-112
Notes to Historical Summary of Gross Revenue and Direct Operating Expenses.................................................. F-113
SHERATON - FORT LAUDERDALE
Report of Independent Public Accountants................................................................................... F-114
Historical Summaries of Gross Revenue and Direct Operating Expenses for the Three Months Ended
March 31, 1996 and 1995, and for the Year Ended December 31, 1995....................................................... F-115
Notes to Historical Summary of Gross Revenue and Direct Operating Expenses................................................. F-116
</TABLE>
F-2
<PAGE> 7
STARWOOD LODGING TRUST AND STARWOOD LODGING CORPORATION
UNAUDITED COMBINED PRO FORMA BALANCE SHEETS
MARCH 31, 1996
<TABLE>
<CAPTION>
Historical
Starwood
Lodging Teachers HOD
Combined Portfolio Portfolio
------------- ------------ ------------
(A) (B) (B)
<S> <C> <C> <C>
ASSETS
Hotel assets held for sale - net ......................... $ 39,923,000 $ -- $ --
Hotel assets - net ....................................... 347,379,000 309,000,000 135,000,000
------------- ------------ ------------
387,302,000 309,000,000 135,000,000
Mortgage notes receivable, net ........................... 78,801,000 -- --
Investments .............................................. 46,865,000 -- --
------------- ------------ ------------
Total real estate investments ........................ 512,968,000 309,000,000 135,000,000
Cash and cash equivalents ................................ 20,646,000 -- --
Accounts and interest receivable ......................... 12,702,000 -- --
Notes receivable, net .................................... 1,776,000 -- --
Inventories, prepaid expenses and other assets ........... 17,004,000 -- --
------------- ------------ ------------
$ 565,096,000 $309,000,000 $135,000,000
============= ============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Secured notes payable and revolving line of credit ....... $ 223,985,000 $309,000,000 $135,000,000
Mortgage and other notes payable ......................... 4,779,000 -- --
Accounts payable and other liabilities ................... 22,388,000 -- --
Dividends and distributions payable ...................... 10,245,000 -- --
------------- ------------ ------------
261,397,000 309,000,000 135,000,000
------------- ------------ ------------
Commitments and contingencies ............................
MINORITY INTEREST 91,569,000 -- --
------------- ------------ ------------
SHAREHOLDERS' EQUITY
Trust shares of beneficial interest,
$.01 par value; authorized 30,000,000 shares;
outstanding 13,798,000; 23,798,000 outstanding
Pro Forma shares ..................................... 138,000 -- --
Corporation common stock at March 31, 1996 and
$.01 par value; authorized 30,000,000 shares;
outstanding 13,798,000; 23,798,000 outstanding
Pro Forma shares ..................................... 138,000 -- --
Additional paid-in capital ............................... 434,104,000 -- --
Accumulated deficit (222,250,000) -- --
------------- ------------ ------------
212,130,000 -- --
------------- ------------ ------------
$ 565,096,000 $309,000,000 $135,000,000
============= ============ ============
<CAPTION>
Pro Forma
Starwood
Other Pro Forma Lodging
Acquisitions Adjustments Combined
------------- ------------- --------------
(B)
<S> <C> <C> <C>
ASSETS
Hotel assets held for sale - net ......................... $ -- $ -- $ 39,923,000
Hotel assets - net ....................................... 73,415,000 (C) -- 864,794,000
------------ ------------- --------------
73,415,000 -- 904,717,000
Mortgage notes receivable, net ........................... (21,115,000)(C) -- 57,686,000
Investments .............................................. -- -- 46,865,000
------------ ------------- --------------
Total real estate investments ........................ 52,300,000 -- 1,009,268,000
Cash and cash equivalents ................................ -- (1,000,000)(G) 19,646,000
Accounts and interest receivable ......................... -- -- 12,702,000
Notes receivable, net .................................... -- -- 1,776,000
Inventories, prepaid expenses and other assets ........... -- 1,000,000 (G) 18,004,000
------------ ------------- --------------
$ 52,300,000 $ -- $1,061,396,000
============ ============= ==============
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Secured notes payable and revolving line of credit ....... $ 50,500,000 $(329,331,000)(E) $ 389,154,000
Mortgage and other notes payable ......................... -- -- 4,779,000
Accounts payable and other liabilities ................... -- -- 22,388,000
Dividends and distributions payable ...................... -- -- 10,245,000
------------ ------------- --------------
50,500,000 (329,331,000) 426,566,000
------------ ------------- --------------
Commitments and contingencies ............................
MINORITY INTEREST 1,800,000 34,321,000 (F) 127,690,000
------------ ------------- --------------
SHAREHOLDERS' EQUITY
Trust shares of beneficial interest,
$.01 par value; authorized 30,000,000 shares;
outstanding 13,798,000; 23,798,000 outstanding
Pro Forma shares ..................................... -- 20,000 (D) 238,000
80,000 (E)
Corporation common stock at March 31, 1996 and
$.01 par value; authorized 30,000,000 shares;
outstanding 13,798,000; 23,798,000 outstanding
Pro Forma shares ..................................... -- 20,000 (D) 238,000
80,000 (E)
Additional paid-in capital ............................... -- 62,331,000 (D) 728,914,000
266,800,000 (E)
(34,321,000)(F)
Accumulated deficit -- -- (222,250,000)
------------ ------------- --------------
-- 295,010,000 507,140,000
------------ ------------- --------------
$ 52,300,000 $ -- $1,061,396,000
============ ============= ==============
</TABLE>
F-3
<PAGE> 8
STARWOOD LODGING TRUST
UNAUDITED PRO FORMA BALANCE SHEET
MARCH 31, 1996
<TABLE>
<CAPTION>
Historical
Starwood
Lodging Teachers HOD
Trust Portfolio Portfolio
------------- ------------ ------------
(A) (B) (B)
<S> <C> <C> <C>
ASSETS
Hotel assets held for sale - net .......................... $ 36,941,000 $ -- $ --
Hotel assets - net ........................................ 237,138,000 309,000,000 135,000,000
------------- ------------ ------------
274,079,000 309,000,000 135,000,000
Mortgage notes receivable, net ............................ 78,801,000 -- --
Mortgage notes receivable - Corporation ................... 85,676,000 -- --
Investments in joint ventures ............................. 46,848,000 -- --
------------- ------------ ------------
Total real estate investments ......................... 485,404,000 309,000,000 135,000,000
Cash and cash equivalents ................................. 7,337,000 -- --
Rent and interest receivable .............................. 3,605,000 -- --
Notes receivable, net ..................................... 1,228,000 -- --
Notes receivable - Corporation ............................ 24,466,000 -- --
Prepaid expenses and other assets ......................... 8,257,000 -- --
------------- ------------ ------------
$ 530,297,000 $309,000,000 $135,000,000
============= ============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Secured notes payable and revolving line of credit ........ $ 223,985,000 $309,000,000 $135,000,000
Mortgage and other notes payable .......................... 100,000 -- --
Accounts payable and other liabilities .................... 3,057,000 -- --
Dividends and distributions payable ....................... 10,245,000 -- --
------------- ------------ ------------
237,387,000 309,000,000 135,000,000
------------- ------------ ------------
Commitments and contingencies .............................
MINORITY INTEREST 88,367,000 -- --
------------- ------------ ------------
SHAREHOLDERS' EQUITY
Trust shares of beneficial interest,
$.01 par value; authorized 30,000,000 shares;
outstanding 13,798,000; 23,798,000 outstanding
Pro Forma shares ...................................... 138,000 -- --
Additional paid-in capital ................................ 354,717,000 -- --
Accumulated deficit ....................................... (150,312,000) -- --
------------- ------------ ------------
204,543,000 -- --
------------- ------------ ------------
$ 530,297,000 $309,000,000 $135,000,000
============= ============ ============
<CAPTION>
Pro Forma
Starwood
Other Pro Forma Lodging
Acquisitions Adjustments Trust
------------- ------------- --------------
(B)
<S> <C> <C> <C>
ASSETS
Hotel assets held for sale - net .......................... $ -- $ -- $ 36,941,000
Hotel assets - net ........................................ 73,415,000 (C) -- 754,553,000
------------ ------------- --------------
73,415,000 -- 791,494,000
Mortgage notes receivable, net ............................ (21,115,000)(C) -- 57,686,000
Mortgage notes receivable - Corporation ................... -- -- 85,676,000
Investments in joint ventures ............................. -- -- 46,848,000
------------ ------------- --------------
Total real estate investments ......................... 52,300,000 -- 981,704,000
Cash and cash equivalents ................................. -- (1,000,000) 6,337,000
Rent and interest receivable .............................. -- -- 3,605,000
Notes receivable, net ..................................... -- -- 1,228,000
Notes receivable - Corporation ............................ -- (16,467,000)(E) 7,999,000
Prepaid expenses and other assets ......................... -- 1,000,000 9,257,000
------------ ------------- --------------
$ 52,300,000 $ (16,467,000) $1,010,130,000
============ ============= ==============
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Secured notes payable and revolving line of credit ........ $ 50,500,000 $(329,331,000)(E) $ 389,154,000
Mortgage and other notes payable .......................... -- -- 100,000
Accounts payable and other liabilities .................... -- -- 3,057,000
Dividends and distributions payable ....................... -- -- 10,245,000
------------ ------------- --------------
50,500,000 (329,331,000) 402,556,000
------------ ------------- --------------
Commitments and contingencies .............................
MINORITY INTEREST 1,800,000 32,041,000 (F) 122,208,000
------------ ------------- --------------
SHAREHOLDERS' EQUITY
Trust shares of beneficial interest,
$.01 par value; authorized 30,000,000 shares;
outstanding 13,798,000; 23,798,000
outstanding Pro Forma shares .......................... -- 20,000 (D) 238,000
80,000 (E)
Additional paid-in capital ................................ -- 59,232,000 (D) 635,440,000
253,532,000 (E)
(32,041,000)(F)
Accumulated deficit ....................................... -- (150,312,000)
------------ ------------- --------------
-- 280,823,000 485,366,000
------------ ------------- --------------
$ 52,300,000 $ (16,467,000) $1,010,130,000
============ ============= ==============
</TABLE>
F-4
<PAGE> 9
STARWOOD LODGING CORPORATION
UNAUDITED PRO FORMA BALANCE SHEET
MARCH 31, 1996
<TABLE>
<CAPTION>
Historical
Starwood
Lodging Teachers HOD
Corporation Portfolio Portfolio
------------ ----------- -----------
(A) (B) (B)
<S> <C> <C> <C>
ASSETS
Hotel assets held for sale - net ......................... $ 2,982,000 $ -- $ --
Hotel assets - net ....................................... 110,241,000 -- --
------------ ----------- -----------
113,223,000 -- --
Investments in joint ventures ............................ 17,000 -- --
------------ ----------- -----------
Total real estate investments ........................ 113,240,000 -- --
Cash and cash equivalents ................................ 13,309,000 -- --
Accounts and interest receivable ......................... 9,097,000 -- --
Notes receivable, net .................................... 548,000 -- --
Inventories, prepaid expenses and other assets ........... 8,747,000 -- --
------------ ----------- -----------
$144,941,000 $ -- $ --
============ =========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Secured notes payable and revolving line of credit ....... $ 4,679,000 $ -- $ --
Mortgage notes payable - Trust ........................... 85,676,000 -- --
Notes payable - Trust .................................... 24,466,000 -- --
Accounts payable and other liabilities ................... 19,331,000 -- --
------------ ----------- -----------
134,152,000 -- --
------------ ----------- -----------
Commitments and contingencies ............................
MINORITY INTEREST 3,202,000 -- --
------------ ----------- -----------
------------ ----------- -----------
SHAREHOLDERS' EQUITY
Corporation common stock at March 31, 1996 and
$.01 par value; authorized 30,000,000 shares;
outstanding 13,798,000; 23,798,000 outstanding
Pro Forma shares...................................... 138,000 -- --
Additional paid-in capital ............................... 79,387,000 -- --
Accumulated deficit ...................................... (71,938,000 -- --
------------ ----------- -----------
7,587,000 -- --
------------ ----------- -----------
$144,941,000 $ -- $ --
============ =========== ===========
<CAPTION>
Pro Forma
Starwood
Other Pro Forma Lodging
Acquisitions Adjustments Corporation
------------ ------------ ------------
(B)
<S> <C> <C> <C>
ASSETS
Hotel assets held for sale - net ......................... $ -- $ -- $ 2,982,000
Hotel assets - net ....................................... -- -- 110,241,000
------------ ------------ ------------
-- -- 113,223,000
Investments in joint ventures ............................ -- -- 17,000
------------ ------------ ------------
Total real estate investments ........................ -- -- 113,240,000
Cash and cash equivalents ................................ -- -- 13,309,000
Accounts and interest receivable ......................... -- -- 9,097,000
Notes receivable, net .................................... -- -- 548,000
Inventories, prepaid expenses and other assets ........... -- -- 8,747,000
------------ ------------ ------------
$ -- $ -- $144,941,000
============ ============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Secured notes payable and revolving line of credit ....... $ -- $ -- $ 4,679,000
Mortgage notes payable - Trust ........................... -- -- 85,676,000
Notes payable - Trust .................................... -- (16,467,000)(E) 7,999,000
Accounts payable and other liabilities ................... -- -- 19,331,000
------------ ------------ ------------
-- (16,467,000) 117,685,000
------------ ------------ ------------
Commitments and contingencies ............................
MINORITY INTEREST -- 2,280,000 (F) 5,482,000
------------ ------------ ------------
------------ ------------ ------------
SHAREHOLDERS' EQUITY
Corporation common stock at March 31, 1996 and
$.01 par value; authorized 30,000,000 shares;
outstanding 13,798,000; 23,798,000 outstanding
Pro Forma shares...................................... -- 20,000 (D) 238,000
80,000 (E)
Additional paid-in capital ............................... -- 3,099,000 (D) 93,474,000
13,268,000 (E)
(2,280,000)(F)
Accumulated deficit ...................................... -- (71,938,000)
------------ ------------ ------------
-- 14,187,000 21,774,000
------------ ------------ ------------
$ -- $ -- $144,941,000
============ ============ ============
</TABLE>
F-5
<PAGE> 10
STARWOOD LODGING TRUST AND
STARWOOD LODGING CORPORATION
NOTES TO THE UNAUDITED COMBINED AND
SEPARATE PRO FORMA BALANCE SHEETS
AT MARCH 31, 1996
NOTE 1. BASIS OF PRESENTATION
(A) The Trust and the Corporation 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. ACQUIRED PROPERTIES
(B) The following properties were acquired subsequent to March 31, 1996, or
are expected to be acquired, and are therefore included in this Form
8-K as pro forma adjustments to the balance sheet:
On April 24, 1996, the Companies acquired the 308-room Clarion hotel,
located at the San Francisco Airport, in San Francisco, California. On
June 1, 1996, the Companies completed the purchase of the 251-room
Doubletree Guest Suites Hotel located at the Philadelphia Airport in
Philadelphia, Pennsylvania. On June 28, 1996, the Companies completed
the purchase of the 175-room Days Inn located at the Philadelphia
Airport in Philadelphia, Pennsylvania. The Companies expect to complete
the purchase of the 294-room Marriott Forrestal Village in Princeton,
New Jersey by July 31, 1996. The cost of these properties is as
follows:
<TABLE>
<S> <C>
Doubletree Guest Suites - Philadelphia, PA $16,983,000
Days Inn - Philadelphia, PA 5,932,000
The Clarion Hotel - San Francisco, CA 30,500,000
Marriott Forrestal - Princeton, NJ 20,000,000
-----------
Total: $73,415,000
===========
</TABLE>
The Companies expect to complete the acquisitions of the Teachers
Portfolio and the HOD Portfolio in August, 1996.
The Companies have assumed that the above acquisitions are acquired
through the issuance of debt and that the debt is partially paid down
with proceeds from the April 1996 Offering (see note D) and the 1996
Offering (see note E).
F-6
<PAGE> 11
NOTE 3. PRO FORMA ADJUSTMENTS
(C) Reflects the reclassification of the debt interest in the Doubletree
Guest Suites Hotel and the Days Inn, both located at the Philadelphia
Airport. The Companies completed the acquisition of these hotels on
June 1 and June 28, respectively, through the issuance of $1.8 million
of partnership units (see Item 2 - Acquisitions and Dispositions of
Assets).
(D) On April 12, 1996, the Trust and the Corporation completed a public
offering of 2,000,000 paired shares (the "April 1996 Offering"). Net
proceeds to the Companies from the April 1996 Offering were
approximately $62.4 million. The proceeds were used to partially fund
the acquisition of a portfolio of three Doubletree Guest Suite hotels
located in Irving, Texas, Ft. Lauderdale, Florida, and Tampa, Florida.
The pro forma effects of these hotels is not included in this Form 8-K,
but was previously included on the Form 8-K, dated April 26, 1996.
Since the April 1996 Offering took place after March 31, 1996, the
effects of such offering are included in this Form 8-K as pro forma
adjustments.
(E) The Companies intend to issue, in a take-down from a shelf registration
statement with the Securities and Exchange Commission for a public
offering (the "1996 Offering"), a total of 8,000,000 paired shares
(exclusive of 1,275,000 paired shares subject to the Underwriters
over-allotment option) at an assumed initial offering price of $35.50
per paired share. Total net proceeds from the 1996 Offering, together
with the net proceeds from the April 1996 Offering, will be used to pay
down debt as follows (in thousands):
<TABLE>
<CAPTION>
Combined Trust Corporation
--------- --------- ------------
<S> <C> <C> <C>
Gross proceeds from 1996 Offering .............. $ 284,000 $ 269,800 $ 14,200
Less offering costs ......................... 17,069 16,216 853
--------- --------- ---------
Net proceeds from 1996 Offering ................ 266,931 253,584 13,347
Net proceeds from April 1996 Offering .......... 62,400 59,280 3,120
Proceeds from Corporation to reduce intercompany
receivable .................................. 16,467 (16,467)
--------- --------- ---------
Total proceeds used to pay down debt ........... $ 329,331 $ 329,331
========= ========= =========
</TABLE>
(F) Reflects the adjustment to minority interest to represent the
minority partnerships share (20.1%) after the effect of the net
assets of the properties acquired.
(G) Represents the estimated financing costs of a new line of credit
facility which the Companies are currently negotiating in
conjunction with the pending acquisitions.
F-7
<PAGE> 12
STARWOOD LODGING TRUST AND
STARWOOD LODGING CORPORATION
PRO FORMA COMBINED AND
SEPARATE STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND
THE YEAR ENDED DECEMBER 31, 1995
(UNAUDITED)
The following Unaudited Combined and Separate Pro Forma Statement of
Operations for the year ended December 31, 1995 give effect to (a) the public
offering on July 6, 1995 of 11,787,500 paired shares of Starwood Lodging Trust
(the "Trust") and Starwood Lodging Corporation (the "Corporation", and
collectively, "the Companies"), raising net proceeds of $245.7 million (the
"1995 Offering"), (b) the application of the net proceeds therefrom, (c) the
acquisitions in 1995 of (i) the Sheraton Colony Square in Atlanta, Georgia, (ii)
the Embassy Suites in Tempe, Arizona and (iii) the Omni Europa in Chapel Hill,
North Carolina, by SLT Realty Limited Partnership ("Realty"), (d) the proposed
public offering of 8,000,000 of the Companies' paired shares (exclusive of
1,275,000 paired shares subject to the underwriters over-allotment option) at
an assumed initial public offering price of $35.50 per paired share, raising net
proceeds of $266.9 million (the "Proposed Offering") (e) the application of the
net proceeds therefrom (the "Application of Proceeds") (f) the acquisition in
1996 of (i) the Doubletree Guest Suites Hotel and the Days Inn Hotel at the
Philadelphia Airport in Philadelphia, Pennsylvania (ii) the Midland Hotel in
Chicago, Illinois, and (iii) the Clarion Hotel at the San Francisco Airport in
San Francisco, California, and (the "1996 Acquisitions") (g) the pending
acquisitions of (i) the Marriott Forrestal Village Hotel in Princeton, New
Jersey (ii) the Teachers Portfolio (see note C) and (iii) the HOD Portfolio (see
note D) (the "Pending Acquisitions"), as of the beginning of the period
presented. Subsequent acquisitions of properties in 1995 (the Doral Inn in New
York, New York, acquired on September 20, 1995, the Terrace Garden and Lenox Inn
in Atlanta, Georgia, acquired on October 21, 1995, and the Holiday Inn in
Beltsville, Maryland, acquired on November 30, 1995) are included in the
following Historical Combined and Separate Statement of Operations for the year
ended December 31, 1995, as of the respective date of acquisition.
The following Unaudited Combined and Separate Pro Forma Statement of
Operations for the three months ended March 31, 1996 give effect to (a) the
Proposed Offering, (b) the Application of Proceeds (c) the 1996 Acquisitions,
and (d) the Pending Acquisitions. Subsequent acquisitions of properties in 1996
(the Grand Hotel in Washington, DC on January 4, 1996 and the 58.2% interest in
the Boston Park Plaza Hotel Complex in Boston, Massachusetts on January 24,
1996) are included in the following Historical Combined and Separate Statement
of Operation for the three months ended March 31, 1996, as of their respective
date of acquisition. 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-8
<PAGE> 13
On April 26, 1996, the Companies completed the acquisition of the
Doubletree Guest Suites in Irving, Texas, the Doubletree Guest Suites in Fort
Lauderdale, Florida and the Doubletree Guest Suites in Tampa, Florida
(collectively, the "FFCA Portfolio") for $75 million in cash. The pro forma
effects of the FFCA Portfolio are not included in the Form 8- K, dated June 28,
1996, but were previously reported in the Form 8-K, dated April 26, 1996.
F-9
<PAGE> 14
STARWOOD LODGING TRUST AND STARWOOD LODGING CORPORATION
UNAUDITED COMBINED PRO FORMA STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1996
<TABLE>
<CAPTION>
Historical
Starwood
Lodging Acquired Teachers HOD
Combined Properties Portfolio Portfolio
------------ ---------- ----------- -----------
(A) (B) (C) (D)
<S> <C> <C> <C> <C>
REVENUE
Hotel .................................................... $ 44,064,000 $ -- $36,224,000 $20,762,000
Gaming ................................................... 6,829,000 -- -- --
Interest from mortgage and other notes ................... 2,525,000 -- -- --
Income from joint ventures and
rents from leased hotel properties ..................... 594,000 -- -- --
Other income ............................................. 873,000 -- -- --
------------ ---------- ----------- -----------
54,885,000 -- 36,224,000 20,762,000
------------ ---------- ----------- -----------
EXPENSES
Hotel operations ......................................... 30,050,000 -- 29,623,000 16,969,000
Gaming operations ........................................ 5,835,000 -- -- --
Interest ................................................. 3,223,000 -- --
--
Depreciation and amortization ............................ 7,660,000 -- 4,201,000 1,835,000
Administrative and operating ............................. 2,373,000 -- -- --
------------ ---------- ----------- -----------
49,141,000 -- 33,824,000 18,804,000
------------ ---------- ----------- -----------
Income (loss) before minority interest in Partnerships ... $ 5,744,000 $ -- $ 2,400,000 $ 1,958,000
========== =========== ===========
Minority interest in Partnerships (J) .................... 1,654,000
------------
Net income (loss) ........................................ $ 4,090,000
============
Net income (loss) per share (K) .......................... $ 0.30
============
Weighted average number of paired shares.................. 13,798,000
============
<CAPTION>
Pro Forma
Starwood
Other Pro Forma Lodging
Acquisitions Adjustments Combined
------------ ----------- ------------
(E)
<S> <C> <C> <C>
REVENUE
Hotel .................................................... $13,172,000 $ -- $114,222,000
Gaming ................................................... -- -- 6,829,000
Interest from mortgage and other notes ................... -- -- 2,525,000
Income from joint ventures and
rents from leased hotel properties ..................... -- -- 594,000
Other income ............................................. -- -- 873,000
----------- ----------- ------------
13,172,000 -- 125,043,000
----------- ----------- ------------
EXPENSES
Hotel operations ......................................... 10,870,000 (2,282,000)(H) 85,230,000
Gaming operations ........................................ -- -- 5,835,000
Interest ................................................. -- 3,766,000 (I) 6,989,000
Depreciation and amortization ............................ 1,266,000 250,000 (L) 15,212,000
Administrative and operating ............................. -- 120,000 (H) 2,493,000
----------- ----------- ------------
12,136,000 1,854,000 115,759,000
----------- ----------- ------------
Income (loss) before minority interest in Partnerships ... $ 1,036,000 $(1,854,000) $ 9,284,000
=========== ===========
Minority interest in Partnerships (J) .................... 1,867,000
------------
Net income (loss) ........................................ $ 7,417,000
============
Net income (loss) per share (K) .......................... $ .31
============
Weighted average number of paired shares.................. 23,798,000
============
</TABLE>
F-10
<PAGE> 15
STARWOOD LODGING TRUST
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1996
<TABLE>
<CAPTION>
Historical
Starwood
Lodging Acquired Teachers HOD
Trust Properties Portfolio Portfolio
----------- ----------- ------------ -----------
(A) (B) (C) (D)
<S> <C> <C> <C> <C>
REVENUE
Rents from Corporation ................................... $11,504,000 $ -- $ -- $ --
Interest from Corporation ................................ 2,188,000 -- -- --
-- -- -- --
Interest from mortgage and other notes ................... 2,504,000 -- -- --
Income from joint ventures and
rents from leased hotel properties ..................... 1,356,000 -- -- --
Other .................................................... 406,000 -- -- --
----------- ----------- ----------- -----------
17,958,000 -- -- --
----------- ----------- ----------- -----------
EXPENSES
Interest ................................................. 3,168,000 -- -- --
Depreciation and amortization ............................ 3,386,000 -- 4,201,000 1,835,000
Administrative and operating ............................. 1,188,000 -- -- --
----------- ----------- ----------- -----------
7,742,000 -- 4,201,000 1,835,000
----------- ----------- ----------- -----------
Income (loss) before minority interest in Partnerships ... 10,216,000 $ -- $(4,201,000) $(1,835,000)
=========== =========== ===========
Minority interest in Partnerships (J) .................... 3,074,000
-----------
Net income (loss) ........................................ $ 7,142,000
===========
Net income (loss) per share (K) .......................... $ 0.52
===========
<CAPTION>
Pro Forma
Starwood
Other Pro Forma Lodging
Acquisitions Adjustments Trust
------------ ------------ -----------
(E)
<S> <C> <C> <C>
REVENUE
Rents from Corporation ................................... $ -- $15,147,000(F) $26,651,000
Interest from Corporation ................................ -- 423,000(G) 2,611,000
-- -
Interest from mortgage and other notes ................... -- - 2,504,000
Income from joint ventures and
rents from leased hotel properties ..................... -- - 1,356,000
Other .................................................... -- - 406,000
------------ ----------- -----------
-- 15,570,000 33,528,000
------------ ----------- -----------
EXPENSES
Interest ................................................. -- 3,766,000(I) 6,934,000
Depreciation and amortization ............................ 974,000 250,000(L) 10,646,000
Administrative and operating ............................. -- - 1,188,000
------------ ----------- -----------
974,000 4,016,000 18,768,000
------------ ----------- -----------
Income (loss) before minority interest in Partnerships ... $(974,000) $11,554,000 14,760,000
============ ===========
Minority interest in Partnerships (J) .................... 2,969,000
-----------
Net income (loss) ........................................ $11,791,000
===========
Net income (loss) per share (K) .......................... $ 0.50
===========
</TABLE>
F-11
<PAGE> 16
STARWOOD LODGING CORPORATION
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1996
<TABLE>
<CAPTION>
Historical
Starwood
Lodging Acquired Teachers HOD
Corporation Properties Portfolio Portfolio
------------- ----------- ----------- -----------
(A) (B) (C) (D)
<S> <C> <C> <C> <C>
REVENUE
Hotel ................................................... $ 44,064,000 $ -- $36,224,000 $20,762,000
Gaming .................................................. 6,829,000 -- -- --
Loss from joint venture ................................. (762,000) -- -- --
Interest from notes receivable .......................... 21,000 -- -- --
Management fees and other income ........................ 467,000 -- -- --
------------ ----------- ----------- -----------
50,619,000 -- 36,224,000 20,762,000
------------ ----------- ----------- -----------
EXPENSES
Hotel operations ........................................ 30,050,000 -- 29,623,000 16,969,000
Gaming operations ....................................... 5,835,000 -- -- --
Rent - Trust ............................................ 11,504,000 -- -- --
Interest - Trust ........................................ 2,188,000 -- -- --
Interest ............................................... 55,000 -- -- --
Depreciation and amortization ........................... 4,274,000 -- -- --
Administrative and operating ............................ 1,185,000 -- -- --
------------ ----------- ----------- -----------
55,091,000 -- 29,623,000 16,969,000
------------ ----------- ----------- -----------
Income (loss) before minority interest in Partnerships .. (4,472,000) $ -- $ 6,601,000 $ 3,793,000
=========== =========== ===========
Minority interest in Partnerships (J) ................... (1,420,000)
------------
Net income (loss) ....................................... $ (3,052,000)
============
Net income (loss) per share (K) ......................... $ (0.22)
============
<CAPTION>
Pro Forma
Starwood
Other Pro Forma Lodging
Acquisitions Adjustments Corporation
------------ ------------- ------------
(E)
<S> <C> <C> <C>
REVENUE
Hotel ................................................... $13,172,000 $ -- $114,222,000
Gaming .................................................. -- -- 6,829,000
Loss from joint venture ................................. -- -- (762,000)
Interest from notes receivable .......................... -- -- 21,000
Management fees and other income ........................ -- -- 467,000
----------- ------------- ------------
13,172,000 -- 120,777,000
----------- ------------- ------------
EXPENSES
Hotel operations ........................................ 10,870,000 (2,282,000)(H) 85,230,000
Gaming operations ....................................... -- -- 5,835,000
Rent - Trust ............................................ -- 15,147,000 (F) 26,651,000
Interest - Trust ........................................ -- 423,000 (G) 2,611,000
Interest ............................................... -- -- 55,000
Depreciation and amortization ........................... 292,000 -- 4,566,000
Administrative and operating ............................ -- 120,000 (H) 1,305,000
----------- ------------- ------------
11,162,000 13,408,000 126,253,000
----------- ------------- ------------
Income (loss) before minority interest in Partnerships .. $ 2,010,000 $(13,408,000) (5,476,000)
=========== =============
Minority interest in Partnerships (J) ................... (1,101,000)
------------
Net income (loss) ....................................... $ (4,375,000)
============
Net income (loss) per share (K) ......................... $ (0.18)
============
</TABLE>
F-12
<PAGE> 17
STARWOOD LODGING TRUST AND STARWOOD LODGING CORPORATION
UNAUDITED COMBINED PRO FORMA STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
Historical
Starwood
Lodging Acquired Teachers HOD
Combined Properties Portfolio Portfolio
------------ ----------- ------------ ------------
(A) (B) (C) (D)
<S> <C> <C> <C> <C>
REVENUE
Hotel .................................................. $121,250,000 $14,854,000 $141,797,000 $79,887,000
Gaming ................................................. 26,929,000 -- -- --
Interest from mortgage and other notes ................. 10,905,000 -- -- --
Income from joint ventures and
rents from leased hotel properties ................... 791,000 -- -- --
Other income ........................................... 1,966,000 -- -- --
Gain (loss) on sales of hotel assets ................... (125,000) -- -- --
------------ ----------- ------------ -----------
161,716,000 14,854,000 141,797,000 79,887,000
------------ ----------- ------------ -----------
EXPENSES
Hotel operations ....................................... 85,017,000 10,285,000 118,701,000 67,252,000
Gaming operations ...................................... 24,242,000 -- -- --
Interest ............................................... 13,138,000 -- -- --
Depreciation and amortization .......................... 15,469,000 3,465,000 16,803,000 7,341,000
Administrative and operating ........................... 5,712,000 -- -- --
------------ ----------- ------------ -----------
143,578,000 13,750,000 135,504,000 74,593,000
------------ ----------- ------------ -----------
Income (loss) before minority interest in Partnerships.. 18,138,000 $ 1,104,000 $ 6,293,000 $ 5,294,000
=========== ============ ===========
Minority interest in Partnerships (J) .................. 7,013,000
------------
Net income (loss) ...................................... $ 11,125,000
============
Net income (loss) per share (K) ........................ $ 1.43
============
Weighted average number of paired shares................ 7,771,000
============
<CAPTION>
Pro Forma
Starwood
Other Pro Forma Lodging
Acquisitions Adjustments Combined
------------ ------------ -------------
(E)
<S> <C> <C> <C>
REVENUE
Hotel .................................................. $53,502,000 $ -- $411,290,000
Gaming ................................................. -- -- 26,929,000
Interest from mortgage and other notes ................. -- -- 10,905,000
Income from joint ventures and
rents from leased hotel properties ................... -- -- 791,000
Other income ........................................... -- -- 1,966,000
Gain (loss) on sales of hotel assets ................... -- -- (125,000)
------------ ----------- ------------
53,502,000 -- 451,756,000
------------ ----------- ------------
EXPENSES
Hotel operations ....................................... 43,002,000 (9,440,000)(H) 314,817,000
Gaming operations ...................................... -- -- 24,242,000
Interest ............................................... -- 4,865,000 (I) 18,003,000
Depreciation and amortization .......................... 5,063,000 1,000,000 (L) 49,141,000
Administrative and operating ........................... -- 491,000 (H) 6,203,000
------------ ----------- ------------
48,065,000 (3,084,000) 412,406,000
------------ ----------- ------------
Income (loss) before minority interest in Partnerships.. $ 5,437,000 $ 3,084,000 39,350,000
============ ===========
Minority interest in Partnerships (J) .................. 7,915,000
------------
Net income (loss) ...................................... $ 31,435,000
============
Net income (loss) per share (K) ........................ $ 1.32
============
Weighted average number of paired shares................ 23,798,000
============
</TABLE>
F-13
<PAGE> 18
STARWOOD LODGING TRUST
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
Historical
Starwood
Lodging Acquired Teachers HOD
Trust Properties Portfolio Portfolio
------------ ------------ ------------- ------------
(A) (B) (C) (D)
<S> <C> <C> <C> <C>
REVENUE
Rents from Corporation .................................. $26,730,000 $ -- $ -- $ --
Interest from Corporation ............................... 4,761,000 -- -- --
Interest from mortgage and other notes .................. 10,792,000 -- -- --
Income from joint ventures and
rents from leased hotel properties.................... 791,000 -- -- --
Other ................................................... 1,074,000 -- -- --
Gain (loss) on sale ..................................... (125,000) -- -- --
----------- ------------ ------------- ------------
44,023,000 -- -- --
----------- ------------ ------------- ------------
EXPENSES
Interest ................................................ 12,429,000 -- -- --
Depreciation and amortization ........................... 8,977,000 1,683,000 16,803,000 7,341,000
Administrative and operating ............................ 2,439,000 -- -- --
----------- ------------ ------------- ------------
23,845,000 1,683,000 16,803,000 7,341,000
----------- ------------ ------------- ------------
Income (loss) before minority interest in Partnerships .. 20,178,000 $(1,683,000) $(16,803,000) $(7,341,000)
============ ============= ============
Minority interest in Partnerships (J) ................... 7,314,000
-----------
Net income (loss) ....................................... $12,864,000
===========
$ 1.66
===========
<CAPTION>
Pro Forma
Starwood
Other Pro Forma Lodging
Acquisitions Adjustments Trust
------------ ------------ ------------
(E)
<S> <C> <C> <C>
REVENUE
Rents from Corporation .................................. $ -- $67,716,000(F) $ 94,446,000
Interest from Corporation ............................... -- 2,238,000(G) 6,999,000
Interest from mortgage and other notes .................. -- - 10,792,000
Income from joint ventures and
rents from leased hotel properties.................... -- - 791,000
Other ................................................... -- - 1,074,000
Gain (loss) on sale ..................................... -- - (125,000)
------------ ----------- ------------
-- 69,954,000 113,977,000
------------ ----------- ------------
EXPENSES
Interest ................................................ -- 5,447,000(I) 17,876,000
Depreciation and amortization ........................... 3,894,000 1,000,000(L) 39,698,000
Administrative and operating ............................ -- - 2,439,000
------------ ----------- ------------
3,894,000 6,447,000 60,013,000
------------ ----------- ------------
Income (loss) before minority interest in Partnerships .. $(3,894,000) $63,507,000 53,964,000
============ ===========
Minority interest in Partnerships (J) ................... 10,854,000
------------
Net income (loss) ....................................... $ 43,110,000
============
$ 1.81
============
</TABLE>
F-14
<PAGE> 19
STARWOOD LODGING CORPORATION
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
Historical
Starwood
Lodging Acquired Teachers HOD
Corporation Properties Portfolio Portfolio
------------ ----------- ------------ -----------
(A) (B) (C) (D)
<S> <C> <C> <C> <C>
REVENUE
Hotel ................................................... $121,250,000 $14,854,000 $141,797,000 $79,887,000
Gaming .................................................. 26,929,000 -- -- --
Income from joint venture ............................... -- -- -- --
Interest from notes receivable .......................... 113,000 -- -- --
Management fees and other income ........................ 892,000 -- -- --
Gain (loss) on sales of hotel assets .................... -- -- -- --
------------ ----------- ------------ -----------
149,184,000 14,854,000 141,797,000 79,887,000
------------ ----------- ------------ -----------
EXPENSES
Hotel operations ........................................ 85,017,000 10,285,000 118,701,000 67,252,000
Gaming operations ....................................... 24,242,000 -- -- --
Rent - Trust ............................................ 26,730,000 -- -- --
Interest - Trust ........................................ 4,761,000 -- -- --
Interest ............................................... 709,000 -- -- --
Depreciation and amortization ........................... 6,492,000 1,782,000 -- --
Administrative and operating ............................ 3,273,000 -- -- --
------------ ----------- ------------ -----------
151,224,000 12,067,000 118,701,000 67,252,000
------------ ----------- ------------ -----------
Income (loss) before minority interest in Partnerships .. (2,040,000) $ 2,787,000 $ 23,096,000 $12,635,000
=========== ============ ===========
Minority interest in Partnerships (J) ................... (301,000)
------------
Net income (loss) ....................................... $ (1,739,000)
============
Net income (loss) per share (K) ......................... $ (0.22)
============
<CAPTION>
Pro Forma
Starwood
Other Pro Forma Lodging
Acquisitions Adjustments Corporation
------------ ------------ ------------
(E)
<S> <C> <C> <C>
REVENUE
Hotel ................................................... $53,502,000 $ -- $411,290,000
Gaming .................................................. -- -- 26,929,000
Income from joint venture ............................... -- -- -
Interest from notes receivable .......................... -- -- 113,000
Management fees and other income ........................ -- -- 892,000
Gain (loss) on sales of hotel assets .................... -- -- -
----------- ------------ ------------
53,502,000 -- 439,224,000
----------- ------------ ------------
EXPENSES
Hotel operations ........................................ 43,002,000 (9,440,000)(H) 314,817,000
Gaming operations ....................................... -- -- 24,242,000
Rent - Trust ............................................ -- 67,716,000 (F) 94,446,000
Interest - Trust ........................................ -- 2,238,000 (G) 6,999,000
Interest ............................................... -- (582,000)(I) 127,000
Depreciation and amortization ........................... 1,169,000 -- 9,443,000
Administrative and operating ............................ -- 491,000 (H) 3,764,000
----------- ------------ ------------
44,171,000 60,423,000 453,838,000
----------- ------------ ------------
Income (loss) before minority interest in Partnerships .. $ 9,331,000 $(60,423,000) (14,614,000)
=========== ============
Minority interest in Partnerships (J) ................... (2,939,000)
------------
Net income (loss) ....................................... $(11,675,000)
============
Net income (loss) per share (K) ......................... $ (0.49)
============
</TABLE>
F-15
<PAGE> 20
STARWOOD LODGING TRUST AND
STARWOOD LODGING CORPORATION
NOTES TO THE UNAUDITED COMBINED AND
SEPARATE PRO FORMA STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND
THE YEAR ENDED DECEMBER 31, 1995
NOTE 1. BASIS OF PRESENTATION
The Trust and the Corporation 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.
(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.
NOTE 2. PRO FORMA ADJUSTMENTS
(B) Reflects the pro forma statements of operations (reflecting the Companies'
cost basis) of the properties acquired in connection with the 1995
Offering. For additional information, please see pages F-1 through F-140
(Financial Statements and Financial Statement Schedules) of the Companies'
Form S-2, as amended, dated June 29, 1995.
Listed below are the effects each acquired hotel had on the Combined Pro
Forma Statement of Operations for the year ended December 31, 1995:
<TABLE>
<CAPTION>
Hotel Hotel Income before
Hotel Revenues Expenses Depreciation Minority Interest
---------------------------------- -------------- --------------- -------------- -----------------
<S> <C> <C> <C> <C>
Omni Chapel Hill (1) $ 1,265,000 $ 887,000 $ 163,000 $ 215,000
Sheraton Colony Square (1) 9,557,000 7,127,000 2,073,000 357,000
Embassy Suites Tempe (1) 4,032,000 2,271,000 1,229,000 532,000
------------ ------------- ----------- ------------
Total $ 14,854,000 $ 10,285,000 $ 3,465,000 $ 1,104,000
============ ============= =========== ============
</TABLE>
(1) For additional information, please see pages F-1 through F-140 (Financial
Statement Schedules) of the Companies' Form S-2, as amended, dated June 29,
1995
F-16
<PAGE> 21
(C) Reflects the pro forma statements of operations (reflecting the Companies'
cost basis) of the Teachers Portfolio.
Listed below are the effects each hotel, in the Teachers Portfolio, had on
the Combined Pro Forma Statement of Operations for the three months ended
March 31, 1996 and for the year ended December 31, 1995:
For the three months ended March 31, 1996:
<TABLE>
<CAPTION>
Hotel Hotel Income Before
Hotel Revenues Expenses Depreciation Minority Interest
- ---------------------------------------------------- --------------- -------------- --------------- ------------------
<S> <C> <C> <C> <C>
Ritz Carlton - Philadelphia, PA.................... $ 5,421,000 $ 4,786,000 $ 462,000 $ 173,000
Ritz Carlton - Kansas City, MO..................... 5,005,000 4,420,000 578,000 7,000
Westin - Waltham, MA............................... 3,874,000 3,428,000 557,000 (111,000)
Doubletree LAX - Los Angeles, CA................... 5,970,000 5,473,000 462,000 35,000
Doubletree Horton Plaza - San Diego, CA............ 5,082,000 3,568,000 632,000 882,000
Doubletree Mall of Americas - Bloomington, MN...... 3,057,000 2,285,000 504,000 268,000
Doubletree Concourse - Atlanta, GA................. 4,587,000 3,330,000 707,000 550,000
Sheraton Airport - Ft. Lauderdale, FL.............. 3,228,000 2,333,000 299,000 596,000
------------ ------------ ----------- ------------
Total.............................................. $ 36,224,000 $ 29,623,000 $ 4,201,000 $ 2,400,000
============ ============ =========== ============
</TABLE>
For the year ended December 31, 1995:
<TABLE>
<CAPTION>
Hotel Hotel Income before
Hotel Revenues Expenses Depreciation Minority Interest
- ---------------------------------------------------- --------------- -------------- --------------- ------------------
<S> <C> <C> <C> <C>
Ritz Carlton - Philadelphia, PA.................... $ 22,231,000 $ 20,239,000 $ 1,849,000 $ 143,000
Ritz Carlton - Kansas City, MO..................... 23,222,000 18,738,000 2,311,000 2,173,000
Westin - Waltham, MA............................... 16,634,000 13,772,000 2,229,000 633,000
Doubletree LAX - Los Angeles, CA................... 22,209,000 21,932,000 1,849,000 (1,572,000)
Doubletree Horton Plaza - San Diego, CA............ 16,632,000 12,519,000 2,529,000 1,584,000
Doubletree Mall of Americas - Bloomington, MN...... 13,802,000 9,767,000 2,012,000 2,023,000
Doubletree Concourse - Atlanta, GA................. 16,505,000 12,482,000 2,828,000 1,195,000
Sheraton Airport - Ft. Lauderdale, FL.............. 10,562,000 9,252,000 1,196,000 114,000
------------- ------------ ------------ -----------
Total.............................................. $ 141,797,000 $118,701,000 $ 16,803,000 $ 6,293,000
============= ============ ============ ===========
</TABLE>
Additional information related to the Teachers Portfolio is as follows:
<TABLE>
<CAPTION>
For the Year Ended December 31,
ADR Occupancy % REVPAR
-----------------------------------------------------------------------
Hotel 1995 1994 1993 1995 1994 1993 1995 1994 1993
- ----- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Ritz Carlton - Philadelphia, PA.................... 153.28 144.13 133.86 71.7% 73.3% 71.6% 109.90 105.65 95.84
Ritz Carlton - Kansas City, MO..................... 122.82 116.76 115.55 74.9% 73.2% 72.6% 91.99 85.47 83.89
Westin - Waltham, MA............................... 100.15 97.17 95.25 72.3% 69.8% 62.5% 72.41 67.82 59.53
Doubletree LAX - Los Angeles, CA................... 55.82 56.87 74.36 79.9% 70.9% 46.2% 44.60 40.32 34.35
Doubletree Horton Plaza - San Diego, CA............ 98.64 92.44 87.55 70.0% 67.9% 62.3% 69.05 62.77 54.54
Doubletree Mall of Americas - Bloomington, MN...... 88.34 79.28 n/av 77.2% 74.7% n/av 68.20 59.22 n/av
Doubletree Concourse - Atlanta, GA................. 96.25 87.32 78.26 71.6% 74.2% 73.5% 68.92 64.79 57.52
Sheraton Airport - Ft. Lauderdale, FL.............. 77.18 77.71 73.94 82.4% 76.2% 76.0% 63.60 59.22 56.19
</TABLE>
(D) Reflects the pro forma statements of operations (reflecting the Companies'
cost basis) of the HOD Portfolio.
F-17
<PAGE> 22
Listed below are the effects each hotel, in the HOD Portfolio, had on the
Combined Pro Forma Statement of Operations for the three months ended March
31, 1996 and for the year ended December 31, 1995:
For the three months ended March 31, 1996:
<TABLE>
<CAPTION>
Hotel Hotel Income before
Hotel Revenues Expenses Depreciation Minority Interest
- ------------------------------------------- --------------- ------------- --------------- ------------------
<S> <C> <C> <C> <C>
The Marque - Atlanta GA $ 2,060,000 $ 1,320,000 $ 313,000 $ 427,000
Sheraton - Needham, MA 2,569,000 2,122,000 272,000 175,000
Embassy Suites - St. Louis, MO 2,092,000 1,743,000 272,000 77,000
Sheraton - Minneapolis, MN 2,516,000 2,091,000 245,000 180,000
Embassy Suites - Palm Desert, CA 2,478,000 1,563,000 190,000 725,000
Hilton - Arlington Park, IL 3,600,000 3,749,000 177,000 (326,000)
Hotel Park - Tucson, AZ 2,380,000 1,541,000 150,000 689,000
Radisson Marque - Winston-Salem, NC 1,492,000 1,384,000 102,000 6,000
Hilton - Allentown, PA 1,575,000 1,456,000 114,000 5,000
------------ ------------ ----------- -----------
Total $ 20,762,000 $ 16,969,000 $ 1,835,000 $ 1,958,000
============ ============ =========== ===========
</TABLE>
For the year ended December 31, 1995:
<TABLE>
<CAPTION>
Hotel Hotel Income before
Hotel Revenues Expenses Depreciation Minority Interest
- ------------------------------------------- --------------- ------------- -------------- -----------------
<S> <C> <C> <C> <C>
The Marque - Atlanta GA..................... $ 7,342,000 $ 4,892,000 $ 1,250,000 $ 1,200,000
Sheraton - Needham, MA 10,276,000 8,351,000 1,087,000 838,000
Embassy Suites - St. Louis, MO 9,284,000 7,480,000 1,088,000 716,000
Sheraton - Minneapolis, MN 10,545,000 8,628,000 979,000 938,000
Embassy Suites - Palm Desert, CA 6,745,000 5,460,000 762,000 523,000
Hilton - Arlington Park, IL................. 15,490,000 14,607,000 707,000 176,000
Hotel Park - Tucson, AZ..................... 6,943,000 6,108,000 597,000 238,000
Radisson Marque - Winston-Salem, NC......... 6,442,000 5,791,000 408,000 243,000
Hilton - Allentown, PA...................... 6,820,000 5,935,000 463,000 422,000
------------- ------------ ------------ -----------
Total....................................... $ 79,887,000 $ 67,252,000 $ 7,341,000 $ 5,294,000
============= ============ ============ ===========
</TABLE>
Additional information related to the HOD Portfolio is as follows:
<TABLE>
<CAPTION>
For the Year Ended December 31,
ADR Occupancy % REVPAR
--------------------------------------------------------------------------
Hotel 1995 1994 1993 1995 1994 1993 1995 1994 1993
- ----- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
The Marque - Atlanta GA..................... 82.21 74.66 66.82 69.2% 68.0% 64.0% 56.89 50.77 42.76
Sheraton - Needham, MA 84.60 80.01 76.52 74.8% 73.6% 70.6% 63.28 58.89 54.02
Embassy Suites - St. Louis, MO 88.02 86.48 81.84 72.0% 71.7% 63.4% 63.37 62.01 51.89
Sheraton - Minneapolis, MN 72.00 66.96 61.92 85.3% 75.7% 72.7% 61.42 50.69 45.02
Embassy Suites - Palm Desert, CA 97.30 96.81 92.18 72.2% 69.1% 69.2% 70.25 66.90 63.79
Hilton - Arlington Park, IL................. 77.76 71.55 71.72 69.4% 64.2% 62.1% 53.97 45.94 44.54
Hotel Park - Tucson, AZ..................... 74.12 69.29 66.07 70.4% 71.3% 70.8% 52.18 49.40 46.78
Radisson Marque - Winston-Salem, NC......... 71.88 69.32 69.17 54.0% 51.2% 49.4% 38.82 35.49 34.17
Hilton - Allentown, PA...................... 60.59 57.96 55.53 77.5% 73.5% 67.2% 46.96 42.60 37.32
</TABLE>
F-18
<PAGE> 23
(E) Reflects the pro forma statements of operations (reflecting the Companies'
cost basis) of the Other Acquisitions.
Listed below are the effects each of the Other Acquisition hotels had on
the Combined Pro Forma Statement of Operations for the three months ended
March 31, 1996 and for the year ended December 31, 1995:
For the three months ended March 31, 1996:
<TABLE>
<CAPTION>
Hotel Hotel Income before
Hotel Revenues Expenses Depreciation Minority Interest
- ------------------------------------------------ --------------- -------------- -------------- -----------------
<S> <C> <C> <C> <C>
The Midland Hotel - Chicago, IL................. $ 2,398,000 $ 2,100,000 $ 292,000 $ 6,000
The Clarion Hotel - San Francisco, CA........... 2,841,000 2,223,000 415,000 203,000
Doubletree Guest Suites - Philadelphia, PA...... 2,134,000 1,775,000 213,000 146,000
Days Inn - Philadelphia, PA..................... 924,000 822,000 74,000 28,000
Marriott Forrestal - Princeton, NJ.............. 4,875,000 3,950,000 272,000 653,000
------------- ------------ ----------- ----------
Total $ 13,172,000 $ 10,870,000 $ 1,266,000 $1,036,000
============= ============ =========== ==========
</TABLE>
For the year ended December 31, 1995:
<TABLE>
<CAPTION>
Hotel Hotel Income before
Hotel Revenues Expenses Depreciation Minority Interest
- ------------------------------------------------ --------------- -------------- -------------- -----------------
<S> <C> <C> <C> <C>
The Midland Hotel - Chicago, IL................. $ 12,186,000 $ 11,552,000 $ 1,168,000 $ (534,000)
The Clarion Hotel - San Francisco, CA........... 11,875,000 8,230,000 1,659,000 1,986,000
Doubletree Guest Suites - Philadelphia, PA...... 9,513,000 7,437,000 850,000 1,226,000
Days Inn - Philadelphia, PA..................... 4,216,000 3,321,000 372,000 523,000
Marriott Forrestal - Princeton, NJ.............. 15,712,000 12,462,000 1,014,000 2,236,000
------------ ------------ ----------- ------------
Total $ 53,502,000 $ 43,002,000 $ 5,063,000 $ 5,437,000
============ ============ =========== ============
</TABLE>
Additional information related to the Other Acquisitions is as follows:
<TABLE>
<CAPTION>
For the Year Ended December 31,
ADR Occupancy % REVPAR
-----------------------------------------------------------------------
Hotel 1995 1994 1993 1995 1994 1993 1995 1994 1993
- ----- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
The Midland Hotel - Chicago, IL................... 111.48 107.43 97.98 73.5% 71.2% 70.1% 81.94 76.49 68.68
The Clarion Hotel - San Francisco, CA............. 60.36 55.09 n/av 86.3% 81.3% n/av 52.09 44.79 n/av
Doubletree Guest Suites - Philadelphia, PA........ 95.94 91.41 86.51 70.3% 73.1% 75.0% 67.45 66.82 64.88
Days Inn - Philadelphia, PA....................... 67.20 66.14 61.03 71.5% 75.7% 79.0% 48.05 50.07 48.21
Marriott Forrestal - Princeton, NJ................ 94.46 89.47 88.12 81.8% 77.3% 72.8% 77.27 69.16 64.15
</TABLE>
(F) Reflects pro forma adjustment for rents on the following hotels and land
acquired by the Companies in 1995 and 1996. 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.
F-19
<PAGE> 24
<TABLE>
<CAPTION>
Hotel Date Acquired/To Be Acquired
------------------------------------------------------- -----------------------------------
<S> <C>
Omni - Chapel Hill, NC................................ April 6, 1995
Colony Square - Atlanta, GA........................... July 24, 1995
Embassy Suites - Tempe, AZ............................ July 27, 1995
The Clarion Hotel - San Francisco, CA................. April 24, 1996
Doubletree Guest Suites - Philadelphia, PA............ June 1, 1996
Days Inn - Philadelphia, PA........................... June 28, 1996
Marriott Forrestal - Princeton, NJ.................... August, 1996
Ritz Carlton - Philadelphia, PA....................... August, 1996
Ritz Carlton - Kansas City, MO........................ August, 1996
Westin - Waltham, MA.................................. August, 1996
Doubletree LAX - Los Angeles, CA...................... August, 1996
Doubletree Horton Plaza - San Diego, CA............... August, 1996
Doubletree Mall of Americas - Bloomington, MN......... August, 1996
Doubletree Concourse - Atlanta, GA.................... August, 1996
Sheraton Airport - Ft. Lauderdale, FL................. August, 1996
The Marque - Atlanta GA............................... August, 1996
Sheraton - Needham, MA................................ August, 1996
Embassy Suites - St. Louis, MO........................ August, 1996
Sheraton - Minneapolis, MN............................ August, 1996
Embassy Suites - Palm Desert, CA...................... August, 1996
Hilton - Arlington Park, IL........................... August, 1996
Hotel Park - Tucson, AZ............................... August, 1996
Radisson Marque - Winston-Salem, NC................... August, 1996
Hilton - Allentown, PA................................ August, 1996
</TABLE>
(G) 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 Inn, prime
plus 3% for notes secured by the Milwaukee property, 10% for the note
secured by the Midland property and prime plus 2% for unsecured notes.
(H) The Corporation's policy is, generally, to operate the Companies' hotels
and terminate existing third party management contracts 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.
F-20
<PAGE> 25
<TABLE>
<CAPTION>
Fees Paid (1)
------------------------------------ ----------------------------
For the Three Year
Hotel Months Ended Ended
3/31/96 12/31/95 Status
- ----------------------------------------------------- ---------------- -------------- -------------------------
<S> <C> <C> <C>
Holiday Inn - Albany, GA........................... $ 0 $ 9,000 Terminated
Best Western - Columbus, OH........................ 0 33,000 Terminated
Best Western - Savannah, GA........................ 0 21,000 Terminated
Radisson - Gainesville, FL......................... 0 19,000 Terminated
Park Central - Dallas, TX.......................... 0 34,000 Terminated
Capitol Hill - Washington, DC...................... 0 43,000 Cancelable in 1996
French Quarter - Lexington, KY..................... 0 21,000 Terminated
Doubletree - Rancho Bernardo, CA................... 0 67,000 Terminated
Colony Square - Atlanta, GA........................ 0 139,000 Terminated
Omni - Chapel Hill, NC............................. 0 23,000 Terminated
Embassy Suites - Tempe, AZ......................... 0 406,000 Terminated
The Midland Hotel - Chicago, IL.................... 0 573,000 Cancelled
The Clarion Hotel - San Francisco, CA.............. 85,000 0 Cancelled
Doubletree Guest Suites - Philadelphia, PA......... 105,000 472,000 Cancelable in 1996
Days Inn - Philadelphia, PA........................ 36,000 167,000 Cancelable in 1996
Ritz Carlton - Philadelphia, PA.................... 189,000 778,000 Cancelable in 1996
Ritz Carlton - Kansas City, MO..................... 122,000 358,000 Cancelable in 1996
Westin - Waltham, MA............................... 263,000 651,000 Cancelable in 1996
Doubletree LAX - Los Angeles, CA................... 172,000 453,000 Cancelable in 1996
Doubletree Horton Plaza - San Diego, CA............ 152,000 498,000 Cancelable in 1996
Doubletree Mall of Americas - Bloomington, MN...... 95,000 489,000 Cancelable in 1996
Doubletree Concourse - Atlanta, GA................. 161,000 575,000 Cancelable in 1996
Sheraton Airport - Ft. Lauderdale, FL.............. 65,000 208,000 Cancelable in 1996
The Marque - Atlanta GA............................ 123,000 458,000 Termination upon closing
Sheraton - Needham, MA............................. 98,000 471,000 Termination upon closing
Embassy Suites - St. Louis, MO..................... 80,000 433,000 Termination upon closing
Sheraton - Minneapolis, MN......................... 98,000 477,000 Termination upon closing
Embassy Suites - Palm Desert, CA................... 151,000 311,000 Termination upon closing
Hilton - Arlington Park, IL........................ 60,000 485,000 Termination upon closing
Hotel Park - Tucson, AZ............................ 141,000 266,000 Termination upon closing
Radisson Marque - Winston-Salem, NC................ 42,000 233,000 Termination upon closing
Hilton - Allentown, PA............................. 44,000 269,000 Termination upon closing
================ ==============
$ 2,282,000 $ 9,440,000
================ ==============
</TABLE>
- ------------------
(1) Fees include base and incentive management fees as well
as accounting fee chargebacks and other corporate costs.
F-21
<PAGE> 26
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 from 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
Three Months Ended Year
3/31/96 Ended
12/31/95
------------------- -------------------
<S> <C> <C>
Additional personnel costs and corporate travel....... $ $ 97,000
Decrease in directors' and officers' liability (87,000)
insurance.............................................
Additional personnel costs - 1996 Acquisitions........ 120,000 481,000
=================== ===================
$ 120,000 $ 491,000
=================== ===================
</TABLE>
(I) Reflects the elimination of historical and pro forma interest expense
related to the debt repaid from the proceeds of the 1996 Offering and the
April 1996 Offering, and the addition of interest expense on pro forma
amounts outstanding, calculated as follows:
<TABLE>
<CAPTION>
Three Months Ended 3/31/96
-----------------------------------------------
Pro forma adjustments to interest expense: Trust Corp Combined
------------- -------------- --------------
<S> <C> <C> <C>
Interest Expense relating to the acquisition of the Midland Hotel (1)........ $ 390,000 $ 390,000
Reduction in interest expense resulting from pay down of debt with proceeds
from April 1996 Offering.................................................... (1,131,000) (1,131,000)
Interest Expense relating to the acquisition of the Clarion Hotel (1)......... 553,000 553,000
Interest Expense relating to the acquisition of the Philadelphia Doubletree
Guest Suites and Days Inn (1)............................................... 383,000 383,000
Interest Expense relating to the acquisition of the Forrestal Marriott (1).... 363,000 363,000
Interest Expense relating to the acquisition of the Teachers Portfolio (1).... 5,601,000 5,601,000
Interest Expense relating to the acquisition of the HOD Portfolio (1)......... 2,446,000 2,446,000
Reduction in interest expense resulting from pay down of debt with proceeds
from 1996 Offering (2)...................................................... (4,839,000) (4,839,000)
============= ============== =============
Total adjustments to pro forma interest expense................................ $ 3,766,000 $ $ 3,766,000
============= ============== =============
</TABLE>
F-22
<PAGE> 27
<TABLE>
<CAPTION>
Year Ended 12/31/95
---------------------------------------------
Calculation of pro forma interest expense: Trust Corp Combined
------------ ------------- --------------
<S> <C> <C> <C>
Interest on GSI note.......................................................... $ $ 97,000 $ 97,000
Interest expense on amount outstanding under line of credit (subsequent to
offering)................................................................... 2,120,000 2,120,000
Reduction in interest expense resulting from pay down of debt with proceeds
from April 1996 Offering.................................................... (4,524,000) (4,524,000)
Interest Expense relating to the acquisition of the Midland Hotel (1)........ 1,559,000 1,559,000
Interest Expense relating to the acquisition of the Clarion Hotel (1)......... 2,211,000 2,211,000
Interest Expense relating to the acquisition of the Philadelphia Doubletree
Guest Suites and Days Inn (1)............................................... 1,531,000 1,531,000
Interest Expense relating to the acquisition of the Forrestal Marriott (1).... 1,450,000 1,450,000
Interest Expense relating to the acquisition of the Teachers Portfolio (1).... 22,403,000 22,403,000
Interest Expense relating to the acquisition of the HOD Portfolio (1)......... 9,788,000 9,788,000
Reduction in interest expense resulting from pay down of debt with proceeds
from 1996 Offering (2)...................................................... (19,355,000) (19,355,000)
Interest expense relating to additional draw down on line (3).................. 530,000 530,000
Other.......................................................................... 163,000 30,000 193,000
============ ============= =============
Total pro forma interest expense............................................... $ 17,876,000 $ 127,000 $ 18,003,000
============ ============= =============
</TABLE>
(1) Assumes draw down on credit facilities to acquire properties on January 1,
1995.
(2) Assumes 1995 Offering, April 1996 Offering and 1996 Offering took place on
January 1, 1995.
(3) Assumes draw down on credit facility of $9.8 million on January 1, 1995 to
reflect actual draw down in 3rd quarter.
(J) Reflects Starwood Capital Group, LP.'s and its affiliates minority
interest in the income of the Partnerships.
(K) Net income (loss) per paired share has been computed using the weighted
average number of paired shares and equivalent paired shares outstanding.
<TABLE>
<S> <C>
Pro forma paired shares outstanding are calculated as follows:
Paired shares outstanding as of 12/31/95........................ 13,798,000
Paired shares issued on April 12, 1996.......................... 2,000,000
Paired shares expected to be issued in August, 1996............. 8,000,000
=============
Pro forma paired shares outstanding............................. 23,798,000
=============
</TABLE>
All paired share information has been adjusted to reflect a one-for-six
reverse split effective June 12, 1995.
(L) Reflects amortization of financing costs of a new line of credit facility
needed to complete pending acquisitions.
F-23
<PAGE> 28
REPORT OF INDEPENDENT ACCOUNTANTS
The Boards of Directors of
The Hotels of Distinction
We have audited the accompanying combined balance sheets of The Hotels of
Distinction, as defined in Note 1 and herein after referred to as "the
Company", as of December 31, 1995 and 1994 and the related combined statements
of operations, changes in owners' equity and cash flows for the years then
ended. 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 combined financial position of The Hotels of
Distinction as of December 31, 1995 and 1994 and the combined results of their
operations and their cash flows for the years then ended in conformity with
generally accepted accounting principles.
Our audits were conducted for the purpose of forming an opinion on the combined
financial statements taken as a whole. The combining information, consisting of
combining balance sheets as of December 31, 1995 and 1994 and combining
statements of operations for the years then ended is presented for purposes of
additional analysis of the combined financial statements rather than to present
the financial position and results of operations of the individual companies.
The combining information has been subjected to the auditing procedures applied
in the audits of the combined financial statements and, in our opinion, is
fairly stated in all material respects in relation to the combined financial
statements taken as a whole.
Coopers & Lybrand L.L.P.
West Palm Beach, Florida
March 8, 1996
F-24
<PAGE> 29
THE HOTELS OF DISTINCTION
COMBINED BALANCE SHEETS as of December 31, 1994 and 1995, and at March 31, 1996.
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1994 1995 1996
(UNAUDITED)
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents, including restricted $ 7,227,686 $ 5,401,339 $ 6,571,907
cash of $363,994 in 1994
Accounts receivable, net of allowance for doubtful
accounts of $83,315, $96,200 and $76,981
(unaudited) in 1994, 1995 and 1996, respectively 2,573,904 2,819,829 2,980,600
Accounts receivable-affiliate 18,823 4,421 85,806
Food and beverage inventory 439,847 433,943 470,857
Prepaid and other current assets 213,340 215,197 206,418
------------ ------------ ------------
Total current assets 10,473,600 8,874,729 10,315,588
Property, plant and equipment, net 89,875,342 86,929,149 85,988,549
Other assets, net 504,095 299,434 298,546
------------ ------------ ------------
Total assets $100,853,037 $ 96,103,312 $ 96,602,683
============ ============ ============
LIABILITIES AND OWNERS' EQUITY
Current liabilities:
Accounts payable - affiliates $ 1,287,514 $ 465,789 $ 0
Accounts payable and accrued liabilities 6,875,681 7,658,071 8,432,744
Current portion of long-term debt 1,025,676 7,299,697 7,299,697
------------ ------------ ------------
Total current liabilities 9,188,871 15,423,557 15,732,441
Long-term debt, net of discount of $623,028,
$490,334, and $490,334 (unaudited) in 1994,
1995 and 1996, respectively 58,727,348 51,434,885 49,242,811
Other liabilities 67,169 4,396 0
------------ ------------ ------------
Total liabilities 67,983,388 66,862,838 64,975,252
------------ ------------ ------------
Commitments and contingencies
Owners' equity:
Owners' capital 47,747,000 47,747,000 47,747,000
Additional paid-in capital 4,396,858 3,873,806 6,503,806
------------ ------------ ------------
52,143,858 51,620,806 54,250,806
Accumulated deficit (19,274,209) (22,380,332) (22,623,375)
------------ ------------ ------------
Total owners' equity 32,869,649 29,240,474 31,627,431
------------ ------------ ------------
Total liabilities and owners' equity $100,853,037 $ 96,103,312 $ 96,602,683
============ ============ ============
</TABLE>
F-25
<PAGE> 30
THE HOTELS OF DISTINCTION
COMBINED STATEMENTS OF OPERATIONS For the Years Ended December 31, 1994 and
1995, and the Three Months Ended March 31, 1996 and 1995.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
1994 1995 1996 1995
----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Gross operating revenue:
Rooms $44,821,159 $48,009,073 $12,705,469 $11,351,691
Food and beverage 27,444,341 28,802,347 7,264,672 6,655,195
Telephone 1,794,494 1,935,339 495,318 466,154
Other 942,390 1,140,341 296,282 260,010
----------- ----------- ----------- -----------
Gross operating revenue 75,002,384 79,887,100 20,761,741 18,733,050
----------- ----------- ----------- -----------
Department profit:
Rooms 31,428,138 34,067,874 9,274,571 8,100,419
Food and beverage 6,224,684 7,054,934 1,766,271 1,459,273
Telephone 764,140 979,905 267,152 241,449
Other 613,792 843,933 243,139 211,202
----------- ----------- ----------- -----------
Total department profit 39,030,754 42,946,646 11,551,133 10,012,343
----------- ----------- ----------- -----------
Unallocated operating expenses:
Administrative and general 6,349,708 6,638,815 1,995,322 1,875,058
Advertising and promotion 7,770,321 8,115,960 2,081,270 2,094,655
Repairs and maintenance 4,243,109 4,293,414 1,171,010 997,798
Heat, light and power 3,838,892 4,053,635 1,094,304 1,015,023
----------- ----------- ----------- -----------
Total unallocated operating expenses 22,202,030 23,101,824 6,341,906 5,982,534
----------- ----------- ----------- -----------
Gross operating profit 16,828,724 19,844,822 5,209,227 4,029,809
Rents, taxes and insurance 3,241,115 3,919,196 947,499 822,244
Incentive fees 3,066,094 3,401,476 421,525 323,292
----------- ----------- ----------- -----------
Operating profit (loss) 10,521,515 12,524,150 3,840,203 2,884,273
Depreciation and amortization (6,672,553) (7,368,641) (1,682,319) (1,778,009)
Interest income 146,852 108,186 11,875 24,781
Interest expense - mortgage notes (5,547,756) (5,671,216) (1,343,062) (1,446,592)
Professional fees (16,755) (18,351) (60,665) (1,374)
Other (9,767) (8,679) 1,737 (24,568)
----------- ----------- ----------- -----------
Loss before income tax provision (1,578,464) (434,551) 767,769 (341,489)
Income tax provision 127,211 61,623 (14,188) 301
----------- ----------- ----------- -----------
Net income (loss) $(1,705,675) $ (496,174) $ 781,957 $ (341,790)
=========== =========== =========== ===========
</TABLE>
F-26
<PAGE> 31
THE HOTELS AND DISTINCTION
COMBINED STATEMENTS OF CHANGES IN OWNERS' EQUITY
Years ended December 31, 1994 and 1995 and three months ended
March 31, 1996 (unaudited)
<TABLE>
<CAPTION>
ADDITIONAL
OWNERS' PAID-IN ACCUMULATED
CAPITAL CAPITAL DEFICIT TOTAL
<S> <C> <C> <C> <C>
Balances, December 31, 1993 $47,747,000 $3,816,386 $(14,473,534) $37,089,852
Net loss 0 0 (1,705,675) (1,705,675)
Contributions 0 985,472 0 985,472
Distributions 0 (405,000) (3,095,000) (3,500,000)
----------- ---------- ------------ -----------
Balances, December 31, 1994 47,747,000 4,396,858 (19,274,209) 32,869,649
Net loss 0 0 (496,174) (496,174)
Contributions 0 450,000 0 450,000
Distributions 0 (973,052) (2,609,949) (3,583,001)
----------- ---------- ------------ -----------
Balance, December 31, 1995 47,747,000 3,873,806 (22,380,332) 29,240,474
Net income (unaudited) 0 0 781,957 781,957
Contributions (unaudited) 0 3,130,000 0 3,130,000
Distributions (unaudited) 0 (500,000) (1,025,000) (1,525,000)
----------- ---------- ------------ -----------
Balance, March 31, 1996
(unaudited) $47,747,000 $6,503,806 $(22,623,375) $31,627,431
=========== ========== ============ ===========
</TABLE>
F-27
<PAGE> 32
THE HOTELS OF DISTINCTION
COMBINED STATEMENTS OF CASH FLOWS For the Years Ended December 31, 1994 and
1995, and the Three Months Ended March 31, 1996 and 1995.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
1994 1995 1996 1995
(UNAUDITED)
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net (loss) income $(1,705,675) $ (496,174) $ 781,957 $ (341,790)
----------- ----------- ----------- -----------
Adjustments to reconcile net (loss) income to net
cash provided by operating activities:
Depreciation and amortization 6,672,553 7,368,641 1,682,319 1,778,009
Changes in operating assets and liabilities:
Accounts receivable 316,850 (245,925) (160,771) (383,089)
Food and beverage inventory (57,099) 5,904 (36,914) (3,652)
Prepaid and other current assets 78,139 (1,857) 8,779 42,778
Other assets (64,571) (56,622) (6,678) 35,637
Accounts payable - affiliates 153,568 (821,725) (465,789) (575,871)
Accounts payable and accrued liabilities 264,404 782,390 774,673 1,175,214
Other liabilities 11,103 (62,773) (4,396) (67,169)
----------- ----------- ----------- -----------
Total adjustments 7,374,947 6,968,033 1,791,223 2,001,857
----------- ----------- ----------- -----------
Net cash provided by operating activities 5,669,272 6,471,859 2,573,180 1,660,067
----------- ----------- ----------- -----------
Cash flows from investing activities:
Net purchases of plant, property and equipment (4,461,545) (4,028,471) (734,153) (1,188,901)
Decrease in accounts receivable - affiliate 31,510 14,402 (81,385) (92,234)
----------- ----------- ----------- -----------
Net cash used in investing activities (4,430,035) (4,014,069) (815,538) (1,281,135)
----------- ----------- ----------- -----------
Cash flows from financing activities:
Principal payments on long-term debt (1,054,677) (1,151,136) (2,192,074) (131,000)
Contributions 985,472 450,000 3,130,000 0
Distributions (3,500,000) (3,583,001) (1,525,000) (300,000)
----------- ----------- ----------- -----------
Net cash used in financing activities (3,569,205) (4,284,137) (587,074) (431,000)
----------- ----------- ----------- -----------
Net decrease in cash and cash equivalents (2,329,968) (1,826,347) 1,170,568 (52,068)
Cash and cash equivalents at beginning of year 9,557,654 7,227,686 5,401,339 7,227,686
----------- ----------- ----------- -----------
Cash and cash equivalents at end of year $ 7,227,686 $ 5,401,339 $ 6,571,907 $ 7,175,618
=========== =========== =========== ===========
Supplemental cash flow information:
Cash paid during the year for interest $ 4,946,774 $ 5,738,701 $ 0 $ 0
=========== =========== =========== ===========
Cash paid during the year for income taxes $ 110,030 $ 67,254 $ 0 $ 0
=========== =========== =========== ===========
</TABLE>
F-28
<PAGE> 33
THE HOTELS OF DISTINCTION
NOTES TO COMBINED FINANCIAL STATEMENTS
1. ORGANIZATION AND PURPOSE:
The accounts of Winston-Salem Hotel Ventures, Inc. ("Marque of
Winston-Salem"); Needham Hotel Ventures, L.P.; Needham Hotels Ventures
II, Inc.; and Needham Hotel Ventures, Inc., (collectively "Sheraton
Needham Hotel"); Minneapolis Hotel Ventures, Inc. ("Sheraton Minneapolis
Metrodome Hotel"); Palm Desert Hotel Ventures, Inc. ("Embassy Suites
Hotel-Palm Desert"); Allentown Hotel Ventures, Inc.; HOD Allentown I
Corp.; HOD Allentown II Corp. and HOD Allentown Trust, (collectively
"Allentown Hilton Hotel"); Atlanta Hotel Ventures, Inc. ("Marque of
Atlanta"); St. Louis Hotel Ventures, Inc. ("Embassy Suites Hotel-St.
Louis"); Tucson Hotel Ventures, Inc. ("Hotel Park Tucson"); and
Arlington Heights Hotel Ventures, Inc. ("Arlington Park Hilton")
(collectively referred to as the "Hotels of Distinction") have been
combined in the accompanying financial statements on the basis of common
ownership by Hotelco, a Delaware corporation which was formed on March
22, 1990 for the purpose of engaging in the business of acquiring,
operating and selling the hotels in the continental United States. All
significant intercompany accounts and transactions have been eliminated
in the combined statements.
Hotelco has purchased the Hotels of Distinction as follows:
On October 19, 1993, Hotelco purchased the land and property known as
the Arlington Park Hilton, a 421-room hotel and restaurant, located in
Arlington Heights, Illinois.
On October 15, 1992, Hotelco purchased the land and property known as
the Hotel Park Tucson, a 216-suite hotel and restaurant, located in
Tucson, Arizona.
On August 20, 1992, Hotelco purchased the land and property known as the
Embassy Suites Hotel, a 297-suite hotel and restaurant, located in St.
Louis, Missouri.
On January 15, 1992, Hotelco purchased the land and property then known
as the Guest Quarters Suites Hotel, a 120-room and 156-suite hotel and
restaurant located in Atlanta, Georgia. The hotel has since terminated
its license agreement with the Guest Quarters Suites Corporation and has
been renamed the Marque of Atlanta.
On December 10, 1991, Hotelco purchased the land and property known as
the Sheraton Needham Hotel, a 247-room hotel and restaurant.
On March 28, 1991, Hotelco purchased the land and property then known as
the Hyatt Winston-Salem, a 293-room hotel and restaurant, located in
Winston-Salem, North Carolina. The hotel has since terminated its
license agreement with the Hyatt Corporation and has been renamed the
Marque of Winston-Salem.
F-29
<PAGE> 34
1. ORGANIZATION AND PURPOSE, CONTINUED:
On December 10, 1990, Hotelco purchased a 199-suite hotel and the
underlying ten acres of land known as the Embassy Suites located in Palm
Desert, California.
On November 15, 1990, Hotelco purchased the property known as the
Allentown Hilton Hotel, a 229-room hotel and restaurant, located in
Allentown, Pennsylvania.
On October 31, 1990, Hotelco purchased the property then known as the
Minneapolis Metrodome Hilton, a 254-room hotel and restaurant, and the
underlying seven acres of land. The hotel has since terminated its
license agreement with Hilton Inns, Inc. and has entered into a license
agreement with Sheraton Inns, Inc. The hotel has been renamed the
Sheraton Minneapolis Metrodome Hotel.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
CASH AND CASH EQUIVALENTS
The Hotels of Distinction consider all highly liquid debt instruments
with original maturities of three months or less to be cash equivalents.
Cash equivalents include investments in U.S. Treasury bills,
certificates of deposit and money market accounts. The Hotels of
Distinction maintain their cash and cash equivalents balances in the
bank accounts with highly rated financial institutions which balances
may at times, exceed federally insured limits.
INVENTORY
Inventory is valued at the lower of cost, first-in, first-out basis, or
market. The cost of china, glassware, silver, linen and uniforms is
expensed as incurred.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are carried at cost less accumulated
depreciation. Depreciation is provided on the straight-line method over
the estimated useful lives of the respective assets. The useful lives
are as follows:
Buildings and improvements 31.5 years
Furniture, fixtures and equipment 5 years
Maintenance and repairs are charged to expense as incurred. Improvements
and betterments that materially prolong the useful lives of assets are
capitalized.
Upon sale or retirement, the cost and related accumulated depreciation
are removed from the accounts and the resulting gain or loss is included
in the statement of operations.
F-30
<PAGE> 35
THE HOTELS OF DISTINCTION
NOTES TO COMBINED FINANCIAL STATEMENTS, CONTINUED
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:
OTHER ASSETS
Covenants not to compete are amortized on a straight-line basis over the
term of the related covenant not to compete, which is five years.
Deferred financing costs are amortized over the life of the related
mortgage. The Hotels of Distinction periodically evaluate the carrying
value of intangible assets to measure and recognize the possible
impairment of these assets.
MORTGAGE NOTES PAYABLE
Mortgage notes payable are discounted to yield market rates at the
purchase dates.
INCOME TAXES
The Hotels of Distinction have adopted the provisions of Statement of
Financial Accounting Standard ("SFAS") No. 109 "Accounting for Income
Taxes" effective January 1, 1993. This standard requires recognition of
future tax benefits measured by enacted tax rates, attributable to
deductible temporary differences between financial statement and income
tax basis of assets and liabilities and net operating loss carryforwards
to the extent that realization of such benefits is more likely than not.
SFAS No. 109 requires a valuation allowance against deferred tax assets
if, based on the weight of available evidence, it is more likely than
not that some or all of the deferred tax assets will not be realized.
The adoption of SFAS No. 109 did not have a significant impact on the
Hotels of Distinctions' financial position or results of operations.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and the reported amounts of revenues and expenses. Actual results could
differ from those estimates.
UNAUDITED INTERIM FINANCIAL INFORMATION
The unaudited balance sheet as of March 31, 1996 and the unaudited
statements of operations, changes in owner's equity and cash flows for
the three month periods ended March 31, 1996 and 1995 (interim financial
information), are unaudited and have been prepared on the same basis as
the unaudited financial statements included herein. In the opinion of
the Hotels of Distinctions' management, the interim financial
information includes all adjustments, consisting of only normal
recurring adjustments, necessary for a fair statement of the results of
the interim periods.
The results of operations for the three months ended March 31, 1996 may
not be indicative of the operating results to be achieved for the full
year or any other interim period.
F-31
<PAGE> 36
THE HOTELS OF DISTINCTION
NOTES TO COMBINED FINANCIAL STATEMENTS, CONTINUED
3. PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment at December 31, 1995 and 1994 consist of
the following:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Land $ 20,945,000 $ 20,945,000
Buildings 64,612,597 62,628,858
Furniture fixtures and equipment 25,977,717 22,677,853
Construction in progress 327,522 1,582,654
------------ ------------
111,862,836 107,834,365
Less accumulated depreciation (24,933,687) (17,959,023)
------------ ------------
$ 86,929,149 $ 89,875,342
============ ============
</TABLE>
The net book value of each of the Hotels of Distinction properties at December
31, 1995 and 1994 is as follows:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Sheraton Needham $ 10,990,492 $ 11,384,360
Embassy Suites-Palm Desert 10,312,308 11,200,403
Allentown Hilton 6,965,939 7,543,769
Sheraton Minneapolis Metrodome 8,551,541 8,907,088
Marque of Winston-Salem 5,016,623 5,419,565
Marque of Atlanta 12,193,928 13,102,897
Hotel Park Tucson 8,691,904 8,851,067
Embassy Suites-St. Louis 11,374,740 11,964,213
Arlington Park Hilton 12,831,737 11,501,980
------------ ------------
$ 86,929,149 $ 89,875,342
============ ============
</TABLE>
Substantially all of these properties are pledged as collateral for
mortgage notes payable.
The Hotels of Distinction periodically have their hotel properties
appraised. At December 31, 1995 and 1994, the appraised value of most
of the properties equals or exceeds their net book value. However, at
December 31, 1995 and 1994, the appraised value of two hotel properties
is less than the net book value by an aggregate amount of $1.7 million
and $1.5 million, respectively. Management believes such differences in
value are temporary, that it has the ability to carry the properties,
and that the net book value of these properties will be recovered from
operations and ultimate disposition.
F-32
<PAGE> 37
THE HOTELS OF DISTINCTION
NOTES TO COMBINED FINANCIAL STATEMENTS, CONTINUED
4. OTHER ASSETS:
Other assets at December 31, 1995 and 1994 consist of the following:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Covenants not to compete $ 1,000,000 $ 1,000,000
Deferred financing costs 212,000 212,000
Other 248,736 117,094
------------ ------------
1,460,736 1,329,094
Less accumulated amortization (1,161,302) (824,999)
------------ ------------
$ 299,434 $ 504,095
============ ============
</TABLE>
5. LONG-TERM DEBT:
Long-term debt at December 31, 1995 and 1994 consists of the following:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Note payable to Fleet Bank
collateralized by a mortgage on
the Sheraton Needham Hotel,
and a security interest in
substantially all other assets.
Principal and interest, at a
rate equal to the seven year
U.S. Treasury Note rate in
effect on October 12 of each
year, plus 200 basis points,
are due monthly through
December 10, 1998 when the
remaining principal of
approximately $6.9 million
is due. Interest is payable
at the following rates: $ 7,303,388 $ 7,398,068
12/10/94-12/9/95 9.49
12/10/95-12/9/96 7.96
Note payable to Great Western Bank,
collateralized by a mortgage on the
Embassy Suites Hotel-Palm Desert.
Principal and interest are payable
in monthly installments ranging
from $40,000 to $50,000 through
January 1, 1998 when the remaining
principal balance of approximately
$9.6 million is due. The note
provides for interest at graduated
rates from 8% in 1991 to 11% in
1997 discounted to yield 10.5%.
The unamortized discount at
December 31, 1995 and 1994 is
$70,453 and $147,374, respectively. 9,760,491 9,832,146
</TABLE>
F-33
<PAGE> 38
THE HOTELS OF DISTINCTION
NOTES TO COMBINED FINANCIAL STATEMENTS, CONTINUED
<TABLE>
<S> <C> <C>
5. LONG-TERM DEBT, CONTINUED:
1995 1994
Note payable to Meridian Bank, collateralized by
a mortgage on the Allentown Hilton. Principal and
interest at 8 1/2% is payable in monthly installments
of $64,282 through May 1, 2007 discounted to yield
10.5%. The unamortized discount at December 31,
1995 and 1994 is $419,881 and $475,654, respectively. 5,106,521 5,328,859
Note payable to Prudential Insurance Company of
America, collateralized by a mortgage on the Sheraton
Minneapolis Metrodome and the assignment of rents.
Principal and interest at 10.38% is payable in
monthly installments of $58,922 through May 15,
1996 when the principal balance of approximately
$4 million is due. 6,091,559 6,141,638
Note payable to Equitable Life Assurance Society of
the United States, collateralized by a mortgage
on the Marque of Atlanta and a general lien and
security interest in substantially all assets.
Principal on a monthly basis through January 23,
1999, when the principal balance of approximately
$10 million is due. 10,518,875 10,630,131
Note payable to State Savings Mortgage Company,
collateralized by a mortgage on the Hotel Park
Tucson. Interest is payable monthly during the
first four years at the following rates:
11/16/92-10/15/94 7 1/2%
10/16/94-10/15/96 8%
Thereafter, principal and interest at 8 1/2% is
payable in monthly installments of $52,278 through
October 15, 1999 when the remaining principal
balance of approximately $5.9 million is due. 6,250,000 6,250,000
Note payable to U.S. West Financial Services, Inc.,
collateralized by a mortgage on the Embassy Suites
Hotel-St. Louis. Principal and interest at the
commercial paper rate plus 4 1/2% (10.3% at
December 31, 1995) are payable monthly through
August 20, 1997 when the remaining principal of
approximately $5.3 million is due. 5,771,331 6,181,421
</TABLE>
F-34
<PAGE> 39
THE HOTELS OF DISTINCTION
NOTES TO COMBINED FINANCIAL STATEMENTS, Continued
<TABLE>
<S> <C> <C>
5. LONG-TERM DEBT, CONTINUED:
1995 1994
Note payable to Metropolitan Life Insurance Company,
collateralized by a mortgage on the Arlington Park
Hilton. No interest accrued on the note through
October 1994. Beginning November 1, 1994, principal
and interest at 8.75% is payable in monthly
installments of $62,936 through November 1,2000
when the remaining principal balance of
approximately $7.6 million is due. 7,932,417 7,990,761
----------- -----------
58,734,582 59,753,024
Less current portion 7,299,697 1,025,676
----------- -----------
$51,434,885 $58,727,348
=========== ===========
</TABLE>
On January 15, 1996, the maturity date of the note payable to Prudential
Insurance Company of America related to the Sheraton Minneapolis
Metrodome was extended to May 15, 1996. In connection with the
extension agreement, the outstanding principal balance of the note was
required to be reduced by $2,000,000. Management has been negotiating
with other lenders to seek refinancing of this note payable.
Certain debt agreements require the maintenance of restricted cash
accounts to be used for renovation of the hotel properties. One
agreement required that a minimum cash balance of $350,000 be maintained
during 1994.
Minimum required principal payments on the mortgage notes discussed
above are as follows net of discount amortization:
<TABLE>
<S> <C>
1996 $ 7,299,697
1997 6,249,754
1998 17,120,709
1999 16,476,426
2000 463,090
Thereafter 11,124,906
-----------
Total $58,734,582
===========
</TABLE>
F-35
<PAGE> 40
The HOTELS OF DISTINCTION
Notes to Combined Financial Statements, Continued
6. RELATED PARTIES:
Hotelco has entered into management agreements with Hotels of
Distinction, Inc. (the "Manager"), an investor of less than 1% of the
outstanding units of Hotelco, to acquire, operate and sell hotels on
Hotelco's behalf. Under the management agreements, the Manager will
receive (i) a property management fee equal to 2% of the annual gross
revenues of the Hotels, (ii) a management incentive fee of 10% of the
Net Income Before Debt Service of each Hotel, as defined, for all hotels
with a Net Income Before Debt Service, (iii) a marketing fee equal to
.5% of the annual gross revenues of the Hotels, (iv) a reimbursement of
up to $200,000 each year for the first three years after the initial
closing of the offering for expenses incurred in identifying and
evaluating hotels for purchase, and (v) an amount of up to 15% of any
distributions or proceeds from the sale of a hotel, once the unit
holders have received a return of their investments, as adjusted for
inflation. The Hotels of Distinction have paid or accrued $3,401,476
and $3,066,094 in fees pursuant to the agreements described in (i), (ii)
and (iii) above in 1995 and 1994, respectively.
In connection with the renovation of the Hotels of Distinction, Hotelco
has entered into Agreements for Design Services with Marque of
Distinction, Inc., a company wholly owned by a relative of the President
and Chairman of the Board of Directors of Hotelco. Fees for these
services amount to 5% of the capital expenditures budget. Fees of
$118,910 and $109,650 were incurred by the Hotels of Distinction in 1995
and 1994, respectively.
7. FURNITURE AND EQUIPMENT RESERVE:
As part of the management agreement, an amount equal to 3% of Total
Revenue, as defined, is paid into a reserve fund each month to be used
for the purpose of making replacements, substitutions and additions to
furniture and equipment. Reserve amounts of $969,699 and $576,895 at
December 31, 1995 and 1994, respectively, have been included in cash and
cash equivalents in the accompanying combined balance sheets.
F-36
<PAGE> 41
THE HOTELS OF DISTINCTION
Notes to Combined Financial Statements, Continued
8. FRANCHISE FEES:
Seven of the Hotels of Distinction have franchise affiliations with
national hotel chains. Franchise agreements generally provide for the
payment of monthly franchise fees of 5% to 7% of gross room sales, as
defined in the agreements.
Franchise fee expense in 1995 and 1994 amounted to $1,826,384 and
$1,465,228, respectively.
9. INCOME TAXES:
The Hotels of Distinction have recognized a net deferred asset,
consisting principally of net operating loss carryforwards, in the
amount of $6,300,000 and $6,200,000 for the years ended December 31,
1995 and 1994, respectively. SFAS 109 requires a valuation allowance
against deferred tax assets if, based on the weight of the available
evidence, it is more likely than not that some or all of the deferred
tax assets may not be realized. The Hotels of Distinction have provided
a full valuation allowance against net deferred assets in the amount of
$6,300,000 and $6,200,000 for the years ended December 31, 1995 and
1994, respectively. Accordingly, the Hotels of Distinction have not
recorded an income tax benefit for the years ended December 31, 1995 and
1994.
As of December 31, 1995, the Hotels of Distinction have tax net
operating loss carryforwards of approximately $15,300,000 which are
available to offset future taxable income. The tax net operating loss
carryforwards expire in various years from 2006 through 2010.
F-37
<PAGE> 42
THE HOTELS OF DISTINCTION
COMBINING BALANCE SHEET (UNAUDITED)
MARCH 31, 1996
<TABLE>
<CAPTION>
SHERATON
ALLENTOWN ARLINGTON MARQUE MINNEAPOLIS SHERATON
HILTON PARK OF METRODOME NEEDHAM
ASSETS HOTEL HILTON ATLANTA HOTEL HOTEL
------ ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Current assets:
Cash $ 298,452 $ 652,459 $ 695,360 $ 469,934 $ 714,677
Accounts receivable 262,932 770,728 225,966 279,265 639,186
Accounts receivable - affiliate 56,218 142,234 23,156 8,025 (152,834)
Inventory 44,413 79,478 11,718 56,267 64,761
Other current assets 5,791 0 149,458 0 28,008
----------- ----------- ----------- ----------- -----------
Total current assets 667,806 1,644,899 1,105,658 813,491 1,293,798
Property, plant & equipment 6,819,717 12,644,318 12,044,164 8,355,977 10,948,969
Other assets, net 25,000 1,000 35,420 15,671 2,091
----------- ----------- ----------- ----------- -----------
Total assets $ 7,512,523 $14,290,217 $13,185,242 $ 9,185,139 $12,244,858
=========== =========== =========== =========== ===========
LIABILITIES AND OWNERS' EQUITY
Current liabilities:
Accounts payable - affiliates $0 $0 $0 $0 $0
Accounts payable and accrued liabilities 387,507 2,673,939 1,153,093 695,141 1,013,366
Current portion of long-term debt 246,534 63,659 122,905 6,091,558 209,654
----------- ----------- ----------- ----------- -----------
Total current liabilities 634,041 2,737,598 1,275,998 6,786,699 1,223,020
Long-term debt, net of discount 4,786,707 7,868,759 10,363,283 (2,001,880) 7,037,633
Other liabilities 0 0 0 0 0
----------- ----------- ----------- ----------- -----------
Total liabilities 5,420,748 10,606,357 11,639,261 4,784,819 8,260,653
----------- ----------- ----------- ----------- -----------
Owners' equity:
Owners' capital 5,500,000 6,000,000 5,250,000 5,000,000 5,100,000
Additional paid in capital 2,479,957 450,000 0 1,725,000 50,000
----------- ----------- ----------- ----------- -----------
7,979,957 6,450,000 5,250,000 6,725,000 5,150,000
Accumulated deficit (5,888,182) (2,766,140) (3,704,039) (2,324,680) (1,165,795)
----------- ----------- ----------- ----------- -----------
Total owners' equity 2,091,775 3,683,860 1,545,961 4,400,320 3,984,205
----------- ----------- ----------- ----------- -----------
Total liabilities and
owners' equity $ 7,512,523 $14,290,217 $13,185,242 $ 9,185,139 $12,244,858
=========== =========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
EMBASSY EMBASSY
SUITES SUITES MARQUE
HOTEL- HOTEL- HOTEL OF
PALM PARK PARK WINSTON- COMBINED
ASSETS DESERT ST. LOUIS TUCSON SALEM TOTAL
------ ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Current assets:
Cash $ 576,749 $ 1,666,842 $ 994,357 $ 503,077 $ 6,571,907
Accounts receivable 189,232 146,062 305,679 161,550 2,980,600
Accounts receivable - affiliate 104,280 (117,235) 11,217 10,745 85,806
Inventory 42,134 49,612 57,859 64,615 470,857
Other current assets 0 19,846 0 3,315 206,418
----------- ----------- ----------- ----------- -----------
Total current assets 912,395 1,765,127 1,369,112 743,302 10,315,588
Property, plant & equipment 10,181,570 11,502,789 8,606,429 4,884,616 85,988,549
Other assets, net 191,514 0 17,150 10,700 298,546
----------- ----------- ----------- ----------- -----------
Total assets $11,285,479 $13,267,916 $ 9,992,691 $ 5,638,618 $96,602,683
=========== =========== =========== =========== ===========
LIABILITIES AND OWNERS' EQUITY
Current liabilities:
Accounts payable - affiliates $0 $0 $0 $0 $0
Accounts payable and accrued liabilities 729,886 527,503 727,790 524,519 8,432,744
Current portion of long-term debt 87,099 450,766 27,522 0 7,299,697
----------- ----------- ----------- ----------- -----------
Total current liabilities 816,985 978,269 755,312 524,519 15,732,441
Long-term debt, net of discount 9,640,871 5,320,566 6,222,478 4,394 49,242,811
Other liabilities 0 0 0 0 0
----------- ----------- ----------- ----------- -----------
Total liabilities 10,457,856 6,298,835 6,977,790 528,913 64,975,252
----------- ----------- ----------- ----------- -----------
Owners' equity:
Owners' capital 5,100,000 5,797,000 3,000,000 7,000,000 47,747,000
Additional paid in capital 798,849 1,000,000 0 0 6,503,806
----------- ----------- ----------- ----------- -----------
5,898,849 6,797,000 3,000,000 7,000,000 54,250,806
Accumulated equity (deficit) (5,071,226) 172,081 14,901 (1,890,295) (22,623,375)
----------- ----------- ----------- ----------- -----------
Total owners' equity 827,623 6,969,081 3,014,901 5,109,705 31,627,431
----------- ----------- ----------- ----------- -----------
Total liabilities and
owners' equity $11,285,479 $13,267,916 $ 9,992,691 $ 5,638,618 $96,602,683
=========== =========== =========== =========== ===========
</TABLE>
F-38
<PAGE> 43
THE HOTELS OF DISTINCTION
COMBINING STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 1995
<TABLE>
<CAPTION>
SHERATON
ALLENTOWN ARLINGTON MARQUE MINNEAPOLIS SHERATON
HILTON PARK OF METRODOME NEEDHAM
HOTEL HILTON ATLANTA HOTEL HOTEL
<S> <C> <C> <C> <C> <C>
Gross operating revenue:
Rooms $844,824 $1,278,678 $1,412,810 $1,157,955 $1,151,000
Food and beverage 565,217 1,393,474 326,223 1,318,724 908,457
Telephone 23,540 65,058 64,877 42,655 44,814
Other 54,137 39,533 19,082 10,836 15,934
---------- ---------- ---------- ---------- ----------
Gross operating revenue 1,487,718 2,776,743 1,622,992 2,530,180 2,120,205
---------- ---------- ---------- ---------- ----------
Department profit:
Rooms 575,054 739,927 1,096,091 819,363 789,002
Food and beverage 107,508 322,068 81,598 409,081 198,558
Telephone 11,624 25,020 36,652 23,438 21,973
Other 17,162 41,122 23,392 13,960 15,934
---------- ---------- ---------- ---------- ----------
Total department profit 711,348 1,128,137 1,237,733 1,265,842 1,025,467
---------- ---------- ---------- ---------- ----------
Unallocated operating expenses:
Administrative and general 190,145 324,637 180,802 207,289 221,052
Advertising and promotion 157,171 432,314 142,734 264,165 239,956
Repairs and maintenance 86,822 213,142 100,468 77,065 119,088
Heat, light and power 81,405 228,910 87,610 86,466 152,121
---------- ---------- ---------- ---------- ----------
Total unallocated operating expenses 515,543 1,199,003 511,614 634,985 732,217
---------- ---------- ---------- ---------- ----------
Gross operating profit 195,805 (70,866) 726,119 630,857 293,250
Rent, taxes and insurance 59,769 419,759 70,378 33,254 109,240
Incentive fees 13,593 (49,182) 65,574 59,760 20,949
---------- ---------- ---------- ---------- ----------
Operating profit 122,443 (441,443) 590,167 537,843 163,061
Depreciation and amortization (203,724) (184,040) (239,476) (202,275) (158,584)
Interest income 149 9,163 4,310 3,124 0
Interest expense-mortgage notes (124,040) (174,695) (265,531) (159,116) (175,382)
Professional fees 0 (683) 0 0 (691)
Other 0 (24,568) 0 0 0
---------- ---------- ---------- ---------- ----------
(Income) loss before income tax provision (205,172) (816,266) 89,470 179,576 (171,596)
Income tax provision 100 0 0 0 201
---------- ---------- ---------- ---------- ----------
Net income (loss) ($205,272) ($816,266) $89,470 $179,576 (171,797)
========== ========== ========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
EMBASSY
SUITES EMBASSY MARQUE
HOTEL- SUITES HOTEL OF
PALM HOTEL- PARK WINSTON- COMBINED
DESERT ST. LOUIS TUCSON SALEM TOTAL
<S> <C> <C> <C> <C> <C>
Gross operating revenue:
Rooms $1,746,619 $1,364,563 $1,495,230 $900,012 $11,351,691
Food and beverage 469,690 423,658 763,822 485,930 6,655,195
Telephone 46,911 72,265 61,742 44,282 466,154
Other 16,073 73,956 18,488 11,971 260,010
---------- ---------- ---------- ---------- -----------
Gross operating revenue 2,279,293 1,934,442 2,339,282 1,442,195 16,733,050
---------- ---------- ---------- ---------- -----------
Department profit:
Rooms 1,363,772 898,735 1,180,443 638,032 8,100,419
Food and beverage 97,098 38,228 156,761 48,373 1,459,273
Telephone 29,605 45,004 33,539 14,594 241,449
Other 17,192 51,126 19,326 11,988 211,202
---------- ---------- ---------- ---------- -----------
Total department profit 1,507,667 1,033,093 1,390,069 712,987 10,012,343
---------- ---------- ---------- ---------- -----------
Unallocated operating expenses:
Administrative and general 180,177 211,103 194,323 165,530 1,875,058
Advertising and promotion 245,877 221,046 162,222 229,170 2,094,655
Repairs and maintenance 88,275 122,279 91,160 99,499 997,798
Heat, light and power 81,609 112,976 93,418 90,508 1,015,023
---------- ---------- ---------- ---------- -----------
Total unallocated operating expenses 595,938 667,404 541,123 584,707 5,982,534
---------- ---------- ---------- ---------- -----------
Gross operating profit 911,729 365,689 848,946 128,280 4,029,809
Rent, taxes and insurance 36,349 55,757 8,891 28,847 822,244
Incentive fees 87,655 30,993 84,006 9,944 323,292
---------- ---------- ---------- ---------- -----------
Operating profit 787,725 278,939 756,049 89,489 2,884,273
Depreciation and amortization (313,531) (184,256) (91,706) (200,417) (1,778,009)
Interest income 1,119 6,060 838 18 24,781
Interest expense-mortgage notes (251,109) (162,302) (132,264) (2,153) (1,446,592)
Professional fees 0 0 0 0 (1,374)
Other 0 0 0 0 (24,568)
---------- ---------- ---------- ---------- -----------
Income (loss) before income tax provision 224,204 (61,559) 532,917 (113,063) (341,489)
Income tax provision 0 0 0 0 301
---------- ---------- ---------- ---------- -----------
Net income (loss) $224,204 ($61,559) $532,917 ($113,083) ($341,790)
========== ========== ========== ========== ===========
</TABLE>
F-39
<PAGE> 44
THE HOTELS OF DISTINCTION
COMBINING STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 1996
<TABLE>
<CAPTION>
SHERATON
ALLENTOWN ARLINGTON MARQUE MINNEAPOLIS SHERATON
HILTON PARK OF METRODOME NEEDHAM
HOTEL HILTON ATLANTA HOTEL HOTEL
<S> <C> <C> <C> <C> <C>
Gross operating revenue:
Rooms $894,367 $1,769,589 $1,621,385 $1,140,746 $1,348,171
Food and beverage 615,308 1,692,457 344,014 1,308,231 1,130,908
Telephone 12,222 84,018 69,215 41,508 57,302
Other 52,702 53,892 25,319 26,184 32,340
--------- ---------- ---------- ---------- ----------
Gross operating revenue 1,574,599 3,599,956 2,059,933 2,516,669 2,568,721
--------- ---------- ---------- ---------- ----------
Department profit:
Rooms 606,505 1,203,268 1,283,895 794,625 955,651
Food and beverage 119,108 449,488 102,656 364,860 360,348
Telephone 2,431 42,817 43,691 18,814 28,260
Other 17,524 54,823 26,670 26,922 32,646
--------- ---------- ---------- ---------- ----------
Total department profit 745,568 1,750,396 1,456,912 1,205,221 1,376,905
--------- ---------- ---------- ---------- ----------
Unallocated operating expenses:
Administrative and general 204,929 342,749 212,547 202,106 235,020
Advertising and promotion 175,252 410,062 143,454 280,745 252,879
Repairs and maintenance 82,136 317,432 81,788 85,151 142,337
Heat, light and power 97,488 274,290 80,219 98,673 160,236
--------- ---------- ---------- ---------- ----------
Total unallocated operating expenses 559,805 1,344,533 518,008 666,675 790,472
--------- ---------- ---------- ---------- ----------
Gross operating profit 185,763 405,863 938,904 538,546 586,433
Rents, taxes and insurance 55,563 566,647 117,857 51,722 76,697
Incentive fees 12,928 (12,051) 82,030 47,165 46,716
--------- ---------- ---------- ---------- ----------
Operating profit 117,272 (148,733) 739,017 439,659 463,020
Depreciation and amortization (180,578) (260,213) (253,544) (218,475) (142,574)
Interest income 720 953 1,351 820 306
Interest expense-mortgage notes (118,089) (173,410) (262,727) (123,152) (146,655)
Professional fees (823) (920) (750) (15,173) (16,455)
Other 1,737 0 0 0 0
--------- ---------- ---------- ---------- ----------
Income (loss) before income tax
provision (179,761) (582,323) 223,347 83,679 157,642
Income tax provision 100 (41,195) 0 0 26,124
--------- ---------- ---------- ---------- ----------
Net income (loss) ($179,861) ($ 541,128) $ 223,347 $ 83,679 $ 131,518
========= ========== ========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
EMBASSY
SUITES EMBASSY MARQUE
HOTEL- SUITES HOTEL OF
PALM HOTEL- PARK WINSTON- COMBINED
DESERT ST. LOUIS TUCSON SALEM TOTAL
<S> <C> <C> <C> <C> <C>
Gross operating revenue:
Rooms $1,940,353 $1,503,422 $1,536,322 $ 951,114 $12,705,469
Food and beverage 470,352 461,683 770,497 471,222 7,264,672
Telephone 52,466 69,419 63,604 45,564 495,318
Other 14,580 57,610 9,825 23,830 296,282
---------- ---------- ---------- ---------- -----------
Gross operating revenue 2,477,751 2,092,134 2,380,248 1,491,730 20,761,741
---------- ---------- ---------- ---------- -----------
Department profit:
Rooms 1,570,694 962,460 1,237,054 660,419 9,274,571
Food and beverage 79,922 86,156 202,508 1,225 1,766,271
Telephone 29,738 44,135 31,766 25,500 267,152
Other 16,420 33,619 10,470 24,045 243,139
---------- ---------- ---------- ---------- -----------
Total department profit 1,696,774 1,126,370 1,481,798 711,189 11,551,133
---------- ---------- ---------- ---------- -----------
Unallocated operating expenses:
Administrative and general 193,376 221,155 193,468 189,972 1,995,322
Advertising and promotion 252,781 204,527 167,302 194,268 2,081,270
Repairs and maintenance 110,535 151,524 95,891 104,216 1,171,010
Heat, light and power 83,638 125,342 83,105 91,313 1,094,304
---------- ---------- ---------- ---------- -----------
Total unallocated operating expenses 640,330 702,548 539,766 579,769 6,341,906
---------- ---------- ---------- ---------- -----------
Gross operating profit 1,056,444 423,822 942,032 131,420 5,209,227
Rents, taxes and insurance 29,319 28,423 9,590 11,681 947,499
Incentive fees 101,457 38,251 93,214 11,815 421,525
---------- ---------- ---------- ---------- -----------
Operating profit 925,668 357,148 839,228 107,924 3,840,203
Depreciation and amortization (175,271) (196,256) (116,745) (138,663) (1,682,319)
Interest income 1,840 5,024 647 214 11,875
Interest expense-mortgage notes (248,449) (145,219) (125,000) (361) (1,343,062)
Professional fees (12,555) (12,887) (301) (801) (60,665)
Other 0 0 0 0 1,737
---------- ---------- ---------- ---------- -----------
Income (loss) before income tax
provision 491,233 7,810 597,829 (31,687) 767,769
Income tax provision 0 0 0 783 (14,188)
---------- ---------- ---------- ---------- -----------
Net income (loss) $ 491,233 $ 7,810 $ 597,829 ($ 32,470) $ 781,957
========== ========== ========== ========== ===========
</TABLE>
F-40
<PAGE> 45
THE HOTELS OF DISTINCTION
COMBINING BALANCE SHEET
DECEMBER 31, 1995
<TABLE>
<CAPTION>
SHERATON
ALLENTOWN ARLINGTON MARQUE MINNEAPOLIS SHERATON
HILTON PARK OF METRODOME NEEDHAM
HOTEL HILTON ATLANTA HOTEL HOTEL
<S> <C> <C> <C> <C> <C>
Assets
Current assets:
Cash $ 207,869 $ 945,352 $ 597,538 $ 631,165 $ 598,963
Accounts receivable 279,046 752,483 323,632 258,175 512,204
Accounts receivable-affiliate 55,163 112,891 19,995 7,191 (193,363)
Inventory 44,091 67,702 15,538 51,229 54,863
Other current assets 2,047 0 150,951 0 28,894
----------- ----------- ----------- ----------- -----------
Total current assets 588,216 1,878,428 1,107,654 947,780 1,001,561
Property, plant & equipment 6,965,939 12,831,739 12,193,928 8,551,541 10,990,428
Other assets, net 25,000 1,000 30,000 16,046 1,341
----------- ----------- ----------- ----------- -----------
Total assets $ 7,579,155 $14,711,167 $13,331,582 $ 9,515,367 $11,993,330
=========== =========== =========== =========== ===========
Liabilities and Owners' Equity
Current liabilities:
Accounts payable-affiliates $ 42,549 $ 33,999 $ 79,392 $ 59,513 $ 98,771
Accounts payable and accrued liabilities 410,891 2,660,004 709,351 771,835 762,054
Current portion of long-term debt 246,534 63,659 122,905 6,091,558 209,654
----------- ----------- ----------- ----------- -----------
Total current liabilities 699,974 2,757,662 911,648 6,922,906 1,070,479
Long-term debt, net of discount 4,859,987 7,868,759 10,395,970 0 7,093,734
Other liabilities 0 0 0 0 0
----------- ----------- ----------- ----------- -----------
Total liabilities 5,559,961 10,626,421 11,307,618 6,922,906 8,164,213
----------- ----------- ----------- ----------- -----------
Owners' equity:
Owners' capital 5,500,000 6,000,000 5,250,000 5,000,000 5,100,000
Additional paid in capital 2,224,957 350,000 0 0 0
----------- ----------- ----------- ----------- -----------
7,724,957 6,350,000 5,250,000 5,000,000 5,100,000
Accumulated deficit (5,705,763) (2,265,254) (3,226,036) (2,407,539) (1,270,883)
----------- ----------- ----------- ----------- -----------
Total owners' equity 2,019,194 4,084,746 2,023,964 2,592,461 3,829,117
----------- ----------- ----------- ----------- -----------
Total liabilities and owners' equity $ 7,579,155 $14,711,167 $13,331,582 $ 9,515,367 $11,993,330
=========== =========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
EMBASSY
SUITES EMBASSY MARQUE
HOTEL- SUITES HOTEL OF
PALM HOTEL- PARK WINSTON- COMBINED
DESERT ST. LOUIS TUCSON SALEM TOTAL
<S> <C> <C> <C> <C> <C>
Assets
Current assets:
Cash $ 529,984 $ 900,130 $ 547,948 $ 442,370 $ 5,401,339
Accounts receivable 148,296 109,398 284,913 153,682 2,819,829
Accounts receivable-affiliate 104,147 (117,618) 8,958 7,057 4,421
Inventory 27,931 54,759 51,516 66,314 433,943
Other current assets 0 19,846 4,504 8,955 215,197
----------- ----------- ---------- ----------- ------------
Total current assets 808,358 966,515 897,839 678,378 8,874,729
Property, plant & equipment 10,312,307 11,374,740 8,691,901 5,016,626 86,929,149
Other assets, net 199,697 0 15,650 10,700 299,434
----------- ----------- ---------- ----------- ------------
Total assets $11,320,362 $12,341,255 $9,605,390 $ 5,705,704 $ 96,103,312
=========== =========== ========== =========== ============
Liabilities and Owners' Equity
Current liabilities:
Accounts payable-affiliates $ 38,249 $ 44,729 $ 18,051 $ 50,536 $ 465,789
Accounts payable and accrued liabilities 683,392 558,898 719,045 382,601 7,658,071
Current portion of long-term debt 87,099 450,766 27,522 0 7,299,697
----------- ----------- ---------- ----------- ------------
Total current liabilities 808,740 1,054,393 764,618 433,137 15,423,557
Long-term debt, net of discount 9,673,392 5,320,566 6,222,477 0 51,434,885
Other liabilities 0 0 0 4,396 4,396
----------- ----------- ---------- ----------- ------------
Total liabilities 10,482,132 6,374,959 6,987,095 437,533 66,862,838
----------- ----------- ---------- ----------- ------------
Owners' equity:
Owners' capital 5,100,000 5,797,000 3,000,000 7,000,000 47,747,000
Additional paid in capital 1,298,849 0 0 0 3,873,806
----------- ----------- ---------- ----------- ------------
6,398,849 5,797,000 3,000,000 7,000,000 51,620,806
Accumulated deficit (5,560,619) 169,296 (381,705) (1,731,829) (22,380,332)
----------- ----------- ---------- ----------- ------------
Total owners' equity 838,230 5,966,296 2,618,295 5,268,171 29,240,474
----------- ----------- ---------- ----------- ------------
Total liabilities and owners' equity $11,320,362 $12,341,255 $9,605,390 $ 5,705,704 $ 96,103,312
=========== =========== ========== =========== ============
</TABLE>
F-41
<PAGE> 46
THE HOTELS OF DISTINCTION
COMBINING BALANCE SHEET
DECEMBER 31, 1994
<TABLE>
<CAPTION>
SHERATON
ALLENTOWN ARLINGTON MARQUE MINNEAPOLIS SHERATON
HILTON PARK OF METRODOME NEEDHAM
ASSETS HOTEL HILTON ATLANTA HOTEL HOTEL
------ ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Current assets:
Cash $ 350,093 $ 2,976,107 $ 681,490 $ 993,211 $ 512,216
Accounts receivable 295,539 648,761 114,517 263,289 414,684
Accounts receivable - affiliate 48,192 58,046 46,002 0 (213,844)
Inventory 41,509 67,561 13,138 48,818 55,088
Other current assets 3,685 (1,960) 110,183 0 20,456
----------- ----------- ----------- ----------- -----------
Total current assets 739,018 3,748,515 965,330 1,305,318 788,600
Property, plant & equipment 7,543,769 11,501,980 13,102,898 8,907,088 11,384,360
Other assets, net 108,334 1,000 25,475 14,675 1,341
----------- ----------- ----------- ----------- -----------
Total assets $ 8,391,121 $15,251,495 $14,093,703 $10,227,081 $12,174,301
=========== =========== =========== =========== ===========
LIABILITIES AND OWNERS' EQUITY
Current liabilities:
Accounts payable - affiliates $ 102,484 $ (12,361) $ 164,642 $ 375,551 $ 165,510
Accounts payable and accrued liabilities 365,994 2,954,798 380,931 569,318 645,617
Current portion of long-term debt 145,453 58,344 111,255 46,548 104,759
----------- ----------- ----------- ----------- -----------
Total current liabilities 613,931 3,000,781 656,828 993,417 915,886
Long-term debt, net of discount 5,183,405 7,932,417 10,518,875 6,093,090 7,293,310
Other liabilities 0 0 0 0 0
----------- ----------- ----------- ----------- -----------
Total liabilities 5,797,336 10,933,198 11,175,703 7,086,507 8,209,196
----------- ----------- ----------- ----------- -----------
Owners' equity:
Owners' capital 5,500,000 6,000,000 5,250,000 5,000,000 5,100,000
Additional paid in capital 2,224,957 0 823,052 0 0
----------- ----------- ----------- ----------- -----------
7,724,957 6,000,000 6,073,052 5,000,000 5,100,000
Accumulated deficit (5,131,172) (1,681,703) (3,155,052) (1,859,426) (1,134,895)
----------- ----------- ----------- ----------- -----------
Total owners' equity 2,593,785 4,318,297 2,918,000 3,140,574 3,965,105
----------- ----------- ----------- ----------- -----------
Total liabilities and
owners' equity $ 8,391,121 $15,251,495 $14,093,703 $10,227,081 $12,174,301
=========== =========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
EMBASSY EMBASSY
SUITES SUITES MARQUE
HOTEL- HOTEL- HOTEL OF
PALM PARK PARK WINSTON- COMBINED
ASSETS DESERT ST. LOUIS TUCSON SALEM TOTAL
------ ----------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Current assets:
Cash $ 278,078 $ 833,053 $ 421,595 $ 181,843 $ 7,227,686
Accounts receivable 167,385 81,972 273,148 314,609 2,573,904
Accounts receivable - affiliate 74,479 0 5,948 0 18,823
Inventory 38,752 49,097 72,727 53,157 439,847
Other current assets 5,960 34,335 0 40,681 213,340
----------- ----------- ----------- ----------- ------------
Total current assets 564,654 998,457 773,418 590,290 10,473,600
Property, plant & equipment 11,200,403 11,964,213 8,851,066 5,419,565 89,875,342
Other assets, net 324,100 0 18,470 10,700 504,095
----------- ----------- ----------- ----------- ------------
Total assets $12,089,157 $12,962,670 $ 9,642,954 $ 6,020,555 $100,853,037
=========== =========== =========== =========== ============
LIABILITIES AND OWNERS' EQUITY
Current liabilities:
Accounts payable - affiliates $ 61,131 $ 327,123 $ 61,194 $ 42,240 $ 1,287,514
Accounts payable and accrued liabilities 471,879 578,501 611,075 287,568 6,875,681
Current portion of long-term debt 147,187 410,130 0 0 1,025,676
----------- ----------- ----------- ----------- ------------
Total current liabilities 680,197 1,315,754 672,269 339,808 9,188,871
Long-term debt, net of discount 9,684,960 5,771,291 6,250,000 0 58,727,348
Other liabilities 44,131 11,296 0 11,742 67,169
----------- ----------- ----------- ----------- ------------
Total liabilities 10,409,288 7,098,341 6,922,269 351,550 67,983,388
----------- ----------- ----------- ----------- ------------
Owners' equity:
Owners' capital 5,100,000 5,797,000 3,000,000 7,000,000 47,747,000
Additional paid in capital 1,198,849 150,000 0 0 4,396,858
----------- ----------- ----------- ----------- ------------
6,298,849 5,947,000 3,000,000 7,000,000 52,143,858
Accumulated deficit (4,618,980) (82,671) (279,315) (1,330,995) (19,274,209)
----------- ----------- ----------- ----------- ------------
Total owners' equity 1,679,869 5,864,329 2,720,685 5,669,005 32,869,649
----------- ----------- ----------- ----------- ------------
Total liabilities and
owners' equity $12,089,157 $12,962,670 $9,642,954 $ 6,020,555 $100,853,037
=========== =========== =========== =========== ============
</TABLE>
F-42
<PAGE> 47
THE HOTELS OF DISTINCTION
COMBINING STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
SHERATON
ALLENTOWN ARLINGTON MARQUE MINNEAPOLIS SHERATON
HILTON PARK OF METRODOME NEEDHAM
HOTEL HILTON ATLANTA HOTEL HOTEL
<S> <C> <C> <C> <C> <C>
Gross operation revenue:
Rooms $ 3,837,322 $ 7,480,069 $ 5,690,781 $ 5,095,537 $ 5,707,986
Food and beverage 2,634,781 7,502,613 1,318,549 5,208,819 4,300,940
Telephone 98,740 358,486 271,225 178,112 191,715
Other 248,900 148,806 61,902 62,457 75,273
----------- ----------- ----------- ----------- -----------
Gross operating revenue 6,819,743 15,489,974 7,342,457 10,544,925 10,275,914
----------- ----------- ----------- ----------- -----------
Department profit:
Rooms 2,669,180 5,074,337 4,428,961 3,614,251 4,111,225
Food and beverage 594,653 2,409,796 331,135 1,601,371 1,258,932
Telephone 41,891 163,374 185,065 100,155 77,385
Other 78,837 140,579 61,902 62,457 75,273
----------- ----------- ----------- ----------- -----------
Total department profit 3,384,561 7,788,086 5,007,063 5,378,234 5,522,815
----------- ----------- ----------- ----------- -----------
Unallocated operating expenses:
Administrative and general 629,237 1,292,248 638,939 701,599 759,437
Advertising and promotion 640,119 1,930,361 510,219 1,029,387 912,163
Repairs and maintenance 304,031 1,120,013 371,349 370,506 469,837
Heat, light and power 320,152 832,148 306,339 324,867 639,196
----------- ----------- ----------- ----------- -----------
Total unallocated operating expenses 1,893,539 5,174,770 1,826,846 2,426,359 2,780,633
----------- ----------- ----------- ----------- -----------
Gross operating profit 1,491,022 2,613,316 3,180,217 2,951,875 2,742,182
Rents, taxes and insurance 339,357 1,266,562 290,977 576,780 350,228
Incentive fees 268,802 485,149 456,193 477,121 470,810
----------- ----------- ----------- ----------- -----------
Operating profit 882,863 861,605 2,433,047 1,897,974 1,921,144
Depreciation and amortization (1,027,127) (821,239) (1,009,953) (857,627) (644,806)
Interest income 1,669 21,232 17,937 19,418 4,176
Interest expense-mortgage notes (435,286) (700,000) (1,058,006) (634,647) (700,310)
Professional fees (451) (6,509) (1,054) (288) (1,082)
Other 0 0 0 0 0
----------- ----------- ----------- ----------- -----------
Income (loss) before income tax provision (578,332) (644,911) 381,971 424,830 579,122
Income tax provision (51,933) (111,745) (19,995) (7,057) 254,169
----------- ----------- ----------- ----------- -----------
Net income (loss) ($526,399) ($533,166) $ 401,966 $ 431,887 $ 324,953
=========== =========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
EMBASSY
SUITES EMBASSY MARQUE
HOTEL- SUITES HOTEL OF
PALM HOTEL- PARK WINSTON- COMBINED
DESERT ST. LOUIS TUCSON SALEM TOTAL
<S> <C> <C> <C> <C> <C>
Gross operation revenue:
Rooms $ 5,075,473 $6,872,115 $4,097,451 $4,152,339 $48,009,073
Food and beverage 1,459,655 1,802,542 2,594,576 1,979,872 28,802,347
Telephone 158,219 290,533 184,502 203,807 1,935,339
Other 51,808 318,876 66,874 105,445 1,140,341
----------- ---------- ---------- ---------- -----------
Gross operating revenue 6,745,155 9,284,066 6,943,403 6,441,463 79,887,100
----------- ---------- ---------- ---------- -----------
Department profit:
Rooms 3,632,620 4,579,092 2,950,748 3,007,460 34,067,874
Food and beverage 93,821 218,026 401,508 145,692 7,054,934
Telephone 84,888 175,003 67,033 85,111 979,905
Other 51,808 200,758 66,874 105,445 843,933
----------- ---------- ---------- ---------- -----------
Total department profit 3,863,137 5,172,879 3,486,163 3,343,708 42,946,646
----------- ---------- ---------- ---------- -----------
Unallocated operating expenses:
Administrative and general 547,709 762,408 641,556 665,682 6,638,815
Advertising and promotion 781,708 877,183 582,229 852,591 8,115,960
Repairs and maintenance 344,796 537,410 356,803 418,669 4,293,414
Heat, light and power 395,493 484,192 422,974 328,274 4,053,635
----------- ---------- ---------- ---------- -----------
Total unallocated operating expenses 2,069,706 2,661,193 2,003,562 2,265,216 23,101,824
----------- ---------- ---------- ---------- -----------
Gross operating profit 1,793,431 2,511,686 1,482,601 1,078,492 19,844,822
Rents, taxes and insurance 207,088 303,479 385,560 199,165 3,919,196
Incentive fees 311,205 432,812 266,495 232,889 3,401,476
----------- ---------- ---------- ---------- -----------
Operating profit 1,275,138 1,775,395 830,546 646,438 12,524,150
Depreciation and amortization (1,243,676) (743,574) (414,686) (605,953) (7,368,641)
Interest income 10,700 26,373 4,497 2,184 108,186
Interest expense-mortgage notes (999,108) (637,307) (506,552) 0 (5,671,216)
Professional fees (5,073) (1,306) (150) (2,438) (18,351)
Other (8,558) 0 0 (121) (8,679)
----------- ---------- ---------- ---------- -----------
Income (loss) before income tax provision (970,577) 419,581 (86,345) 40,110 (434,551)
Income tax provision (103,419) 117,618 (8,958) (7,057) 61,623
----------- ---------- ---------- ---------- -----------
Net income (loss) ($867,158) $ 301,963 ($77,387) $ 47,167 ($496,174)
=========== ========== ========== ========== ===========
</TABLE>
F-43
<PAGE> 48
THE HOTELS OF DISTINCTION
COMBINING STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1994
<TABLE>
<CAPTION>
SHERATON
ALLENTOWN ARLINGTON MARQUE MINNEAPOLIS SHERATON
HILTON PARK OF METRODOME NEEDHAM
HOTEL HILTON ATLANTA HOTEL HOTEL
<S> <C> <C> <C> <C> <C>
Gross operating revenue:
Rooms $ 3,481,262 $ 7,069,504 $ 5,080,626 $ 4,680,700 $ 5,310,424
Food and beverage 2,387,388 6,841,846 1,173,955 4,639,763 4,492,235
Telephone 106,825 376,148 276,478 187,405 213,949
Other 206,052 9,810 44,896 25,474 73,856
----------- ----------- ----------- ----------- -----------
Gross operating revenue 6,181,527 14,288,308 6,575,955 9,533,342 10,090,464
----------- ----------- ----------- ----------- -----------
Department profit:
Rooms 2,381,448 4,616,453 3,876,496 3,289,236 3,772,357
Food and beverage 576,167 1,793,331 142,590 1,423,282 1,402,590
Telephone 51,977 129,414 172,023 93,256 97,012
Other 71,125 (62,012) 44,896 25,474 73,856
----------- ----------- ----------- ----------- -----------
Total department profit 3,080,717 6,477,186 4,236,005 4,831,248 5,345,815
----------- ----------- ----------- ----------- -----------
Unallocated operating expenses:
Administrative and general 553,418 1,265,480 643,783 643,937 750,650
Advertising and promotion 618,305 1,606,189 548,420 858,360 873,029
Repairs and maintenance 313,264 1,214,030 350,458 326,342 466,351
Heat, light and power 318,034 694,429 315,996 321,730 595,336
----------- ----------- ----------- ----------- -----------
Total unallocated operating expenses 1,803,021 4,780,128 1,858,657 2,150,369 2,685,366
----------- ----------- ----------- ----------- -----------
Gross operating profit 1,277,696 1,697,058 2,377,348 2,680,879 2,660,449
Rents, taxes and insurance 317,404 803,290 360,261 521,724 343,494
Incentive fees 235,101 423,717 350,841 431,321 458,608
----------- ----------- ----------- ----------- -----------
Operating profit 725,191 470,051 1,666,246 1,727,834 1,858,347
Depreciation and amortization (821,466) (646,058) (964,839) (920,573) (614,491)
Interest income 794 106,452 9,983 7,387 4,234
Interest expense-mortgage notes (565,008) (700,000) (1,059,549) (635,862) (537,234)
Professional fees (1,212) (1,874) (497) 0 (5,215)
Other 0 0 0 0 0
----------- ----------- ----------- ----------- -----------
Income (loss) before income tax provision (661,701) (771,429) (348,656) 178,786 705,641
Income tax provision (48,192) (11,728) (46,002) 0 307,612
----------- ----------- ----------- ----------- -----------
Net income (loss) ($613,509) ($759,701) ($302,654) $ 178,786 $ 398,029
=========== =========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
EMBASSY
SUITES EMBASSY MARQUE
HOTEL- SUITES HOTEL OF
PALM HOTEL- PARK WINSTON- COMBINED
DESERT ST. LOUIS TUCSON SALEM TOTAL
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Gross operating revenue:
Rooms $ 4,827,670 $6,720,373 $3,867,132 $3,792,468 $44,821,159
Food and beverage 1,431,789 1,647,093 2,634,790 2,195,482 27,444,341
Telephone 89,392 235,809 133,467 175,021 1,794,494
Other 56,095 262,680 61,720 201,807 942,390
----------- ---------- ---------- ---------- -----------
Gross operating revenue 6,404,946 8,865,955 6,697,109 6,364,778 75,002,384
----------- ---------- ---------- ---------- -----------
Department profit:
Rooms 3,376,637 4,603,791 2,818,820 2,692,900 31,428,138
Food and beverage 99,690 100,866 458,012 228,156 6,224,684
Telephone 21,555 110,277 42,118 46,508 764,140
Other 56,095 140,831 61,720 201,807 613,792
----------- ---------- ---------- ---------- -----------
Total department profit 3,553,977 4,955,765 3,380,670 3,169,371 39,030,754
----------- ---------- ---------- ---------- -----------
Unallocated operating expenses:
Administrative and general 528,009 766,165 612,986 585,280 6,349,708
Advertising and promotion 736,963 1,060,023 646,614 822,418 7,770,321
Repairs and maintenance 363,993 528,113 280,377 400,181 4,243,109
Heat, light and power 375,504 472,869 402,328 342,666 3,838,892
----------- ---------- ---------- ---------- -----------
Total unallocated operating expenses 2,004,469 2,827,170 1,942,305 2,150,545 22,202,030
----------- ---------- ---------- ---------- -----------
Gross operating profit 1,549,508 2,128,595 1,438,365 1,018,626 16,828,724
Rents, taxes and insurance 207,168 143,873 352,387 191,516 3,241,115
Incentive fees 278,786 398,949 263,091 225,680 3,066,094
----------- ---------- ---------- ---------- -----------
Operating profit 1,063,556 1,585,773 822,887 601,630 10,521,515
Depreciation and amortization (1,185,877) (695,615) (366,823) (456,811) (6,672,553)
Interest income 4,539 8,589 2,345 2,529 146,852
Interest expense-mortgage notes (1,013,119) (568,235) (468,749) 0 (5,547,756)
Professional fees (1,155) (600) (516) (5,686) (16,755)
Other 0 (9,767) 0 0 (9,767)
----------- ---------- ---------- ---------- -----------
Income (loss) before income tax provision (1,132,056) 320,145 (10,856) 141,662 (1,578,464)
Income tax provision (74,479) 0 0 0 127,211
----------- ---------- ---------- ---------- -----------
Net income (loss) ($1,057,577) $ 320,145 ($10,856) $ 141,662 ($1,705,675)
=========== ========== ========== ========== ===========
</TABLE>
F-44
<PAGE> 49
Report of Independent Public Accountants
To the Board of Directors
730 Cal Hotel Properties II, Inc. d/b/a Doubletree Hotel Los Angeles Airport
We have audited the accompanying statement of net assets of hotel operations of
730 Cal Hotel Properties II, Inc. d/b/a Doubletree Hotel Los Angeles Airport as
of December 31, 1995, 1994 and 1993 and the related statements of hotel
operating revenue and expenses and hotel cash flows for the years ended December
31, 1995 and 1994 and the period from April 1, 1993 (commencement of operations)
to December 31, 1993. 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 audits 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 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.
The accompanying statements have been prepared for inclusion in Form 8-K of SLT
Realty Limited Partnership (SLT) and SLC Operating Limited Partnership (SLC)
pursuant to the Purchase and Sale Agreement as described in Note 1 between 730
Cal Hotel Properties II, Inc. d/b/a Doubletree Hotel Los Angeles Airport, SLT
and SLC dated May 3, 1996, and are not intended to be a complete presentation of
730 Cal Hotel Properties II, Inc.'s assets and liabilities or results of its
operations or its cash flows.
In our opinion, the statements referred to above present fairly, in all material
respects, the net assets of hotel operations of 730 Cal Hotel Properties II,
Inc. d/b/a Doubletree Hotel Los Angeles Airport as of December 31, 1995, 1994
and 1993, and the results of the hotel operations and the hotel cash flows for
the years ended December 31, 1995 and 1994 and the period from April 1, 1993
(commencement of operations) to December 31, 1993, in conformity with generally
accepted accounting principles.
As discussed in notes 1 and 4 to the financial statements, during 1995 730 Cal
Hotel Properties II, Inc. d/b/a Doubletree Hotel Los Angeles Airport adopted
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of."
PANNELL KERR FORSTER, PC
Boston, Massachusetts
February 28, 1996
F-45
<PAGE> 50
730 CAL HOTEL PROPERTIES II, INC.
D/B/A DOUBLETREE HOTEL LOS ANGELES AIRPORT
Statement of Net Assets of Hotel Operations
(Note 1)
<TABLE>
<CAPTION>
March 31 December 31
------------------------ ---------------------------------------
1996 1995 1995 1994 1993
---- ---- ---- ---- ----
(unaudited)
Assets
<S> <C> <C> <C> <C> <C>
Current assets
Cash (note 1) $ 1,264,832 $ 820,032 $ 881,550 $ 346,270 $ 210,636
Receivables - net 1,379,732 2,178,779 1,568,641 2,406,585 2,421,764
Inventories (note 1) 105,260 160,335 111,493 157,878 132,607
Prepaid expenses 273,341 119,090 193,617 107,876 258,905
----------- ----------- ----------- ----------- -----------
Total current assets 3,023,165 3,278,236 2,755,301 3,018,609 3,023,912
Property and equipment - net (notes 1, 2, 3 and 4) 25,227,764 37,594,567 25,190,564 38,217,056 38,168,244
Other assets (note 1) 207,362 360,214 245,612 397,714 10,404
----------- ----------- ----------- ----------- -----------
Total assets $28,458,291 $41,233,017 $28,191,477 $41,633,379 $41,202,560
----------- ----------- ----------- ----------- -----------
Liabilities
Current liabilities
Accounts payable $ 1,612,452 $ 1,538,701 $ 1,562,106 $ 1,944,664 $ 875,106
Advance deposits 58,577 131,832 23,734 85,115 201,355
Accrued expenses 902,485 895,057 1,107,668 884,171 1,095,894
Current portion of obligations under capital
leases (note 3) 222,175 217,968 218,383 217,968 126,631
----------- ----------- ----------- ----------- -----------
Total current liabilities 2,795,689 2,783,558 2,911,891 3,131,918 2,298,986
Obligations under capital leases - net 453,462 298,060 510,249 349,081 311,129
----------- ----------- ----------- ----------- -----------
Total liabilities 3,249,151 3,081,618 3,422,140 3,480,999 2,610,115
----------- ----------- ----------- ----------- -----------
Commitments and contingencies (notes 3, 5 and 6)
Net assets $25,209,140 $38,151,399 $24,769,337 $38,152,380 $38,592,445
----------- ----------- ----------- ----------- -----------
</TABLE>
See notes to financial statements
F-46
<PAGE> 51
730 CAL HOTEL PROPERTIES II, INC.
D/B/A DOUBLETREE HOTEL LOS ANGELES AIRPORT
Statement of Hotel Operating Revenue and Expenses
<TABLE>
<CAPTION>
Period from
April 1, 1993
Three Months Ended Year Ended (Commencement
March 31 December 31 of operations)
------------------------ ------------------------- to December 31,
1996 1995 1995 1994 1993
---- ---- ---- ---- ----
(unaudited)
<S> <C> <C> <C> <C> <C>
Revenue
Rooms $ 3,122,267 $ 2,873,769 $ 11,736,378 $10,753,096 $ 6,790,344
Food and beverage 2,214,516 2,118,658 8,427,939 7,618,110 5,239,030
Telephone 276,167 186,593 779,198 690,092 520,340
Other income 356,761 295,081 1,265,069 1,168,443 891,724
----------- ----------- ------------ ----------- -----------
5,969,711 5,474,101 22,208,584 20,229,741 13,441,438
----------- ----------- ------------ ----------- -----------
Cost of sales and departmental expenses
Rooms 1,148,857 1,172,154 4,739,612 4,929,854 2,916,254
Food and beverage 1,610,122 1,681,335 6,789,187 6,616,997 4,224,539
Telephone 92,705 123,107 467,900 536,221 371,949
Other expenses 124,097 142,574 519,165 466,511 371,729
----------- ----------- ------------ ----------- -----------
2,975,781 3,119,170 12,515,864 12,549,583 7,884,471
----------- ----------- ------------ ----------- -----------
Departmental operating income 2,993,930 2,354,931 9,692,720 7,680,158 5,556,967
----------- ----------- ------------ ----------- -----------
Undistributed operating expenses
Administrative and general 579,485 570,704 2,408,147 2,826,298 2,232,552
Advertising and promotion 659,160 508,158 2,191,031 2,221,741 1,746,756
Energy 310,329 325,086 1,329,816 1,282,941 894,904
Property operation and maintenance 304,697 281,302 1,249,750 1,442,648 1,080,364
----------- ----------- ------------ ----------- -----------
1,853,671 1,685,250 7,178,744 7,773,628 5,954,576
----------- ----------- ------------ ----------- -----------
Income (loss) before management
fees, fixed charges and other 1,140,259 669,681 2,513,976 (93,470) (397,609)
----------- ----------- ------------ ----------- -----------
Management fees, fixed charges and other
Management fees (note 5) 171,752 109,482 452,672 300,599 134,444
Depreciation and amortization 640,987 670,518 2,762,562 2,364,905 1,378,968
Property taxes, insurance and rent 471,301 437,263 1,784,550 1,812,652 1,148,604
Interest 16,413 15,302 58,818 30,880 18,190
Impairment loss - building (note 4) - - 11,400,000 - -
Costs related to management termination
(note 5) - - - 257,462 -
----------- ----------- ------------ ----------- -----------
1,300,453 1,232,565 16,458,602 4,766,498 2,680,206
----------- ----------- ------------ ----------- -----------
Deficiency of hotel operating
revenue over expenses $ (160,194) $ (562,884) $(13,944,626) $(4,859,968) $(3,077,815)
----------- ----------- ------------ ----------- -----------
</TABLE>
See notes to financial statements
F-47
<PAGE> 52
730 CAL HOTEL PROPERTIES II, INC.
D/B/A DOUBLETREE HOTEL LOS ANGELES AIRPORT
Statement of Hotel Cash Flows
<TABLE>
<CAPTION>
Period from
April 1, 1993
Three Months Ended Year Ended (Commencement
March 31 December 31 of operations)
------------------------ ------------------------- to December 31,
1996 1995 1995 1994 1993
---- ---- ---- ---- ----
(unaudited)
<S> <C> <C> <C> <C> <C>
Operating activities
Deficiency of hotel operating revenue
over expenses $ (160,194) $ (562,884) $(13,944,626) $(4,859,968) $(3,077,815)
Adjustments to reconcile deficiency of
hotel operating revenue over expenses
to net cash provided (used) by oper-
ating activities
Depreciation and amortization 640,987 670,518 2,762,562 2,364,905 1,378,968
Impairment loss - building - - 11,400,000 - -
Changes in operating assets and lia-
bilities that provided (used) cash
Receivables - net 188,909 227,806 837,944 15,179 (897,259)
Inventories 6,233 (2,457) 46,385 (25,271) 15,780
Prepaid expenses (79,724) (11,214) (85,741) 151,029 208,488
Other assets - - 1,102 (12,310) (10,404)
Accounts payable 50,346 (405,963) (382,558) 1,069,558 4,988
Advance deposits 34,843 46,717 (61,381) (116,240) 201,355
Accrued expenses (205,183) 10,886 223,498 (211,723) 125,857
----------- ----------- ------------ ----------- -----------
Net cash provided (used) by
operating activities 476,217 (26,591) 797,185 (1,624,841) (2,050,042)
----------- ----------- ------------ ----------- -----------
Investing activities
Purchase of property and equipment (639,940) (10,529) (539,271) (2,084,977) (1,041,003)
Costs related to the conversion of the
management company - - - (450,000) -
----------- ----------- ------------ ----------- -----------
Net cash (used) by investing
activities (639,940) (10,529) (539,271) (2,534,977) (1,041,003)
----------- ----------- ------------ ----------- -----------
Financing activities
Cash transferred from company 600,000 561,903 561,583 4,419,903 3,009,949
Principal payments on obligations under
capital leases (52,995) (51,021) (284,217) (124,451) (68,450)
Cash acquired at date of transfer - - - - 360,182
----------- ----------- ------------ ----------- -----------
Net cash provided by financing
activities 547,005 510,882 277,366 4,295,452 3,301,681
----------- ----------- ------------ ----------- -----------
Increase in cash 383,282 473,762 535,280 135,634 210,636
Cash at beginning of period 881,550 346,270 346,270 210,636 -
----------- ----------- ------------ ----------- ----------
Cash at end of period $ 1,264,832 $ 820,032 $ 881,550 $ 346,270 $ 210,636
----------- ----------- ------------ ----------- -----------
Supplemental disclosure of cash flow
information
Cash paid during the period for
Interest $ 16,413 $ 15,302 $ 58,818 $ 30,880 $ 18,190
----------- ----------- ------------ ----------- -----------
Supplemental schedule of non-cash investing
and financing activities
Net assets contributed by TIAA on April
1, 1993 (commencement of operations) $ - $ - $ - $ - $38,300,129
----------- ----------- ------------ ----------- -----------
Acquisition of equipment obtained through
capital lease obligations $ - $ - $ 445,800 $ 253,740 $ 506,210
----------- ----------- ------------ ----------- -----------
</TABLE>
See notes to financial statements
F-48
<PAGE> 53
730 CAL HOTEL PROPERTIES II, INC.
D/B/A DOUBLETREE HOTEL LOS ANGELES AIRPORT
Notes to Financial Statements
December 31, 1995
Note 1 - Organization and summary of significant accounting policies
Organization and basis of presentation
Teachers Insurance and Annuity Association of America ("TIAA") was
the holder of a first mortgage on the Stouffer Concourse Hotel, a
721-room airport property located in Los Angeles, California (the
"Property"). The borrower defaulted on the loan and TIAA commenced
foreclosure proceedings. In anticipation of the foreclosure pro-
ceedings, 730 Properties, Inc., a wholly-owned subsidiary of TIAA
(effective July 1, 1993 TIAA sold, transferred and assigned 100%
of its interest in 730 Properties, Inc. to its wholly-owned
subsidiary Macallister Holdings, Inc.), formed 730 Cal Hotel
Properties II, Inc. (the "Company"). TIAA assigned the rights and
interest in the mortgage to the Company which in turn foreclosed
on the property on April 1, 1993 and acquired title. The property
has been operated as a Doubletree hotel since July 1, 1994.
The contributed interest in the property consisted of building and
equipment valued at $38,000,000. The value was determined based on
an appraisal of the property and was allocated to the following
assets:
<TABLE>
<S> <C>
Building $33,600,000
Furniture, fixtures and equipment 4,400,000
-----------
$38,000,000
-----------
</TABLE>
On May 3, 1996, 730 Cal Hotel Properties II, Inc., entered into a
Purchase and Sale Agreement (the "Agreement") with SLT Realty
Limited Partnership and SLC Operating Limited Partnership to sell
substantially all of the operating hotel property assets.
The accompanying financial statements reflect only the operations
of the Doubletree Hotel Los Angeles Airport as if it were a
separate legal entity and includes normal assets and liabilities
related to the hotel operations. Also, the accompanying financial
statements do not include any purchase accounting adjustments
which may be caused by the closing of the Agreement. The Company's
assets and liabilities not involved in the hotel operations have
been excluded.
Summary of significant accounting policies
A. Accounting method
The accrual method of accounting is used in the preparation
of the financial statements and the Corporation Income Tax
Returns.
The preparation of financial statements in conformity with
generally accepted accounting principles requires management
to make estimates and
F-49
<PAGE> 54
730 CAL HOTEL PROPERTIES II, INC.
D/B/A DOUBLETREE HOTEL LOS ANGELES AIRPORT
Notes to Financial Statements (Continued)
December 31, 1995
Note 1 - Organization and summary of significant accounting policies (continued)
Summary of significant accounting policies (continued)
A. Accounting method (continued)
assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those
estimates.
B. Inventories
Inventories are valued at the lower of cost or market on the
first-in, first-out method.
C. Property and equipment
Property and equipment acquired through foreclosure is
recorded at estimated fair value. Subsequent additions are
recorded at cost. Depreciation is computed using the
straight-line method for financial statement purposes.
Effective January 1, 1994, the Company revised its estimate
of the useful lives of property and equipment. These changes
were made to better reflect the estimated periods during
which such assets will remain in service. The effect of this
change was to increase 1994 depreciation and increase the
deficiency of hotel operating revenue over expenses
approximately $148,000. Estimated useful lives are as
follows:
Building 40 years
Furniture, fixtures and equipment 3-7 years
Operating equipment consists of linens which are amortized
over three years to one-half of the initial cost which will
remain as the carrying value. Subsequent purchases will be
expensed.
Amortization expense on assets acquired under capital leases
in the amount of $162,765, $186,122 and $72,708 in years
1995 and 1994 and for the period April 1, 1993 (commencement
of operations) to December 31, 1993, respectively, is
included with depreciation. Depreciation and amortization
expense charged to operations was $2,611,562, $2,289,905 and
$1,378,968 for years 1995 and 1994 and the period April 1,
1993 (commencement of operations) to December 31, 1993,
respectively. (Amortization expense on management company
conversion costs is also included in depreciation and
amortization expense charged to operations.
See note 1E.)
F-50
<PAGE> 55
730 CAL HOTEL PROPERTIES II, INC.
D/B/A DOUBLETREE HOTEL LOS ANGELES AIRPORT
Notes to Financial Statements (Continued)
December 31, 1995
Note 1 - Organization and summary of significant accounting policies (continued)
Summary of significant accounting policies (continued)
C. Property and equipment (continued)
Expenditures for repairs and maintenance are charged to
expense as incurred. For assets sold or otherwise disposed,
the cost and related accumulated depreciation are removed
from the accounts, and any resulting gain or loss is
reflected in operations for the year.
D. Long-lived assets
The Company has adopted Statement of Financial Accounting
Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of" (SFAS 121), effective December 31, 1995. The statement
requires that an entity evaluate long-lived assets and
certain other identifiable intangible assets for impairment
whenever events or changes in circumstances indicate that
the carrying amount of the asset may not be recoverable.
Impairment loss meeting the recognition criteria is to be
measured as an amount by which the carrying amount for
financial reporting purposes exceeds the fair value of the
assets.
E. Management company conversion costs
The costs associated with the 1994 conversion of hotel
management companies (see note 5) are being amortized on a
straight-line basis over three years. Conversion costs of
$450,000 net of accumulated amortization of $226,000 and
$75,000 at December 31, 1995 and 1994, respectively, are
included in other assets. Amortization expense for 1995 and
1994 was $151,000 and $75,000, respectively, and is included
in depreciation and amortization expense.
F. Cash and statement of cash flows
For purposes of the statement of hotel cash flows, the
Company includes all cash on hand and in banks. The Company
has no items considered to be cash equivalents. The Company
monitors its credit risk on a regular basis and has not
experienced any losses on its bank balances.
G. Fair value of financial instruments
The carrying amounts reported in the net assets of hotel
operations for cash, accounts receivable and accounts
payable approximate fair value because of the immediate or
short-term maturity of these financial instruments.
F-51
<PAGE> 56
730 CAL HOTEL PROPERTIES II, INC.
D/B/A DOUBLETREE HOTEL LOS ANGELES AIRPORT
Notes to Financial Statements (Continued)
December 31, 1995
Note 1 - Organization and summary of significant accounting policies (continued)
Summary of significant accounting policies (continued)
H. Income taxes
No provision has been made for Federal or State income taxes
in the accompanying financial statements since any taxable
income or loss from the hotel operations is included in the
income tax returns of the Company's parent.
I. Unaudited interim financial information
The unaudited interim financial information as of March 31,
1996 and 1995, and for the three months ended March 31, 1996
and 1995, include all normal, recurring adjustments which
are, in the opinion of management, necessary to a fair
presentation of the hotel's financial position and results
of operations for the interim periods presented.
Note 2 - Property and equipment
Property and equipment consists of the following at December 31:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Building - net of impairment
(note 4) $22,404,479 $33,804,479 $33,749,479
Furniture, fixtures and equipment 8,674,765 8,034,770 5,410,536
----------- ----------- -----------
31,079,244 41,839,249 39,160,015
Accumulated depreciation and
amortization 6,267,599 3,664,205 1,378,968
----------- ----------- -----------
24,811,645 38,175,044 37,781,047
Construction in progress 345,076 - 387,197
Operating equipment - net 33,843 42,012 -
----------- ----------- -----------
Property and equipment - net $25,190,564 $38,217,056 $38,168,244
----------- ----------- -----------
</TABLE>
Note 3 - Leases
Capital leases
Equipment, consisting of vans and computer equipment, with an
original cost of $986,777 and a net book value of $686,794 at
December 31, 1995 are being leased under capital leases.
F-52
<PAGE> 57
730 CAL HOTEL PROPERTIES II, INC.
D/B/A DOUBLETREE HOTEL LOS ANGELES AIRPORT
Notes to Financial Statements (Continued)
December 31, 1995
Note 3 - Leases (continued)
Capital leases (continued)
The following is a schedule by years of future minimum lease
payments under capital leases and the present value of the net
minimum lease payments at December 31, 1995:
<TABLE>
<S> <C>
Year ending December 31
1996 $268,295
1997 279,283
1998 222,955
1999 (final year) 54,195
--------
Total minimum lease payments 824,728
Less amount representing interest 96,096
--------
Present value of net minimum lease payments 728,632
Less current maturities 218,383
--------
$510,249
--------
</TABLE>
In connection with certain capital leases the Company has letters
of credit in the amount of $584,790 at December 31, 1995.
Ground lease
The Company assumed a ground lease in connection with the
foreclosure. The lease covers the land on which the hotel and
garage are located. The lease, which initially began in August
1986 (rent commencement date), is for a term of 70 years. Base
rent is adjusted every five years by 50% of the percentage that
the Consumer Price Index ("CPI"), at the end of each fifth year,
has increased over the CPI at the rent commencement date. Base
rent is presently $861,315 per annum. The Company is also required
to pay real estate taxes and additional rent which is the
difference between the base rent and 3% of gross revenues during
the first 10 years of the lease.
Additional rent increases to 3.5% of gross revenues during the
second 10 year period and to 4% for the remainder of the lease
term.
Base rent expense was $861,315 for both 1995 and 1994, and
$645,986 for the period April 1, 1993 (commencement of operations)
to December 31, 1993. There was no additional rent due.
Operating leases
The Company has certain operating leases, principally for copiers
and word processors which expire at various times through the year
1999.
F-53
<PAGE> 58
730 CAL HOTEL PROPERTIES II, INC.
D/B/A DOUBLETREE HOTEL LOS ANGELES AIRPORT
Notes to Financial Statements (Continued)
December 31, 1995
Note 3 - Leases (continued)
Operating leases (continued)
The following is a schedule by years of future minimum rental
payments required under operating leases that have remaining
noncancelable lease terms in excess of one year as of December 31,
1995:
<TABLE>
<CAPTION>
Year ending December 31
<S> <C>
1996 $ 65,176
1997 65,176
1998 55,720
1999 (final year) 35,885
--------
Total future minimum lease payments $221,957
--------
</TABLE>
Note 4 - Impairment loss - building
As discussed in note 1, the Company has adopted SFAS 121. During
1995, events and circumstances indicated that property and
equipment might be impaired. Accordingly, the Company evaluated
ongoing value of property and equipment. Based on this evaluation,
the Company determined that the building with a net book value of
$31,322,700 was impaired and wrote it down by $11,400,000 to its
fair value. Fair value was based on an appraisal.
Note 5 - Management agreements
Pursuant to the April 1, 1993 foreclosure and acquisition, the
Company assumed the remainder of the management agreement with the
Westin Hotel Company ("Westin"). In accordance with the management
agreement, the hotel operated as a Westin Hotel. This was a ten
(10) year agreement which began October 15, 1992 and was
terminated on June 30, 1994. The agreement provided for a base
management fee of 1% of gross revenues. The Westin management fee
expense was $102,455 for the period January 1, 1994 to June 30,
1994 (termination of agreement) and $134,444 for the period April
1, 1993 (commencement of operations) to December 31, 1993.
The management agreement also provided for central marketing fees
to be paid by the Company based upon 1.9% of gross revenues.
Westin was also reimbursed for central reservation and marketing
services as defined.
Effective June 30, 1994, the Company entered into a Termination
Agreement with Westin to terminate the management agreement.
Accordingly, the Company paid a termination fee of $1,939,000 and
agreed to a severance obligation not to exceed $300,000. In
addition, there were other termination provisions including the
cost of signage removal and subsequent usage fees for the use of
Westin computer software. Termination expenses were incurred by
the Company in 1994. The net expense to the Company after being
offset by the receipt of a conversion subsidy, as described below,
was $723,980. The Hotel's share of the expense was $257,462.
F-54
<PAGE> 59
730 CAL HOTEL PROPERTIES II, INC.
D/B/A DOUBLETREE HOTEL LOS ANGELES AIRPORT
Notes to Financial Statements (Continued)
December 31, 1995
Note 5 - Management agreements (continued)
Effective July 1, 1994, the Company entered into a management
agreement with Doubletree Hotels Corporation ("Doubletree"). In
accordance with the management agreement, the hotel will operate
as a Doubletree Hotel. Doubletree paid a conversion subsidy of
$1,500,000 to the Company. The term of the agreement is for
twenty-five (25) years, but may be terminated upon the sale of the
hotel and the payment of a cancellation fee, or if the hotel fails
to meet specified performance levels. There is a base management
fee of 2% of gross revenues which increased to 2.5% in accordance
with the agreement. In addition, there is an incentive management
fee ranging from 10% to 30% of net operating income as defined.
The total of the base and incentive management fee are not to
exceed 4.5% of gross revenues for any fiscal year. The Doubletree
management fee expense was $452,672 and $198,144 for 1995 and the
period July 1, 1994 to December 31, 1994, respectively.
The management agreement provided for a central marketing
assessment not to exceed 1.5% of gross revenues. Doubletree also
provides chain services consisting of central reservation,
accounting and other related services not to exceed 1% of gross
revenues. As amended, effective January 1, 1995, the central
marketing assessment and central reservation services were
assessed at a combined rate of 3.5% of room revenue.
Total marketing and related services were $511,253 and $303,835
for 1995 and 1994, respectively. There was no such central
marketing assessment for the period April 1, 1993 (commencement of
operations) to December 31, 1993.
In addition, the Company purchased selected supplies and other
services through an affiliate of Doubletree in the amounts of
$877,168 and $363,280 in 1995 and 1994, respectively.
Note 6 - 401(k) retirement plan
The Company participates in the Doubletree Hotels Corporation
401(k) Retirement Plan which covers all employees who are 21 years
of age with one year or more of service. The Company matches 100%
of an employee's contribution up to 3% of compensation. Employer
contributions to this Plan were $205,330 and $36,513 for 1995 and
1994, respectively. There were no contributions for the period
April 1, 1993 (commencement of operations) to December 31, 1993.
Prior to the commencement of the Doubletree Hotels Corporation
401(k) Retirement Plan the Company participated in the Westin
Hotel Company 401(k) Savings Plan and a Westin Retirement Account
Plan.
F-55
<PAGE> 60
Report of Independent Public Accountants
To the Board of Directors
730 Georgia Hotel Properties I, Inc. d/b/a Doubletree Concourse, Atlanta
We have audited the accompanying statement of net assets of hotel operations of
730 Georgia Hotel Properties I, Inc. d/b/a Doubletree Concourse, Atlanta as of
December 31, 1995 and 1994, and the related statements of hotel operating
revenue and expenses and hotel cash flows for the year ended December 31, 1995
and the period from April 5, 1994 (commencement of operations) to 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 audits 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 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.
The accompanying statements have been prepared for inclusion in Form 8-K of SLT
Realty Limited Partnership (SLT) and SLC Operating Limited Partnership (SLC)
pursuant to the Purchase and Sale Agreement as described in Note 1 between 730
Georgia Hotel Properties I, Inc. d/b/a Doubletree Concourse, Atlanta, SLT and
SLC dated May 3, 1996, and are not intended to be a complete presentation of 730
Georgia Hotel Properties I, Inc.'s assets and liabilities or results of its
operations or its cash flows.
In our opinion, the statements referred to above present fairly, in all material
respects, the net assets of hotel operations of 730 Georgia Hotel Properties I,
Inc. d/b/a Doubletree Concourse, Atlanta as of December 31, 1995 and 1994, and
the results of the hotel operations and the hotel cash flows for the year ended
December 31, 1995 and the period from April 5, 1994 (commencement of operations)
to December 31, 1994, in conformity with generally accepted accounting
principles.
PANNELL KERR FORSTER, PC
Boston, Massachusetts
February 13, 1996
F-56
<PAGE> 61
730 GEORGIA HOTEL PROPERTIES I, INC.
D/B/A DOUBLETREE CONCOURSE, ATLANTA
Statement of Net Assets of Hotel Operations
(Note 1)
<TABLE>
<CAPTION>
March 31 December 31 December 31
------------------------ ----------- -----------
1996 1995 1995 1994
---- ---- ---- ----
(unaudited)
<S> <C> <C> <C> <C>
Assets
Current assets
Cash and cash equivalents (notes 1 and 2) $ 1,669,626 $ 757,495 $ 1,003,852 $ 601,518
Receivables - net 1,041,985 389,337 713,785 545,363
Inventories (note 1) 97,480 135,011 102,650 128,592
Prepaid expenses 194,307 136,322 168,750 89,484
----------- ----------- ----------- -----------
Total current assets 3,003,398 1,418,165 1,989,037 1,364,957
Property and equipment - net (notes 1 and 2) 26,376,719 26,791,293 26,546,142 26,654,453
Other assets 14,934 15,634 15,334 15,734
----------- ----------- ----------- -----------
Total assets $29,395,051 $28,225,092 $28,550,513 $28,035,144
----------- ----------- ----------- -----------
Liabilities
Current liabilities
Accounts payable $ 566,990 $ 576,489 $ 533,016 $ 407,715
Advance deposits 1,138,130 122,502 174,297 60,958
Accrued expenses 792,378 707,846 746,775 783,425
Current portion of obligations under capital leases 85,770 - 112,362 -
----------- ----------- ----------- ----------
Total current liabilities 2,583,268 1,406,837 1,566,450 1,252,098
Long-term liabilities
Obligations under capital leases (note 3) 324,592 310,715
----------- ----------- ----------- -----------
Total liabilities 2,907,860 1,406,837 1,877,165 1,252,098
----------- ----------- ----------- -----------
Commitments and contingencies (notes 3, 4 and 5)
Net assets $26,487,191 $26,818,255 $26,673,348 $26,783,046
----------- ----------- ----------- -----------
</TABLE>
See notes to financial statements
F-57
<PAGE> 62
730 GEORGIA HOTEL PROPERTIES I, INC.
D/B/A DOUBLETREE CONCOURSE, ATLANTA
Statement of Hotel Operating Revenue and Expenses
<TABLE>
<CAPTION>
Period from
April 5, 1994
(Commencement
of Opera-
Three Months Ended Year Ended tions) to
March 31 December 31 December 31,
-------------------------------------------------------
1996 1995 1995 1994
---- ---- ---- ----
(unaudited)
<S> <C> <C> <C> <C>
Revenue
Rooms $ 2,690,684 $ 2,369,611 $ 9,312,835 $ 6,447,364
Food and beverage 1,629,762 1,675,480 6,220,093 4,837,338
Telephone 148,561 127,615 509,810 292,917
Other income 118,193 84,454 462,412 197,348
----------- ----------- ----------- -----------
4,587,200 4,257,160 16,505,150 11,774,967
----------- ----------- ----------- -----------
Cost of sales and departmental expenses
Rooms 596,572 566,562 2,124,966 1,665,731
Food and beverage 1,230,675 1,227,430 4,825,772 3,699,723
Telephone 77,389 72,189 266,297 201,712
Other expenses 59,465 40,347 221,651 18,358
----------- ----------- ----------- -----------
1,964,101 1,906,528 7,438,686 5,585,524
----------- ----------- ----------- -----------
Departmental operating income 2,623,099 2,350,632 9,066,464 6,189,443
----------- ----------- ----------- -----------
Undistributed operating expenses
Administrative and general 359,067 319,431 1,264,841 993,070
Advertising and promotion 356,405 373,490 1,336,214 802,579
Energy 145,943 133,302 537,878 427,188
Property operation and maintenance 182,958 205,021 698,057 464,331
----------- ----------- ----------- -----------
1,044,373 1,031,244 3,836,990 2,687,168
----------- ----------- ----------- -----------
Income before management fees and
fixed charges 1,578,726 1,319,388 5,229,474 3,502,275
----------- ----------- ----------- -----------
Management fees and fixed charges
Management fees (note 4) 160,552 149,090 574,323 410,610
Depreciation and amortization 286,895 347,860 1,069,119 633,300
Property taxes, insurance and rent 161,206 168,002 632,514 429,010
Interest 23,501 - 21,286 -
----------- ----------- ----------- ----------
632,154 664,952 2,297,242 1,472,920
----------- ----------- ----------- -----------
Excess of hotel operating revenue
over expenses $ 946,572 $ 654,436 $ 2,932,232 $ 2,029,355
----------- ----------- ----------- -----------
</TABLE>
See notes to financial statements
F-58
<PAGE> 63
730 GEORGIA HOTEL PROPERTIES I, INC.
D/B/A DOUBLETREE CONCOURSE, ATLANTA
Statement of Hotel Cash Flows
<TABLE>
<CAPTION>
Period from
April 5, 1994
(Commencement
of Opera-
Three Months Ended Year Ended tions) to
March 31 December 31 December 31,
-------------------------------------------------------
1996 1995 1995 1994
---- ---- ---- ----
(unaudited)
<S> <C> <C> <C> <C>
Operating activities
Excess of hotel operating revenue over expenses $ 946,572 $ 654,436 $ 2,932,232 $ 2,029,355
Adjustments to reconcile excess of hotel operating
revenue over expenses to net cash provided by
operating activities
Depreciation and amortization 286,895 347,860 1,069,119 633,300
Changes in operating assets and liabilities
that provided (used) cash
Receivables - net (328,200) 156,026 (168,422) 190,778
Inventories 5,170 (6,419) 25,942 (34,464)
Prepaid expenses (25,557) (46,838) (79,266) 22,069
Other assets - - - (6,028)
Accounts payable 33,974 (168,774) 125,301 (80,162)
Advance deposits 963,833 61,544 113,339 60,958
Accrued expenses 45,603 (75,939) (36,650) (264,652)
---------- ----------- ----------- -----------
Net cash provided by operating activities 1,928,290 921,896 3,981,595 2,551,154
---------- ----------- ----------- -----------
Investing activities
Purchase of equipment (117,071) (146,692) (469,320) (237,753)
---------- ----------- ----------- -----------
Net cash (used) by investing activities (117,071) (146,692) (469,320) (237,753)
---------- ----------- ----------- -----------
Financing activities
Cash transferred to company (1,132,730) (619,227) (3,041,929) (2,901,259)
Principal payments on obligations under capital leases (12,715) - (68,012) -
Cash acquired at date of transfer - - - 1,189,376
---------- ----------- ----------- -----------
Net cash (used) by financing activities (1,145,445) (619,227) (3,109,941) (1,711,883)
---------- ----------- ----------- -----------
Net increase in cash and cash equivalents 665,774 155,977 402,334 601,518
Cash and cash equivalents at beginning of period 1,003,852 601,518 601,518 -
---------- ----------- ----------- -----------
Cash and cash equivalents at end of period $1,669,626 $ 757,495 $ 1,003,852 $ 601,518
---------- ----------- ----------- -----------
Supplemental disclosure of cash flow information
Cash paid during the period for
Interest $ 23,501 $ - $ 21,286 $ -
---------- ----------- ----------- ----------
Supplemental schedule of non-cash financing activities
Acquisition of equipment obtained through capital
lease obligations $ - $ - $ 491,089 $ -
---------- ----------- ----------- ----------
Net assets contributed by TIAA on April 5, 1994
(total contribution of $27,604,949 less cash
acquired $1,189,374) (note 1) $ - $ - $ - $26,415,575
---------- ----------- ----------- -----------
</TABLE>
See notes to financial statements
F-59
<PAGE> 64
730 GEORGIA HOTEL PROPERTIES I, INC.
D/B/A DOUBLETREE CONCOURSE, ATLANTA
Notes to Financial Statements
December 31, 1995
Note 1 - Organization and summary of significant accounting policies
Organization and basis of presentation
Teachers Insurance and Annuity Association of America ("TIAA") was
the holder of a first mortgage on the Doubletree Concourse Hotel,
a 370-room property, in Atlanta, Georgia (the "Property"). The
borrower defaulted on the loan and TIAA commenced foreclosure
proceedings. In anticipation of the foreclosure proceedings, 730
Properties, Inc., a wholly-owned subsidiary of Macallister
Holdings, Inc. (Macallister Holdings, Inc. is a wholly-owned
subsidiary of TIAA), formed 730 Georgia Hotel Properties I, Inc.
(the "Company"). TIAA assigned the rights and interest in the
mortgage to the Company which in turn foreclosed on the property
on April 5, 1994 and acquired title.
The contributed interest in the property consisted of land,
building, furniture, fixtures and equipment valued at $27,000,000.
The value was determined based on an appraisal of the property and
was allocated to the following assets.
<TABLE>
<S> <C>
Land $ 3,000,000
Building 22,000,000
Furniture, fixtures and equipment 2,000,000
-----------
$27,000,000
-----------
</TABLE>
On May 3, 1996, 730 Georgia Hotel Properties I, Inc., entered into
a Purchase and Sale Agreement (the "Agreement") with SLT Realty
Limited Partnership and SLC Operating Limited Partnership to sell
substantially all of the operating hotel property assets.
The accompanying financial statements reflect only the operations
of the Doubletree Concourse Hotel, Atlanta as if it were a
separate legal entity and includes normal assets and liabilities
related to the hotel operations. Also, the accompanying financial
statements do not include any purchase accounting adjustments
which may be caused by the closing of the Agreement. The Company's
assets and liabilities not involved in the hotel operations have
been excluded.
Summary of significant accounting policies
A. Accounting method
The accrual method of accounting is used in the preparation
of the financial statements and the consolidated Corporation
Income Tax Return.
The preparation of financial statements in conformity with
generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported
amounts of assets and liabilities
F-60
<PAGE> 65
730 GEORGIA HOTEL PROPERTIES I, INC.
D/B/A DOUBLETREE CONCOURSE, ATLANTA
Notes to Financial Statements (Continued)
December 31, 1995
Note 1 - Organization and summary of significant accounting policies (continued)
Summary of significant accounting policies (continued)
A. Accounting method (continued)
and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual
results could differ from those estimates.
B. Inventories
Inventories are valued at the lower of cost or market on the
first-in, first-out method.
C. Property and equipment
Property and equipment is carried at cost for assets
acquired after commencement of operations and at estimated
fair value for assets acquired through foreclosure.
Depreciation is computed using the straight-line method for
financial statement purposes over estimated lives as
follows:
Building 40 years
Furniture, fixtures and equipment 5-7 years
The initial operating equipment, which consists of china,
glassware, silverware, and linen, is valued at estimated
fair value for assets acquired through foreclosure.
Operating equipment will be amortized over three years to
one-half of the initial estimated fair value which will
remain at carrying value. Subsequent purchases are expensed
to operations as incurred.
Amortization expense on assets acquired under capital leases
in the amount of $34,248 is included in depreciation and
amortization for 1995. Depreciation and amortization expense
charged to operations were $1,069,119 and $633,300 for 1995
and the period April 5, 1994 (commencement of operations) to
December 31, 1994, respectively.
Expenditures for repairs and maintenance are charged to
expense as incurred. For assets sold or otherwise disposed,
the cost and related accumulated depreciation are removed
from the accounts, and any resulting gain or loss is
reflected in operations for the period.
F-61
<PAGE> 66
730 GEORGIA HOTEL PROPERTIES I, INC.
D/B/A DOUBLETREE CONCOURSE, ATLANTA
Notes to Financial Statements (Continued)
December 31, 1995
Note 1 - Organization and summary of significant accounting policies (continued)
Summary of significant accounting policies (continued)
D. Statement of cash flows
For purposes of the statement of hotel cash flows, the
Company includes all cash on hand and in banks. The Company
has no items considered to be cash equivalents. The Company
monitors its credit risk on a regular basis and has not
experienced any losses on its bank balances.
E. Fair value of financial instruments
The carrying amounts reported in the net assets of hotel
operations for cash, accounts receivable and accounts
payable approximate fair value because of the immediate or
short-term maturity of these financial instruments.
F. Income taxes
No provision has been made for Federal or State income taxes
in the accompanying financial statements since any taxable
income or loss from the hotel operations is included in the
income tax returns of the Company's parent.
G. Unaudited interim financial information
The unaudited interim financial information as of March 31,
1996 and 1995, and for the three months ended March 31, 1996
and 1995, include all normal, recurring adjustments which
are, in the opinion of management, necessary to a fair
presentation of the hotel's financial position and results
of operations for the interim periods presented.
Note 2 - Property and equipment
Property and equipment consists of the following at December 31:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Land $ 3,000,000 $ 3,000,000
Building 22,050,000 22,050,000
Furniture, fixtures and equipment 3,022,158 2,061,753
----------- -----------
28,072,158 27,111,753
Accumulated depreciation and
amortization 1,658,015 618,633
----------- -----------
26,414,143 26,493,120
Operating equipment - net 131,999 161,333
----------- -----------
Property and equipment - net $26,546,142 $26,654,453
----------- -----------
</TABLE>
F-62
<PAGE> 67
730 GEORGIA HOTEL PROPERTIES I, INC.
D/B/A DOUBLETREE CONCOURSE, ATLANTA
Notes to Financial Statements (Continued)
December 31, 1995
Note 3 - Leases
Operating leases
The Company assumed leases in connection with the
foreclosure, consisting of vehicles and copiers. The
following is a schedule by years of future minimum lease
payments required under operating leases which expire at
various times through the year 1998 as of December 31, 1995:
<TABLE>
<CAPTION>
Year ending December 31
<S> <C>
1996 $34,866
1997 20,808
1998 (final year) 6,936
-------
Total minimum lease payments $62,610
-------
</TABLE>
Capital leases
Furniture and equipment, with an original cost of $491,089 and a
net book value of $456,841 at December 31, 1995, are being leased
under capital leases.
The following is a schedule of future minimum lease payments under
capital leases and the present value of the net minimum lease
payments at December 31, 1995:
<TABLE>
<CAPTION>
Year ending December 31
<S> <C>
1996 $144,864
1997 144,864
1998 144,864
1999 (final year) 55,549
--------
Total minimum lease payments 490,141
Less amount representing interest 67,064
--------
Present value of net minimum lease payments 423,077
Less current maturities 112,362
--------
$310,715
--------
</TABLE>
In connection with the two capital leases, the Company has letters
of credit in the amount of $491,089.
Note 4 - Management contract
Pursuant to the April 5, 1994 foreclosure and acquisition, the
Company assumed the remainder of a management contract (the
"contract") with the Doubletree Hotel Corporation ("Doubletree").
In accordance with the contract, the hotel will operate as a
Doubletree Hotel. The term of the contract is for the balance of
1994 (retroactive to April 5, 1994), plus an initial term of five
years, with an option for an additional five years, by mutual
consent.
F-63
<PAGE> 68
D/B/A DOUBLETREE CONCOURSE, ATLANTA
Notes to Financial Statements (Continued)
December 31, 1995
Note 4 - Management contract (continued)
The contract may be terminated upon sale of the hotel and payment
of a termination fee. The contract may also be terminated if the
hotel fails to meet specified performance levels. The base
management fee is 2.5% of total revenues. There is also an
incentive management fee ranging from 25% to 30% of an incremental
difference in net operating income performance, in comparison to
an annual net operating income incentive threshold, as defined in
the agreement. The base management fee and incentive management
fee for the year ended December 31, 1995 and for the period April
5, 1994 (commencement of operations) to December 31, 1994 amounted
to $410,231 and $293,293, respectively, and $164,092 and $117,317,
respectively. The total of the base management and incentive fee
is not to exceed 3.5% of total revenues.
The management contract provides for central marketing fees to be
paid by the Company based upon 1.25% of total revenues. Doubletree
also provides chain services consisting of central reservations,
accounting and other related services. As amended, effective
January 1, 1995, the central marketing fee and central reservation
services will be assessed at a combined rate of 3.5% of room
revenue. Total marketing and related services were $440,339 and
$378,425 for 1995 and the period April 5, 1994 (commencement of
operations) to December 31, 1994, respectively.
In addition, the Company purchased selected supplies through an
affiliate of Doubletree in the amount of $132,680 and $87,529
during 1995 and the period April 5, 1994 (commencement of
operations) to December 31, 1994, respectively.
At December 31, 1995 and 1994, amounts of $219,521 and $166,113,
respectively, were due to Doubletree for management and marketing
fees.
Note 5 - 401(k) retirement plan
The Company participates in the Doubletree Hotels Corporation
401(k) Retirement Plan which covers all employees who are 21 years
of age with one year or more of service. The Company matches 100%
of an employee's contribution up to 3% of compensation. Employer
contributions to the Plan were $85,884 and $44,739 during 1995 and
the period April 5, 1994 (commencement of operations) to December
31, 1994, respectively.
F-64
<PAGE> 69
Report of Independent Public Accountants
To the Partners of SLT Realty Limited Partnership
and SLC Operating Limited Partnership
We have audited the accompanying Historical Summary of Gross Revenue and Direct
Operating Expenses (the "Historical Summary") of the hotel property (the
"Doubletree Concourse Hotel, Atlanta") described in Note 1 to the Historical
Summary for the year ended December 31, 1993. The Historical Summary is the
responsibility of the management of the Doubletree Concourse Hotel, Atlanta. Our
responsibility is to express an opinion on this Historical Summary based on our
audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the Historical Summary is free of material misstatement.
An audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the Historical Summary. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall presentation of the Historical Summary. We believe
that our audit provides a reasonable basis for our opinion.
The accompanying Historical Summary was prepared for the purpose of complying
with the rules and regulations of the Securities and Exchange Commission as
described in Note 1 to the Historical Summary, and are not intended to be a
complete presentation of the Doubletree Concourse Hotel, Atlanta expenses.
In our opinion, such Historical Summary presents fairly, in all material
respects, the gross revenue and direct operating expenses described in Note 1 of
the Doubletree Concourse Hotel, Atlanta for the year ended December 31, 1993, in
conformity with generally accepted accounting principles.
PANNELL KERR FORSTER, PC
Boston, Massachusetts
June 26, 1996
F-65
<PAGE> 70
DOUBLETREE CONCOURSE HOTEL, ATLANTA
Historical Summary of Gross Revenue and
Direct Operating Expenses
For the Year Ended December 31, 1993
<TABLE>
<S> <C>
Revenue
Rooms $ 7,425,324
Food and beverage 5,910,496
Telephone 365,682
Other income 366,961
-----------
14,068,463
Cost of sales and departmental expenses
Rooms 2,044,725
Food and beverage 4,738,010
Telephone 256,029
Other expenses 28,070
-----------
7,066,834
Departmental operating income 7,001,629
Undistributed operating expenses
Administrative and general 1,385,507
Advertising and promotion 1,050,141
Energy 546,387
Property operation and maintenance 644,973
Management fees 553,511
Property taxes, insurance and rent 669,046
-----------
4,849,565
Gross revenue in excess of
direct operating expenses $ 2,152,064
-----------
</TABLE>
The accompanying notes are an integral part of this summary.
F-66
<PAGE> 71
DOUBLETREE CONCOURSE HOTEL, ATLANTA
Notes to Historical Summary of Gross Revenue
and Direct Operating Expenses
Note 1 - Basis of presentation
The Historical Summary of Gross Revenue and Direct Operating
Expenses (the "Historical Summary") relates to the operation of a
370-room Doubletree Concourse Hotel (the "Doubletree Concourse
Hotel") located in Atlanta, Georgia.
The hotel is expected to be acquired from an unaffiliated party by
SLT Realty Limited Partnership and SLC Operating Limited
Partnership.
The Historical Summary has been prepared to substantially comply
with the rules and regulations of the Securities and Exchange
Commission for business combinations accounted for as a purchase.
A historical financial statement summary, rather than a full
audited financial statement, is presented for the Doubletree
Concourse Hotel, Atlanta because the Doubletree Concourse Hotel,
Atlanta will be acquired from an unaffiliated third party in a
negotiated transaction and the seller of the Doubletree Concourse
Hotel, Atlanta did not possess adequate records supporting hotel
and certain other costs. Accordingly, it is not practicable to
provide a full audited financial statement. The Historical Summary
of Gross Revenue and Direct Operating Expenses does not include
certain historical expenses of the Doubletree Concourse Hotel,
Atlanta such as interest, depreciation and amortization and
indirect costs. The Historical Summary is not representative of
the actual operations for the period presented.
The preparation of the Historical Summary in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
revenues and expenses during the reporting period. Actual results
could differ from those estimates.
Revenue is recognized as earned. Management has provided for
credit risks; and credit losses have been within management's
expectations.
Maintenance and repairs are charged to operations as incurred;
major renewals and betterments are capitalized.
F-67
<PAGE> 72
Report of Independent Public Accountants
To the Board of Directors
730 Minn. Hotel Properties I, Inc. d/b/a Doubletree Grand Hotel at Mall of
America
We have audited the accompanying statement of net assets of hotel operations of
730 Minn. Hotel Properties I, Inc. d/b/a Doubletree Grand Hotel at Mall of
America as of December 31, 1995, 1994 and 1993 and the related statements of
hotel operating revenue and expenses and hotel cash flows for each of the three
years in the period ended December 31, 1995. 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 audits 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 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.
The accompanying statements have been prepared for inclusion in Form 8-K of SLT
Realty Limited Partnership (SLT) and SLC Operating Limited Partnership (SLC)
pursuant to the Purchase and Sale Agreement as described in Note 1 between 730
Minn. Hotel Properties I, Inc. d/b/a Doubletree Grand Hotel at Mall of America,
SLT and SLC dated May 3, 1996, and are not intended to be a complete
presentation of 730 Minn. Hotel Properties I, Inc.'s assets and liabilities or
results of its operations or its cash flows.
In our opinion, the statements referred to above present fairly, in all material
respects, the net assets of hotel operations of 730 Minn. Hotel Properties I,
Inc. d/b/a Doubletree Grand Hotel at Mall of America as of December 31, 1995,
1994 and 1993, and the results of the hotel operations and the hotel cash flows
for each of the three years in the period ended December 31, 1995, in conformity
with generally accepted accounting principles.
PANNELL KERR FORSTER, PC
Boston, Massachusetts
January 26, 1996
F-68
<PAGE> 73
730 MINN. HOTEL PROPERTIES I, INC.
D/B/A DOUBLETREE GRAND HOTEL AT MALL OF AMERICA
Statement of Net Assets of Hotel Operations
(Note 1)
<TABLE>
<CAPTION>
March 31 December 31
---------------------------- -------------------------------------------
1996 1995 1995 1994 1993
----------- ----------- ----------- ----------- -----------
(unaudited)
<S> <C> <C> <C> <C> <C>
Assets
Current assets
Cash and cash equivalents (notes 1 and 2) $ 699,856 $ 455,262 $ 570,975 $ 456,627 $ 881,673
Cash restricted for property taxes 374,880 253,870 187,657 99,877 557,473
Receivables - net 589,887 505,312 570,083 662,441 596,818
Inventories (note 1) 64,968 77,548 72,918 78,321 85,936
Prepaid expenses 81,460 52,211 57,568 103,259 45,801
----------- ----------- ----------- ----------- -----------
Total current assets 1,811,051 1,344,203 1,459,201 1,400,525 2,167,701
Property and equipment - net (notes 1 and 3) 12,008,358 12,082,096 12,026,029 12,300,719 10,714,647
Other assets 110,251 251,194 145,486 286,429 4,894
----------- ----------- ----------- ----------- -----------
Total assets $13,929,660 $13,677,493 $13,630,716 $13,987,673 $12,887,242
----------- ----------- ----------- ----------- -----------
Liabilities
Current liabilities
Accounts payable $ 362,709 $ 378,388 $ 506,934 $ 487,274 $ 165,166
Advance deposits 49,984 51,656 28,822 40,839 42,514
Accrued expenses 663,796 412,166 526,505 317,931 453,537
Current portion of obligations under capital
leases 34,372 20,520 34,372 35,578 57,501
----------- ----------- ----------- ----------- -----------
Total current liabilities 1,110,861 862,730 1,096,633 881,622 718,718
Long-term liabilities
Obligations under capital leases (note 4) 77,471 -- 85,780 -- 35,578
----------- ----------- ----------- ----------- -----------
Total liabilities 1,188,332 862,730 1,182,413 881,622 754,296
----------- ----------- ----------- ----------- -----------
Commitments and contingencies (notes 4, 5 and 6)
Net assets $12,741,328 $12,814,763 $12,448,303 $13,106,051 $12,132,946
----------- ----------- ----------- ----------- -----------
</TABLE>
See notes to financial statements
F-69
<PAGE> 74
730 MINN. HOTEL PROPERTIES I, INC.
D/B/A DOUBLETREE GRAND HOTEL AT MALL OF AMERICA
Statement of Hotel Operating Revenue and Expenses
<TABLE>
<CAPTION>
Three Months Ended Year Ended
March 31 December 31
---------------------------- -------------------------------------------
1996 1995 1995 1994 1993
----------- ----------- ----------- ----------- -----------
(unaudited)
<S> <C> <C> <C> <C> <C>
Revenue
Rooms $ 1,708,395 $ 1,557,537 $ 7,986,486 $ 6,936,583 $ 6,517,074
Food and beverage 1,167,502 1,027,958 5,025,275 4,652,107 4,658,670
Telephone 77,916 58,914 349,005 246,293 316,515
Other income 103,513 89,098 441,303 378,809 254,012
----------- ----------- ----------- ----------- -----------
3,057,326 2,733,507 13,802,069 12,213,792 11,746,271
----------- ----------- ----------- ----------- -----------
Cost of sales and departmental expenses
Rooms 421,297 417,305 1,961,938 1,877,297 1,883,554
Food and beverage 642,898 602,558 2,850,584 2,846,476 3,268,960
Telephone 37,942 33,718 158,149 172,310 236,051
Other expenses 42,612 55,451 249,853 238,521 124,033
----------- ----------- ----------- ----------- -----------
1,144,749 1,109,032 5,220,524 5,134,604 5,512,598
----------- ----------- ----------- ----------- -----------
Departmental operating income 1,912,577 1,624,475 8,581,545 7,079,188 6,233,673
----------- ----------- ----------- ----------- -----------
Undistributed operating expenses
Administrative and general 236,418 235,055 1,110,304 1,020,756 1,159,986
Advertising and promotion 313,066 283,583 1,090,417 1,248,178 1,096,291
Energy 158,189 143,847 506,953 525,160 484,649
Property operation and maintenance 130,501 123,231 628,021 577,404 737,515
----------- ----------- ----------- ----------- -----------
838,174 785,716 3,335,695 3,371,498 3,478,441
----------- ----------- ----------- ----------- -----------
Income before management fees
and fixed charges 1,074,403 838,759 5,245,850 3,707,690 2,755,232
----------- ----------- ----------- ----------- -----------
Management fees and fixed charges
Management fees (note 5) 93,971 47,836 489,026 213,741 361,187
Depreciation and amortization 326,537 311,942 1,259,159 1,019,411 612,720
Property taxes and insurance 208,072 210,602 722,158 628,751 737,151
Interest 2,609 572 9,795 5,022 3,331
----------- ----------- ----------- ----------- -----------
631,189 570,952 2,480,138 1,866,925 1,714,389
----------- ----------- ----------- ----------- -----------
Excess of hotel operating revenue
over expenses $ 443,214 $ 267,807 $ 2,765,712 $ 1,840,765 $ 1,040,843
----------- ----------- ----------- ----------- -----------
</TABLE>
See notes to financial statements
F-70
<PAGE> 75
730 MINN. HOTEL PROPERTIES I, INC.
D/B/A DOUBLETREE GRAND HOTEL AT MALL OF AMERICA
Statement of Hotel Cash Flows
<TABLE>
<CAPTION>
Three Months Ended Year Ended
March 31 December 31
---------------------------- -------------------------------------------
1996 1995 1995 1994 1993
----------- ----------- ----------- ----------- -----------
(unaudited)
<S> <C> <C> <C> <C> <C>
Operating activities
Excess of hotel operating revenue over expenses $ 443,214 $ 267,807 $ 2,765,712 $ 1,840,765 $ 1,040,843
Adjustments to reconcile excess of hotel operat-
ing revenue over expenses to net cash provided
by operating activities
Depreciation and amortization 326,537 311,942 1,259,159 1,019,411 612,720
Loss on disposal of assets -- -- 22,972 -- --
Changes in operating assets and
liabilities that provided (used) cash
Receivables - net (19,804) 157,129 92,358 (65,623) (92,836)
Inventories 7,950 773 5,403 7,615 7,004
Prepaid expenses (23,892) 51,048 45,691 (57,458) 739,708
Other assets -- -- -- 394 (4,894)
Accounts payable (144,225) (108,886) 19,660 322,108 165,412
Advance deposits 21,162 10,817 (12,017) (1,675) 42,514
Accrued expenses 137,291 94,235 208,574 (135,606) (219,891)
----------- ----------- ----------- ----------- -----------
Net cash provided by operating
activities 748,233 784,865 4,407,512 2,929,931 2,290,580
----------- ----------- ----------- ----------- -----------
Investing activities
Purchase of equipment (273,630) (58,083) (668,690) (2,464,542) (693,134)
Purchase of operating stock -- -- (58,727) -- --
Proceeds from disposal of assets -- -- 8,564 -- --
Cost related to conversion of management company -- -- -- (422,872) --
(Increase) decrease in restricted cash (187,223) (153,995) (87,780) 457,596 (230,496)
----------- ----------- ----------- ----------- -----------
Net cash (used) by investing activities (460,853) (212,078) (806,633) (2,429,818) (923,630)
----------- ----------- ----------- ----------- -----------
Financing activities
Cash transferred to company (150,190) (559,094) (3,423,460) (867,658) (320,000)
Principal payments on obligations under capital
leases (8,309) (15,058) (63,071) (57,501) (22,721)
----------- ----------- ----------- ----------- -----------
Net cash (used) by financing activities (158,499) (574,152) (3,486,531) (925,159) (342,721)
----------- ----------- ----------- ----------- -----------
Net increase (decrease) in cash and cash equivalents 128,881 (1,365) 114,348 (425,046) 1,024,229
Cash and cash equivalents at beginning of year 570,975 456,627 456,627 881,673 (142,556)
----------- ----------- ----------- ----------- -----------
Cash and cash equivalents at end of
year $ 699,856 $ 455,262 $ 570,975 $ 456,627 $ 881,673
----------- ----------- ----------- ----------- -----------
Supplemental disclosures of cash flow information
Cash paid during the year for
Interest $ 2,609 $ 572 $ 9,795 $ 5,022 $ 3,331
----------- ----------- ----------- ----------- -----------
Supplemental schedule of non-cash investing and
financing activities
Acquisition of equipment obtained through
capital lease obligations $ -- $ -- $ 147,645 $ -- $ 115,800
----------- ----------- ----------- ----------- -----------
</TABLE>
See notes to financial statements
F-71
<PAGE> 76
730 MINN. HOTEL PROPERTIES I, INC.
D/B/A DOUBLETREE GRAND HOTEL AT MALL OF AMERICA
Notes to Financial Statements
December 31, 1995
Note 1 - Organization and summary of significant accounting policies
Organization and basis of presentation
Teachers Insurance and Annuity Association of America ("TIAA") was
the holder of a first mortgage on The Registry Hotel, a 321-room
property, in Bloomington, Minnesota (the "Property"). The borrower
was unable to pay the debt service on the loan which was due on
January 1, 1992. The borrower was willing to convey title to the
Property in lieu of foreclosure.
On September 23, 1991, 730 Properties, Inc., a wholly-owned
subsidiary of Macallister Holdings, Inc. (a wholly-owned subsidiary
of TIAA), formed 730 Minn. Hotel Properties I, Inc. (the "Company")
and on November 26, 1991, 730 Minn. Holding I, Inc. was formed. On
February 6, 1992, the borrower delivered a deed in lieu of
foreclosure to The Registry Hotel. TIAA contributed its mortgage to
the 730 Properties, Inc., which in turn contributed the mortgage to
730 Minn. Holding I, Inc. and the right to acquire the property
securing the mortgage to 730 Minn. Hotel Properties I, Inc. (the
"Subsidiary"). From February 1, 1994 to December 1, 1995, the
Property operated as The Mall at America Grand Hotel; as of December
1, 1995, the Property is operating as Doubletree Grand Hotel at Mall
of America. The Property has been managed by Doubletree Partners from
February 1, 1994, pursuant to a management agreement which expires in
1998 or may be terminated upon the sale of the hotel and the payment
of a cancellation fee.
The contributed interest in the property consisted of land, building
and equipment valued at $10,300,000. The value was determined based
on an appraisal of the property and was allocated to the following
assets:
<TABLE>
<S> <C>
Land and improvements $ 1,450,000
Buildings 7,430,047
Furniture, fixtures and equipment 1,419,953
-----------
$10,300,000
===========
</TABLE>
On May 3, 1996, 730 Minn. Hotel Properties I, Inc., entered into a
Purchase and Sale Agreement (the "Agreement") with SLT Realty Limited
Partnership and SLC Operating Limited Partnership to sell
substantially all of the operating hotel property assets.
The accompanying financial statements reflect only the operations of
the Doubletree Grand Hotel at Mall of America as if it were a
separate legal entity and includes normal assets and liabilities
related to the hotel operations. Also, the accompanying financial
statements do not include any purchase accounting adjustments which
may be caused by the closing of the Agreement. The Company's assets
and liabilities not involved in the hotel operations have been
excluded.
F-72
<PAGE> 77
730 MINN. HOTEL PROPERTIES I, INC.
D/B/A DOUBLETREE GRAND HOTEL AT MALL OF AMERICA
Notes to Financial Statements (Continued)
December 31, 1995
Note 1 - Organization and summary of significant accounting policies
(continued)
Summary of significant accounting policies
A. Accounting method
The accrual method of accounting is used in the preparation of
the financial statements and the consolidated Corporation Income
Tax Return.
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
B. Inventories
Inventories are valued at the lower of cost or market on the
first-in, first-out method.
C. Property and equipment
Property and equipment are carried at cost for assets acquired
after commencement of operations and at estimated fair value for
assets acquired by deed in lieu of foreclosure. Depreciation is
computed using the straight-line for financial accounting
purposes.
Effective January 1, 1994, the Company revised its estimate of
the useful lives of property and equipment. These changes were
made to better reflect the estimated periods during which such
assets will remain in service. The effect of this change was to
reduce 1994 depreciation and increase excess of hotel operating
revenue over expenses by approximately $14,700. Estimated useful
lives are as follows:
Building and improvements 40 years
Furniture and equipment 3-7 years
The initial operating equipment, china, glassware, silver, and
linen are carried at cost for assets acquired after commencement
of operations and at approximate fair value for assets acquired
when the property was acquired by deed in lieu of foreclosure.
Operating equipment will be amortized over three years to
one-half of the initial cost which will remain at the carrying
value. Subsequent purchases are expensed to operations as
incurred.
Depreciation and amortization charged to operations was
$1,259,159, $1,019,411 and $612,720 in 1995, 1994 and 1993,
respectively.
F-73
<PAGE> 78
730 MINN. HOTEL PROPERTIES I, INC.
D/B/A DOUBLETREE GRAND HOTEL AT MALL OF AMERICA
Notes to Financial Statements (Continued)
December 31, 1995
Note 1 - Organization and summary of significant accounting policies
(continued)
Summary of significant accounting policies (continued)
D. Management company conversion costs
The costs associated with the conversion of the hotel management
company (see note 5) are being amortized on a straight-line basis
over three years. Conversion costs of $422,872 net of accumulated
amortization of $281,886, $140,943 and $-0-, respectively, are
included in other assets at December 31, 1995, 1994 and 1993.
E. Statement of cash flows
For purposes of the statement of hotel cash flows, cash and cash
equivalents include all cash on hand, unrestricted cash in banks
and highly liquid investments with an original maturity of three
months or less.
F. Fair value of financial instruments
The carrying amounts reported in the net assets of hotel
operations for cash, accounts receivable and accounts payable
approximate fair value because of the immediate or short-term
maturity of these financial instruments.
G. Income taxes
No provision has been made for Federal or State income taxes in
the accompanying financial statements since any taxable income or
loss from the hotel operations is included in the income tax
returns of the Company's parent.
H. Unaudited interim financial information
The unaudited interim financial information as of March 31, 1996
and 1995, and for the three months ended March 31, 1996 and 1995,
include all normal, recurring adjustments which are, in the
opinion of management, necessary to a fair presentation of the
hotel's financial position and results of operations for the
interim periods presented.
Note 2 - Cash and cash equivalents
At December 31, 1995, 1994 and 1993, the Company had cash on hand
and in banks in the amount of $234,087, $398,727 and $125,812,
respectively. Cash equivalents at December 31, 1995, 1994 and 1993
consist of overnight deposits and short-term government notes of
$336,888, $57,900 and $755,861, respectively. They are carried at
cost plus accrued interest which approximates market.
F-74
<PAGE> 79
730 MINN. HOTEL PROPERTIES I, INC.
D/B/A DOUBLETREE GRAND HOTEL AT MALL OF AMERICA
Notes to Financial Statements (Continued)
December 31, 1995
Note 2 - Cash and cash equivalents (continued)
The Company monitors its credit risk on a regular basis. The
Company has not experienced any losses in such accounts.
Note 3 - Property and equipment
Property and equipment consists of the following at December 31:
<TABLE>
<CAPTION>
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Land and improvements $ 1,487,129 $ 1,487,129 $ 1,487,129
Building 8,012,561 7,735,932 7,718,507
Furniture and equipment 5,165,174 4,645,841 2,240,543
Construction in progress 20,373 -- --
----------- ----------- -----------
14,685,237 13,868,902 11,446,179
Accumulated depreciation
and amortization 3,007,496 1,960,655 1,117,874
----------- ----------- -----------
11,677,741 11,908,247 10,328,305
Operating equipment - net 348,288 392,472 386,342
----------- ----------- -----------
Property and equipment - net $12,026,029 $12,300,719 $10,714,647
----------- ----------- -----------
</TABLE>
Note 4 - Capital leases
Communication equipment, with an original cost of $147,645 and a
net book value of $141,272 at December 31, 1995 is being leased
under capital leases.
The following is a schedule of future minimum lease payments under
capital leases and the present value of the net minimum lease
payments at December 31, 1995:
<TABLE>
<S> <C>
Year ending December 31
1996 $ 43,673
1997 43,673
1998 43,673
1999 7,275
--------
Total minimum lease payments 138,294
Less amount representing interest 18,142
--------
Present value of net minimum lease payments 120,152
Less current maturities 34,372
--------
$ 85,780
--------
</TABLE>
In connection with one of the capital leases, the Property has a
letter of credit in the amount of $147,645 at December 31, 1995.
F-75
<PAGE> 80
D/B/A DOUBLETREE GRAND HOTEL AT MALL OF AMERICA
Notes to Financial Statements (Continued)
December 31, 1995
Note 5 - Management contract
Effective December 1, 1993, the Company entered into a management
contract with Doubletree Partners (formerly Harbor Hotel
Corporation). The term of the agreement is for five full fiscal
years; the agreement may be terminated upon sale of the hotel and
payment of a cancellation fee. The agreement may also be
terminated if the hotel fails to meet specified performance
levels. The base management fee was 1.75% of gross revenues for
1993 and 1994, and 2% of gross revenues for 1995 and thereafter.
There is also an incentive management fee equal to 20% to 40% of
net operating income in any fiscal year in which net operating
income exceeds $2.8 million, however, the base fee and incentive
fee are limited to a combined 4.5% of gross revenues. The
agreement also provides for a chain services fee which covers
central accounting among other services, and is set not to exceed
$76,200. The amount of the chain services fee will be set forth
thereafter in the annual plan. Management fees for the years 1995,
1994 and for December, 1993 were $489,026, $213,741 and $14,713,
respectively. The management fee paid to the predecessor
management company for the period January 1, 1993 through November
30, 1993 was $346,474.
Note 6 - 401(k) retirement plan
The Company participates in the Doubletree Hotels Corporation
401(k) Retirement Plan which covers all employees who are 21 years
of age with one year or more of service. The Company matches 100%
of an employee's contribution up to 3% of compensation. Employer
contributions to the Plan in 1995 were $21,156. There were no
contributions for 1994 or 1993.
F-76
<PAGE> 81
Report of Independent Public Accountants
To the Board of Directors
730 MO Hotel Properties I, Inc. d/b/a The Ritz-Carlton, Kansas City
We have audited the accompanying statement of net assets of hotel operations of
730 MO Hotel Properties I, Inc. d/b/a The Ritz-Carlton, Kansas City as of
December 31, 1995 and 1994 and the related statements of hotel operating revenue
and expenses and hotel cash flows for the year ended December 31, 1995 and the
period from February 22, 1994 (commencement of operations) to 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 audits 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 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.
The accompanying statements have been prepared for inclusion in Form 8-K of SLT
Realty Limited Partnership (SLT) and SLC Operating Limited Partnership (SLC)
pursuant to the Purchase and Sale Agreement as described in Note 1 between 730
MO Hotel Properties I, Inc. d/b/a The Ritz-Carlton, Kansas City, SLT and SLC
dated May 3, 1996, and are not intended to be a complete presentation of 730 MO
Hotel Properties I, Inc.'s assets and liabilities or results of its operations
or its cash flows.
In our opinion, the statements referred to above present fairly, in all material
respects, the net assets of hotel operations of 730 MO Hotel Properties I, Inc.
d/b/a The Ritz-Carlton, Kansas City as of December 31, 1995 and 1994, and the
results of the hotel operations and the hotel cash flows for the year ended
December 31, 1995 and the period from February 22, 1994 (commencement of
operations) to December 31, 1994, in conformity with generally accepted
accounting principles.
PANNELL KERR FORSTER, PC
Boston, Massachusetts
February 27, 1996
F-77
<PAGE> 82
730 MO HOTEL PROPERTIES I, INC.
D/B/A THE RITZ-CARLTON, KANSAS CITY
Statement of Net Assets of Hotel Operations
(Note 1)
<TABLE>
<CAPTION>
March 31 December 31
----------------------------- -----------------------------
1996 1995 1995 1994
----------- ----------- ----------- -----------
(unaudited)
<S> <C> <C> <C> <C>
Assets
Current assets
Cash and cash equivalents (notes 1 and 2) $ 899,077 $ 481,230 $ 1,753,899 $ 711,456
Receivables - net 1,958,881 1,728,316 1,886,279 1,741,074
Inventories (note 1) 310,715 332,815 310,971 350,483
Prepaid expenses 123,620 124,072 32,893 85,232
----------- ----------- ----------- -----------
Total current assets 3,292,293 2,666,433 3,984,042 2,888,245
Property and equipment - net (notes 1, 3 and 7) 41,296,131 38,878,302 40,170,975 39,011,180
Other assets 39,444 46,320 39,444 46,320
----------- ----------- ----------- -----------
Total assets $44,627,868 $41,591,055 $44,194,461 $41,945,745
----------- ----------- ----------- -----------
Liabilities
Current liabilities
Accounts payable $ 338,500 $ 310,207 $ 468,735 $ 396,329
Advance deposits 44,425 55,625 34,727 49,506
Accrued expenses 1,644,472 1,203,511 1,513,768 1,247,588
----------- ----------- ----------- -----------
Total current liabilities 2,027,397 1,569,343 2,017,230 1,693,423
----------- ----------- ----------- -----------
Commitments and contingencies (notes 4, 5, 6 and 7)
Net assets $42,600,471 $40,021,712 $42,177,231 $40,252,322
----------- ----------- ----------- -----------
</TABLE>
See notes to financial statements
F-78
<PAGE> 83
730 MO HOTEL PROPERTIES I, INC.
D/B/A THE RITZ-CARLTON, KANSAS CITY
Statement of Hotel Operating Revenue and Expenses
<TABLE>
<CAPTION>
Period from
February 22,
1994 (Commen-
Three Months Ended cement of Op-
March 31 Year Ended erations) to
----------------------------- December 31, December 31,
1996 1995 1995 1994
----------- ----------- ----------- -----------
(unaudited)
<S> <C> <C> <C> <C>
Revenue
Rooms $ 2,817,269 $ 2,416,796 $ 12,524,433 $ 10,336,230
Food and beverage 1,923,018 1,980,408 9,040,128 7,436,552
Telephone 82,012 90,392 419,176 349,220
Other income 183,239 180,971 1,237,505 652,319
------------ ------------ ------------ ------------
5,005,538 4,668,567 23,221,242 18,774,321
------------ ------------ ------------ ------------
Cost of sales and departmental expenses
Rooms 874,813 821,553 3,822,496 3,107,075
Food and beverage 1,642,865 1,726,368 7,281,697 6,174,772
Telephone 70,283 63,181 293,893 221,292
Other expenses 206,303 137,106 614,506 449,173
------------ ------------ ------------ ------------
2,794,264 2,748,208 12,012,592 9,952,312
------------ ------------ ------------ ------------
Departmental operating income 2,211,274 1,920,359 11,208,650 8,822,009
------------ ------------ ------------ ------------
Undistributed operating expenses
Administrative and general 389,868 386,802 1,674,895 1,517,846
Advertising and promotion 456,984 430,958 1,872,325 1,566,938
Energy 174,639 170,301 705,310 613,652
Property operation and maintenance 219,433 237,082 937,213 806,575
------------ ------------ ------------ ------------
1,240,924 1,225,143 5,189,743 4,505,011
------------ ------------ ------------ ------------
Income before management fees and
fixed charges 970,350 695,216 6,018,907 4,316,998
------------ ------------ ------------ ------------
Management fees and fixed charges
Management fees (note 5) 122,809 46,605 357,851 749,381
Depreciation and amortization 612,078 539,157 2,217,829 1,268,642
Property taxes, insurance and rent 262,224 340,065 1,177,418 938,157
------------ ------------ ------------ ------------
997,111 925,827 3,753,098 2,956,180
------------ ------------ ------------ ------------
Excess (deficiency) of hotel operating
revenue over expenses $ (26,761) $ (230,611) $ 2,265,809 $ 1,360,818
------------ ------------ ------------ ------------
</TABLE>
See notes to financial statements
F-79
<PAGE> 84
730 MO HOTEL PROPERTIES I, INC.
D/B/A THE RITZ-CARLTON, KANSAS CITY
Statement of Hotel Cash Flows
<TABLE>
<CAPTION>
Period from
February 22,
1994 (Commen-
Three Months Ended cement of Op-
March 31 Year Ended erations) to
----------------------------- December 31, December 31,
1996 1995 1995 1994
----------- ----------- ----------- -----------
(unaudited)
<S> <C> <C> <C> <C>
Operating activities
Excess (deficiency) of hotel operating revenue over
expenses $ (26,761) $ (230,611) $ 2,265,809 $ 1,360,818
Adjustments to reconcile excess (deficiency) of hotel
operating revenue over expenses to net cash provided
by operating activitie
Depreciation and amortization 612,078 539,157 2,217,829 1,268,642
Changes in operating assets and liabilities that
provided (used) cash
Receivable - net (72,602) 12,758 (145,205) (374,244)
Inventories 256 17,668 39,512 (22,009)
Prepaid expenses (90,726) (38,840) 52,339 77,009
Other assets -- -- 6,876 (46,320)
Accounts payable (130,235) (86,122) 72,406 (3,765)
Advance deposits 9,698 6,119 (14,779) 49,506
Accrued expenses 130,704 (44,077) 266,180 458,323
------------ ------------ ------------ ------------
Net cash provided by operating
activities 432,412 176,052 4,760,967 2,767,960
------------ ------------ ------------ ------------
Investing activities
Purchase of equipment (1,737,234) (406,278) (3,377,624) (179,822)
------------ ------------ ------------ ------------
Net cash (used) by investing activities (1,737,234) (406,278) (3,377,624) (179,822)
------------ ------------ ------------ ------------
Financing activities
Cash transferred from company 450,000 -- -- --
Cash transferred to company -- -- (340,900) (3,523,278)
Cash acquired at date of transfer -- -- -- 1,646,596
------------ ------------ ------------ ------------
Net cash provided (used) by financing
activities 450,000 -- (340,900) (1,876,682)
------------ ------------ ------------ ------------
Net increase (decrease) in cash and cash
equivalents (854,822) (230,226) 1,042,443 711,456
Cash and cash equivalents at beginning of period 1,753,899 711,456 711,456 --
------------ ------------ ------------ ------------
Cash and cash equivalents at end of period $ 899,077 $ 481,230 $ 1,753,899 $ 711,456
------------ ------------ ------------ ------------
Supplemental schedule of non-cash investing and
financing activities
Net assets contributed by TIAA on February 22,
1994 (commencement of operations) (note 1) $ -- $ -- $ -- $ 40,768,195
------------ ------------ ------------ ------------
Conversion of related party payables treated
as return of capital $ -- $ -- $ 84,650 $ --
------------ ------------ ------------ ------------
</TABLE>
See notes to financial statements
F-80
<PAGE> 85
730 MO HOTEL PROPERTIES I, INC.
D/B/A THE RITZ-CARLTON, KANSAS CITY
Notes to Financial Statements
December 31, 1995
Note 1 - Organization and summary of significant accounting policies
Organization
Teachers Insurance and Annuity Association of America ("TIAA") was
the holder of a first mortgage on the Ritz-Carlton Hotel, a 373-room
property, in Kansas City, Missouri (the "Property"). The borrower
defaulted on the loan and TIAA commenced foreclosure proceedings. In
anticipation of the foreclosure proceedings, 730 Properties, Inc., a
wholly-owned subsidiary of Macallister Holdings, Inc. (Macallister
Holdings, Inc. is a wholly-owned subsidiary of TIAA), formed 730 MO
Hotel Properties I, Inc. (the "Company"). TIAA assigned the rights
and interest in the mortgage to the Company which in turn foreclosed
on the property on February 22, 1994 and acquired title.
The contributed interest in the property consisted of land, building
and equipment valued at $40,100,000. The value was determined based
on an appraisal of the property and was allocated to the following
assets.
<TABLE>
<S> <C>
Land $ 8,000,000
Building 24,500,000
Furniture, fixtures and equipment 7,600,000
-----------
$40,100,000
-----------
</TABLE>
In conjunction with the foreclosure process the Company took over
operating assets and assumed certain liabilities amounting to net
$2,314,791 excess operating assets.
On May 3, 1996, 730 MO Hotel Properties I, Inc. entered into a
Purchase and Sale Agreement (the "Agreement") with SLT Realty Limited
Partnership and SLC Operating Limited Partnership to sell
substantially all of the operating hotel property assets.
The accompanying financial statements reflect only the operations of
the Ritz-Carlton, Kansas City as if it were a separate legal entity
and includes normal assets and liabilities related to the hotel
operations. Also, the accompanying financial statements do not
include any purchase accounting adjustments which may be caused by
the closing of the Agreement. The Company's assets and liabilities
not involved in the hotel operations have been excluded.
Summary of significant accounting policies
A. Accounting method
The accrual method of accounting is used in the preparation of
the financial statements and the Corporation Income Tax Returns.
F-81
<PAGE> 86
730 MO HOTEL PROPERTIES I, INC.
D/B/A THE RITZ-CARLTON, KANSAS CITY
Notes to Financial Statements (Continued)
December 31, 1995
Note 1 - Organization and summary of significant accounting policies
(continued)
Summary of significant accounting policies (continued)
A. Accounting method (continued)
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
B. Inventories
Inventories are valued at the lower of cost or market on the
first-in, first-out method.
C. Property and equipment
Property and equipment is carried at cost for assets acquired
after commencement of operations and at estimated fair value for
assets acquired through foreclosure. Depreciation is computed
using the straight-line method for financial statement purposes
over estimated lives as follows:
Building and improvements 40 years
Furniture, fixtures and equipment 5-7 years
The initial operating equipment which consists of china,
glassware, silverware and linen, is valued at estimated fair
value for assets acquired through foreclosure. Operating
equipment will be amortized over three years to one-half of the
initial estimated fair value which will remain as the carrying
value. Subsequent purchases are expensed to operations as
incurred.
Depreciation and amortization expense charged to operations was
$2,217,829 in 1995 and $1,268,642 for the period February 22,
1994 (commencement of operations) to December 31, 1994,
respectively.
Expenditures for repairs and maintenance are charged to expense
as incurred. For assets sold or otherwise disposed, the cost and
related accumulated depreciation are removed from the accounts,
and any resulting gain or loss is reflected in operations for the
period.
D. Statement of cash flows
For purposes of the statement of hotel cash flows, cash and cash
equivalents include all cash on hand, unrestricted cash in banks
and highly liquid investments with an original maturity of three
months or less.
F-82
<PAGE> 87
730 MO HOTEL PROPERTIES I, INC.
D/B/A THE RITZ-CARLTON, KANSAS CITY
Notes to Financial Statements (Continued)
December 31, 1995
Note 1 - Organization and summary of significant accounting policies
(continued)
Summary of significant accounting policies (continued)
E. Fair value of financial instruments
The carrying amounts reported in the net assets of hotel
operations for cash, accounts receivable and accounts payable
approximate fair value because of the immediate or short-term
maturity of these financial instruments.
F. Income taxes
No provision has been made for Federal or State income taxes in
the accompanying financial statements since any taxable income or
loss from the hotel operations is included in the income tax
returns of the Company's parent.
G. Unaudited interim financial information
The unaudited interim financial information as of March 31, 1996
and 1995, and for the three months ended March 31, 1996 and 1995,
include all normal, recurring adjustments which are, in the
opinion of management, necessary to a fair presentation of the
Hotel's financial position and results of operations for the
interim periods presented.
Note 2 - Cash and cash equivalents
At December 31, 1995 and 1994, the Company had cash on hand and in
banks in the amount of $148,094 and $238,634, respectively. Cash
equivalents consist of overnight deposits of $1,605,805 and $472,822,
respectively, that are carried at cost which approximates market and
have maturities of less than three months.
The Company monitors its credit risk on a regular basis. The Company
has not experienced any losses in such accounts.
Note 3 - Property and equipment
Property and equipment consists of the following at December 31:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Land $ 8,000,000 $ 8,000,000
Building 26,764,980 24,585,440
Furniture, fixtures and equipment 7,790,950 7,247,382
----------- -----------
42,555,930 39,832,822
Accumulated depreciation and amortization 3,374,721 1,231,392
----------- -----------
39,181,209 38,601,430
Construction in progress 654,516 -
Operating equipment - net 335,250 409,750
----------- -----------
Property and equipment - net $40,170,975 $39,011,180
----------- -----------
</TABLE>
F-83
<PAGE> 88
730 MO HOTEL PROPERTIES I, INC.
D/B/A THE RITZ-CARLTON, KANSAS CITY
Notes to Financial Statements (Continued)
December 31, 1995
Note 4 - Operating leases
The following is a schedule by years of future minimum rental
payments required under the telephone, copier, and automobile leases
for each of the four years succeeding 1995 at December 31, 1995:
<TABLE>
<S> <C>
Year ending December 31
1996 $140,477
1997 43,410
1998 28,156
1999 (final year) 9,752
--------
Aggregate future minimum rental payments $221,795
--------
</TABLE>
Note 5 - Management agreement
Pursuant to the February 22, 1994 foreclosure and acquisition, the
Company assumed the remainder of a management agreement with the
Ritz-Carlton Hotel Company ("Ritz-Carlton"). Effective October 1,
1994, a new management agreement was entered, whereby the hotel will
continue to operate as a Ritz-Carlton Hotel through April 30, 2015.
The agreement may be terminated upon sale of the hotel and payment of
a termination fee. The agreement may also be terminated if the hotel
fails to meet specified performance levels. The base management fee
is 2.0% of gross revenues. In each month during 1995, one-twelfth of
1.5% of total revenues from February 22, 1994 through September 30,
1994 was deducted from the base management fee. The base management
fee expense for 1995 and the period February 22, 1994 (commencement
of operations) to December 31, 1994 was $269,579 and $749,381,
respectively. There is also an incentive management fee equal to 20%
to 40% of net operating income in any fiscal year in which net
operating income exceeds $2.6 million. The incentive management fee
for the years 1995 and the period February 22, 1994 (commencement of
operations) to December 31, 1994 were $88,272 and $-0-, respectively.
The base fee and incentive fee are limited to a combined 4.5% of
gross revenues.
The management agreement provides for central marketing fees to be
paid by the Company based upon 1% of gross revenues. Ritz-Carlton is
also reimbursed for central reservation and marketing services as
defined. Total marketing and related services were $487,202 and
$326,950 for 1995 and the period February 22, 1994 (commencement of
operations) to December 31, 1994, respectively.
At December 31, 1995 and 1994, an amount of $247,718 and $114,647,
respectively, was due to Ritz-Carlton Hotel Company for insurance,
marketing and management fees, which are included in accrued
expenses.
F-84
<PAGE> 89
730 MO HOTEL PROPERTIES I, INC.
D/B/A THE RITZ-CARLTON, KANSAS CITY
Notes to Financial Statements (Continued)
December 31, 1995
Note 6 - Employee benefit plans
The Company reimburses Ritz-Carlton for contributions made on behalf
of hotel employees covered under Ritz-Carlton's Special Reserve Plan.
The Plan covers all salaried and non-union hourly employees who are
21 years old or older and have completed at least 1,000 hours of
service. Employees can contribute up to 15% of their pre-tax pay. The
Company reimburses Ritz-Carlton for its 50% match on the first 2% of
an employee's contribution and 25% match on the second 2% of an
employee's contribution. Total reimbursements related to the Plan
were approximately $38,200 and $46,500, for 1995 and the period
February 22, 1994 (commencement of operations) to December 31, 1994,
respectively.
Note 7 - Commitments and contingencies
Legal proceedings with a former owner
There was ongoing litigation with the J.C. Nichols Organization
("Nichols") which was a principal in the original financing. Nichols
appealed the order winding up the receivership that was put in place
in connection with the foreclosure (see note 1). However, on April
11, 1995, Nichols filed a motion to dismiss the appeal.
There continued to be a disagreement involving office space located
in the hotel which is leased to Smith Barney. Nichols ground leased
the hotel property to Kantel, a partnership between Nichols and the
Ritz-Carlton Hotel Company. Kantel leased the office space back to
Nichols, so Nichols, not Kantel was Smith Barney's landlord. Both
Nichols and Kantel signed the TIAA mortgage. Nichols disputed the
Company's right to receive rents derived from the office space and
Smith Barney filed an interpleader action to determine who should
receive the rents. This required Smith Barney's monthly rental
payments to go into an interpleader bank account pending the outcome
of the case.
In January 1996, a Settlement Agreement and Release (the
"Settlement") was reached between all the parties. The Settlement
called for the release of the interpleader funds (representing the
Smith Barney monthly rent payments) net of expenses (approximately
$37,500) amounting to $322,157. Included in other income for 1995 is
the $322,157 plus approximately $138,000 which was collected prior to
establishment of the interpleader fund but was recorded as deferred
revenue pending the outcome of the case.
F-85
<PAGE> 90
Report of Independent Public Accountants
To the Partners of SLT Realty Limited Partnership
and SLC Operating Limited Partnership
We have audited the accompanying Historical Summary of Gross Revenue and Direct
Operating Expenses (the "Historical Summary") of the hotel property (the
"Ritz-Carlton, Kansas City") described in Note 1 to the Historical Summary for
the year ended December 31, 1993. The Historical Summary is the responsibility
of the management of the Ritz-Carlton, Kansas City. Our responsibility is to
express an opinion on this Historical Summary based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the Historical Summary is free of material misstatement.
An audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the Historical Summary. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall presentation of the Historical Summary. We believe
that our audit provides a reasonable basis for our opinion.
The accompanying Historical Summary was prepared for the purpose of complying
with the rules and regulations of the Securities and Exchange Commission as
described in Note 1 to the Historical Summary, and are not intended to be a
complete presentation of the Ritz-Carlton, Kansas City expenses.
In our opinion, such Historical Summary presents fairly, in all material
respects, the gross revenue and direct operating expenses described in Note 1 of
the Ritz-Carlton, Kansas City for the year ended December 31, 1993, in
conformity with generally accepted accounting principles.
PANNELL KERR FORSTER, PC
Boston, Massachusetts
June 20, 1996
F-86
<PAGE> 91
RITZ-CARLTON, KANSAS CITY
Historical Summary of Gross Revenue and
Direct Operating Expenses
For the Year Ended December 31, 1993
<TABLE>
<S> <C>
Revenue
Rooms $11,415,428
Food and beverage 8,821,212
Telephone 439,807
Garage 169,860
Other income 551,596
-----------
21,397,903
-----------
Cost of sales and departmental expenses
Rooms 3,175,343
Food and beverage 7,161,495
Telephone 293,905
Garage 165,185
Other expenses 299,443
-----------
11,095,371
-----------
Departmental operating income 10,302,532
-----------
Undistributed operating expenses
Administrative and general 1,592,286
Advertising and promotion 1,932,475
Energy 719,580
Property operation and maintenance 877,123
Management fees 1,069,895
Property taxes, insurance and rent 1,200,836
-----------
7,392,195
-----------
Gross revenue in excess of
direct operating expenses $ 2,910,337
-----------
</TABLE>
The accompanying notes are an integral part of this summary.
F-87
<PAGE> 92
RITZ-CARLTON, KANSAS CITY
Notes to Historical Summary of Gross Revenue
and Direct Operating Expenses
Note 1 - Basis of presentation
The Historical Summary of Gross Revenue and Direct Operating Expenses
(the "Historical Summary") relates to the operation of a 373-room
Ritz-Carlton Hotel (the "Ritz-Carlton Hotel") located in Kansas City,
Missouri.
The hotel is expected to be acquired from an unaffiliated party by SLT
Realty Limited Partnership and SLC Operating Limited Partnership.
The Historical Summary has been prepared to substantially comply with
the rules and regulations of the Securities and Exchange Commission for
business combinations accounted for as a purchase. A historical
financial statement summary, rather than a full audited financial
statement, is presented for the Ritz-Carlton, Kansas City because the
Ritz-Carlton, Kansas City will be acquired from an unaffiliated third
party in a negotiated transaction and the seller of the Ritz-Carlton,
Kansas City did not possess adequate records supporting hotel and
certain other costs. Accordingly, it is not practicable to provide a
full audited financial statement. The Historical Summary of Gross
Revenue and Direct Operating Expenses does not include certain
historical expenses of the Ritz-Carlton, Kansas City such as interest,
depreciation and amortization and indirect costs. The Historical
Summary is not representative of the actual operations for the period
presented.
The preparation of the Historical Summary in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates.
Revenue is recognized as earned. Management has provided for credit
risks; and credit losses have been within management's expectations.
Maintenance and repairs are charged to operations as incurred; major
renewals and betterments are capitalized.
F-88
<PAGE> 93
Report of Independent Public Accountants
To the Board of Directors
730 Mass. Hotel Properties I, Inc. d/b/a Westin - Waltham Hotel
We have audited the accompanying statement of net assets of hotel operations of
730 Mass. Hotel Properties I, Inc. d/b/a Westin - Waltham Hotel as of December
31, 1995, 1994 and 1993 and the related statements of hotel operating revenue
and expenses and hotel cash flows for the years ended December 31, 1995 and 1994
and the period from April 1, 1993 (commencement of operations) to December 31,
1993. 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 audits 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 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.
The accompanying statements have been prepared for inclusion in Form 8-K of SLT
Realty Limited Partnership (SLT) and SLC Operating Limited Partnership (SLC)
pursuant to the Purchase and Sale Agreement as described in Note 1 between 730
Mass. Hotel Properties I, Inc. d/b/a Westin - Waltham Hotel, SLT and SLC dated
May 3, 1996, and are not intended to be a complete presentation of 730 Mass.
Hotel Properties I, Inc.'s assets and liabilities or results of its operations
or its cash flows.
In our opinion, the statements referred to above present fairly, in all material
respects, the net assets of hotel operations of 730 Mass. Hotel Properties I,
Inc. d/b/a Westin - Waltham Hotel as of December 31, 1995, 1994 and 1993, and
the results of the hotel operations and the hotel cash flows for the years ended
December 31, 1995 and 1994 and the period from April 1, 1993 (commencement of
operations) to December 31, 1993, in conformity with generally accepted
accounting principles.
As discussed in notes 1 and 5 to the financial statements, during 1995 730 Mass.
Hotel Properties I, Inc. d/b/a Westin - Waltham Hotel adopted Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of."
PANNELL KERR FORSTER, PC
Boston, Massachusetts
January 30, 1996
F-89
<PAGE> 94
730 MASS. HOTEL PROPERTIES I, INC.
D/B/A WESTIN - WALTHAM HOTEL
Statement of Net Assets of Hotel Operations
(Note 1)
<TABLE>
<CAPTION>
March 31 December 31
---------------------------- -------------------------------------------
1996 1995 1995 1994 1993
----------- ----------- ----------- ----------- -----------
(unaudited)
<S> <C> <C> <C> <C> <C>
Assets
Current assets
Cash and cash equivalents (note 2) $ 971,587 $ 158,181 $ 763,404 $ 624,749 $ 1,053,614
Receivables - net 903,706 864,607 1,248,229 963,075 819,502
Inventories (note 1) 116,402 127,523 118,666 134,430 156,057
Prepaid expenses 168,231 285,733 132,605 155,993 272,835
----------- ----------- ----------- ----------- -----------
Total current assets 2,159,926 1,436,044 2,262,904 1,878,247 2,302,008
Property and equipment - net (notes 1, 3 and 5) 27,566,538 39,339,464 27,798,357 39,375,332 38,981,703
----------- ----------- ----------- ----------- -----------
Total assets $29,726,464 $40,775,508 $30,061,261 $41,253,579 $41,283,711
----------- ----------- ----------- ----------- -----------
Liabilities
Current liabilities
Accounts payable $ 726,961 $ 579,082 $ 542,076 $ 445,828 $ 539,960
Advance deposits 76,937 79,210 75,845 61,988 64,126
Accrued expenses 641,803 513,154 533,373 795,997 582,587
Current portion of obligations under capital
leases 75,040 70,061 73,759 68,875 --
----------- ----------- ----------- ----------- -----------
Total current liabilities 1,520,741 1,241,507 1,225,053 1,372,688 1,186,673
----------- ----------- ----------- ----------- -----------
Long-term liabilities
Obligations under capital leases (note 4) 91,340 166,987 110,924 185,045 --
----------- ----------- ----------- ----------- -----------
Total liabilities 1,612,081 1,408,494 1,335,977 1,557,733 1,186,673
----------- ----------- ----------- ----------- -----------
Commitments and contingencies (notes 4, 6, 7 and 8)
Net assets $28,114,383 $39,367,014 $28,725,284 $39,695,846 $40,097,038
----------- ----------- ----------- ----------- -----------
</TABLE>
See notes to financial statements
F-90
<PAGE> 95
730 MASS. HOTEL PROPERTIES I, INC.
D/B/A WESTIN - WALTHAM HOTEL
Statement of Hotel Operating Revenue and Expenses
<TABLE>
<CAPTION>
Period from
April 1, 1993
Three Months Ended Year Ended (Commencement
March 31 December 31 of Operations)
---------------------------- --------------------------- to December 31
1996 1995 1995 1994 1993
----------- ----------- ----------- ----------- -----------
(unaudited)
<S> <C> <C> <C> <C> <C>
Revenue
Rooms $ 2,195,831 $ 1,716,600 $ 9,139,581 $ 8,635,842 $ 5,683,158
Food and beverage 1,488,482 1,253,352 6,741,083 6,289,928 4,504,513
Telephone 116,615 86,015 458,470 387,280 278,546
Other income 73,215 54,525 295,220 253,254 116,272
------------ ------------ ------------ ------------ ------------
3,874,143 3,110,492 16,634,354 15,566,304 10,582,489
------------ ------------ ------------ ------------ ------------
Cost of sales and departmental expenses
Rooms 594,339 562,435 2,505,382 2,419,918 1,605,328
Food and beverage 1,126,788 1,024,608 4,682,764 4,565,197 3,422,353
Telephone 55,208 44,204 181,148 203,332 153,750
Other expenses 81,472 86,676 308,592 394,423 284,019
------------ ------------ ------------ ------------ ------------
1,857,807 1,717,923 7,677,886 7,582,870 5,465,450
------------ ------------ ------------ ------------ ------------
Departmental operating income 2,016,336 1,392,569 8,956,468 7,983,434 5,117,039
------------ ------------ ------------ ------------ ------------
Undistributed operating expenses
Administrative and general 367,592 381,047 1,629,015 1,638,551 1,430,953
Advertising and promotion 316,785 353,206 1,409,214 1,473,544 975,583
Energy 275,191 210,196 924,221 923,600 612,079
Property operation and maintenance 177,154 201,643 792,976 769,940 590,875
------------ ------------ ------------ ------------ ------------
1,136,722 1,146,092 4,755,426 4,805,635 3,609,490
------------ ------------ ------------ ------------ ------------
Income before management fees,
fixed charges and other 879,614 246,477 4,201,042 3,177,799 1,507,549
------------ ------------ ------------ ------------ ------------
Management fees, fixed charges and other
Management fees (note 6) 263,113 141,928 650,975 455,604 132,171
Depreciation and amortization 299,798 500,620 1,513,716 1,469,284 1,185,504
Property taxes and insurance 170,171 177,442 687,455 640,542 453,562
Interest 7,432 5,319 19,458 12,560 --
Impairment loss - property and equipment
(note 5) -- -- 10,800,000 -- --
------------ ------------ ------------ ------------ ------------
740,514 825,309 13,671,604 2,577,990 1,771,237
------------ ------------ ------------ ------------ ------------
Excess (deficiency) of hotel
operating revenue over expenses $ 139,100 $ (578,832) $ (9,470,562) $ 599,809 $ (263,688)
------------ ------------ ------------ ------------ ------------
</TABLE>
See notes to financial statements
F-91
<PAGE> 96
730 MASS. HOTEL PROPERTIES I, INC.
D/B/A WESTIN - WALTHAM HOTEL
Statement of Hotel Cash Flows
<TABLE>
<CAPTION>
Period from
April 1, 1993
Three Months Ended Year Ended (Commencement
March 31 December 31 of Operations)
---------------------------- --------------------------- to December 31
1996 1995 1995 1994 1993
----------- ----------- ----------- ----------- -----------
(unaudited)
<S> <C> <C> <C> <C> <C>
Operating activities
Excess (deficiency) of hotel operating
revenue over expenses $ 139,100 $ (578,832) $ (9,470,562) $ 599,809 $ (263,688)
Adjustments to reconcile excess (deficiency)
of hotel operating revenue over expenses
to net cash provided (used) by operating
activities
Depreciation and amortization 299,798 500,620 1,513,716 1,469,284 1,185,504
Impairment loss - property and equipment -- -- 10,800,000 -- --
Changes in operating assets and liabil-
ities that provided (used) cash
Receivables - net 344,523 98,468 (285,154) (138,440) (747,482)
Inventories 2,264 6,907 15,764 21,627 (87,727)
Prepaid expenses (35,626) (129,740) 23,388 111,709 (270,699)
Accounts payable 184,885 133,254 96,248 (94,132) 491,935
Advance deposits 1,092 17,222 13,857 (2,138) 64,126
Accrued expenses 108,430 (281,626) (262,624) 213,410 426,244
------------ ------------ ------------ ------------ ------------
Net cash provided (used) by oper-
ating activities 1,044,466 (233,727) 2,444,633 2,181,129 798,213
------------ ------------ ------------ ------------ ------------
Investing activities
Purchase of equipment (67,978) (464,783) (736,741) (1,563,480) (167,207)
------------ ------------ ------------ ------------ ------------
Net cash (used) by investing
activities (67,978) (464,783) (736,741) (1,563,480) (167,207)
------------ ------------ ------------ ------------ ------------
Financing activities
Cash transferred from company -- 250,000 -- -- --
Cash transferred to company (750,000) -- (1,500,000) -- --
Capital contributions (1,001,001) 395,595
Principal payments on obligations under
capital leases (18,305) (18,058) (69,237) (45,513) --
Cash acquired at date of transfer -- -- -- -- 27,013
------------ ------------ ------------ ------------ ------------
Net cash provided (used) by
financing activities (768,305) 231,942 (1,569,237) (1,046,514) 422,608
------------ ------------ ------------ ------------ ------------
Net increase (decrease) in cash and cash
equivalents 208,183 (466,568) 138,655 (428,865) 1,053,614
Cash and cash equivalents at beginning of period 763,404 624,749 624,749 1,053,614 --
------------ ------------ ------------ ------------ ------------
Cash and cash equivalents at end of period $ 971,587 $ 158,181 $ 763,404 $ 624,749 $ 1,053,614
------------ ------------ ------------ ------------ ------------
Supplemental disclosures of cash flow
information
Cash paid during the year for
Interest $ 7,432 $ 5,319 $ 19,458 $ 12,560 $ --
------------ ------------ ------------ ------------ ------------
Supplemental schedule of non-cash financing
activities
Conversion of related party receivable
treated as a return of capital $ -- $ -- $ 585,611 $ -- $ --
------------ ------------ ------------ ------------ ------------
Acquisition of equipment obtained through
capital lease obligations and accounts
payable $ -- $ -- $ -- $ 299,433 $ --
------------ ------------ ------------ ------------ ------------
Net assets contributed by TIAA on
April 1, 1993 $ -- $ -- $ -- $ -- $ 39,938,119
------------ ------------ ------------ ------------ ------------
</TABLE>
See notes to financial statements
F-92
<PAGE> 97
730 MASS. HOTEL PROPERTIES I, INC.
D/B/A WESTIN - WALTHAM HOTEL
Notes to Financial Statements
December 31, 1995
Note 1 - Organization and summary of significant accounting policies
Organization and basis of presentation
Teachers Insurance and Annuity Association of America ("TIAA") was
the holder of a first mortgage on The Vista International Hotel (the
"Property"), a 346-room property, in Waltham, Massachusetts. The
borrower was unable to pay the debt service on the loan and was
therefore willing to convey title to the Property in lieu of
foreclosure.
On March 23, 1993, 730 Properties, Inc., a wholly-owned subsidiary of
Macallister Holdings, Inc. (a wholly-owned subsidiary of TIAA),
formed 730 Mass. Holding, Inc. and 730 Mass. Hotel Properties I, Inc.
(the "Company") were formed. On April 1, 1993, the borrower delivered
a deed in lieu of foreclosure to The Vista International Hotel. TIAA
contributed its mortgage to 730 Properties, Inc., which in turn
contributed the mortgage to 730 Mass. Holding I, Inc. and the right
to acquire the Property securing the mortgage to 730 Mass. Hotel
Properties I, Inc. From April 1, 1993 the Property has been operated
as a Westin Hotel.
The contributed interest in the property consisted of land, building
and equipment valued at $40,000,000. The value was determined based
on an appraisal of the property and was allocated to the following
assets.
<TABLE>
<S> <C>
Land and improvements $ 4,800,000
Buildings 31,200,000
Furniture and equipment 4,000,000
-----------
$40,000,000
-----------
</TABLE>
On May 3, 1996, 730 Mass. Hotel Properties I, Inc., entered into a
Purchase and Sale Agreement (the "Agreement") with SLT Realty Limited
Partnership and SLC Operating Limited Partnership to sell
substantially all of the operating hotel property assets.
The accompanying financial statements reflect only the operations of
the Westin Waltham Hotel as if it were a separate legal entity and
includes normal assets and liabilities related to the hotel
operations. Also, the accompanying financial statements do not
include any purchase accounting adjustments which may be caused by
the closing of the Agreement. The Company's assets and liabilities
not involved in the hotel operations have been excluded.
Summary of significant accounting policies
A. Accounting method
The accrual method of accounting is used in the preparation of
the financial statements and the consolidated Corporation Income
Tax Return.
F-93
<PAGE> 98
730 MASS. HOTEL PROPERTIES I, INC.
D/B/A WESTIN - WALTHAM HOTEL
Notes to Financial Statements (Continued)
December 31, 1995
Note 1 - Organization and summary of significant accounting policies
(continued)
Summary of significant accounting policies
A. Accounting method (continued)
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
year. Actual results could differ from those estimates.
B. Inventories
Inventories are valued at the lower of cost or market on the
first-in, first-out method.
C. Property and equipment
Property and equipment contributed to the Company at inception
was recorded at agreed-upon value. Subsequent additions are
recorded at cost. Depreciation is computed using the
straight-line method for financial statement purposes.
Effective January 1, 1994, the Company revised its estimate of
the useful lives of property and equipment. These changes were
made to better reflect the estimated periods during which such
assets will remain in service. The effect of this change was to
reduce 1994 depreciation and increase 1994 excess of hotel
operating revenue over expenses by approximately $235,000.
Estimated lives are as follows:
<TABLE>
<S> <C>
Building 40 years
Furniture and equipment 3-7 years
</TABLE>
Amortization expense on assets acquired under capital leases in
the amount of $55,766, $37,910 and $-0- for the years 1995 and
1994 and the period from April 1, 1993 (commencement of
operations) to December 31, 1993, respectively, is included with
depreciation. Depreciation and amortization expense charged to
operations were $1,513,716, $1,469,284 and $1,185,504 for the
years 1995 and 1994 and the period from April 1, 1993
(commencement of operations) to December 31, 1993, respectively.
The initial operating equipment was provided by the management
company in accordance with the management agreement. Subsequent
purchases are expensed to operations as incurred.
F-94
<PAGE> 99
730 MASS. HOTEL PROPERTIES I, INC.
D/B/A WESTIN - WALTHAM HOTEL
Notes to Financial Statements (Continued)
December 31, 1995
Note 1 - Organization and summary of significant accounting policies
(continued)
Summary of significant accounting policies (continued)
C. Property and equipment (continued)
Expenditures for repairs and maintenance are charged to expense
as incurred. For assets sold or otherwise disposed, the cost and
related accumulated depreciation are removed from the accounts,
and any resulting gain or loss is reflected in operations for the
year.
D. Long-lived assets
The Company has adopted Statement of Financial Accounting
Standards No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of" (SFAS 121),
effective December 31, 1995. The statement requires that an
entity evaluate long-lived assets and certain other identifiable
intangible assets for impairment whenever events or changes in
circumstances indicate that the carrying amount of the asset may
not be recoverable. Impairment loss meeting the recognition
criteria is to be measured as an amount by which the carrying
amount for financial reporting purposes exceeds the fair value of
the assets.
E. Statement of cash flows
For purposes of the statement of hotel cash flows, cash and cash
equivalents include all cash on hand, unrestricted cash in banks
and highly liquid investments with an original maturity of three
months or less.
F. Fair value of financial instruments
The carrying amounts reported in the net assets of hotel
operations for cash, accounts receivable and accounts payable
approximate fair value because of the immediate or short-term
maturity of these financial instruments.
G. Income taxes
No provision has been made for Federal or State income taxes in
the accompanying financial statements since any taxable income or
loss from the hotel operations is included in the income tax
returns of the Company's parent.
H. Unaudited interim financial information
The unaudited interim financial information as of March 31, 1996
and 1995, and for the three months ended March 31, 1996 and 1995,
include all normal, recurring adjustments which are, in the
opinion of management,
F-95
<PAGE> 100
730 MASS. HOTEL PROPERTIES I, INC.
D/B/A WESTIN - WALTHAM HOTEL
Notes to Financial Statements (Continued)
December 31, 1995
Note 1 - Organization and summary of significant accounting policies
(continued)
Summary of significant accounting policies (continued)
H. Unaudited interim financial information (continued)
necessary to a fair presentation of the hotel's financial
position and results of operations for the interim periods
presented.
Note 2 - Cash and cash equivalents
At December 31, 1995, 1994 and 1993, the Company had cash on hand and
in banks in the amount of $-0-, $24,749 and $68,614, respectively.
Cash equivalents consist of overnight deposits in the amount of
$763,404, $600,000 and $985,000, respectively, and their carrying
amounts approximate fair value.
The Company monitors its credit risk on a regular basis. The Company
has not experienced any losses in such accounts.
Note 3 - Property and equipment
Property and equipment consists of the following at December 31:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Land and improvements $ 3,830,365 $ 4,800,000 $ 4,800,000
Building and improvements 22,076,291 31,201,106 31,201,106
Furniture and equipment 5,881,097 5,345,315 4,156,851
----------- ----------- -----------
Total - net of impairment
(note 5) 31,787,753 41,346,421 40,157,957
Accumulated depreciation and
amortization 4,013,597 2,654,789 1,185,504
----------- ----------- -----------
27,774,156 38,691,632 38,972,453
Construction in progress 24,201 683,700 9,250
----------- ----------- -----------
Property and equipment - net $27,798,357 $39,375,332 $38,981,703
----------- ----------- -----------
</TABLE>
Note 4 - Leases
Capital leases
Equipment, consisting of computer equipment, a vehicle and linen
handling equipment, with an original cost of $299,433 and a net book
value of $251,496 at December 31, 1995 are being leased under capital
leases. Included in this is $261,318 of equipment sold and leased
back in a sale-leaseback arrangement.
F-96
<PAGE> 101
730 MASS. HOTEL PROPERTIES I, INC.
D/B/A WESTIN - WALTHAM HOTEL
Notes to Financial Statements (Continued)
December 31, 1995
Note 4 - Leases (continued)
Capital leases (continued)
The following is a schedule by years of future minimum lease
payments under capital leases and the present value of the net
minimum lease payments at December 31, 1995:
<TABLE>
<S> <C>
Year ending December 31
1996 $ 87,288
1997 86,516
1998 26,450
1999 (final year) 8,230
--------
Total minimum lease payments 208,484
Less amount representing interest (23,801)
--------
Present value of net minimum lease payments 184,683
Less current maturities (73,759)
--------
$110,924
</TABLE>
In connection with one of the capital leases the Property has a
letter of credit in the amount of $154,827 at December 31, 1995.
Operating leases
The Property has certain operating leases, principally for telephone
and office equipment, which expires at various times through the year
2000.
The following is a schedule by years of future minimum rental
payments required under operating leases that have remaining
noncancelable lease terms in excess of one year as of December 31,
1995:
<TABLE>
Year ending December 31
<S> <C>
1996 $133,924
1997 82,884
1998 75,204
1999 70,884
2000 (final year) 64,977
--------
Aggregate future minimum payments $427,873
--------
</TABLE>
Rent expense on operating leases for the years 1995 and 1994 and the
period April 1, 1993 (commencement of operations) to December 31,
1993 was $151,793, $193,703 and $146,653, respectively.
Note 5 - Impairment loss - property and equipment
As discussed in note 1, the Company has adopted SFAS 121. During
1995, events and circumstances indicated that property and equipment
might be impaired. Accordingly, the Company evaluated the ongoing
value of property and
F-97
<PAGE> 102
730 MASS. HOTEL PROPERTIES I, INC.
D/B/A WESTIN - WALTHAM HOTEL
Notes to Financial Statements (Continued)
December 31, 1995
Note 5 - Impairment loss - property and equipment (continued)
equipment. Based on this evaluation, the Company determined that
property and equipment with a net book value of $38,598,357 were
impaired and wrote them down by $10,800,000 to their fair value. Fair
value was based on an appraisal.
Note 6 - Management agreement
Effective April 1, 1993, 730 Mass. Hotel Properties I, Inc. entered
into a management agreement with Westin Hotel Company. In accordance
with the management agreement the Hotel will operate as a Westin
Hotel. The agreement began April 1, 1993 and ends March 31, 2003.
After five years the agreement may be terminated upon sale of the
hotel and payment of a termination fee. The agreement may also be
terminated if the hotel fails to meet specified performance levels.
The base management fee is: 1.25% of gross revenues for the period
April 1, 1993 (commencement of operations) to December 31, 1993;
1.50% of gross revenues for 1994; and 1.75% of gross revenues for
1995 and thereafter. The base management fee expense for the years
1995 and 1994 and the period from April 1, 1993 (commencement of
operations) to December 31, 1993 was $289,737, $233,118 and $132,171,
respectively. There is also an incentive management fee equal to 7%
to 14% of adjusted gross operating profit in any fiscal year in which
gross operating profit is greater than 20%. The incentive management
fee for the years 1995 and 1994 and the period from April 1, 1993
(commencement of operations) to December 31, 1993 was $361,238,
$222,486 and $-0-, respectively.
The management agreement states that central marketing fees are to be
paid by the Property based upon 1.9% of gross revenues. Westin is
also reimbursed for accounting and central reservations services and
for certain chain services. Total marketing and related services for
1995 and 1994 and the period from April 1, 1993 (commencement of
operations) to December 31, 1993 were $669,697, $644,361 and
$345,286, respectively.
Westin provides computer software to the Property for a usage fee of
$1,040 per month.
Balances due to/from Westin Hotels consisted of the following at
December 31:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Accounts payable and accrued
expenses - Westin Hotels $279,602 $114,054 $56,192
-------- -------- -------
Receivables from Westin Hotels $ 75,522 $ 32,459 $27,418
-------- -------- -------
</TABLE>
Reference is also made to note 7.
F-98
<PAGE> 103
730 MASS. HOTEL PROPERTIES I, INC.
D/B/A WESTIN - WALTHAM HOTEL
Notes to Financial Statements (Continued)
December 31, 1995
Note 7 - Employee benefit plans
The Company reimburses Westin for contributions made on behalf of
certain hotel employees covered under Westin's Salaried Retirement
Account and 401(k) Savings Plans. The Westin Hotel Company 401(k)
Savings Plan covers all salaried employees with at least four
calendar months of service. The Company reimburses Westin for its 50%
match (up to a maximum of 6% of compensation) of an employee's
contribution. In addition, the Westin Salaried Retirement Account
Plan covers all salaried and non-union hourly employees with at least
1,000 hours of service. The Company also reimburses Westin for its
contribution of 3% of an employee's annual salary to the Westin
Salaried Retirement Account Plan. Total reimbursements related to
these plans was approximately $115,557, $123,276 and $19,742 for the
years 1995 and 1994 and the period April 1, 1993 (commencement of
operations) to December 31, 1993, respectively.
Note 8 - Commitments and contingencies
Environmental contingency
An environmental audit has identified potential lingering
contamination located on property adjacent to the Company's property.
Additional monitoring of the site and discussions with the State
Environmental Protection Agency have been ongoing. As yet no decision
has been made about what, if anything, must be done. If remediation
is determined to be necessary, the environmental consultants and TIAA
environmental experts estimate the maximum cost to be approximately
$1,000,000. In the opinion of the Company's management and TIAA legal
counsel there are a number of Potential Responsible Parties ("PRP")
who may be responsible for all or a portion of any potential
remediation. Due to the uncertainty of what must be done to remediate
the site problem and the PRP potential responsibility, no reasonable
estimate of costs the Company may incur, can be made at this time.
F-99
<PAGE> 104
Report of Independent Public Accountants
To the Partners
Cal Hotel Properties I Associates
d/b/a Doubletree Hotel - Horton Plaza, San Diego
We have audited the accompanying balance sheet of Cal Hotel Properties I
Associates d/b/a Doubletree Hotel - Horton Plaza, San Diego as of December 31,
1995, 1994 and 1993, and the related statements of operations and partners'
capital, and cash flows for each of the three years in the period ended December
31, 1995. These financial statements are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits 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 Cal Hotel Properties I
Associates d/b/a Doubletree Hotel - Horton Plaza, San Diego at December 31,
1995, 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, 1995 in conformity with
generally accepted accounting principles.
As discussed in notes 1 and 6 to the financial statements, during 1995 Cal Hotel
Properties I Associates d/b/a Doubletree Hotel - Horton Plaza, San Diego adopted
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long- Lived Assets to be Disposed Of."
PANNELL KERR FORSTER, PC
Boston, Massachusetts
February 17, 1996, except for note 9
as to which the date is April 23, 1996
F-100
<PAGE> 105
CAL HOTEL PROPERTIES I ASSOCIATES
D/B/A DOUBLETREE HOTEL - HORTON PLAZA, SAN DIEGO
Balance Sheet
<TABLE>
<CAPTION>
March 31 December 31
------------------------ --------------------------------------
1996 1995 1995 1994 1993
---- ---- ---- ---- ----
(unaudited)
Assets
<S> <C> <C> <C> <C> <C>
Current assets
Cash and cash equivalents (notes 1 and 2) $ 319,902 $ 73,206 $ 791,169 $ 581,058 $ 532,591
Receivables - net 979,602 1,606,416 384,347 544,459 403,447
Inventories (note 1) 121,420 136,308 104,469 144,065 175,448
Prepaid expenses 307,177 109,546 203,703 141,861 43,500
----------- ----------- ----------- ----------- -----------
Total current assets 1,728,101 1,925,476 1,483,688 1,411,443 1,154,986
Property and equipment - net (notes 1, 3, 5 and 6) 36,417,913 48,341,356 36,682,415 48,513,068 49,780,752
Reserve for replacements (note 4) 332,331 210,872 195,236 63,966 261,341
Other assets 46,378 54,908 46,378 54,368 54,368
----------- ----------- ----------- ----------- -----------
Total assets $38,524,723 $50,532,612 $38,407,717 $50,042,845 $51,251,447
----------- ----------- ----------- ----------- -----------
Liabilities and Partners' Capital
Current liabilities
Accounts payable $ 858,757 $ 903,300 $ 571,415 $ 354,507 $ 389,801
Advance deposits 48,355 91,112 28,177 36,355 34,731
Accrued expenses 348,461 348,796 431,863 516,756 416,212
Current portion of obligations under capital
leases (note 5) 133,296 84,946 138,141 84,946 108,075
----------- ----------- ----------- ----------- -----------
Total current liabilities 1,388,869 1,428,154 1,169,596 992,564 948,819
Obligations under capital leases - net (note 5) 210,399 176,548 241,371 197,213 282,657
----------- ----------- ----------- ----------- -----------
Total liabilities 1,599,268 1,604,702 1,410,967 1,189,777 1,231,476
----------- ----------- ----------- ----------- -----------
Commitments (notes 5, 7 and 8)
Partners' capital 36,925,455 48,927,910 36,996,750 48,853,068 50,019,971
----------- ----------- ----------- ----------- -----------
Total liabilities and partners'
capital $38,524,723 $50,532,612 $38,407,717 $50,042,845 $51,251,447
----------- ----------- ----------- ----------- -----------
</TABLE>
See notes to financial statements
F-101
<PAGE> 106
CAL HOTEL PROPERTIES I ASSOCIATES
D/B/A DOUBLETREE HOTEL - HORTON PLAZA, SAN DIEGO
Statement of Operations and Partners' Capital
<TABLE>
<CAPTION>
Three Months Ended Year Ended
March 31 December 31
------------------------ --------------------------------------
1996 1995 1995 1994 1993
---- ---- ---- ---- ----
(unaudited)
<S> <C> <C> <C> <C> <C>
Revenue
Rooms $ 3,302,208 $ 3,070,797 $11,335,182 $10,305,788 $ 8,989,531
Food and beverage 1,387,744 1,198,089 4,014,654 3,739,365 3,155,955
Telephone 147,325 124,282 470,880 393,690 364,881
Garage 136,740 113,941 478,258 437,667 473,947
Health club 27,300 27,457 97,342 102,554 86,309
Other income 80,353 67,958 235,970 122,077 124,970
----------- ----------- ----------- ----------- -----------
5,081,670 4,602,524 16,632,286 15,101,141 13,195,593
----------- ----------- ----------- ----------- -----------
Cost of sales and departmental expenses
Rooms 730,204 718,777 2,544,033 2,383,377 2,286,551
Food and beverage 1,014,014 917,777 3,302,487 3,163,757 3,154,483
Telephone 66,871 75,202 245,043 247,833 219,019
Garage 91,156 82,811 316,924 312,423 329,955
Health club 24,498 33,700 97,838 105,680 98,328
Other expenses 41,276 30,534 105,626 27,250 19,037
----------- ----------- ----------- ----------- -----------
1,968,019 1,858,801 6,611,951 6,240,320 6,107,373
----------- ----------- ----------- ----------- -----------
Departmental operating income 3,113,651 2,743,723 10,020,335 8,860,821 7,088,220
----------- ----------- ----------- ----------- -----------
Undistributed operating expenses
Administrative and general 450,288 403,916 1,531,969 1,626,105 1,441,519
Advertising and promotion 405,272 361,564 1,352,206 1,312,569 1,239,499
Energy 183,479 203,825 979,661 923,353 906,448
Property operation and maintenance 235,165 344,910 907,950 736,307 785,284
----------- ----------- ----------- ----------- -----------
1,274,204 1,314,215 4,771,786 4,598,334 4,372,750
----------- ----------- ----------- ----------- -----------
Income before management fees, fixed
charges and other 1,839,447 1,429,508 5,248,549 4,262,487 2,715,470
----------- ----------- ----------- ----------- -----------
Management fees, fixed charges and other
Management fees (note 7) 152,261 136,428 498,123 452,435 394,642
Property taxes, insurance and rent 173,614 134,627 637,085 562,210 611,916
Interest 7,939 4,656 18,813 23,293 31,035
Depreciation and amortization (note 1) 546,437 529,169 2,335,077 2,089,265 2,382,563
Impairment loss - land and building (note 6) - 10,500,000 - -
----------- ----------- ----------- ----------- -----------
880,251 804,880 13,989,098 3,127,203 3,420,156
----------- ----------- ----------- ----------- -----------
Net income (loss) 959,196 624,628 (8,740,549) 1,135,284 (704,686)
Partners' capital
Beginning balance 36,996,750 48,853,068 48,853,068 50,019,971 51,577,879
Capital contributions - - - - 250,000
Cash distributions (1,030,491) (549,786) (3,115,769) (2,302,187) (1,103,222)
----------- ----------- ----------- ----------- -----------
End of period $36,925,455 $48,927,910 $36,996,750 $48,853,068 $50,019,971
----------- ----------- ----------- ----------- -----------
</TABLE>
See notes to financial statements
F-102
<PAGE> 107
CAL HOTEL PROPERTIES I ASSOCIATES
D/B/A DOUBLETREE HOTEL - HORTON PLAZA, SAN DIEGO
Statement of Cash Flows
<TABLE>
<CAPTION>
Three Months Ended Year Ended
March 31 December 31
------------------------ ---------------------------------------
1996 1995 1995 1994 1993
-----------------------------------------------------------------
(unaudited) ---- ---- ----
<S> <C> <C> <C> <C> <C>
Operating activities
Net income (loss) $ 959,196 $ 624,628 $(8,740,549) $ 1,135,284 $ (704,686)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities
Depreciation and amortization 546,437 529,169 2,335,077 2,089,265 2,382,563
Impairment loss - land and building (note 6) - - 10,500,000 - -
Changes in operating assets and liabilities
that provided (used) cash
Receivables - net (595,255) (1,061,957) 160,112 (141,012) 152,150
Inventories (16,951) 7,757 39,596 31,383 (31,333)
Prepaid expenses (103,474) 32,315 (61,842) (98,361) 6,687
Other assets - (540) 7,990 - 20,648
Accounts payable 287,342 548,793 216,908 (35,294) (60,179)
Advance deposits 20,178 54,757 (8,178) 1,624 (10,604)
Accrued expenses (83,402) (167,960) (84,893) 100,544 118,020
----------- ----------- ----------- ----------- -----------
Net cash provided by operating
activities 1,014,071 566,962 4,364,221 3,083,433 1,873,266
----------- ----------- ----------- ----------- -----------
Investing activities
Purchase of property and equipment (281,935) (357,457) (815,383) (821,581) (701,077)
(Increase) decrease in reserve for replacements (137,095) (146,906) (131,270) 197,375 42,256
----------- ----------- ----------- ----------- -----------
Net cash (used) by investing activities (419,030) (504,363) (946,653) (624,206) (658,821)
----------- ----------- ----------- ----------- -----------
Financing activities
Principal payments on obligations under capital
leases (35,817) (20,665) (91,688) (108,573) (108,074)
Partners' capital contributions - - 250,000
Distributions to partners (1,030,491) (549,786) (3,115,769) (2,302,187) (1,103,222)
----------- ----------- ----------- ----------- -----------
Net cash (used) by financing activities (1,066,308) (570,451) (3,207,457) (2,410,760) (961,296)
----------- ----------- ----------- ----------- -----------
Net (decrease) increase in cash and cash equivalents (471,267) (507,852) 210,111 48,467 253,149
Cash and cash equivalents at beginning of period 791,169 581,058 581,058 532,591 279,442
----------- ----------- ----------- ----------- -----------
Cash and cash equivalents at end of
period $ 319,902 $ 73,206 $ 791,169 $ 581,058 $ 532,591
----------- ----------- ----------- ----------- -----------
Supplemental disclosure of cash flow information
Cash paid during the period for
Interest $ 7,939 $ 4,656 $ 18,813 $ 23,293 $ 31,035
----------- ----------- ----------- ----------- -----------
Supplemental schedule of non-cash investing and
financing activities
Noncash acquisition of equipment obtained
through capital lease obligations $ - $ - $ 189,041 $ - $ 232,880
----------- ----------- ----------- ----------- -----------
</TABLE>
See notes to financial statements
F-103
<PAGE> 108
CAL HOTEL PROPERTIES I ASSOCIATES
D/B/A DOUBLETREE HOTEL - HORTON PLAZA, SAN DIEGO
Notes to Financial Statements
December 31, 1995
Note 1 - Organization and summary of significant accounting policies
Organization
Cal Hotel Properties I Associates, a California general
partnership, was formed by 730 Cal Hotel Properties I, Inc.
(90.74% interest) and 730 Properties, Inc. (9.26% interest) in
anticipation of 730 Properties, Inc. subsequent sale of its
partnership interest (in accordance with the acquisition agreement
referred to below). The Partnership was formed for the purpose of
owning, developing, managing, mortgaging, selling or otherwise
dealing with all or any portion of a 450-room hotel in San Diego,
California. 730 Cal Hotel Properties I, Inc. contributed property
and equipment, operating assets and liabilities at an agreed-upon
value as defined in the Partnership agreement in the amount of
$49,185,848. Effective January 3, 1992, the Partnership agreement
was amended and restated among 730 Cal Hotel Properties I, Inc.,
730 Proper ties, Inc., DT Real Estate, Inc. and DTR Limited
Partnership. DT Real Estate, Inc. and DTR Limited Partnership are
affiliated with Doubletree Hotels Corporation (see note 7).
The agreement provided for the withdrawal of 730 Properties, Inc.
and the admission of DT Real Estate, Inc. and DTR Limited
Partnership, pursuant to an Acquisition Agreement between these
parties where 730 Properties, Inc. sold its 9.26% interest in the
partnership to DT Real Estate, Inc. (5.56%) and DTR Limited
Partnership (3.70%) for $5,000,000.
In conjunction with the Acquisition Agreement, 730 Cal Hotel
Properties I, Inc. contributed additional capital of $1.5 million
for certain deferred maintenance costs, common area restoration
and marketing.
Partnership agreement
The Partnership agreement is effective until December 31, 2041 and
may be terminated by a written agreement of the partners, the
occurrence of any event which under the laws of the State of
California results in the dissolution of the Partnership or other
events as prescribed in the agreement.
The partners' respective ownership and allocations of losses are
as follows:
<TABLE>
<S> <C>
730 Cal Hotel Properties I, Inc. ("730 Cal") 90.74%
DT Real Estate, Inc. ("DT") 5.56
DTR Limited Partnership ("DTR") 3.70
</TABLE>
The allocation of profits are in accordance with the distribution
of operating cash flows as follows:
During a three year preference period up through January 31, 1995,
DTR was entitled to receive a preferred return equal to 9% of its
original contribution but not to exceed 4.88% of operating cash
flow as defined.
F-104
<PAGE> 109
CAL HOTEL PROPERTIES I ASSOCIATES
D/B/A DOUBLETREE HOTEL - HORTON PLAZA, SAN DIEGO
Notes to Financial Statements (Continued)
December 31, 1995
Note 1 - Organization and summary of significant accounting policies
(continued)
Partnership agreement (continued)
The balance of operating cash flow is distributed to DT and 730
Cal until each has received an amount equal to DTR's preferred
return rate in the ratio of their respective original
contributions. If operating cash flow is not sufficient to achieve
DTR's preferred return rate there is a provision to accrue cash
flow distributions. Accrued cash flow distributions are not
recorded in the financial statements as they represent a future
commitment to distribute cash flow to partners as described below.
Accrued cash flow distributions are as follows at December 31,
1995:
<TABLE>
<S> <C>
DT $ 102,444
730 Cal 1,673,248
</TABLE>
After the preference period, (effective February 1, 1995)
operating cash flow will be distributed to each partner in an
amount equal to 9% of their respective original contributions.
As to any period during or after the preference period 50% of any
remaining operating cash flow will be distributed to DT and 730
Cal to repay cash flow accruals. The balance of the remaining
operating cash flow will then be distributed to each partner in
proportion to their respective original contributions.
Summary of significant accounting policies
A. Accounting method
The accrual method of accounting is used in the preparation
of the financial statements and the Partnership income tax
returns.
The preparation of financial statements in conformity with
generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results
could differ from those estimates.
B. Inventories
Inventories are valued at the lower of cost or market on the
first-in, first-out method.
F-105
<PAGE> 110
CAL HOTEL PROPERTIES I ASSOCIATES
D/B/A DOUBLETREE HOTEL - HORTON PLAZA, SAN DIEGO
Notes to Financial Statements (Continued)
December 31, 1995
Note 1 - Organization and summary of significant accounting policies
(continued)
Summary of significant accounting policies (continued)
C. Property and equipment
Property and equipment contributed to the Partnership at
inception is recorded at an agreed-upon value. Subsequent
additions are recorded at cost. Depreciation is computed
using the straight-line method for financial statement
purposes.
Effective January 1, 1994, the Partnership revised its
estimate of the useful lives of property and equipment.
These changes were made to better reflect the estimated
periods during which such assets will remain in service. The
effect of this change was to reduce 1994 depreciation and
increase net income by approximately $438,000. Estimated
useful lives are as follows:
<TABLE>
<S> <C>
Building 40 years
Furniture and equipment 3-7 years
</TABLE>
Operating equipment consists of china, glassware, silverware
and linen that was acquired upon the formation of the
Partnership. Operating equipment will be amortized over
three years to one-half of the initial cost which will
remain as the carrying value. Subsequent purchases will be
expensed.
Amortization expense on assets acquired under capital leases
in the amount of $61,882, $42,978 and $123,884 in 1995, 1994
and 1993, respectively, is included with depreciation.
Depreciation and amortization expense charged to operations
was $2,335,077, $2,089,265 and $2,382,563 in 1995, 1994 and
1993, respectively.
Expenditures for repairs and maintenance are charged to
expense as incurred. For assets sold or otherwise disposed,
the cost and related accumulated depreciation are removed
from the accounts, and any resulting gain or loss is
reflected in operations for the period.
D. Long-lived assets
The Partnership has adopted Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to Be
Disposed Of" (SFAS 121), effective December 31, 1995. The
statement requires that an entity evaluate long-lived assets
and certain other identifiable intangible assets for
impairment whenever events or changes in circumstances
indicate that the carrying amount of the asset may not be
recoverable. Impairment loss meeting the recognition
criteria is to be measured as an amount by which the
carrying amount for financial reporting purposes exceeds the
fair value of the assets.
F-106
<PAGE> 111
CAL HOTEL PROPERTIES I ASSOCIATES
D/B/A DOUBLETREE HOTEL - HORTON PLAZA, SAN DIEGO
Notes to Financial Statements (Continued)
December 31, 1995
Note 1 - Organization and summary of significant accounting policies
(continued)
Summary of significant accounting policies (continued)
E. Statement of cash flows
For purposes of the statement of cash flows, cash and cash
equivalents include all cash on hand, unrestricted cash in
banks and highly liquid investments recorded at cost which
approximates market and have an original maturity of three
months or less.
F. Fair value of financial instruments
The carrying amounts reported in the balance sheet for cash,
accounts receivable and accounts payable approximate fair
value because of the immediate or short-term maturity of
these financial instruments.
G. Income taxes
No provision for income taxes is included in the financial
statements as income and losses of the Partnership are
taxable to or deductible by the individual partners on their
respective income tax returns.
Differences between the taxable income and the income as
reported on the financial statements arise primarily due to
differences in carrying values of property and equipment and
in methods of depreciation.
H. Concentration of credit risk
The Partnership maintains cash balances at a bank which are
in excess of the insured amount. The Partnership has not
experienced any losses in such accounts and monitors its
credit risk on a regular basis.
I. Unaudited interim financial information
The unaudited interim financial information as of March 31,
1996 and 1995, and for the three months ended March 31, 1996
and 1995, include all normal, recurring adjustments which
are, in the opinion of management, necessary to a fair
presentation of the Hotel's financial position and results
of operations for the interim periods presented.
Note 2 - Cash and cash equivalents
At December 31, 1995, 1994 and 1993, the Company had cash on hand
and in banks in the amount of $-0-, $-0- and $532,591,
respectively. Cash equivalents consist of overnight deposits in
the amount of $791,169, $581,058, and $-0-, respectively, and
their carrying amounts approximate fair value.
F-107
<PAGE> 112
CAL HOTEL PROPERTIES I ASSOCIATES
D/B/A DOUBLETREE HOTEL - HORTON PLAZA, SAN DIEGO
Notes to Financial Statements (Continued)
December 31, 1995
Note 2 - Cash and cash equivalents (continued)
The Company monitors its credit-risk on a regular basis. The Company
has not experienced any losses in such accounts.
Note 3 - Property and equipment
Property and equipment consists of the following at December 31:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Land - net of impairment (note 6) $ 4,361,620 $ 5,186,669 $ 5,186,669
Building - net of impairment
(note 6) 33,827,482 43,502,433 43,436,948
Furniture and equipment 7,390,405 5,623,300 5,582,127
----------- ----------- -----------
45,579,507 54,312,402 54,205,744
Accumulated depreciation and
amortization 9,044,042 6,717,797 4,645,370
----------- ----------- -----------
36,535,465 47,594,605 49,560,374
Construction in progress - 758,699 43,775
Operating equipment - net 146,950 159,764 176,603
----------- ----------- -----------
Property and equipment - net $36,682,415 $48,513,068 $49,780,752
----------- ----------- -----------
</TABLE>
Note 4 - Reserve for replacements
In accordance with the management agreement with DT Management, Inc.
(see note 7) the Partnership is required to make monthly deposits based
on 3% of gross revenues to a reserve account to be used for the
replacement of assets. Accordingly, a bank account was established.
The activity in this account is as follows:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Balance, beginning of year $ 63,966 $ 261,341 $ 303,597
Deposits 787,351 634,103 395,476
Interest earned 3,537 5,566 5,498
Withdrawals (659,618) (837,044) (443,230)
--------- --------- ---------
Balance, end of year $ 195,236 $ 63,966 $ 261,341
--------- --------- ---------
</TABLE>
Note 5 - Capital leases
Furniture and equipment, with an original cost of $479,548 and a net
book value of $334,112 at December 31, 1995 are being leased under
capital leases.
F-108
<PAGE> 113
CAL HOTEL PROPERTIES I ASSOCIATES
D/B/A DOUBLETREE HOTEL - HORTON PLAZA, SAN DIEGO
Notes to Financial Statements (Continued)
December 31, 1995
Note 5 - Capital leases (continued)
The following is a schedule by years of future minimum lease payments
under capital leases and the present value of the net minimum lease
payments as of December 31, 1995:
<TABLE>
<S> <C>
Year ending December 31
1996 $160,427
1997 146,415
1998 69,628
1999 (final year) 46,085
--------
Total minimum lease payments 422,555
Less amount representing interest 43,043
--------
Present value of net minimum lease payments 379,512
Less current maturities 138,141
--------
$241,371
--------
</TABLE>
In connection with one of the capital leases the Partnership has a
letter of credit in the amount of $186,957 at December 31, 1995.
Note 6 - Impairment loss - land and building
As discussed in note 1, the Partnership has adopted SFAS 121. During
1995, events and circumstances indicated that property and equipment
might be impaired. Accordingly, the Partnership evaluated the ongoing
value of property and equipment. Based on this evaluation, the
Partnership determined that the land and building with a net book value
of $43,683,942 was impaired and wrote it down by $10,500,000 to its
fair value.
Fair value was based on an appraisal.
Note 7 - Management agreement
Effective January 3, 1992, 730 Cal Hotel Properties I, Inc. entered
into a management agreement with DT Management, Inc., a wholly-owned
subsidiary of Doubletree Hotels Corporation. In accordance with the
management agreement the hotel will operate as a Doubletree hotel.
The term of the agreement is for fifteen (15) years and bears a base
management fee of 3% of gross revenues, not to exceed $500,000 adjusted
by an index as defined in the agreement. In addition, there is an
incentive management fee equal to 10% of the operating cash flow which
exceeds 9% of the weighted average balances of the aggregate
contributions of the partners in any fiscal year. The contract provides
for cancellation provisions both with and without penalty payments. The
management fee expense was $498,123, $452,435 and $394,642 for 1995,
1994 and 1993, respectively.
The management agreement provided for central marketing fees to be paid
by the Partnership based upon 1.25% of gross revenues. DT Management,
Inc. and
F-109
<PAGE> 114
CAL HOTEL PROPERTIES I ASSOCIATES
D/B/A DOUBLETREE HOTEL - HORTON PLAZA, SAN DIEGO
Notes to Financial Statements (Continued)
December 31, 1995
Note 7 - Management agreement (continued)
its affiliates also provide services for accounting and central
reservations and are reimbursed for certain chain services. As amended,
effective January 1, 1995, the central marketing fees and central
reservation services were assessed at a combined rate of 2.99% of room
revenue. Total marketing and related services were $445,672, $543,441
and $400,768 for 1995, 1994 and 1993, respectively.
In addition, the Partnership purchases selected supplies through an
affiliate of Doubletree Hotels Corporation. Total purchases were
$824,909, $430,508 and $196,272 for 1995, 1994 and 1993, respectively.
Note 8 - 401(k) retirement plan
The Partnership participates in the Doubletree Hotels Corporation
401(k) Retirement Plan which covers all employees who are 21 years of
age with one year or more of service. The Partnership matches 100% of
an employee's contribution up to 3% of compensation. Employer
contributions to the Plan were $91,715, $69,964 and $71,598 for 1995,
1994 and 1993, respectively.
Note 9 - Subsequent event
Subsequent to December 31, 1995, 730 Properties, Inc., on behalf of 730
Cal, a wholly-owned subsidiary, entered into discussions regarding the
sale of the hotel. A Purchase and Sale Agreement is currently being
negotiated. The sale is expected to become effective within 90 days of
the signing of a Purchase and Sale Agreement. A gain from the sale is
anticipated.
The occurrence of the sale will terminate the Partnership agreement in
accordance with the termination provisions as described in note 1.
F-110
<PAGE> 115
Report of Independent Public Accountants
To the Partners of SLT Realty Limited Partnership
and SLC Operating Limited Partnership
We have audited the accompanying Historical Summaries of Gross Revenue and
Direct Operating Expenses (the "Historical Summaries") of the hotel property
(the "Ritz-Carlton, Philadelphia") described in Note 1 to the Historical
Summaries for the years ended December 31, 1995 and 1994. The Historical
Summaries are the responsibility of the management of the Ritz- Carlton,
Philadelphia. Our responsibility is to express an opinion on these Historical
Summaries 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 Historical Summaries are free of material
misstatements. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the Historical Summaries. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the Historical
Summaries. We believe that our audits provide a reasonable basis for our
opinion.
The accompanying Historical Summaries were prepared for the purpose of complying
with the rules and regulations of the Securities and Exchange Commission as
described in Note 1 to the Historical Summaries, and are not intended to be a
complete presentation of the Ritz-Carlton, Philadelphia expenses.
In our opinion, such Historical Summaries present fairly, in all material
respects, the gross revenue and direct operating expenses described in Note 1 of
the Ritz-Carlton, Philadelphia for the years ended December 31, 1995 and 1994,
in conformity with generally accepted accounting principles.
PANNELL KERR FORSTER, PC
Boston, Massachusetts
June 21, 1996
F-111
<PAGE> 116
RITZ-CARLTON, PHILADELPHIA
Historical Summaries of Gross Revenue and
Direct Operating Expenses
<TABLE>
<CAPTION>
Three Months Ended Year Ended
March 31 December 31
----------------------------- -----------------------------
1996 1995 1995 1994
----------- ----------- ----------- -----------
(unaudited)
<S> <C> <C> <C> <C>
Revenue
Rooms $ 2,886,464 $ 2,867,068 $11,626,033 $11,188,236
Food and
beverage 2,219,038 2,093,367 9,051,042 9,625,155
Telephone 163,240 155,868 664,778 639,426
Garage 111,564 118,790 509,075 514,252
Other income 40,776 90,639 380,239 411,625
----------- ----------- ----------- -----------
5,421,082 5,325,732 22,231,167 22,378,694
----------- ----------- ----------- -----------
Cost of sales and
departmental expenses
Rooms 873,056 892,351 3,590,262 3,607,267
Food and
beverage 1,923,807 1,984,327 8,055,738 8,062,235
Telephone 94,458 87,435 392,228 354,022
Garage 163,960 132,855 508,554 507,609
Other expenses 25,426 42,484 224,517 232,236
----------- ----------- ----------- -----------
3,080,707 3,139,452 12,771,299 12,763,369
----------- ----------- ----------- -----------
Departmental
operating
income 2,340,375 2,186,280 9,459,868 9,615,325
----------- ----------- ----------- -----------
Undistributed
operating expenses
Administrative and
general 508,327 505,411 1,998,929 1,942,588
Advertising and
promotion 458,293 471,941 1,848,839 1,932,871
Energy 182,581 181,958 712,236 782,733
Property operation
and maintenance 218,414 218,142 883,794 765,337
Management fees 189,233 186,427 778,227 783,241
Property taxes,
insurance and
rent 148,837 247,393 1,245,426 981,641
----------- ----------- ----------- -----------
1,705,685 1,811,272 7,467,451 7,188,411
----------- ----------- ----------- -----------
Gross revenue in
excess of direct
operating
expenses $ 634,690 $ 375,008 $ 1,992,417 $ 2,426,914
----------- ----------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of these summaries.
F-112
<PAGE> 117
RITZ-CARLTON, PHILADELPHIA
Notes to Historical Summaries of Gross Revenue
and Direct Operating Expenses
Note 1 - Basis of presentation
The Historical Summaries of Gross Revenue and Direct Operating Expenses
(the "Historical Summaries") relate to the operation of a 290-room
Ritz-Carlton Hotel (the "Ritz-Carlton Hotel") located in Philadelphia,
Pennsylvania.
The hotel is expected to be acquired from an unaffiliated party by SLT
Realty Limited Partnership and SLC Operating Limited Partnership.
The Historical Summaries have been prepared to substantially comply
with the rules and regulations of the Securities and Exchange
Commission for business combinations accounted for as a purchase.
Historical financial statement summaries, rather than full audited
financial statements, are presented for the Ritz-Carlton, Philadelphia
because the Ritz-Carlton, Philadelphia will be acquired from an
unaffiliated third party in a negotiated transaction and the seller of
the Ritz-Carlton, Philadelphia did not possess adequate records
supporting hotel and certain other costs. Accordingly, it is not
practicable to provide full audited financial statements. The
Historical Summaries of Gross Revenue and Direct Operating Expenses do
not include certain historical expenses of the Ritz-Carlton,
Philadelphia such as interest, depreciation and amortization and
indirect costs. The Historical Summaries are not representative of the
actual operations for the periods presented.
The preparation of the Historical Summaries in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
Revenue is recognized as earned. Management has provided for credit
risks; and credit losses have been within management's expectations.
Maintenance and repairs are charged to operations as incurred; major
renewals and betterments are capitalized.
The accompanying unaudited interim financial statements reflect, in the
opinion of management, all adjustments necessary for a fair
presentation of the interim financial statements. All such adjustments
are of a normal and recurring nature.
F-113
<PAGE> 118
Report of Independent Public Accountants
To the Partners of SLT Realty Limited Partnership
and SLC Operating Limited Partnership
We have audited the accompanying Historical Summary of Gross Revenue and Direct
Operating Expenses (the "Historical Summary") of the hotel property (the
"Sheraton Fort Lauderdale Airport Hotel") described in Note 1 to the Historical
Summary for the year ended December 31, 1995. The Historical Summary is the
responsibility of the management of the Sheraton Fort Lauderdale Airport Hotel.
Our responsibility is to express an opinion on this Historical Summary based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the Historical Summary is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the Historical Summary. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the Historical
Summary. We believe that our audit provides a reasonable basis for our opinion.
The accompanying Historical Summary was prepared for the purpose of complying
with the rules and regulations of the Securities and Exchange Commission as
described in Note 1 to the Historical Summary, and are not intended to be a
complete presentation of the Sheraton Fort Lauderdale Airport Hotel expenses.
In our opinion, such Historical Summary presents fairly, in all material
respects, the gross revenue and direct operating expenses described in Note 1
of the Sheraton Fort Lauderdale Airport Hotel for the year ended December 31,
1995, in conformity with generally accepted accounting principles.
PANNELL KERR FORSTER, PC
Boston, Massachusetts
May 17, 1996
F-114
<PAGE> 119
SHERATON FORT LAUDERDALE AIRPORT HOTEL
Historical Summary of Gross Revenue and
Direct Operating Expenses
<TABLE>
<CAPTION>
Three Months Ended Year Ended
March 31 December 31
------------------------- ------------
1996 1995 1995
---------- ---------- ------------
(unaudited)
<S> <C> <C> <C>
Revenue
Rooms $1,921,254 $2,061,711 $ 5,806,445
Food and beverage 1,182,478 1,173,990 4,301,079
Telephone 84,407 93,866 300,155
Other income 39,618 65,213 154,521
---------- ---------- -----------
3,227,757 3,394,780 10,562,200
---------- ---------- -----------
Cost of sales and
departmental expenses
Rooms 386,534 420,405 1,470,115
Food and beverage 958,870 969,043 3,728,975
Telephone 40,710 40,593 155,582
Other expenses 375 368 2,196
---------- ---------- -----------
1,386,489 1,430,409 5,356,868
---------- ---------- -----------
Departmental operating
income 1,841,268 1,964,371 5,205,332
---------- ---------- -----------
Undistributed operating
expenses
Administrative and
general 250,344 261,431 1,282,291
Advertising and promotion 106,762 150,239 539,128
Energy 131,219 102,466 488,385
Property operation and
maintenance 141,337 158,182 606,104
Management fees 64,972 64,977 208,047
Franchise fees 96,211 103,127 278,207
Property taxes, insurance
and rent 155,255 174,173 493,467
---------- ---------- -----------
946,100 1,014,595 3,895,629
---------- ---------- -----------
Gross revenue in excess
of direct operating
expenses $ 895,168 $ 949,776 $ 1,309,703
---------- ---------- -----------
</TABLE>
The accompanying notes are an integral part of this summary.
F-115
<PAGE> 120
SHERATON FORT LAUDERDALE AIRPORT HOTEL
Notes to Historical Summary of Gross Revenue
and Direct Operating Expenses
Note 1 - Basis of presentation
The Historical Summary of Gross Revenue and Direct Operating Expenses
(the "Historical Summary") relates to the operation of a 250-room
Sheraton Fort Lauderdale Airport Hotel (the "Sheraton Fort Lauderdale
Airport Hotel") located in Fort Lauderdale, Florida.
The hotel is expected to be acquired from an unaffiliated party by SLT
Realty Limited Partnership and SLC Operating Limited Partnership.
The Historical Summary has been prepared to substantially comply with
the rules and regulations of the Securities and Exchange Commission for
business combinations accounted for as a purchase. A historical
financial statement summary, rather than a full audited financial
statement, is presented for the Sheraton Fort Lauderdale Airport Hotel
because the Sheraton Fort Lauderdale Airport Hotel will be acquired from
an unaffiliated third party in a negotiated transaction and the seller
of the Sheraton Fort Lauderdale Airport Hotel did not possess adequate
records supporting hotel and certain other costs. Accordingly, it is not
practicable to provide a full audited financial statement. The
Historical Summary of Gross Revenue and Direct Operating Expenses does
not include certain historical expenses of the Sheraton Fort Lauderdale
Airport Hotel such as interest, depreciation and amortization and
indirect costs. The Historical Summary is not representative of the
actual operations for the periods presented.
The preparation of the Historical Summary in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Revenue is recognized as earned. Management has provided for credit
risks; and credit losses have been within management's
F-116
<PAGE> 121
expectations.
Maintenance and repairs are charged to operations as incurred; major
renewals and betterments are capitalized.
The accompanying unaudited interim financial statements reflect, in the
opinion of management, all adjustments necessary for a fair presentation
of the interim financial statements. All such adjustments are of a normal and
recurring nature.
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<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statements on
Form S-3 (File No. 33-64335 and 33-64335-01) of Starwood Lodging Trust and
Starwood Lodging Corporation of our report dated March 8, 1996 on our audits of
the combined financial statements and supplementary information of
Winston-Salem Hotel Ventures, Inc.; Needham Hotel Ventures, L.P.; Needham
Hotel Ventures, II, Inc.; Needham Hotel Ventures, Inc.; Minneapolis Hotel
Ventures, Inc.; Palm Desert Hotel Ventures, Inc.; Allentown Hotel Ventures,
Inc.; HOD Allentown I Corp.; HOD Allentown II Corp.; HOD Allentown Trust,
Atlanta Hotel Ventures, Inc.; Tucson Hotel Ventures, Inc.; St. Louis Ventures,
Inc.; and Arlington Heights Hotel Ventures, Inc. (collectively, the "Hotels of
Distinction") as of and for the years ended December 31, 1995 and 1994 which
report is included in this Form 8-K dated July 15, 1996. We also consent to the
reference to our firm under the caption "Experts".
Coopers & Lybrand L.L.P.
West Palm Beach, Florida
July 15, 1996
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statements on
Form S-3 (File No. 33-64335 and 33-64335-01) of Starwood Lodging Trust and
Starwood Lodging Corporation of our report dated January 26, 1996 on our audit
of the statement of net assets of hotel operations of 730 Minn. Hotel
Properties I, Inc. d/b/a Doubletree Grand Hotel at Mall of America as of
December 31, 1995, 1994 and 1993 and the related statements of hotel operating
revenue and expenses and hotel cash flows for each of the three years in the
period ended December 31, 1995, our report dated January 30, 1996 on our audit
of the statement of net assets of hotel operations of 730 Mass. Hotel Properties
I, Inc. d/b/a Westin - Waltham Hotel as of December 31, 1995, 1994 and 1993 and
the related statements of hotel operating revenue and expenses and hotel cash
flows for the years ended December 31, 1995 and 1994 and the period from April
1, 1993 (commencement of operations) to December 31, 1993, our report dated
February 27, 1996 on our audit of the statement of net assets of hotel
operations of 730 MO Hotel Properties I, Inc. d/b/a The Ritz-Carlton, Kansas
City as of December 31, 1995 and 1994 and the related statements of hotel
operating revenue and expenses and hotel cash flows for the year ended December
31, 1995 and the period from February 22, 1994 (commencement of operations) to
December 31, 1994, our report dated February 13, 1996 on our audit of the
statement of net assets of hotel operations of 730 Georgia Hotel Properties I,
Inc. d/b/a Doubletree Concourse, Atlanta as of December 31, 1995 and 1994 and
the related statements of hotel operating revenue and expenses and hotel cash
flows for the year ended December 31, 1995 and the period from April 5, 1994
(commencement of operations) to December 31, 1994, our report dated February
17, 1996 on our audit of the balance sheet of 730 Cal Hotel Properties I
Associates d/b/a Doubletree Hotel - Horton Plaza as of December 31, 1995, 1994
and 1993 and the related statements of operations and partners' capital, and
cash flows for each of the three years in the period ended December 31, 1995,
our report dated February 28, 1996 on our audit of the statement of net assets
of hotel operations of 730 Cal Hotel Properties II, Inc. d/b/a Doubletree Hotel
Los Angeles Airport as of December 31, 1995, 1994 and 1993 and the related
statements of hotel operating revenue and expenses and hotel cash flows for the
years ended December 31, 1995 and 1994 and the period from April 1, 1993
(commencement of operations) to December 31, 1993, our report dated June 21,
1996 on our audit of the Historical Summaries of Gross Revenue and Direct
Operating Expenses of the hotel property, The Ritz-Carlton, Philadelphia, for
the years ended December 31, 1995 and 1994, our report dated May 17, 1996 on
our audit of the Historical Summary of Gross Revenue and Direct Operating
Expenses of the hotel property, The Sheraton Fort Lauderdale Airport Hotel, for
the year ended December 31, 1995, our report dated June 20, 1996 on our audit
of the Historical Summary of Gross Revenue and Direct Operating Expenses of the
hotel property, The Ritz-Carlton, Kansas City, for the year ended December 31,
1993, and our report dated June 26, 1996 on our audit of the Historical Summary
of Gross Revenue and Direct Operating Expenses of the hotel property,
Doubletree Concourse Hotel, Atlanta, for the year ended December 31, 1993 which
reports are included in this Form 8-K dated July 15, 1996. We also consent to
the reference to our firm under the caption "Experts".
PANNELL KERR FORSTER, PC
Boston, Massachusetts
July 15, 1996
<PAGE> 1
EXHIBIT 99.1
FOR IMMEDIATE RELEASE
May 14, 1996
STARWOOD LODGING TRUST TO ACQUIRE EIGHT HOTELS FOR $309 MILLION
LOS ANGELES, CA, May 14, 1996...Starwood Lodging Trust (the "Trust"), a real
estate investment trust, and Starwood Lodging Corporation (the "Corporation"), a
hotel management and operating company, whose shares are paired and trade
together as a unit (NYSE: HOT), today announced that they have entered into a
definitive agreement to acquire eight upscale and luxury full-service hotels
from Teachers Insurance and Annuity Association ("TIAA") for $309 million.
The portfolio contains prominent hotel assets which are very well
located in major markets. In total, the acquisition will add 3,141 upscale hotel
rooms to the Trust's portfolio. The properties include The Ritz Carlton,
Philadelphia; The Ritz Carlton, Kansas City; The Westin Hotel Waltham, suburban
Boston; the Doubletree Hotel at Concourse, Atlanta; The Doubletree Hotel LAX,
Los Angeles; the Doubletree Hotel at Horton Plaza, San Diego; the Doubletree
Grand Hotel at Mall of America, Bloomington, Minnesota; and the Sheraton Ft.
Lauderdale Airport Hotel, Dania, Florida.
The transaction was sourced, structured, and negotiated on behalf of
the Trust in a private transaction by Starwood Capital Group, L.P., a
diversified real estate investment firm based in Greenwich, Connecticut. The
transaction is scheduled to close by August 31, subject to completion of due
diligence and certain other conditions.
"This is the finest quality full-service hotel portfolio we have
encountered since our public offering last year," said Barry Sternlicht,
Chairman and CEO of Starwood Lodging Trust. "At an average purchase price per
room of under $100,000, the portfolio epitomizes our strategy of acquiring
upscale properties with significant upside potential at discounts to replacement
cost. These assets continue to build our base of first-class hotels for the long
term."
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Starwood Lodging
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Ted Darnall, Chief Operating Officer of Starwood Lodging Corporation,
said, "It is very unusual to find a portfolio of this size and quality,
particularly where most assets can be purchased free and clear of third party
management contracts. This flexibility increases the accountability of each
manager and provides us with heightened control over operations."
The eight hotels represent TIAA's entire equity hotel holdings. TIAA,
which is part of the world's largest pension system, was seeking to sell its
hotel portfolio since its mortgage and real estate investment program
concentrates primarily on non-hospitality commercial properties. The hotels
represent less than one percent of TIAA's $28.5 billion mortgage and real estate
investment portfolio. Joseph Luik, Managing Director of TIAA, said, "A main
factor in selecting Starwood was the confidence TIAA has in Starwood's ability
to close the transaction in a timely manner, thus minimizing the potential for
disruption to day-to-day hotel operations.
Including this portfolio and additional acquisitions previously
announced or closed, The Trust and the Corporation will have acquired interests
in 25 first class hotels throughout the United States aggregating approximately
8,700 rooms at a total acquisition cost of approximately $700 million over the
past twelve months.
The Ritz Carlton, Philadelphia (290 rooms) is the newest luxury hotel
in Philadelphia. Opened in 1990, it is located at 17th and Chestnut Streets, in
the heart of the city's business district. The hotel is connected to Liberty
Place I and II, the city's two largest office buildings, and the upscale retail
space in The Shops at Liberty Place. The new Pennsylvania Convention Center and
Philadelphia's central shopping district are located within five blocks of the
hotel, and the historical district is located within eleven blocks. This
property will complement Starwood Lodging's recently announced acquisition of
the Philadelphia Airport Doubletree Guest Suites Hotel.
The Ritz Carlton, Kansas City (373 rooms) is located in the Country
Club Plaza, the city's premier shopping, dining, and entertainment center. The
property recently underwent an extensive $8 million renovation and commands the
highest average daily rate in its market. This property will be the Trust's
first hotel in Kansas City.
The acquisition adds two new major markets in California to Starwood's
portfolio. The Doubletree Hotel at Horton Plaza (450 rooms) is located in the
heart of San Diego's downtown business district, immediately adjacent to Horton
Plaza, the city's preeminent shopping and entertainment center. The property is
located within walking distance of the San Diego Convention Center, the Gaslamp
District and major downtown office buildings. Originally constructed in 1987,
the hotel offers nearly 25,000 square feet of meeting space and the full
complement of amenities associated with first-class convention hotels.
The Doubletree Hotel LAX (739 rooms), will become Starwood Lodging's
ninth airport hotel and is located approximately one half-mile east of the Los
Angeles International Airport. The hotel, built in 1986, has 40,000 square feet
of meeting and function space, a 1,100 space parking garage, and other amenities
typical of a first class convention hotel.
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The Doubletree Hotel at Concourse (370 rooms) will become Starwood
Lodging's fourth property in Atlanta and introduces the company to a new
submarket, The Perimeter area. Following the acquisition, Starwood Lodging will
have 1,372 rooms in Atlanta, which is one of the strongest hotel markets in the
country and has experienced annual growth in REVPAR of 6.5% over the past six
years. Located in the 64-acre Concourse Corporate Park, this twenty story
contemporary hotel includes over 20,000 square feet of meeting space and was
built in 1986. The immediate neighborhood includes over 2.1 million square feet
of quality office space, and the 189-store Perimeter Mall is also nearby. The
Perimeter has become recognized for its prestigious office space.
The Westin Hotel Waltham (347 rooms) is centrally located on the Route
128 Corridor, also known as the "Silicon Valley" of the East Coast,
approximately 12 miles west of downtown Boston. Built in 1990, the ten-story
property exhibits a distinctive architectural design with an exterior of
double-paned, blue glazed glass. The hotel caters to a concentration of business
parks occupied by firms involved in telecommunications, high technology,
biotechnology, and medicine, as well as to Brandeis University. This property
will complement Starwood Lodging's recently acquired 977 room Boston Park Plaza
Hotel.
The Doubletree Grand Hotel, Bloomington (321 rooms) is located adjacent
to the 4.2 million square foot Mall of America, and five miles west of the
Minneapolis-St. Paul International Airport. With 41 million visitors in 1995,
the Mall was the largest tourist attraction in the Midwest and is a demand
generator for the hotel. In addition, the nearby I-494 corridor office submarket
enjoys a vacancy rate of only 5.6%. The 15-story hotel was built in 1974 and has
undergone a $5.0 million renovation since 1994.
The Sheraton Ft. Lauderdale Airport Hotel, Dania (251 rooms) is located
at I-95 and Griffin Road, well situated to service Broward County's most
significant demand generators, including Ft. Lauderdale Airport, Port Everglades
(the world's second busiest cruise port) and the 370,000 square foot Broward
County Convention Center. The hotel also services and is connected to the Design
Center of the Americas, a 550,000 square foot trade center. Constructed in 1986,
the hotel offers 12,600 square feet of meeting space, health facilities and
other amenities.
The Trust, which conducts all of its business as general partner of SLT
Realty Limited Partnership, is the only hotel REIT whose shares are paired with
a hotel operating company, the Corporation. The Corporation, which conducts
substantially all of its business as managing general partner of SLC operating
Limited Partnership, leases properties from the Trust and operates them directly
or through third party management companies.
# # #
<PAGE> 1
EXHIBIT 99.2
FOR IMMEDIATE RELEASE
July 3, 1996
STARWOOD LODGING TRUST TO ACQUIRE NINE HOTELS
FROM HOTELS OF DISTINCTION FOR $135 MILLION
LOS ANGELES, CA, July 3, 1996...Starwood Lodging Trust (the "Trust"), a real
estate investment trust (REIT), and Starwood Lodging Corporation (the
"Corporation"), a hotel management and operating company, whose shares are
paired and trade together as a unit (NYSE: HOT), today announced that they have
entered into a definitive agreement to acquire nine mid- and up-scale,
full-service hotels from Hotels of Distinction Ventures, Inc. ("HODV") for $134
million, or $55,000 per key. For an additional $1 million, the Trust will
acquire certain personal and intellectual property from Hotels of Distinction,
Inc. ("HOD"), the hotel operating company currently managing the portfolio.
Starwood Lodging Corporation will assume management of all nine hotels
immediately after closing. The acquisition price represents approximately 63% of
estimated replacement cost.
The portfolio consists of the following hotels:
<TABLE>
<CAPTION>
Total
Hotel City State Rooms
----- ---- ----- -----
<S> <C> <C> <C>
The Marque Atlanta GA 275
The Sheraton Hotel Needham MA 247
Embassy Suites Palm Desert CA 198
Embassy Suites St. Louis MO 297
Hotel Park Tucson Tucson AZ 215
Sheraton Metrodome Minneapolis MN 254
Arlington Park Hilton Arlington Heights IL 422
The Hilton Hotel Allentown PA 224
The Radisson Marque Winston-Salem NC 293
------
2,425
======
</TABLE>
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The transaction was sourced, structured, and negotiated on behalf of
the Trust in a private transaction by Starwood Capital Group, L.P., a
diversified real estate investment firm based in Greenwich, Connecticut. Michael
Mueller, who led the acquisition effort for Starwood, said "The transaction is
scheduled to close in mid- to late summer, subject to certain conditions."
"This portfolio acquisition is distinguished by its significant
discount to replacement cost and is yet another successful example of our growth
strategy of acquiring up-scale and mid-scale full service hotels," said Barry
Sternlicht, CEO of Starwood Lodging Trust. "Furthermore, many of these hotels
are strategically located in strong markets where we already have a presence,
allowing certain operating efficiencies in cities like Atlanta and Boston."
The Marque of Atlanta represents Starwood Lodging's fifth hotel
property (1,669 rooms) in Atlanta, one of the strongest hotel markets in the
country. Atlanta has experienced average annual growth in RevPAR of 6.5% during
the past six years. The acquisition will add a hotel in the "Perimeter"
sub-market, in addition to the pending acquisition of the Doubletree Hotel at
Concourse.
The Sheraton Hotel of Needham, MA, located 10 miles west of downtown
Boston, boasts a favorable location and high visibility for catering to nearby
telecommunications, high technology, biotechnology and medical firms, as well as
Brandeis University, all of which are located in the Route 128 (1-95) corridor
known as the "Silicon Valley" of the East. This acquisition will complement
Starwood Lodging's recent acquisition of the Boston Park Plaza and pending
acquisition of the Westin Waltham, bringing Starwood Lodging's presence in the
Boston area to 1,554 rooms.
The Embassy Suites Palm Desert is situated on nine-acres of land in the
heart of the Coachella Valley, a premier desert resort area in Southern
California. More than 90 golf courses are within 15 miles of the hotel, and the
acclaimed El Paseo shopping district is two miles away. The Palm Springs Airport
and downtown Palm Springs are approximately 15 miles from this property.
The Embassy Suites St. Louis is located at Laclede's Landing, a
recreational riverfront area on the Mississippi River, offering shopping,
riverboat gambling, live music and immediate proximity to the Gateway Arch. Also
within a few blocks are the recently completed TWA Dome (new home of the St.
Louis Rams) and the central business district.
The Hotel Park Tucson is located near the Catalina Mountain Foothills,
11 miles from Tucson Airport and minutes from the University of Arizona and
Tucson's shopping and business districts. Adjacent to the Tucson Medical Center,
the hotel was designed originally to cater to long-term guests and commercial
visitors.
The Sheraton Metrodome is 4 miles northeast of the 65,000-seat
Metrodome, the University of Minnesota and the central business district of
Minneapolis. The Sheraton Metrodome will complement Starwood Lodging's recently
announced acquisition of the Doubletree Grand at the Mall of America, located
approximately 20 miles away.
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The Arlington Park Hilton is located in Arlington Heights, IL, 28 miles
northwest of downtown Chicago and 15 miles from O'Hare Airport. It is also
directly west of the Arlington International Race Course and near the Woodfield
Mall and Poplar Creek Theater. The 14-story hotel, which has 65,000 square feet
of meeting space, has undergone over $3 million in renovations since 1993. This
property will be the Trust's second acquisition in the Chicago area following
its recent purchase of the Midland Hotel.
The Allentown Hilton is located in downtown Allentown, PA. The
nine-story property is directly across from the headquarters of Pennsylvania
Power & Light Company. The property offers 10,000 square feet of meeting space,
a full-service restaurant, a pool and other amenities.
The Radisson Marque of Winston-Salem is located in downtown
Winston-Salem and is connected via underground passage to the 150,000 square
foot Benton Convention Center. It is also within walking distance of the Stevens
Center for Performing Arts and the Omni Sports Complex.
Including this portfolio and other acquisitions that have been
previously announced or closed, the Trust and the Corporation will have acquired
interests in 34 hotels throughout the United States during the past twelve
months. These properties aggregate approximately 11,300 rooms at a total
acquisition cost of approximately $840 million. After the acquisition of these
properties, Starwood Lodging will own equity interests in 62 hotels containing
over 16,400 rooms.
The Trust, which conducts all of its business as general partner of SLT
Realty Limited Partnership, is the only hotel REIT whose shares are paired with
a hotel operating company, the Corporation. The Corporation, which conducts
substantially all of its business as managing general partner of SLC Operating
Limited Partnership, leases properties from the Trust and operates them
directly.
# # #
