<PAGE> 1
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): January 24, 1996
<TABLE>
<S> <C>
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)
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.)
11845 W. Olympic Blvd., Suite 550 11845 W. Olympic Blvd., Suite 560
Los Angeles, California 90064 Los Angeles, California 90064
(Address of principal executive (Address of principal executive
offices, including zip code) offices, including zip code)
(310) 575-3900 (310) 575-3900
(Registrant's telephone number, (Registrant's telephone number,
including area code) including area code)
(Former name or former address, (Former name or former address,
if changed since last report) if changed since last report)
</TABLE>
================================================================================
The undersigned Registrants hereby amend the following items, the Financial
Statements, Pro Forma Financial Information and Exhibits of their Form 8-K dated
February 5, 1996 as set forth in the pages attached hereto:
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<PAGE> 2
Item 7 of the Joint Current Report on Form 8-KA dated February 5, 1996
filed by Starwood Lodging Trust and Starwood Lodging Corporation is hereby
amended to read in its entirety as follows:
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) Financial Statements of Businesses Acquired. See Index to Financial
Statements (page F-1).
(b) Pro Forma Financial Information. See Index to Financial Statements
(page F-1).
<PAGE> 3
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
each Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereto duly authorized.
STARWOOD LODGING TRUST STARWOOD LODGING CORPORATION
By: /s/ RONALD C. BROWN By: /s/ KEVIN E. MALLORY
---------------------------- ------------------------------------
Ronald C. Brown Kevin E. Mallory
Vice President and Executive Vice President
Chief Financial Officer
Date: February 12, 1996
<PAGE> 4
INDEX TO FINANCIAL STATEMENTS
STARWOOD LODGING TRUST AND STARWOOD LODGING
CORPORATION -- PRO FORMA
<TABLE>
<S> <C>
Combined and Separate Balance Sheets at September 30, 1995........................................ F-2
Notes to the Pro Forma Balance Sheets............................................................. F-5
Combined and Separate Statements of Operations for the nine months ended September 30, 1995
and the year ended December 31, 1994 ........................................................... F-8
Notes to Pro Forma Statements of Operations ...................................................... F-14
THE BOSTON PARK PLAZA HOTEL LIMITED PARTNERSHIP
Reports of Independent Public Accountants ........................................................ F-18
Balance Sheets as of October 31, 1994 ............................................................ F-19
Statements of Income ............................................................................. F-20
Statements of Partners' Deficit .................................................................. F-21
Statements of Cash Flows ......................................................................... F-22
Notes to Financial Statements .................................................................... F-23
THE BOSTON PARK PLAZA HOTEL OPERATING COMPANY, INC.
Reports of Independent Public Accountants......................................................... F-32
Balance Sheets as of October 31, 1994............................................................. F-33
Statements of Operations and Retained Earnings.................................................... F-34
Statements of Cash Flows.......................................................................... F-35
Notes to Financial Statements..................................................................... F-36
</TABLE>
F-1
<PAGE> 5
STARWOOD LODGING TRUST AND STARWOOD LODGING CORPORATION
UNAUDITED COMBINED PRO FORMA BALANCE SHEETS
SEPTEMBER 30, 1995
<TABLE>
<CAPTION>
Historical
Starwood Boston Park Starwood
Lodging Plaza Hotel Pro Forma Lodging
Combined and Complex Adjustments Combined
------------ ----------- ----------- ------------
(A) (B)
<S> <C> <C> <C> <C>
ASSETS
Hotel assets held for sale - net................... $ 8,328,000 $ $ $ 8,328,000
Hotel assets - net................................. 281,231,000 281,231,000
------------- ----------- ---------- -------------
289,559,000 289,559,000
Mortgage notes receivable, net..................... 78,454,000 78,454,000
Investments in joint ventures...................... 620,000 41,600,000 2,880,000 45,100,000
------------- ----------- ---------- -------------
Total real estate investments.................. 368,633,000 41,600,000 2,880,000 413,113,000
Cash and cash equivalents.......................... 18,135,000 18,135,000
Accounts and interest receivable................... 6,911,000 6,911,000
Notes receivable, net.............................. 1,816,000 1,816,000
Inventories, prepaid expenses and other assets..... 11,660,000 11,660,000
------------- ----------- ---------- -------------
$ 407,155,000 $41,600,000 $2,880,000 $ 451,635,000
============= =========== ========== =============
LIABILITIES AND SHAREHOLDERS'
EQUITY
LIABILITIES
Secured notes payable and revolving line of credit
$ 64,600,000 41,600,000 $ 106,200,000
Mortgage and other notes payable................... 4,370,000 4,370,000
Accounts payable and other liabilities............. 17,325,000 17,325,000
------------- ----------- ---------- -------------
86,295,000 41,600,000 $ 127,895,000
------------- ----------- ---------- -------------
Commitments and contingencies
MINORITY INTEREST............................... 96,544,000 867,000 97,411,000
------------- ----------- ---------- -------------
SHAREHOLDERS' EQUITY
Trust shares of beneficial interest,
$0.01 par value; authorized
100,000,000 shares; outstanding
13,810,000 shares................................ 138,000 138,000
Corporation common stock, $0.01 par
value; authorized 100,000,000 shares;
outstanding 13,810,000 shares.................... 138,000 138,000
Additional paid-in capital......................... 434,134,000 434,134,000
Accumulated deficit................................ (210,094,000) 2,013,000 (208,081,000)
------------- ----------- ---------- -------------
224,316,000 2,013,000 226,329,000
------------- ----------- ---------- -------------
$ 407,155,000 $41,600,000 $2,880,000 $ 451,635,000
============= =========== ========== =============
</TABLE>
F-2
<PAGE> 6
STARWOOD LODGING TRUST
UNAUDITED COMBINED PRO FORMA BALANCE SHEETS
SEPTEMBER 30, 1995
<TABLE>
<CAPTION>
Historical Pro Forma
Starwood Boston Park Starwood
Lodging Plaza Hotel Pro Forma Lodging
Trust and Complex Adjustments Trust
------------- ----------- ----------- -------------
(A) (B)
<S> <C> <C> <C> <C>
ASSETS
Hotel assets held for sale - net..................... $ 8,094,000 $ $ $ 8,094,000
Hotel assets - net................................... 192,076,000 192,076,000
------------- ----------- ----------- -------------
200,170,000 200,170,000
Mortgage notes receivable, net....................... 78,454,000 78,454,000
Investments in joint ventures........................ 603,000 41,600,000 (628,000) (C) 41,575,000
------------- ----------- ----------- -------------
Total real estate investments.................... 279,227,000 41,600,000 (628,000) 320,199,000
Cash and cash equivalents............................ 7,450,000 7,450,000
Rent and interest receivable......................... 853,000 853,000
Notes receivable - Corporation....................... 77,589,000 5,350,000 (C) 82,939,000
Notes receivable, net................................ 1,236,000 1,236,000
Prepaid expenses and other assets.................... 3,757,000 3,757,000
------------- ----------- ----------- -------------
$ 370,112,000 $41,600,000 $ 4,722,000 $ 416,434,000
============= =========== =========== =============
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Secured notes payable and revolving line of credit... $ 64,600,000 $41,600,000 $ $ 106,200,000
Mortgage and other notes payable..................... 100,000 100,000
Accounts payable and other liabilities............... 2,499,000 2,499,000
------------- ----------- ----------- -------------
67,199,000 41,600,000 108,799,000
------------- ----------- ----------- -------------
Commitments and contingencies
MINORITY INTEREST.................................... 91,144,000 1,421,000 92,565,000
------------- ----------- ----------- -------------
SHAREHOLDERS' EQUITY
Trust shares of beneficial interest,
$0.01 par value; authorized
100,000,000 shares; outstanding
13,810,000 shares.................................. 138,000 138,000
Additional paid-in capital........................... 354,682,000 354,682,000
Accumulated deficit.................................. (143,051,000) 3,301,000 (139,750,000)
------------- ----------- ----------- -------------
211,769,000 3,301,000 215,070,000
------------- ----------- ----------- -------------
$ 370,112,000 $41,600,000 $ 4,722,000 $ 416,434,000
============= =========== =========== =============
</TABLE>
F-3
<PAGE> 7
STARWOOD LODGING CORPORATION
UNAUDITED COMBINED PRO FORMA BALANCE SHEETS
SEPTEMBER 30, 1995
<TABLE>
<CAPTION>
Historical Pro Forma
Starwood Boston Park Starwood
Lodging Plaza Hotel Pro Forma Lodging
Corporation and Complex Adjustments Corporation
------------- ----------- ----------- -------------
(A) (B)
<S> <C> <C> <C> <C>
ASSETS
Hotel assets held for sale - net..................... $ 234,000 $ $ $ 234,000
Hotel assets - net................................... 89,155,000 89,155,000
------------ ----------- ---------- ------------
89,389,000 89,389,000
Investments in joint ventures........................ 17,000 3,508,000 (C) 3,525,000
------------ ----------- ---------- ------------
Total real estate investments.................... 89,406,000 3,508,000 92,914,000
Cash and cash equivalents............................ 10,685,000 10,685,000
Accounts and interest receivable..................... 6,058,000 6,058,000
Notes receivable, net................................ 580,000 580,000
Inventories, prepaid expenses and other assets....... 7,903,000 7,903,000
------------ ----------- ---------- ------------
$114,632,000 $ $3,508,000 $118,140,000
============ =========== ========== ============
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Secured notes payable and revolving line of credit... $ 4,270,000 $ $ $ 4,270,000
Notes payable - Trust................................ 77,589,000 5,350,000 (C) 82,939,000
Accounts payable and other liabilities............... 14,826,000 14,826,000
------------ ----------- ---------- ------------
96,685,000 5,350,000 102,035,000
------------ ----------- ---------- ------------
Commitments and contingencies
MINORITY INTEREST.................................... 5,400,000 (554,000) 4,846,000
------------ ----------- ---------- ------------
SHAREHOLDERS' EQUITY
Corporation common stock, $0.01 par
value; authorized 100,000,000 shares;
outstanding 13,810,000 shares...................... 138,000 138,000
Additional paid-in capital........................... 79,452,000 79,452,000
Accumulated deficit.................................. (67,043,000) (1,288,000) (68,331,000)
------------ ----------- ---------- ------------
12,547,000 (1,288,000) 11,259,000
------------ ----------- ---------- ------------
$114,632,000 $ $3,508,000 $118,140,000
============ =========== ========== ============
</TABLE>
F-4
<PAGE> 8
STARWOOD LODGING TRUST AND
STARWOOD LODGING CORPORATION
NOTES TO THE UNAUDITED COMBINED AND
SEPARATE PRO FORMA BALANCE SHEETS
AT SEPTEMBER 30, 1995
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 PROPERTY
(B) On January 24, 1996, SaunStar Land Co., LLC ("Land Co."), a Delaware
limited liability company, in which SLT Realty Limited Partnership (SLT")
has a 58.2% interest and in which The Donald Saunders Family Limited
Liability Company ("DSF"), a Massachusetts limited liability company, has
a 41.8% interest, acquired (i) the Boston Park Plaza Hotel and Towers (the
"Hotel") which contains 977 guest rooms, approximately 45,500 square feet
of meeting and function space and approximately 24,000 square feet of net
rentable retail space, (ii) the Statler Office Building (the "Office
Building") which contains approximately 250,000 square feet of gross
rentable area which is adjacent to and shares utilities and other
facilities with the Hotel and (iii) the Armory of the First Corps of
Cadets, which contains approximately 52,000 square feet of gross useable
area and is near the Hotel and the Office Building (collectively, the
"Property"). Land Co. acquired these properties from the Boston Park Plaza
Limited Partnership in which certain affiliates of DSF had an aggregate
43.75% interest. The Property is subject to a first mortgage held by a
third-party lender, the outstanding principal balance of which is
approximately $25 million and which matures on May 1, 1996.
In connection with this transaction, SLT invested approximately $41.4
million plus closing cost and its share of closing adjustments.
Immediately after acquiring the property, Land Co. distributed all
fixtures, furnishings and equipment to its members in proportion to their
interest. SLT then sold its interest in the personal property to SLC
Operating Limited Partnership ("SLC") for approximately $5.4 million for a
note in such amount. SLC and DSF then contributed their interest in such
personal property to SaunStar Operating Co., LLC ("Operating Co."), a
limited liability company, in which SLC has a 58.2 % interest and DSF has
a 41.8% interest.
F-5
<PAGE> 9
Land Co. has leased the Property to Operating Co. Operating Co. has
engaged SLC to manage the hotel portion of the Property and Saunders Real
Estate Corporation, an affiliate of DSF, to manage the office and retail
portion of the Property. Each management agreement has a term of 10 years
and, subject to the mutual consent of the parties, is extendible for two
additional terms of 10 years each.
NOTE 4. PRO FORMA ADJUSTMENTS
(C) Immediately after receiving its interest in the property, the Trust sold
its interest in the personal property to the Corporation for approximately
$5,350,000 for a note in such amount.
F-6
<PAGE> 10
STARWOOD LODGING TRUST AND
STARWOOD LODGING CORPORATION
PRO FORMA COMBINED AND
SEPARATE STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995
AND THE YEAR ENDED DECEMBER 31, 1994
(UNAUDITED)
Effective January 1, 1995, Starwood Lodging Trust (the "Trust") and
Starwood Lodging Corporation (the "Corporation" and collectively, "the
Companies") consummated the previously announced reorganization (the
"Reorganization") with Starwood Capital Group, L.P. and its affiliates
(collectively "Starwood Capital"). On July 6, 1995, the Trust and the
Corporation completed a public offering (the "Offering") of 11,787,500 paired
shares. Net proceeds from the Offering of approximately $252.1 million together
with proceeds from a financing facility and cash on hand were used as follows:
approximately $206.5 million was used to repay existing indebtedness, including
$10 million which was used by Realty to purchase the first trust deed on
Operating's Milwaukee hotel, and approximately $53.8 million was used for the
acquisition of the 462-room Sheraton Colony Square in Atlanta, Georgia and the
224-room Embassy Suites in Tempe, Arizona. On September 20, 1995, the Companies
acquired the Doral Inn in New York, New York for $43.3 million. On January 24,
1996, the Companies formed a partnership with Saunders Real Estate Corporation
("Saunders") to acquire the Boston Park Plaza Hotel Complex. The Companies
contributed $41.6 million to the partnership.
Due to the impact of the Offering and the acquisitions of properties
acquired, the historical results of operations and earnings per share are not
indicative of future results of operations and earnings per share. The following
Unaudited Combined and Separate Pro Forma Statements of Operations for the nine
months ended September 30, 1995 and for the year ended December 31, 1994 give
effect to the Reorganization, the Offering and the acquisitions previously
discussed as of the beginning of the periods presented and exclude the results
from properties sold in 1994. The pro forma information is based upon historical
information and does not purport to present what actual results would have been
had such transactions, in fact, occurred at the beginning of each period
presented, or to project results for any future period.
F-7
<PAGE> 11
STARWOOD LODGING TRUST AND STARWOOD LODGING CORPORATION
UNAUDITED COMBINED PRO FORMA STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995
<TABLE>
<CAPTION>
Historical Pro Forma
Starwood Boston Park Starwood
Lodging Acquired Plaza Hotel Pro Forma Lodging
Combined Properties Complex Adjustments Combined
------------ ------------ ----------- ----------- ----------
(A) (C) (D)
<S> <C> <C> <C> <C> <C>
REVENUE
Hotel .................................... $ 81,951,000 $28,166,000 $ $ $110,117,000
Gaming ................................... 20,375,000 20,375,000
Interest from mortgage and other notes ... 8,004,000 8,004,000
Income from joint ventures and
rents from leased hotel properties...... 608,000 760,000 2,120,000 (E) 3,488,000
Other income.............................. 1,334,000 1,334,000
Gain (loss) on sales of hotel assets ..... (125,000) (125,000)
------------ ----------- -------- ------------ ------------
112,147,000 28,166,000 760,000 2,120,000 143,193,000
------------ ----------- -------- ------------ ------------
EXPENSES
Hotel operations ......................... 56,232,000 21,647,000 (1,248,000) (F) 76,631,000
Gaming operations ........................ 18,351,000 18,351,000
Interest ................................. 11,198,000 3,219,000 (11,647,000) (G) 5,345,000
2,575,000 (G)
Depreciation and amortization............. 10,182,000 6,657,000 16,839,000
Administrative and operating ............. 3,836,000 10,000 (F) 3,846,000
------------ ----------- -------- ------------ ------------
99,799,000 31,523,000 (10,310,000) 121,012,000
------------ ----------- -------- ------------ ------------
Income (loss) before minority interest ... 12,348,000 $(3,357,000) $760,000 $ 12,430,000 22,181,000
=========== ======== ============
Minority interest in Partnerships (H) .... 5,398,000 6,674,000
------------ ------------
Net income (loss) ........................ $ 6,950,000 $ 15,507,000
============ ============
Net income (loss) per paired share (I) ... $ 1.17 $ 1.12
============ ============
</TABLE>
See accompanying notes to the pro forma statements of operations.
F-8
<PAGE> 12
STARWOOD LODGING TRUST
UNAUDITED COMBINED PRO FORMA STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995
<TABLE>
<CAPTION>
Historical Pro Forma
Starwood Boston Park Starwood
Lodging Acquired Plaza Hotel Pro Forma Lodging
Trust Properties Complex Adjustments Trust
----------- ----------- ----------- ----------- -----------
(A) (C) (D)
<S> <C> <C> <C> <C> <C>
REVENUE
Rents from Corporation ................... $18,287,000 $ $ $ 4,566,000 (J) $22,853,000
Interest from Corporation ................ 2,629,000 3,813,000 (K) 6,442,000
Interest from mortgage and other notes ... 7,915,000 7,915,000
Income from joint ventures and
rents from leased hotel properties ..... 608,000 4,722,000 (E) 5,330,000
Other income.............................. 461,000 461,000
Gain (loss) on sales of hotel assets ..... (125,000) (125,000)
----------- ----------- ----------- ----------- -----------
29,775,000 13,101,000 42,876,000
----------- ----------- ----------- ----------- -----------
EXPENSES
Interest - other ......................... 10,534,000 (7,846,000) (G) 5,263,000
2,575,000 (G)
Depreciation and amortization............. 6,260,000 1,483,000 7,743,000
Administrative and operating ............. 1,178,000 1,178,000
----------- ----------- ----------- ----------- -----------
17,972,000 1,483,000 (5,271,000) 14,184,000
----------- ----------- ----------- ----------- -----------
Income (loss) before minority interest ... 11,803,000 $(1,483,000) $ $18,372,000 28,692,000
=========== =========== ===========
Minority interest in Partnerships (H) .... 4,957,000 8,633,000
----------- -----------
Net income (loss) ........................ $ 6,846,000 $20,059,000
=========== ===========
Net income (loss) per paired share (I) ... $ 1.15 $ 1.45
=========== ===========
</TABLE>
See accompanying notes to the pro forma statements of operations.
F-9
<PAGE> 13
STARWOOD LODGING CORPORATION
UNAUDITED COMBINED PRO FORMA STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995
<TABLE>
<CAPTION>
Historical Pro Forma
Starwood Boston Park Starwood
Lodging Acquired Plaza Hotel Pro Forma Lodging
Corporation Properties Complex Adjustments Corporation
----------- ---------- ------- ----------- -----------
(A) (C) (D)
<S> <C> <C> <C> <C> <C>
REVENUE
Hotel ...................................... $ 81,951,000 $28,166,000 $ $ $110,117,000
Gaming ..................................... 20,375,000 20,375,000
Income (loss) from joint venture............ 760,000 (2,602,000) (E) (1,842,000)
Interest from mortgage and other notes ..... 89,000 89,000
Other income................................ 873,000 873,000
------------ ----------- -------- ----------- ------------
103,288,000 28,166,000 760,000 2,602,000 129,612,000
------------ ----------- -------- ----------- ------------
EXPENSES
Hotel operations ........................... 56,232,000 21,647,000 (1,248,000) (F) 76,631,000
Gaming operations .......................... 18,351,000 18,351,000
Rent - Trust ............................... 18,287,000 4,566,000 (J) 22,853,000
Interest - Trust ........................... 2,629,000 3,813,000 (K) 6,442,000
Interest - other ........................... 664,000 3,219,000 (3,801,000) (G) 82,000
Depreciation and amortization............... 3,922,000 5,174,000 9,096,000
Administrative and operating ............... 2,658,000 10,000 (F) 2,668,000
------------ ----------- -------- ----------- ------------
102,743,000 30,040,000 3,340,000 136,123,000
------------ ----------- -------- ----------- ------------
Income (loss) before minority interest ..... 545,000 $(1,874,000) $760,000 $(5,942,000) (6,511,000)
=========== ======== ===========
Minority interest in Partnerships (H) ...... 441,000 (1,959,000)
------------ ------------
Net income (loss) .......................... $ 104,000 $ (4,552,000)
============ ============
Net income (loss) per paired share (I)..... $ 0.02 $ (0.33)
============ ============
</TABLE>
See accompanying notes to the pro forma statements of operations.
F-10
<PAGE> 14
STARWOOD LODGING TRUST AND STARWOOD LODGING CORPORATION
UNAUDITED COMBINED PRO FORMA STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1994
<TABLE>
<CAPTION>
Historical Pro Forma
Starwood Boston Park Starwood
Lodging Starwood Acquired Plaza Hotel Pro Forma Lodging
Combined Capital Properties Complex Adjustments Combined
-------- ------- ---------- ------- ----------- --------
(A) (B) (C) (D)
<S> <C> <C> <C> <C> <C> <C>
REVENUE
Hotel .................................. $ 82,668,000 $16,467,000 $46,091,000 $ $ $145,226,000
Gaming ................................. 27,981,000 27,981,000
Interest from mortgage and
other notes .......................... 1,554,000 8,496,000 10,050,000
Income from joint ventures and
rents from leased hotel properties ... 927,000 331,000 3,459,000 (E) 4,717,000
Other income............................ 411,000 411,000
Gain (loss) on sales of hotel assets ... 456,000 456,000
------------ ----------- ----------- -------- ------------ ------------
113,997,000 24,963,000 46,091,000 331,000 3,459,000 188,841,000
------------ ----------- ----------- -------- ------------ ------------
EXPENSES
Hotel operations ....................... 60,829,000 12,751,000 34,554,000 (3,359,000) (F) 104,775,000
Gaming operations ...................... 24,454,000 24,454,000
Interest ............................... 17,606,000 3,834,000 7,354,000 (25,691,000) (G) 7,063,000
3,960,000 (G)
Depreciation and amortization........... 8,161,000 2,496,000 10,509,000 1,220,000 (L) 22,386,000
Administrative and operating ........... 4,203,000 286,000 (F) 4,489,000
Shareholder litigation expense ......... 2,648,000 2,648,000
Provision for losses ................... 759,000 759,000
------------ ----------- ----------- -------- ------------ ------------
118,660,000 19,081,000 52,417,000 (23,584,000) 166,574,000
------------ ----------- ----------- -------- ------------ ------------
Income before minority interest ........ (4,663,000) $ 5,882,000 $(6,326,000) $331,000 $ 27,043,000 22,267,000
=========== =========== ======== ============
Minority interest in
Partnerships (H) ..................... 6,700,000
------------ ------------
Net income (loss) ...................... $ (4,663,000) $ 15,567,000
============ ============
Net income per paired share (I) ........ $ (2.31) $ 1.13
============ ============
</TABLE>
See accompanying notes to the pro forma statements of operations.
F-11
<PAGE> 15
STARWOOD LODGING TRUST
UNAUDITED COMBINED PRO FORMA STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1994
<TABLE>
<CAPTION>
Historical Pro Forma
Starwood Boston Park Starwood
Lodging Starwood Acquired Plaza Hotel Pro Forma Lodging
Trust Capital Properties Complex Adjustments Trust
----- ------- ---------- ------- ----------- -----
(A) (B) (C) (D)
<S> <C> <C> <C> <C> <C> <C>
REVENUE
Rents from Corporation ................. $16,906,000 $ $ $ 8,589,000 (J) $25,495,000
Interest from Corporation .............. 1,730,000 6,424,000 (K) 8,154,000
Interest from mortgage and
other notes ......................... 1,512,000 8,496,000 10,008,000
Income from joint ventures and
rents from leased hotel properties ... 927,000 7,481,000 (E) 8,408,000
Other income............................ 164,000 164,000
Gain (loss) on sales of hotel assets ... 432,000 432,000
----------- ---------- ----------- ----------- ----------- -----------
21,671,000 8,496,000 22,494,000 52,661,000
----------- ---------- ----------- ----------- ----------- -----------
EXPENSES
Interest - other ....................... 16,265,000 3,834,000 875,000 (17,958,000)(G) 6,976,000
3,960,000 (G)
Depreciation and amortization........... 5,205,000 1,270,000 2,791,000 610,000 (L) 9,876,000
Administrative and operating ........... 1,583,000 1,583,000
Shareholder litigation expense ......... 1,324,000 1,324,000
Provision for losses ................... 759,000 759,000
----------- ---------- ----------- ----------- ----------- -----------
25,136,000 5,104,000 3,666,000 (13,388,000) 20,518,000
------------ ----------- ------------ ----------- ------------ ----------------
Income before minority interest ........ (3,465,000) $3,392,000 $(3,666,000) $35,882,000 32,143,000
========== =========== =========== ===========
Minority interest in
Partnerships (H) ..................... 9,672,000
----------- -----------
Net income (loss) ...................... $(3,465,000) $22,471,000
=========== ===========
Net income per paired share (I) ........ $ (1.71) $ 1.63
=========== ===========
</TABLE>
See accompanying notes to the pro forma statements of operations.
F-12
<PAGE> 16
STARWOOD LODGING CORPORATION
UNAUDITED COMBINED PRO FORMA STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1994
<TABLE>
<CAPTION>
Historical Pro Forma
Starwood Boston Park Starwood
Lodging Starwood Acquired Plaza Hotel Pro Forma Lodging
Corporation Capital Properties Complex Adjustments Corporation
----------- ------- ---------- ------- ----------- -----------
(A) (B) (C) (D)
<S> <C> <C> <C> <C> <C> <C>
REVENUE
Hotel .................................... $ 82,668,000 $16,467,000 $46,091,000 $ $ $145,226,000
Gaming ................................... 27,981,000 27,981,000
Income (loss) from joint venture.......... 331,000 (4,022,000) (E) (3,691,000)
Interest from mortgage and other notes ... 42,000 42,000
Other income.............................. 247,000 247,000
Gain (loss) on sales of hotel assets ..... 24,000 24,000
------------ ----------- ----------- -------- ----------- ------------
110,962,000 16,467,000 46,091,000 331,000 (4,022,000) 169,829,000
------------ ----------- ----------- -------- ----------- ------------
EXPENSES
Hotel operations ......................... 60,829,000 12,751,000 34,554,000 (3,359,000) (F) 104,775,000
Gaming operations ........................ 24,454,000 24,454,000
Rent - Trust ............................. 16,906,000 8,589,000 (J) 25,495,000
Interest - Trust ......................... 1,730,000 6,424,000 (K) 8,154,000
Interest - other ......................... 1,341,000 6,479,000 (7,733,000) (G) 87,000
Depreciation and amortization............. 2,956,000 1,226,000 7,718,000 610,000 (L) 12,510,000
Administrative and operating ............. 2,620,000 286,000 (F) 2,906,000
Shareholder litigation expense ........... 1,324,000 1,324,000
------------ ----------- ----------- -------- ----------- ------------
112,160,000 13,977,000 48,751,000 4,817,000 179,705,000
------------ ----------- ----------- -------- ----------- ------------
Income before minority interest .......... (1,198,000) $ 2,490,000 $(2,660,000) $331,000 $(8,839,000) (9,876,000)
=========== =========== ======== ===========
Minority interest in
Partnerships (H) ....................... (2,972,000)
------------ ------------
Net income (loss) ........................ $ (1,198,000) $ (6,904,000)
============ ============
Net income per paired share (I) .......... $ (0.59) $ (0.50)
============ ============
</TABLE>
See accompanying notes to the pro forma statements of operations.
F-13
<PAGE> 17
STARWOOD LODGING TRUST AND
STARWOOD LODGING CORPORATION
NOTES TO THE UNAUDITED COMBINED AND
SEPARATE PRO FORMA STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995
AND THE YEAR ENDED DECEMBER 31, 1994
NOTE 1. BASIS OF PRESENTATION
The Trust and the Corporation have unilateral control of SLT Realty Limited
Partnership ("Realty") and SLC Operating Limited Partnership ("Operating" and,
together with Realty the "Partnerships"), respectively, and therefore, the
historical financial statements of Realty and Operating are consolidated with
those of the Trust and the Corporation. Unless the context otherwise requires,
all references herein to the "Companies" refer to the Trust and the Corporation,
and all references to the "Trust" and the "Corporation" include the Trust and
the Corporation and those entities respectively owned or controlled by the Trust
or the Corporation, including Realty and Operating.
NOTE 2. PRO FORMA ADJUSTMENTS
(A) Reflects the historical statements of operations of the Companies.
Operations for properties sold or pending sale are not considered material
to the pro forma presentation.
(B) Reflects the pro forma statements of operations (reflecting Starwood
Capital's cost basis) of the assets and liabilities contributed by
Starwood Capital in the Reorganization. For additional information
regarding the Reorganization, please see Item 7 (Financial Statements, Pro
Forma Financial Information and Exhibits) of the Companies' Form 8-K as
amended dated January 31, 1995, which is incorporated herein by reference.
(C) Reflects the pro forma statements of operations (reflecting the Companies'
cost basis) of the Doral Inn and the properties acquired in connection
with the 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 and Item 7
(Financial Statements, Pro Forma Financial Information and Exhibits) of
the Companies' Form 8-K as amended dated September 20, 1995, which is
incorporated herein by reference.
(D) Reflects the pro forma statements of operations of the Boston Park Plaza
Hotel Complex. See description of the acquisition in note 2 to the
Unaudited Combined and Separate Pro Forma Balance Sheets.
Additional information related to the property is as follows:
<TABLE>
<CAPTION>
For the Twelve Months Ending
----------------------------
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Average occupancy rate ............ 75% 71% 71%
Average room rate ................. $97.60 $90.40 $88.42
Revenue per available room ........ $73.20 $64.18 $62.78
</TABLE>
F-14
<PAGE> 18
(E) Pro Forma income from joint ventures and rents from leased hotel
properties reflect the Companies' proportionate share of (i) increases
from management fees earned, (ii) decreases in administrative and
operating expenses resulting primarily from reduction in personnel and
other administrative costs, (iii) differences in depreciation and (iv)
intercompany rents as follows:
<TABLE>
<CAPTION>
Twelve Months Ended December 31, 1994
-------------------------------------
Trust Corporation Combined
----- ----------- --------
<S> <C> <C> <C>
Additional management fees
earned .......................... -- 833,000 833,000
Decrease in personnel and
other administrative costs ...... -- 2,586,000 2,586,000
Difference in depreciation ....... (573,000) 613,000 40,000
Intercompany rents ............... 8,054,000 (8,054,000)
--------- --------- ---------
7,481,000 (4,022,000) 3,459,000
========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
Nine Months Ended September 30, 1996
------------------------------------
Trust Corporation Combined
----- ----------- --------
<S> <C> <C> <C>
Additional Mgmt Fees ........... -- 572,000 572,000
Earned Decrease in
personnel and other
administrative costs .......... -- 1,704,000 1,704,000
Difference in depreciation ..... (430,000) 274,000 (156,000)
Intercompany rents ............. 5,152,000 (5,152,000)
--------- --------- ---------
4,722,000 (2,602,000) 2,120,000
========= ========== =========
</TABLE>
(F) The Corporation intends to operate all of the Companies' hotels and
terminate existing third party management contracts for all properties at
the earliest practicable date. Accordingly, certain costs directly
attributable to existing third party management contracts included in the
pro forma statements of operations have been eliminated. Such cost savings
are reflected in the pro forma statements of operations as if such
contracts had been canceled as of the beginning of the periods presented.
Listed below are the hotels on which third party management contracts have
been or are anticipated to be terminated and the related management and
other fees incurred in each period.
F-15
<PAGE> 19
<TABLE>
<CAPTION>
Fees Paid (1)
----------------------
12 Months 9 Months
Ended Ended
12/31/94 9/30/95 Status
--------- -------- ------
Hotel
<S> <C> <C> <C>
Holiday Inn - Albany, GA ........ $ 160,000 $ 9,000 Terminated
Best Western - Columbus, OH ..... 156,000 33,000 Cancelable in 1995
Best Western - Savannah, GA ..... 109,000 21,000 Cancelable in 1995
Radisson - Gainesville, FL ...... 149,000 19,000 Cancelable in 1996
Park Central - Dallas, TX ....... 342,000 34,000 Terminated
Capital Hill - Washington, DC ... 143,000 43,000 Cancelable in 1995
French Quarter - Lexington, KY .. 432,000 21,000 Terminated
Doubletree - Rancho Bernardo, CA 237,000 67,000 Terminated
Colony Square - Atlanta, GA ..... 624,000 139,000 Terminated
Omni - Chapel Hill, NC .......... 92,000 23,000 Terminated
Embassy Suites - Tempe, AZ ...... 284,000 406,000 Terminated
Doral Inn - New York, NY ........ 631,000 433,000 Cancelable in 1995
---------- ----------
3,359,000 1,248,000
========== ==========
</TABLE>
- ------------------
(1) Fees include base and incentive management fees as well as accounting fee
chargebacks and other corporate costs.
Pro Forma administrative and operating expenses reflect (i) increases in
operating expenses resulting principally from additional corporate office
personnel and (ii) decreases in operating expenses resulting form a
decrease in director's and officers' liability insurance. Such cost
adjustments are reflected in the pro forma statements of operations as
follows:
<TABLE>
<CAPTION>
Administrative and
Operating Expenses
------------------
12 Months 9 Months
Ended Ended
12/31/94 9/30/95
-------- -------
<S> <C> <C>
Additional personnel costs and corporate travel........... $ 486,000 $ 97,000
Decrease in directors' and officers' liability insurance.. (200,000) (87,000)
--------- --------
$ 286,000 $ 10,000
========= ========
</TABLE>
(G) Reflects the elimination of historical and pro forma interest expense
related to the debt repaid from the proceeds of the Offering and the
addition of interest expense on pro forma amounts outstanding.
(H) Reflects Starwood Capital's minority interest in the income of the
Partnerships.
F-16
<PAGE> 20
(I) Net income (loss) per paired share has been computed using the weighted
average number of paired shares and equivalent paired shares outstanding.
All paired share information has been adjusted to reflect a one-for-six
reverse split effective June 12, 1995.
(J) Reflects pro forma adjustment for rents on the following hotels
contributed by Starwood Capital in the Reorganization and hotels and land
acquired by the Companies in 1995. The hotel leases between the Trust and
the Corporation provide for annual base or minimum rents plus contingent
or percentage rents based on the gross revenue of the properties and are
accounted for as operating leases.
<TABLE>
<CAPTION>
Hotel Date Contributed/Acquired
- ------------------------------------- -------------------------
<S> <C>
Capitol Hill - Washington, DC........ January 1, 1995
French Quarter - Lexington, KY....... January 1, 1995
Doubletree - Rancho Bernardo, CA..... January 1, 1995
Harvey - Wichita, KS................. January 1, 1995
Omni - Chapel Hill, NC............... April 6, 1995
Colony Square - Atlanta, GA.......... July 24, 1995
Embassy Suites - Tempe, AZ........... July 27, 1995
Doral Inn - New York, NY............. September 20, 1995
</TABLE>
(K) Reflects interest on the notes payable from the Corporation to the Trust
at 9.5% for the note secured by the leasehold interest in the Doral
property, prime plus 3% for notes secured by the Milwaukee property and
prime plus 2% for unsecured notes.
(L) Reflects the amortization of organization costs related to the formation
of the Partnerships over a five-year period.
F-17
<PAGE> 21
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Partners of
The Boston Park Plaza Hotel Limited Partnership:
We have audited the accompanying balance sheets of The Boston Park Plaza Hotel
Limited Partnership (a Massachusetts limited partnership) (the Partnership) as
of October 31, 1993 and 1994, and the related statements of income, partners'
deficit and cash flows for the years then ended. 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 audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of The Boston Park Plaza Hotel
Limited Partnership as of October 31, 1993 and 1994, and the results of its
operations and its cash flows for the years then ended in conformity with
generally accepted accounting principles.
As more fully described in Note 6 to the financial statements, one of the
Partnership's two general partners, Donald L. Saunders, has asserted on behalf
of the Partnership that the Boston Park Plaza Hotel Operating Company, Inc. (the
Operating Company) is in default of its lease with the Partnership as it relates
to the payment of rent and other claims. The Partnership has thus notified the
Operating Company that it is in default under its lease with the Partnership and
has brought legal action against the Operating Company. The other general
partner, Roger A. Saunders, has denied these claims and has asserted
counterclaims against Donald L. Saunders, related to the operations of the
Partnership. Both parties have agreed to use a Special Master appointed by the
court to determine all such claims. At this time, the ultimate resolution of
these items is uncertain as is the recovery, if any, from the Operating Company
of any amounts referenced in the claims. The accompanying financial statements
do not include any adjustments that might result from the ultimate resolution of
these matters.
In addition, the Partnership has disputed certain charges from the Operating
Company as of October 31, 1994. These charges have been offset by the Operating
Company against the amounts it owes to the Partnership. The resulting difference
in the receivable recorded by the Partnership and the payable recorded by the
Operating Company is $2,031,260 as of October 31, 1994. At this time, the
ultimate resolution of these items is uncertain, as is the recovery, if any,
from the Operating Company of any amounts referenced in the claims. The
accompanying financial statements do not include any adjustments that might
result from the ultimate resolution of these matters.
ARTHUR ANDERSEN LLP
Boston, Massachusetts
August 10, 1995
F-18
<PAGE> 22
THE BOSTON PARK PLAZA HOTEL LIMITED PARTNERSHIP
BALANCE SHEETS
<TABLE>
<CAPTION>
OCTOBER 31, SEPTEMBER 30,
ASSETS 1993 1994 1995
(UNAUDITED)
<S> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents (Note 3) $ 512,293 $ 100,804 $ 71,571
Accounts receivable-
Trade, less allowance for doubtful accounts of $274,000 in
1993, $256,000 in 1994 and $136,000 in 1995 (Note 8)
The Boston Park Plaza Hotel Operating 288,534 266,031 190,053
Company, Inc., an affiliate (Notes 6 and 7)
Other 1,286,917 2,759,689 3,048,959
Loan receivable from co-general partners and certain limited 42,682 182,652 124,816
partners
Prepaid expenses -- -- 744,851
256,326 66,279 87,891
----------- ----------- -----------
Total current assets
2,386,752 3,375,455 4,268,141
----------- ----------- -----------
PROPERTY AND EQUIPMENT (Notes 1 and 2):
Land
Buildings and improvements 794,826 794,826 794,826
Furniture and equipment 16,053,443 16,207,081 15,649,282
13,734,714 13,831,265 14,425,070
----------- ----------- -----------
30,582,983 30,833,172 30,869,178
Less--Accumulated depreciation and amortization
20,031,296 21,080,376 21,804,450
----------- ----------- -----------
Property and equipment, net
10,551,687 9,752,796 9,064,728
----------- ----------- -----------
OTHER ASSETS:
Deferred lease commissions (Note 2)
Other (Note 2) 295,544 311,812 254,484
198,703 202,362 34,267
----------- ----------- -----------
494,247 514,174 288,751
----------- ----------- -----------
Total assets
$13,432,686 $13,642,425 $13,621,620
=========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
OCTOBER 31, SEPTEMBER 30,
LIABILITIES AND PARTNERS' DEFICIT 1993 1994 1995
(UNAUDITED)
<S> <C> <C> <C>
CURRENT LIABILITIES:
Current maturities of long-term debt and
capital lease obligations (Notes 4 and 6) $ 199,036 $ 226,893 $ 25,251,832
Accounts payable 272,341 477,828 763,306
Accrued expenses 568,257 245,780 221,508
Tenant security deposits and rent paid in advance 353,013 410,025 372,658
Amounts payable to co-general partners -- 163,587 163,587
Notes payable to general partner -- -- 149,549
------------ ------------ ------------
Total current liabilities 1,392,647 1,524,113 26,922,440
------------ ------------ ------------
LONG-TERM DEBT, NET OF CURRENT MATURITIES (Note 4) 25,284,956 25,144,114 --
CAPITAL LEASE OBLIGATION, NET OF CURRENT MATURITIES (Note 6)
433,224 335,599 247,203
------------ ------------ ------------
Total liabilities
27,110,827 27,003,826 27,169,643
------------ ------------ ------------
PARTNERS' DEFICIT
(13,678,141) (13,361,401) (13,548,023)
------------ ------------ ------------
Total liabilities and partners' deficit
$ 13,432,686 $ 13,642,425 $ 13,621,620
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-19
<PAGE> 23
W THE BOSTON PARK PLAZA HOTEL LIMITED PARTNERSHIP
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
ELEVEN MONTHS ENDED
YEAR ENDED OCTOBER 31, SEPTEMBER 30,
1993 1994 1994 1995
(UNAUDITED)
<S> <C> <C> <C> <C>
REVENUE:
Rentals-
Partnership tenants (Note 6(a)) $ 1,013,323 $ 1,076,099 $ 882,021 $ 874,719
Statler Division (Note 6(b)) 4,285,459 4,044,180 3,677,971 4,274,046
The Boston Park Plaza Hotel Operating Company,
Inc., an affiliate (Notes 6 and 7) 5,108,577 5,856,882 5,368,808 5,502,805
Armory Drill Hall/Plaza Castle (Note 6(e)) 240,000 256,738 235,901 230,163
----------- ----------- ----------- -----------
Total revenue 10,647,359 11,233,899 10,164,701 10,881,733
----------- ----------- ----------- -----------
OPERATING EXPENSES:
Property operation, insurance, maintenance
and utility costs 2,450,259 2,598,338 2,317,647 2,468,599
General and administrative expenses 2,417,139 3,945,234 3,572,997 3,763,113
Property taxes 1,502,006 1,524,870 1,382,983 1,428,687
Depreciation and amortization 1,324,705 1,131,896 1,018,060 786,215
----------- ----------- ----------- -----------
7,694,109 9,200,338 8,291,687 8,446,614
----------- ----------- ----------- -----------
Operating income 2,953,250 2,033,561 1,873,014 2,435,119
OTHER INCOME (EXPENSE):
Interest expense (2,296,720) (2,133,897) (1,953,884) (2,203,941)
Interest income 111,247 49,393 49,127 2,592
Miscellaneous 363,377 425,096 376,870 79,608
----------- ----------- ----------- -----------
Net income $ 1,131,154 $ 374,153 $ 345,127 $ 313,378
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-20
<PAGE> 24
THE BOSTON PARK PLAZA HOTEL LIMITED PARTNERSHIP
STATEMENTS OF PARTNERS' DEFICIT
<TABLE>
<CAPTION>
GENERAL LIMITED
PARTNERS PARTNERS TOTAL
<S> <C> <C> <C>
BALANCE, OCTOBER 31, 1992 $(18,912,865) $ 4,142,284 $(14,770,581)
Allocation of net income for the year ended October 31,
1993 (Note 1) 22,623 1,108,531 1,131,154
Distributions (38,714) -- (38,714)
------------ ----------- ------------
BALANCE, OCTOBER 31, 1993 (18,928,956) 5,250,815 (13,678,141)
Allocation of net income for the year ended
October 31, 1994 (Note 1) 7,483 366,670 374,153
Distributions (57,413) -- (57,413)
------------ ----------- ------------
BALANCE, OCTOBER 31, 1994 (18,978,886) 5,617,485 (13,361,401)
Allocation of net income for the eleven-month period
ended September 30, 1995 (unaudited) 6,268 307,110 313,378
Distributions (unaudited) (10,000) (490,000) (500,000)
------------ ----------- ------------
BALANCE, SEPTEMBER 30, 1995 (UNAUDITED) $(18,982,618) $ 5,434,595 $(13,548,023)
============ =========== ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-21
<PAGE> 25
THE BOSTON PARK PLAZA HOTEL LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
ELEVEN MONTHS ENDED
YEAR ENDED OCTOBER 31, SEPTEMBER 30,
1993 1994 1994 1995
(UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C> <C> <C>
Net income $ 1,131,154 $ 374,153 $ 345,127 $ 313,378
Adjustments to reconcile net income to net cash
provided by operating activities-
Depreciation and amortization 1,324,705 1,131,896 1,018,060 786,215
Changes in current assets and liabilities-
Allowance for accounts receivable 131,000 (18,000) 85,000 (120,000)
Accounts receivable 43,082 (1,572,239) (1,398,613) (35,456)
Loan receivable from co-general partners and
certain limited partners -- -- -- (744,851)
Prepaid expenses 187,171 190,047 159,118 (21,612)
Accounts payable (181,743) 205,487 226,535 285,478
Accrued expenses 336,381 (322,477) (457,747) (24,272)
Tenant security deposits and rent paid in advance (81,459) 57,012 42,710 (37,367)
Amounts payable to co-general partners -- 163,587 -- --
----------- ----------- ----------- ----------
Net cash provided by operating activities 2,890,291 209,466 20,190 401,513
----------- ----------- ----------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment (1,928,360) (250,189) (266,198) (36,006)
(Additions to) deductions from deferred lease
commissions and other (121,068) (102,743) (28,135) 163,282
----------- ----------- ----------- ----------
Net cash provided by (used in) investing
activities (2,049,428) (352,932) (294,333) 127,276
----------- ----------- ----------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal borrowings -- -- -- 149,549
Principal payments of long-term debt (119,174) (140,842) (130,008) (119,175)
Distributions to partners (38,714) (57,413) -- (500,000)
Payments of notes payable to partner (585,930) -- -- --
Principal payments under capital lease obligation (69,679) (69,768) (62,168) (88,396)
----------- ----------- ----------- ----------
Net cash used in financing activities (813,497) (268,023) (192,176) (558,022)
----------- ----------- ----------- ----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 27,366 (411,489) (466,319) (29,233)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 484,927 512,293 512,293 100,804
----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 512,293 $ 100,804 $ 45,974 $ 71,571
----------- ----------- ----------- ----------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest $ 2,119,888 $ 2,310,728 $ 1,905,977 $2,115,715
=========== =========== =========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-22
<PAGE> 26
THE BOSTON PARK PLAZA HOTEL LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1994
(1) ORGANIZATIONAL STRUCTURE AND TAX STATUS
The Boston Park Plaza Hotel Limited Partnership (the Limited Partnership
or the Partnership), a Massachusetts limited partnership organized on
January 28, 1977, is the beneficial owner and operator of a building which
consists of approximately 1,000,000 square feet of total space on 14
floors. Approximately 700,000 square feet of the Partnership's space is
operated as the Boston Park Plaza Hotel and Towers (the Hotel), containing
966 rooms. The remaining space is operated as the Statler Building
Division (the Division) and consists of leasable office and retail space
and common areas such as boiler and engine rooms and the underlying land.
The Partnership also directly owns the Armory of the 1st Corps of Cadets
(also known as the Armory Head House and the Armory Drill Hall/Plaza
Castle), which contains approximately 21,000 square feet of office space
on eight floors of the Head House Section and approximately 20,000 square
feet of exhibition hall space on the single street level adjoining the
Armory Head House. The Hotel and the Armory Drill Hall/Plaza Castle are
operated on a tenancy-at-will basis through an affiliate (see Notes 6 and
7).
Legal title to the real estate (except for the entire Armory building
referred to above) is held in the name of The Boston Park Plaza Hotel
Trust, a nominee trust (the Trust). The two general partners of the
Partnership are also the same two trustees of the Trust. The beneficiary
of the Trust is the Limited Partnership.
The Partnership Agreement provides that the net profits and net losses of
the Partnership, before deduction of depreciation expense, are to be
allocated to the general partners and the limited partner in the
respective amounts of 2% and 98%. The Partnership will expire on January
28, 1997, or earlier, if agreed to by the two general partners or as
provided in the Partnership Agreement.
For income tax purposes, Partnership returns are filed, and accordingly,
all taxable income or loss and available tax credits are reported pro rata
by the partners on their respective individual and trust tax returns.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Property and Equipment
Property and equipment are reported at cost. Depreciation for financial
statement purposes is computed primarily using the accelerated method
acceptable for tax purposes in the year the asset is placed into service.
Buildings and building improvements are depreciated primarily using the
straight-line method over the useful lives of 15 to 39 years. Leased
assets are depreciated over the lease term (five years) on a straight-line
basis.
F-23
<PAGE> 27
THE BOSTON PARK PLAZA HOTEL LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1994
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Intangible Assets
Deferred lease commissions are amortized using the straight-line method
and charged against income over the respective terms of the related
leases.
Accounting for Leases
(A) RENTALS UNDER LEASES
The Partnership, as lessor, classifies its leases with its tenants
as operating leases (see Note 6). Rent is reported as income over
the lease term in a systematic manner, usually the straight-line
method, and the leased property is depreciated like other
productive assets.
(B) OBLIGATIONS UNDER OPERATING AND CAPITAL LEASES
Leases that transfer most of the benefits and risks of ownership of
an asset are classified as capital leases, wherein the leased
property is accounted for as an asset by the Partnership and the
payment obligations are accounted for as a liability. Other leases
that do not transfer any benefits or risks of ownership of an asset
are classified as operating leases by the Partnership, and payments
are charged to rental expense.
(3) CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of the following:
<TABLE>
<CAPTION>
1993 1994
<S> <C> <C>
Cash-
On hand $ 1,275 $ 1,275
Demand deposits 300,961 69,844
Cash equivalents-
Money market accounts 210,057 29,685
-------- --------
Total cash and cash equivalents,
at cost which approximates market $512,293 $100,804
======== ========
</TABLE>
F-24
<PAGE> 28
THE BOSTON PARK PLAZA HOTEL LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1994
(4) LONG-TERM DEBT
On May 6, 1986, the Partnership issued a $26 million mortgage note payable
(the Note) to Barclays American Business Credit, Inc. (Barclays) for
purposes of refinancing the then-existing mortgage notes payable and for
other Partnership purposes. The original term of the Note was seven years,
with an option for the Partnership to extend for an additional three years
at the request of the Partnership. Principal payments commenced on May 1,
1989 in monthly installments of $10,834. In fiscal 1993, the Partnership
exercised its option to extend the note repayment until May 1, 1996.
Principal payments of $10,834 will continue through May 1, 1996, with the
remaining balance due for payment at that time.
Current interest requirements on the Note are based on a contract rate, as
defined, which offers the Partnership a choice of three interest options
based on the interest rates of different financial instruments. The
contract rate for the period from November 1993 through October 1994 was
8.08%. The effective interest rate was 8.08% and 8.44% for the years ended
October 31, 1993 and 1994, respectively. The Note stipulates that when the
contract rate exceeds 12%, the Partnership may elect to defer payment of
the amount of interest expense in excess of 12% to a cumulative maximum of
$2,600,000. Furthermore, when the interest rate is below 12%, the
Partnership is required to make payments at the same rate, with the
difference applied against any deferred interest. There was accumulated
deferred interest of $173,620 as of October 31, 1991, which was repaid
based on interest payments at the contract rate in fiscal 1992. There was
no deferred interest added to the note in 1993 or 1994. Interest is
payable monthly in arrears.
The Note is secured by a majority of the Partnership's assets, exclusive
of the assets of the Armory. The Partnership can prepay the Note subject
to certain restrictions based upon the interest rate selected. The Note is
subject to certain covenants, including compliance with certain financial
ratios and reporting requirements; the Partnership is in compliance with
all such covenants at October 31, 1994, with the exception of a reporting
requirement that was subsequently extended to September 30, 1995.
The following is a summary of the principal payments required for the Note
in each of the years following October 31, 1994:
<TABLE>
<CAPTION>
Years Ending October 31,
<S> <C>
1995 $ 130,008
1996 25,144,114
-----------
$25,274,122
===========
</TABLE>
F-25
<PAGE> 29
THE BOSTON PARK PLAZA HOTEL LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1994
(5) EMPLOYEE BENEFIT PLAN
The Partnership participates in a 401(k) plan (the Plan), established in
1988 by an affiliate. Participants may elect annually to contribute up to
15% of their compensation to the Plan, up to a defined maximum. The
Partnership will make a matching contribution equal to 50% of the
employees' contributions, not to exceed 2.5% of the employees'
compensation. Additionally, discretionary contributions can be made each
year by the Partnership. There is a vesting of certain contributions made
by the Partnership on behalf of the participants from 0% (less than one
year of service) to 100% (six years of service).
For the years ended October 31, 1993 and 1994, the Partnership made
matching contributions of $12,261 and $7,339, respectively, to the Plan on
behalf of the Partnership's employees. No discretionary contributions were
made for the years ended October 31, 1994 or 1993.
(6) RENTALS UNDER LEASES
(a) Partnership Tenants
The retail spaces in the entire property, including the Hotel, are
leased, operated and managed by the Statler Division of the Limited
Partnership.
(b) Statler Division
The Partnership leases space to approximately 200 commercial office
and retail tenants for periods generally ranging from one to ten
years. Under the terms of many of the lease contracts, the
Partnership receives annual rentals, payable monthly, computed on the
basis of a contract rent as stated in each lease which, in certain
leases, is adjusted annually for increases in the consumer price
index, plus additional rent based upon changes in real estate taxes
and operating costs compared to certain base years. The rent charged
to certain retail tenants is also calculated on a percentage-of-sales
basis. Percentage rent payments are generally paid one month in
arrears, following the sales reporting from these same retail
tenants' contracts referred to above.
F-26
<PAGE> 30
THE BOSTON PARK PLAZA HOTEL LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1994
(6) RENTALS UNDER LEASES (Continued)
(b) Statler Division (Continued)
The following is a schedule of minimum future rental income from
operating leases of the Partnership tenants and the Statler division
as of October 31, 1994:
<TABLE>
<CAPTION>
MINIMUM
FUTURE
RENTALS
Years Ending October 31,
<S> <C>
1995 $ 2,928,398
1996 2,285,311
1997 1,844,369
1998 1,440,600
1999 1,115,140
2000 and thereafter 3,023,720
-----------
Total minimum future rentals $12,637,538*
===========
</TABLE>
* This amount does not include rentals that may be received in
excess of stipulated minimums for escalation billings related
to real estate taxes and operating costs. Percentage sales
rents in excess of stipulated minimums were $847,000 and
$850,000 for the years ended October 31, 1993 and 1994,
respectively.
(c) Hotel
The Partnership leases approximately 700,000 square feet of the
building's total space to the Boston Park Plaza Hotel Operating
Company, Inc. (the Operating Company), an affiliated entity, for the
purpose of operating the Hotel. The two general partners of the
Partnership are also the sole stockholders of the Operating Company.
The lease between the Partnership and the Operating Company is a
one-year lease. For the eleven-month period ended September 30, 1994,
the rent was calculated based on 95% of the Operating Company's net
profit (as defined in the lease). As discussed in the following
paragraph, this determination is currently a matter of dispute
between the two general partners.
F-27
<PAGE> 31
THE BOSTON PARK PLAZA HOTEL LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1994
(6) RENTALS UNDER LEASES (Continued)
(c) Hotel (Continued)
There is presently certain litigation that arose out of disputes
between the Partnership's two general partners. One of the
Partnership's general partners, Donald L. Saunders, has asserted
on behalf of the Partnership that the Operating Company is in
default on its lease with the Partnership as it relates to the
payment of rent, other expenses under this provision of the lease
and other claims. The claim alleges that amounts due to the
Partnership from the Operating Company for 1994 and prior for
unpaid rent and other claims amounts to approximately $39,469,937
as of October 31, 1994. The financial statements of the Operating
Company show a net worth as of October 31, 1994 of approximately
$3.3 million without consideration for these amounts. The
Partnership has notified the Operating Company that it is in
default under its lease with the Partnership and has brought legal
action against the Operating Company. The other general partner,
Roger A. Saunders, has denied these claims and has asserted
counterclaims against Donald L. Saunders related to the operations
of the Partnership. Both parties have agreed to use a Special
Master appointed by the court to determine these claims. At this
time, the ultimate resolution of these items is uncertain, as is
the recovery, if any, of the claims due from the Operating
Company. The accompanying financial statements do not include any
adjustments that might result from the ultimate resolution of
these matters.
In addition, the Partnership has disputed certain charges from the
Operating Company as of October 31, 1994. These charges have been
offset by the Operating Company against the amounts it owes to the
Partnership. The resulting difference in the receivable recorded
by the Partnership and the payable recorded by the Operating
Company is $2,031,260 as of October 31, 1994. At this time, the
ultimate resolution of these items is uncertain, as is the
recovery, if any, of the claims due from the Operating Company.
The accompanying financial statements do not include any
adjustments that might result from the ultimate resolution of
these matters.
F-28
<PAGE> 32
THE BOSTON PARK PLAZA HOTEL LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1994
(6) RENTALS UNDER LEASES (Continued)
(d) Capital Leases
The Partnership leases certain equipment under capital lease
agreements. Future minimum payments under these leases as of
October 31, 1994 are as follows:
<TABLE>
<CAPTION>
AMOUNT
<S> <C>
Years Ending October 31,
1995 $140,223
1996 140,223
1997 139,776
1998 112,381
--------
532,603
Less--Amounts representing interest 100,119
--------
Present value of minimum lease payments 432,484
Less--Amounts included in current liabilities 96,885
--------
$335,599
========
</TABLE>
(e) Armory Drill Hall/Plaza Castle
Rental income from the Operating Company for the use of the Armory
Drill Hall/Plaza Castle was recorded to be $250,000 and $240,000
for the years ended October 31, 1993 and 1994, respectively. These
amounts were accounted for through the intercompany account, as no
cash payments were made. The rental terms are in dispute and
included as part of the litigation discussed in Note 6(c). The
claim alleges that the net rental payments from the Operating
Company shall be a minimum of $250,000 in cash, not by
intercompany transactions, plus out-of-pocket expenses, and the
Operating Company shall assume the cost of all operating expenses,
including real estate taxes. The counter claim denies these
assertions.
F-29
<PAGE> 33
THE BOSTON PARK PLAZA HOTEL LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1994
(7) RELATED PARTY TRANSACTIONS
The following is a summary of the major transactions with related parties
for the years ending October 31, 1993 and 1994:
(a) Amounts Payable to Co-general Partners
Amounts payable to co-general partners represent amounts owed for
expenses paid by partners and/or affiliates on behalf of the
Partnership.
(b) Boston Park Plaza Hotel Operating Company, Inc.
Amounts due to and from the Operating Company represent
intercompany activity resulting from the payment of certain
invoices, cash transfers and rental arrangements. Donald L.
Saunders alleges that the payments have not been made in
accordance with agreements between the two general partners.
(c) Utility Expenses
Total utility costs for the property for the years ended October
31, 1993 and 1994 were approximately $2,337,000 and $2,265,000,
respectively, of which the respective amounts of approximately
$391,000 and $374,000 were charged to the Partnership. These
amounts are also in dispute and are included as part of the
litigation discussed in Note 6(c). The claim alleges that all
utility expenses historically and prospectively are to be borne by
the Operating Company. The counter claim denies these allegations.
(d) Partners' Compensation/Management Fees
For the years ended October 31, 1994 and 1993, no management fees
were paid by the Parntership to Donald L. Saunders.
The litigation discussed in Note 6(c) alleges that payments were
improperly made to Roger A. Saunders and his sons and to their
other entities for amounts yet to be determined, as is the effect,
if any, on the Partnership's financial statements. The Operating
Company paid $153,413 directly to these other entities in fiscal
1994 and, in addition, paid $1,227,891 to unrelated third parties
for amounts incurred by the related entities on behalf of the
Operating Company. These amounts are included in the disputed
charges discussed in Note 6(c), and no adjustment has been made to
the accompanying financial statements to reflect the potential
outcome of this uncertainty.
F-30
<PAGE> 34
THE BOSTON PARK PLAZA HOTEL LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1994
(7) RELATED PARTY TRANSACTIONS (Continued)
(e) Notes Payable to a General Partner
During 1990 and 1989, Mr. Donald L. Saunders, one of the two
general partners, loaned approximately $682,000 and $615,000,
respectively, totaling $1,297,000, to the Partnership, of which
$585,930 remained outstanding as of October 31, 1992. The
remaining balance of the notes was paid off in August 1993.
Interest expense related to these notes, incurred by the
Partnership, was $51,970 for the year ended October 31, 1993.
Principal and interest payments were made directly to a bank loan
account held by this general partner.
(8) MATTERS RELATED TO UNAUDITED PERIODS (UNAUDITED)
In November 1995, Starwood Lodging Trust and Donald L. Saunders, one of
the two general partners, entered into an agreement to purchase the other
Partnership interests and The Boston Park Plaza Hotel. The transaction is
expected to be completed in 1996.
As more fully discussed in Note 6, the Partnership has continued to
dispute certain charges from the Operating Company. The difference in the
receivable recorded by the Partnership and the payable recorded by the
Operating Company is $3,937,190 as of September 30, 1995. The principal
components of this difference are the treatment of certain fixed asset
purchases ($2,302,075) and certain operating and management charges. The
Partnership has not recorded any depreciation expense on these fixed
assets as the amounts are in dispute. The Partnership has also recorded
as a receivable certain amounts paid to one of the general partners and
certain limited partners in the amount of $638,114 as of September 30,
1995. The ultimate resolution of these items is uncertain as is the
recovery of these amounts pending the determination of these claims by
the Special Master. The accompanying financial statements do not include
any adjustments that might result from the ultimate resolution of these
matters.
F-31
<PAGE> 35
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders of
The Boston Park Plaza Hotel Operating Company, Inc.:
We have audited the accompanying balance sheets of The Boston Park Plaza Hotel
Operating Company, Inc. (the Company), as of October 31, 1994 and 1993, and the
related statements of operations and retained earnings 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 financial position of The Boston Park Plaza Hotel
Operating Company, Inc. as of October 31, 1994 and 1993, and the results of its
operations and its cash flows for the years then ended, in conformity with
generally accepted accounting principles.
As further discussed in Note 2 to the financial statements, one of the general
partners of The Boston Park Plaza Hotel Limited Partnership (the Partnership),
Donald L. Saunders, an affiliate, has filed claims purportedly on behalf of the
Partnership against the Company relating to amounts allegedly due under the
lease between the parties and other disputes. The Partnership has notified the
Company claiming that the Company is in default under its lease with the
Partnership and has brought legal action against the Company. The other general
partner, Roger A. Saunders, has denied these claims and has asserted
counterclaims against Donald L. Saunders, related to the operations of the
Partnership.
In addition, the Partnership has disputed certain charges related to capital
improvements and other items from the Company for the years ended October 31,
1994. Payment for such items has been offset by the Company against the amount
it owes the Partnership. The resulting difference in the receivable recorded by
the Partnership and the payable recorded by the Company is $2,031,260 as of
October 31, 1994. At this time, the ultimate resolution of these items is
uncertain as is the liability of the Company to the Partnership, if any, as a
result of the claims discussed in the preceding paragraph. The accompanying
financial statements do not include any adjustments that might result from the
ultimate resolution of these matters.
ARTHUR ANDERSEN LLP
Boston, Massachusetts
August 17, 1995
F-32
<PAGE> 36
THE BOSTON PARK PLAZA HOTEL
OPERATING COMPANY, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS OCTOBER 31, SEPTEMBER 30,
1993 1994 1995
(UNAUDITED)
<S> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $2,101,498 $1,517,893 $1,809,145
Accounts receivable, less
allowance for doubtful
accounts of $120,745 in 1994
and $63,509 in 1993 (Note 5) 3,816,806 4,417,041 2,921,923
Due from The Boston Park Plaza
Hotel Limited Partnership
(Notes 2 and 5) - - 888,231
Other receivables (Note 5) 210,592 227,560 119,025
Inventories 219,828 243,354 166,231
Prepaid expenses 163,772 196,178 144,482
Refundable income taxes - 27,900 --
Net deferred tax asset (Note 3) 195,000 324,500 249,908
---------- ---------- ----------
Total current assets 6,707,496 6,954,426 6,298,945
---------- ---------- ----------
OTHER ASSETS 62,500 62,500 --
---------- ---------- ----------
Total assets $6,769,996 $7,016,926 $6,298,945
========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' OCTOBER 31, SEPTEMBER 30,
EQUITY 1993 1994 1995
(UNAUDITED)
<S> <C> <C> <C>
CURRENT LIABILITIES:
Accounts payable $ 268,885 $ 338,784 $ 922,714
Due to The Boston Park
Plaza Hotel Limited
Partnership (Notes 2 and 5) 1,228,397 728,428 --
Advance deposits 101,485 194,172 271,332
Accrued payroll 441,281 517,567 619,689
Other accrued liabilities
(Notes 4 and 5)-
Accrued vacation 448,196 460,434 486,187
Accrued insurance 340,787 502,778 402,264
Accrued legal 2,941 210,480 --
Other 845,038 777,641 405,577
---------- ---------- ----------
Total current
liabilities 3,677,010 3,730,284 3,107,763
---------- ---------- ----------
COMMITMENTS AND CONTINGENCIES
(Notes 2, 4 and 6)
STOCKHOLDERS' EQUITY:
Common stock, no par value-
Authorized--12,500 shares
Issued and outstanding--100
shares 500 500 500
Retained earnings 3,092,486 3,286,142 3,190,682
---------- ---------- ----------
Total stockholders'
equity 3,092,986 3,286,642 3,191,182
---------- ---------- ----------
Total liabilities and
stockholders' equity $6,769,996 $7,016,926 $6,298,945
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-33
<PAGE> 37
THE BOSTON PARK PLAZA HOTEL
OPERATING COMPANY, INC.
STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
<TABLE>
<CAPTION>
ELEVEN MONTHS ENDED
YEARS ENDED OCTOBER 31, SEPTEMBER 30,
1993 1994 1994 1995
<C> <C> <C> <C>
(UNAUDITED)
REVENUES:
Rooms $22,535,871 $25,777,520 $22,349,704 $23,076,954
Food and beverage 8,699,519 8,933,391 7,930,197 8,431,785
Telephone 962,985 1,001,752 877,298 944,447
Other 1,318,301 1,292,783 1,118,876 1,258,932
----------- ----------- ----------- -----------
Total revenues 33,516,676 37,005,446 32,276,075 33,712,118
----------- ----------- ----------- -----------
DEPARTMENTAL EXPENSES:
Rooms 7,376,968 7,958,302 7,077,293 7,672,130
Food and beverage 8,018,902 8,687,828 7,811,107 7,871,665
Telephone 531,553 566,319 503,010 571,756
Other 762,960 875,339 786,854 832,941
----------- ----------- ----------- -----------
Total departmental expenses 16,690,383 18,087,788 16,178,264 16,948,492
----------- ----------- ----------- -----------
OPERATING EXPENSES:
Administrative and general 3,773,799 3,935,351 4,044,320 4,190,436
Marketing and promotion 2,272,579 2,168,781 1,933,743 2,113,927
Property operation and maintenance 3,127,634 3,649,189 3,265,577 3,222,613
Energy costs 1,965,796 2,044,285 1,883,971 1,881,639
----------- ----------- ----------- -----------
Total undistributed operating
expenses 11,139,808 11,797,606 11,127,611 11,408,615
----------- ----------- ----------- -----------
Gross operating profit 5,686,485 7,120,052 4,970,200 5,355,011
CAPITAL EXPENSES:
Fixed charges 271,304 263,579 240,530 251,875
Rent (Note 2) 5,108,578 5,856,882 4,496,498 4,847,979
Other 37,732 691,332 -- --
Corporate excise tax 8,033 8,520 7,810 7,817
----------- ----------- ----------- -----------
Income before provision for income
taxes 260,838 299,739 225,362 247,340
PROVISION FOR INCOME TAXES (Note 3) 136,379 106,083 97,243 220,774
----------- ----------- ----------- -----------
Net income 124,459 193,656 128,119 26,566
RETAINED EARNINGS, BEGINNING OF YEAR 2,968,027 3,092,486 3,092,486 3,286,142
DIVIDENDS -- -- -- 122,026
----------- ----------- ----------- -----------
RETAINED EARNINGS, END OF YEAR $ 3,092,486 $ 3,286,142 $ 3,220,605 $ 3,190,682
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-34
<PAGE> 38
THE BOSTON PARK PLAZA HOTEL
OPERATING COMPANY, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED OCTOBER 31, ELEVEN MONTHS ENDED SEPTEMBER 30,
1993 1994 1994 1995
(UNAUDITED)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 124,459 $ 193,656 $ 128,119 $ 26,566
Adjustments to reconcile net income to net cash
provided by (used in) operating activities-
(Increase) decrease in accounts receivable (326,695) (600,235) (67,969) 1,495,118
(Increase) decrease in other receivables 235,766 (16,968) 85,376 108,535
(Increase) decrease in inventories 12,791 (23,526) (13,182) 77,123
(Increase) decrease in prepaid expenses 200,020 (32,406) (39,965) 51,696
Increase in refundable income taxes -- (27,900) (27,900) --
Increase in deferred tax asset (195,000) (129,500) (112,447) 102,492
Decrease in other assets -- -- -- 62,500
Increase (decrease) in accounts payable (48,765) 69,899 93,264 583,930
Increase (decrease) in advance deposits (68,088) 92,687 182,076 77,160
Increase in accrued payroll 180,299 76,286 (50,249) 102,122
Increase (decrease) in other accrued liabilities 429,636 314,371 169,068 (657,305)
---------- ---------- ----------- -----------
Net cash provided by (used in) operating
activities 544,423 (83,636) 346,191 2,029,937
---------- ---------- ----------- -----------
CASH FLOWS FROM INVESTING/FINANCING ACTIVITIES:
Increase (decrease) in due to the Boston Park
Plaza Hotel Limited Partnership 229,851 (499,969) (1,171,731) (1,616,659)
Dividends -- (122,026)
---------- ---------- ----------- -----------
Net cash provided by (used in)
investing/financing activities 229,851 (499,969) (1,171,731) (1,738,685)
---------- ---------- ----------- -----------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 774,274 (583,605) (825,540) 291,252
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 1,327,224 2,101,498 2,101,498 1,517,893
---------- ---------- ----------- -----------
CASH AND CASH EQUIVALENTS, END OF YEAR $2,101,498 $1,517,893 $ 1,275,958 $ 1,809,145
========== ========== =========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid during the year for-
Income taxes $ 240,700 $ 369,100 $ 309,100 $ 115,000
========== ========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-35
<PAGE> 39
THE BOSTON PARK PLAZA HOTEL
OPERATING COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1994
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Inventories and Operating Stock
Inventories, principally food and beverage, are carried at the
lower of cost (first-in, first-out) or market.
Acquisitions of operating stock, consisting of linen, china,
glassware and silver, are expensed when acquired.
(b) Property, Equipment and Depreciation
All of the property and equipment of the Boston Park Plaza Hotel
Operating Company, Inc. (the Company) are maintained and owned by
The Boston Park Plaza Hotel Limited Partnership (the Partnership),
and accordingly, such assets, along with the related depreciation,
are not presented in the accompanying financial statements.
(c) Income Taxes
Income taxes are provided based on the liability method of
accounting pursuant to Statement of Financial Accounting Standards
(SFAS) No. 109, Accounting for Income Taxes, which was adopted for
the year ended October 31, 1993. The adoption of SFAS No. 109 did
not have a material impact. Deferred income taxes are provided for
temporary differences resulting from income and expenses that are
reported for tax purposes in different years than for financial
reporting purposes. These temporary differences relate primarily
to workmen's compensation insurance, the reserve for bad debts and
accrued expenses, which are not currently deductible for tax
purposes.
(d) Cash and Cash Equivalents
For the purposes of the statements of cash flows, the Company
considers all highly liquid investments, purchased with a maturity
of three months or less, to be cash equivalents.
(d) Reclassification
Certain 1993 amounts have been reclassified to conform to the 1994
presentation.
F-36
<PAGE> 40
(2) OPERATING LEASE AND RELATED LITIGATION
The Company leases the property, including personal property, known as
The Boston Park Plaza Hotel (the Hotel), from the Partnership, an
affiliate. The Company's stockholders are the general partners of the
Partnership. The initial term of the lease was for the period from
January 28, 1977 to December 31, 1977. In accordance with the terms of
the lease agreement, the lease has been automatically extended from year
to year.
The rent has been calculated as the greater of (i) 95% of the lessee's
net profit, as defined, from the operation of the Hotel or (ii) 70% of
the lessor's debt service on its mortgage and real estate taxes related
to the Hotel, as defined. For the years ended October 31, 1994 and 1993,
rent was based on 95% of the lessee's net profit, as defined, and
amounted to $5,966,087 and $5,856,882, respectively. As discussed in the
following paragraph, the exact interpretation of this calculation and
other matters are in dispute.
There is presently certain litigation that arose out of disputes between
the Partnership's general partners. One of the Partnership's general
partners, Donald L. Saunders, has filed substantial claims purportedly on
behalf of the Partnership against the Company relating to amounts
allegedly due under the lease and other disputes. The Partnership has
rendered invoices to the Company for additional rent for the current and
prior years in the approximate amount of $39,500,000. The Partnership has
notified the Company claiming that it is in default under its lease with
the Partnership and has brought legal action against the Company. This
rent claim is based on Donald L. Saunders' recalculation in 1995 of the
rent allegedly due back to 1984. The other general partner, Roger A.
Saunders, has denied these claims and has asserted counterclaims against
Donald L. Saunders related to the operations of the Partnership.
In addition, the Partnership has disputed certain charges related to
capital improvements and other items from the Company for the years ended
October 31, 1994. These charges have been offset by the Company against
the amount it owes the Partnership. The resulting difference in the
receivable recorded by the Partnership and the payable recorded by the
Company is $2,031,260 as of October 31, 1994. At this time, the ultimate
resolution of these items is uncertain as is the liability of the
Company, if any, as a result of the claims. In the opinion of Hotel
management, based on the advice of its legal counsel, the Partnership's
claims are without merit, and the ultimate resolution of these matters
will not have a material adverse effect on the financial condition and
results of operations of the Company. The accompanying financial
statements do not include any adjustments that might result from the
ultimate resolution of these uncertainties.
F-37
<PAGE> 41
(3) INCOME TAXES
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
1994 1993
<S> <C> <C>
Current-
Federal $ 173,670 $ 170,700
State 61,913 48,167
Deferred tax benefit (129,500) (82,488)
--------- ---------
$ 106,083 $ 136,379
========= =========
</TABLE>
The net deferred tax asset consists of the following:
<TABLE>
<CAPTION>
1994 1993
<S> <C> <C>
Deferred tax assets $ 377,400 $258,400
Deferred tax liabilities (52,900) (63,400)
-------- --------
Net deferred tax asset $ 324,500 $195,000
======== ========
</TABLE>
(4) EMPLOYEE BENEFIT PLANS
The Company's union employees are covered by a defined contribution,
multiemployer union pension plan. Contributions to the plan are made in
accordance with a negotiated labor contract. Amounts charged to
operations for contributions to the plan amounted to $47,961 in 1994 and
$129,220 in 1993.
Under the collective bargaining agreement between the Company and the
Union, bonus compensation is provided to certain union employees based on
the attainment of a specified level of occupancy for a calendar year
among the nine hotels that are participants in the agreement. For the
years ended October 31, 1994 and 1993, the Company has accrued a
liability based on a preliminary estimate of occupancy totaling $146,600
and $159,880, respectively.
The Company participates in the Saunders Hotels Group Thrift Savings
Plan, a Section 401(k) plan, for its nonunion employees. The Company
contributes $.50 for each $1.00 contributed by its participating
employees to this plan, up to the first 6% of employees' compensation,
subject to eligibility requirements. Employees become vested in the
Company's contributions, based on length of employment, over a period of
seven years. The Company's contributions under this plan amounted to
$81,728 in 1994 and $70,706 in 1993.
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(5) RELATED PARTY TRANSACTIONS
Amounts due to the Partnership represent activity resulting from the
payment of certain invoices, cash transfers, capitalizable purchases and
net of the rent charge for the Hotel premises. In addition, the Company
rents, on a month-to-month basis, the exhibition hall area of the Plaza
Castle from the Partnership for a monthly charge of $20,000 plus utility
costs, and less a credit equal to the amount of revenue received by the
Partnership for that space. The rent charged to expense under this
arrangement was $117,213 in 1994 and $117,932 in 1993. As discussed in
Note 2, the amount owed by the Company to the Partnership is in dispute.
For the years ended October 31, 1994 and 1993, utility charges were
allocated to the Partnership by the Company for office and retail space
occupied by tenants in the Statler Office Building. Such charges amounted
to $403,011 and $381,405 in 1994 and 1993, respectively.
Included in trade and other receivables at October 31, 1994 and 1993 are
receivables due from affiliates of $60,167 and $103,521, respectively.
For the years ended October 31, 1994 and 1993, respectively, the Company
included in other income $119,252 and $116,804, respectively, which was
collected from related parties for security services.
(6) OTHER COMMITMENTS AND CONTINGENCIES
As of October 31, 1994, the Company has an outstanding purchase
commitment for computer equipment and software to be utilized in hotel
operations. The Company expects to obtain lease financing for a term of
seven years, in amounts not to exceed $350,000 at a proposed interest
rate of 9.63% per annum.
As of October 31, 1994, the Company is contingently liable under
irrevocable letters of credit totaling $229,596 issued to an insurance
carrier as part of its paid-loss retroinsurance program.
(7) MATTERS RELATED TO UNAUDITED PERIODS (UNAUDITED)
In November 1995, Starwood Lodging Trust and Mr. Donald L. Saunders, one
of the stockholders, entered into an agreement to purchase the other
stockholders' interests and the other partnership interests in The Boston
Park Plaza Hotel Limited Partnership. The transaction is expected to be
completed in 1996.
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(7) MATTERS RELATED TO UNAUDITED PERIODS (UNAUDITED) (Continued)
As more fully discussed in Note 2, the Partnership has continued to
dispute certain charges from the Operating Company. The difference in the
receivable recorded by the Partnership and the payable recorded by the
Operating Company is $3,937,190 as of September 30, 1995. The principal
components of this difference are the treatment of certain fixed asset
purchases ($2,302,075) and certain operating and management charges. The
ultimate resolution of these items is uncertain pending the determination
of these claims by the Special Master. The accompanying financial
statements do not include any adjustments that might result from the
ultimate resolution of these matters.
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