<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[x] Quarterly report pursuant to Section 13 or 15(d) of the
Securities and Exchange Act of 1934
For the quarterly period ended September 30, 1996
OR
[ ] Transition report pursuant to Section 13 or 15(d) of
the Securities and Exchange Act of 1934
For the transition period from _________ to _________
Commission File Number: 1-6828
STARWOOD LODGING
TRUST
(Exact name of registrant as specified in its charter)
Maryland
(State or other jurisdiction
of incorporation or organization)
52-0901263
(I.R.S. employer identification no.)
2231 East Camelback Road, Suite 410
Phoenix, AZ 85016
(Address of principal executive
offices, including zip code)
(602) 852-3900
(Registrant's telephone number,
including area code)
Commission File Number: 1-7959
STARWOOD LODGING
CORPORATION
(Exact name of registrant as specified in its charter)
Maryland
(State or other jurisdiction
of incorporation or organization)
52-1193298
(I.R.S. employer identification no.)
2231 East Camelback Road, Suite 400
Phoenix, AZ 85016
(Address of principal executive
offices, including zip code)
(602) 852-3900
(Registrant's telephone number,
including area code)
Indicate by check mark whether the Registrants (1) have filed all
reports required to be filed by Section 13 or 15 (d) of the Securities
Exchange Act of 1934 during the preceding 12 months or for such shorter
period that the Registrants were required to file such reports), and (2)
have been subject to such filing requirements for the past 90 days.
Yes X No .
--- ---
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
26,682,514 Shares of Beneficial Interest, par value $0.01 per share,
of Starwood Lodging Trust paired with 26,682,514 Shares of Common Stock,
par value $0.01 per share, of Starwood Lodging Corporation, outstanding as
of November 7, 1996.
<PAGE> 2
STARWOOD LODGING TRUST AND STARWOOD LODGING CORPORATION
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The following financial statements of Starwood Lodging Trust and Starwood
Lodging Corporation are provided pursuant to the requirements of this item.
INDEX TO FINANCIAL STATEMENTS
Starwood Lodging Trust and Starwood Lodging Corporation:
Combined Balance Sheets - As of September 30, 1996 and December 31, 1995
Combined Statements of Operations - For the three and nine months ended
September 30, 1996 and 1995
Combined Statements of Cash Flows - For the nine months ended September 30,
1996 and 1995
Starwood Lodging Trust:
Balance Sheets - As of September 30, 1996 and December 31, 1995 Statements of
Operations - For the three and nine months ended September 30, 1996 and 1995
Statements of Cash Flows - For the nine months ended September 30, 1996 and
1995
Starwood Lodging Corporation:
Balance Sheets - As of September 30, 1996 and December 31, 1995 Statements of
Operations - For the three and nine months ended September 30, 1996 and 1995
Statements of Cash Flows - For the nine months ended September 30, 1996 and
1995
Notes to Financial Statements
Starwood Lodging Trust and Starwood Lodging Corporation: Combined Statement of
Operations for the three and nine months ended September 30, 1996 Combined Pro
Forma Statement of Operations - For the three and nine months ended
September 30, 1995
Notes to Unaudited Combined Pro Forma Statements of Operations for the three and
nine months ended September 30, 1996
2
<PAGE> 3
STARWOOD LODGING TRUST AND STARWOOD LODGING CORPORATION
COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
(Unaudited)
--------------- -------------
<S> <C> <C>
ASSETS
Hotel assets held for sale, net ............................... $ 32,921,000 $ 21,063,000
Hotel assets, net ............................................. 968,781,000 315,895,000
--------------- -------------
1,001,702,000 336,958,000
Mortgage notes receivable, net ................................ 72,446,000 79,261,000
Investments ................................................... 48,934,000 2,858,000
--------------- -------------
Total real estate investments .............................. 1,123,082,000 419,077,000
Cash and cash equivalents ..................................... 31,298,000 9,332,000
Accounts and interest receivable .............................. 40,724,000 9,595,000
Notes receivable, net ......................................... 2,916,000 1,796,000
Inventories, prepaid expenses and other assets ................ 16,292,000 20,194,000
--------------- -------------
$ 1,214,312,000 $ 459,994,000
=============== =============
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Collateralized notes payable and revolving lines of credit .... $ 423,709,000 $ 119,100,000
Mortgage and other notes payable .............................. 1,582,000 4,385,000
Accounts payable and other liabilities ........................ 43,223,000 19,022,000
Dividends/distributions payable ............................... 15,990,000 9,284,000
--------------- -------------
484,504,000 151,791,000
--------------- -------------
Commitments and contingencies
MINORITY INTEREST ............................................. 134,022,000 92,735,000
--------------- -------------
SHAREHOLDERS' EQUITY
Trust shares of beneficial interest, $.01 par value; authorized
100,000,000 shares; outstanding 26,636,000 shares and
13,799,000 at September 30, 1996 and December 31,
1995, respectively .......................................... 266,000 138,000
Corporation common stock at, $.01 par value; authorized
100,000,000 shares; outstanding 26,636,000 shares and
13,799,000 at September 30, 1996 and December 31, 1995,
respectively ................................................ 266,000 138,000
Additional paid-in capital .................................... 863,487,000 434,107,000
Distributions in excess of earnings ........................... (268,233,000) (218,915,000)
--------------- -------------
595,786,000 215,468,000
--------------- -------------
$ 1,214,312,000 $ 459,994,000
=============== =============
</TABLE>
See accompanying notes to financial statements.
3
<PAGE> 4
STARWOOD LODGING TRUST AND STARWOOD LODGING CORPORATION
COMBINED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three months ended September 30,
--------------------------------
1996 1995
------------- ------------
<S> <C> <C>
REVENUE
Hotel .......................................................... $ 99,574,000 $ 32,366,000
Gaming ......................................................... 5,593,000 6,559,000
Interest from mortgage and other notes ......................... 2,843,000 2,868,000
Income from joint ventures and
rents from leased hotel properties .......................... 872,000 221,000
Other .......................................................... 509,000 377,000
Loss on sale of real estate assets ............................. (1,037,000) (12,000)
------------- ------------
108,354,000 42,379,000
------------- ------------
EXPENSES
Hotel operations ............................................... 69,934,000 21,875,000
Gaming operations .............................................. 5,624,000 6,018,000
Interest ....................................................... 6,062,000 461,000
Depreciation and amortization .................................. 13,921,000 3,997,000
Administrative and operating ................................... 4,644,000 1,386,000
------------- ------------
100,185,000 33,737,000
------------- ------------
Income before extraordinary item and minority interest ......... 8,169,000 8,642,000
Minority interest .............................................. 2,070,000 2,655,000
------------- ------------
Income before extraordinary item ............................... 6,099,000 5,987,000
Extraordinary item (net of $1,084,000 minority interest in 1995) -- (2,518,000)
------------- ------------
NET INCOME $ 6,099,000 $ 3,469,000
============= ============
EARNINGS PER PAIRED SHARE
Income before extraordinary item ............................... $ 0.28 $ 0.43
Extraordinary item ............................................. -- (0.18)
------------- ------------
NET INCOME PER PAIRED SHARE $ 0.28 $ 0.25
============= ============
Weighted average number of paired shares 21,933,000 13,810,000
============= ============
</TABLE>
See accompanying notes to financial statements.
4
<PAGE> 5
STARWOOD LODGING TRUST AND STARWOOD LODGING CORPORATION
COMBINED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine months ended September 30,
-------------------------------
1996 1995
------------- -------------
<S> <C> <C>
REVENUE
Hotel ............................................................ $ 203,079,000 $ 81,951,000
Gaming ........................................................... 19,336,000 20,375,000
Interest from mortgage and other notes ........................... 7,604,000 8,004,000
Income from joint ventures and
rents from leased hotel properties ............................ 3,545,000 608,000
Other ............................................................ 2,561,000 1,334,000
Loss on sale of hotel assets ..................................... (1,384,000) (125,000)
------------- -------------
234,741,000 112,147,000
------------- -------------
EXPENSES
Hotel operations ................................................. 139,587,000 56,232,000
Gaming operations ................................................ 17,816,000 18,351,000
Interest ......................................................... 13,688,000 11,198,000
Depreciation and amortization .................................... 27,373,000 10,182,000
Administrative and operating ..................................... 10,009,000 3,836,000
------------- -------------
208,473,000 99,799,000
------------- -------------
Income before extraordinary item and minority interest ........... 26,268,000 12,348,000
Minority interest ................................................ 7,558,000 5,398,000
------------- -------------
Income before extraordinary item ................................. 18,710,000 6,950,000
Extraordinary item (net of $413,000 and $163,000 minority interest
in 1996 and 1995, respectively ................................ 1,077,000 (2,155,000)
------------- -------------
NET INCOME $ 19,787,000 $ 4,795,000
============= =============
EARNINGS PER PAIRED SHARE
Income before extraordinary item ................................. $ 1.08 $ 1.17
Extraordinary item ............................................... 0.06 (0.36)
------------- -------------
NET INCOME PER PAIRED SHARE $ 1.14 $ 0.81
============= =============
Weighted average number of paired shares 17,333,000 5,951,000
============= =============
</TABLE>
See accompanying notes to financial statements.
5
<PAGE> 6
STARWOOD LODGING TRUST AND STARWOOD LODGING CORPORATION
COMBINED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine months ended September 30,
-------------------------------
1996 1995
------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income .................................................. $ 19,787,000 $ 4,795,000
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Minority interest ......................................... 7,558,000 5,398,000
Extraordinary item ........................................ (1,077,000) 2,155,000
Depreciation and amortization ............................. 27,373,000 10,182,000
Accretion of discount ..................................... (2,344,000) (2,286,000)
Deferred interest ......................................... -- 649,000
Loss on sale of real estate assets ........................ 1,384,000 125,000
Changes in operating assets and liabilities:
Accounts receivable, inventories, prepaid expenses and
other assets .............................................. (24,945,000) (9,374,000)
Accounts payable and other liabilities .................... 20,573,000 5,681,000
------------- -------------
Net cash provided by operating activities ............. 48,309,000 17,325,000
------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to hotel assets ................................... (664,020,000) (113,075,000)
Purchase of investments ..................................... (45,878,000) --
Net proceeds from sale of hotel assets ...................... 11,284,000 --
Increase in mortgage notes receivable ....................... (34,289,000) (19,515,000)
Principal received on mortgage and other notes receivable ... 3,331,000 6,332,,000
Reorganization costs ........................................ -- (2,786,000)
Changes in investments ..................................... (2,069,000) --
------------- -------------
Net cash used in investing activities ................. (731,641,000) (129,044,000)
------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on mortgage and other notes payable ...... (3,376,000) (106,130,000)
Borrowings (payments) under collateralized notes payable, net 117,235,000 (38,299,000)
Borrowings under mortgage and other notes payable ........... 190,886,000 9,977,000
Capital contributions, net .................................. 1,264,000 14,860,000
Proceeds from equity offerings .............................. 429,495,000 245,681,000
Dividends/distributions paid ................................ (30,206,000) --
Purchase of warrants ........................................ -- (1,300,000)
------------- -------------
Net cash provided by financing activities ............. 705,298,000 124,789,000
------------- -------------
INCREASE IN CASH AND CASH EQUIVALENTS ....................... 21,966,000 13,070,000
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD .................................... 9,332,000 5,065,000
------------- -------------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD .......................................... $ 31,298,000 $ 18,135,000
============= =============
</TABLE>
See accompanying notes to financial statements.
6
<PAGE> 7
STARWOOD LODGING TRUST
BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
(Unaudited)
--------------- -------------
<S> <C> <C>
ASSETS
Hotel assets held for sale, net ................................. $ 29,381,000 $ 20,547,000
Hotel assets, net ............................................... 858,088,000 221,063,000
--------------- -------------
887,469,000 241,610,000
Mortgage notes receivable, net .................................. 72,446,000 79,261,000
Mortgage notes receivable, Corporation .......................... 87,884,000 68,486,000
Investments ..................................................... 47,482,000 2,841,000
--------------- -------------
Total real estate investments ............................. 1,095,281,000 392,198,000
Cash and cash equivalents ....................................... 12,852,000 710,000
Rent and interest receivable .................................... 9,203,000 1,841,000
Notes receivable, net ........................................... 2,239,000 1,232,000
Notes receivable, Corporation ................................... 11,162,000 17,978,000
Prepaid expenses and other assets ............................... 9,117,000 11,778,000
--------------- -------------
$ 1,139,854,000 $ 425,737,000
=============== =============
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Collateralized notes payable and revolving line of credit ....... $ 423,709,000 $ 119,100,000
Mortgage and other notes payable ................................ -- 100,000
Accounts payable and other liabilities .......................... 7,125,000 4,412,000
Dividends/Distributions payable ................................. 15,990,000 9,284,000
--------------- -------------
446,824,000 132,896,000
--------------- -------------
Commitments and contingencies
MINORITY INTEREST ............................................... 127,268,000 88,113,000
--------------- -------------
SHAREHOLDERS' EQUITY
Trust shares of beneficial interest, $.01 par value; authorized
100,000,000 shares; outstanding 26,636,000 shares and
13,799,000 at September 30, 1996 and December 31, 1995,
respectively .................................................. 266,000 138,000
Additional paid-in capital ...................................... 762,610,000 354,619,000
Distributions in excess of earnings ............................. (197,114,000) (150,029,000)
--------------- -------------
565,762,000 204,728,000
--------------- -------------
$ 1,139,854,000 $ 425,737,000
=============== =============
</TABLE>
See accompanying notes to financial statements.
7
<PAGE> 8
STARWOOD LODGING TRUST
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
September 30,
-----------------------------
1996 1995
------------ ------------
<S> <C> <C>
REVENUE
Rents from Corporation .......................................... $ 23,767,000 $ 7,319,000
Interest from Corporation ....................................... 1,855,000 1,060,000
Interest from mortgage and other notes .......................... 2,952,000 2,802,000
Income (loss) from joint venture and
rents from other leased hotel properties ..................... (53,000) 221,000
Other income .................................................... 305,000 361,000
Loss on sale of real estate assets .............................. (1,037,000) (12,000)
------------ ------------
27,789,000 11,751,000
------------ ------------
EXPENSES
Interest ........................................................ 6,021,000 426,000
Depreciation and amortization ................................... 11,744,000 2,342,000
Administrative and operating .................................... 156,000 405,000
------------ ------------
17,921,000 3,173,000
------------ ------------
Income before extraordinary item and minority interest .......... 9,868,000 8,578,000
Minority interest ............................................... 2,260,000 2,581,000
------------ ------------
Income before extraordinary item ................................ 7,608,000 5,997,000
Extraordinary item (net of $1,084,000 minority interest in 1995) -- (2,518,.000)
------------ ------------
NET INCOME $ 7,608,000 $ 3,479,000
============ ============
EARNINGS PER PAIRED SHARE
Income before extraordinary item ................................ $ 0.35 $ 0.43
Extraordinary item............................................... (0.18)
------------ ------------
NET INCOME PER SHARE $ 0.35 $ 0.25
============ ============
</TABLE>
See accompanying notes to financial statements.
8
<PAGE> 9
STARWOOD LODGING TRUST
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
-----------------------------
1996 1995
------------ ------------
<S> <C> <C>
REVENUE
Rents from Corporation ....................................... $ 47,021,000 $ 18,287,000
Interest from Corporation .................................... 5,958,000 2,629,000
Interest from mortgage and other notes ....................... 7,648,000 7,915,000
Income from joint venture and
rents from other leased hotel properties .................. 2,177,000 608,000
Other income ................................................. 1,378,000 461,000
Loss on sale of real estate assets ........................... (1,384,000) (125,000)
------------ ------------
62,798,000 29,775,000
------------ ------------
EXPENSES
Interest ..................................................... 13,460,000 10,534,000
Depreciation and amortization ................................ 18,622,000 6,260,000
Administrative and operating ................................. 2,886,000 1,178,000
------------ ------------
34,968,000 17,972,000
------------ ------------
Income before extraordinary item and minority interest ....... 27,830,000 11,803,000
Minority interest ............................................ 7,480,000 4,957,000
------------ ------------
Income before extraordinary item ............................. 20,350,000 6,846,000
Extraordinary item (net of $921,000 minority interest in 1995) -- (2,155,000)
------------ ------------
NET INCOME $ 20,350,000 $ 4,691,000
============ ============
EARNINGS PER PAIRED SHARE
Income before extraordinary item ............................. $ 1.17 $ 1.15
Extraordinary item ........................................... (0.36)
------------ ------------
NET INCOME PER SHARE $ 1.17 $ 0.79
============ ============
</TABLE>
See accompanying notes to financial statements.
9
<PAGE> 10
STARWOOD LODGING TRUST
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine months ended
September 30,
-------------------------------
1996 1995
------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income .............................................. $ 20,350,000 $ 4,691,000
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Minority interest ..................................... 7,480,000 4,957,000
Extraordinary item .................................... -- 2,155,000
Depreciation and amortization ......................... 18,622,000 6,260,000
Accretion of discount ................................. (2,344,000) (2,286,000)
Deferred interest ..................................... -- 649,000
Deferred interest - Corporation ....................... (2,076,000) (1,111,000)
Loss on sale of real estate assets .................... 1,384,000 125,000
Changes in operating assets and liabilities:
Accounts receivable, prepaid expenses and other assets (2,707,000) (4,460,000)
Accounts payable and other liabilities ................ (153,000) 190,000
------------- -------------
Net cash provided by operating activities ......... 40,556,000 11,170,000
------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to hotel assets ............................... (653,372,000) (59,014,000)
Purchase of investments ................................. (45,369,000) --
Net proceeds from sale of hotel assets .................. 11,284,000 --
Increase in mortgage notes receivable ................... (51,143,000) (17,729,000)
Principal received on mortgage and other notes receivable 23,411,000 4,503,000
Reorganization costs .................................... -- (1,393,000)
Net changes in notes receivable, Corporation ............ 969,000 (49,562,000)
Changes in investments .................................. (634,000) --
------------- -------------
Net cash used in investing activities ............. (714,854,000) (123,195,000)
------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on mortgage and other notes payable .. (1,723,000) (38,299,000)
Borrowings (payments) under collateralized notes payable 118,822,000 (96,589,000)
Borrowings under mortgage and other notes payable ....... 190,276,000 9,977,000
Capital contributions, net .............................. 1,252,000 11,968,000
Proceeds from equity offerings .......................... 408,019,000 233,398,000
Dividends/distributions paid ............................ (30,206,000) --
Purchase of warrants .................................... -- (1,235,000)
------------- -------------
Net cash provided by financing activities ......... 686,440,000 119,220,000
------------- -------------
INCREASE IN CASH AND
CASH EQUIVALENTS
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD ................................ 12,142,000 7,195,000
CASH AND CASH EQUIVALENTS
AT END OF PERIOD ...................................... 710,000 255,000
------------- -------------
$ 12,852,000 $ 7,450,000
============= =============
</TABLE>
See accompanying notes to financial statements.
10
<PAGE> 11
STARWOOD LODGING CORPORATION
BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
(Unaudited)
------------- -------------
<S> <C> <C>
ASSETS
Hotel assets held for sale, net ................................ $ 3,540,000 $ 516,000
Hotel assets, net .............................................. 110,693,000 94,832,000
------------- -------------
114,233,000 95,348,000
Investments .................................................... 1,452,000 17,000
------------- -------------
Total real estate investments ............................ 115,685,000 95,365,000
Cash and cash equivalents ...................................... 18,446,000 8,622,000
Accounts receivable ............................................ 31,521,000 7,754,000
Notes receivable ............................................... 677,000 564,000
Inventories, prepaid expenses and other assets ................. 7,175,000 8,416,000
------------- -------------
$ 173,504,000 $ 120,721,000
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Mortgage and other notes payable ............................... $ 1,582,000 $ 4,285,000
Mortgage notes payable, Trust .................................. 87,884,000 68,486,000
Notes payable, Trust ........................................... 11,162,000 17,978,000
Accounts payable and other liabilities ......................... 36,098,000 14,610,000
------------- -------------
136,726,000 105,359,000
------------- -------------
Commitments and contingencies
MINORITY INTEREST .............................................. 6,754,000 4,622,000
------------- -------------
SHAREHOLDERS' EQUITY
Corporation common stock, $.01 par value; authorized 100,000,000
shares; outstanding 26,636,000 shares and 13,799,000 at
September 30, 1996 and December 31, 1995,
respectively ................................................. 266,000 138,000
Additional paid-in capital ..................................... 100,877,000 79,488,000
Accumulated deficit ............................................ (71,119,000) (68,886,000)
------------- -------------
30,024,000 10,740,000
------------- -------------
$ 173,504,000 $ 120,721,000
============= =============
</TABLE>
See accompanying notes to financial statements.
11
<PAGE> 12
STARWOOD LODGING CORPORATION
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three months ended
September 30,
------------------------------
1996 1995
------------- ------------
<S> <C> <C>
REVENUE
Hotel ................................ $ 99,574,000 $ 32,366,000
Gaming ............................... 5,593,000 6,559,000
Income from joint venture ............ 925,000 --
Interest from notes receivable ....... -- 66,000
Management fees and other income ..... 95,000 16,000
------------- ------------
106,187,000 39,007,000
------------- ------------
EXPENSES
Hotel operations ..................... 69,934,000 21,875,000
Gaming operations .................... 5,624,000 6,018,000
Rent, Trust .......................... 23,767,000 7,319,000
Interest, Trust ...................... 1,855,000 1,060,000
Interest, other ...................... 41,000 35,000
Depreciation and amortization ........ 2,177,000 1,655,000
Administrative and operating ......... 4,488,000 981,000
------------- ------------
107,886,000 38,943,000
------------- ------------
Income (loss) before minority interest (1,699,000) 64,000
Minority interest .................... (190,000) (74,000)
------------- ------------
NET LOSS $ (1,509,000) $ 10,000
============= ============
NET LOSS PER SHARE $ (0.07) $ 0.00
============= ============
</TABLE>
See accompanying notes to financial statements.
12
<PAGE> 13
STARWOOD LODGING CORPORATION
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine months ended September 30,
------------------------------
1996 1995
------------- ------------
<S> <C> <C>
REVENUE
Hotel ................................................ $ 203,079,000 $ 81,951,000
Gaming ............................................... 19,336,000 20,375,000
Income from joint venture ............................ 1,368,000 --
Interest from notes receivable ....................... 57,000 89,000
Management fees and other income ..................... 1,082,000 873,000
------------- ------------
224,922,000 103,288,000
------------- ------------
EXPENSES
Hotel operations ..................................... 139,587,000 56,232,000
Gaming operations .................................... 17,816,000 18,351,000
Rent, Trust .......................................... 47,021,000 18,287,000
Interest, Trust ...................................... 5,958,000 2,629,000
Interest, other ...................................... 228,000 664,000
Depreciation and amortization ........................ 8,751,000 3,922,000
Administrative and operating ......................... 7,123,000 2,658,000
------------- ------------
226,484,000 102,743,000
------------- ------------
Income (loss) before minority interest ............... (1,562,000) 545,000
Minority interest .................................... 78,000 441,000
------------- ------------
Income (loss) before extraordinary item .............. (1,640,000) 104,000
Extraordinary item (net of $413,000 minority interest) 1,077,000 --
------------- ------------
NET INCOME (LOSS) $ (563,000) $ 104,000
============= ============
EARNINGS PER SHARE
Income (loss) before extraordinary item............... $ (0.09) $ 0.02
Extraordinary item.................................... 0.06 --
------------- ------------
NET INCOME (LOSS ) PER SHARE $ (0.03) $ 0.02
============= ============
</TABLE>
See accompanying notes to financial statements.
13
<PAGE> 14
STARWOOD LODGING CORPORATION
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine months ended September 30,
-------------------------------
1996 1995
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) ......................................... $ (563,000) $ 104,000
Adjustments to reconcile net income to net cash provided by
(used in) operating activities ..........................
Minority interest ....................................... 78,000 441,000
Extraordinary item ...................................... (1,077,000)
Depreciation and amortization ........................... 8,751,000 3,922,000
Deferred interest - Trust ............................... 2,076,000 1,111,000
Changes in operating assets and liabilities:
Accounts receivable, inventories, prepaid expenses and
other assets .......................................... (22,238,000) (4,914,000)
Accounts payable and other liabilities .................. 20,726,000 5,491,000
------------ ------------
Net cash provided by operating activities ........... 7,753,000 6,155,000
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to hotel assets ................................. (30,761,000) (54,061,000)
Purchase of investments ................................... (509,000) --
Increase in investments ................................... (1,435,000) --
Principal received on notes receivable .................... 33,000 43,000
Reorganization costs ...................................... -- (1,393,000)
Increase in mortgage note receivable ...................... (146,000) --
------------ ------------
Net cash used in investing activities ............... (32,818,000) (55,411,000)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net change in notes payable - Trust ....................... (969,000) 49,562,000
Increase in mortgage notes payable - Trust ................ 17,610,000 --
Principal payments on mortgage and other notes payable .... (3,240,000) (9,541,000)
Capital contributions, net ................................ 12,000 2,892,000
Proceeds from equity offerings ............................ 21,476,000 12,283,000
Purchase of warrants ...................................... -- (65,000)
------------ ------------
Net cash provided by financing activities ........... 34,889,000 55,131,000
------------ ------------
INCREASE IN CASH AND CASH EQUIVALENTS ..................... 9,824,000 5,875,000
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD .................................. 8,622,000 4,810,000
------------ ------------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD ........................................ $ 18,446,000 $ 10,685,000
============ ============
</TABLE>
See accompanying notes to financial statements.
14
<PAGE> 15
STARWOOD LODGING TRUST AND
STARWOOD LODGING CORPORATION
NOTES TO FINANCIAL STATEMENTS
NOTE 1. INTERIM FINANCIAL STATEMENTS
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q which mandate adherence to
Rule 10-01 of Regulation S-X. Accordingly, these statements do not include all
of the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management of
the Trust and the Corporation, all adjustments necessary for a fair
presentation, consisting only of normal recurring accruals, have been included.
The financial statements presented herein have been prepared in accordance with
the accounting policies described in the Registrants' Joint Annual Report on
Form 10-K/A for the year ended December 31, 1995 and should be read in
conjunction therewith.
NOTE 2. BASIS OF PRESENTATION
The Trust and the Corporation (together, the "Company") have unilateral
control of SLT Realty Limited Partnership ("Realty") and SLC Operating Limited
Partnership ("Operating"), respectively, and therefore, the historical financial
statements of Realty and Operating are consolidated with those of the Trust and
the Corporation, respectively. Unless the context otherwise requires, all
references herein to the "Company" refer to the Trust and the Corporation, and
all references to the "Trust" and to 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. Paired share information has
been adjusted to reflect a one-for-six reverse stock split effective June 19,
1995.
NOTE 3. HOTEL ASSETS
On January 4, 1996, the Company completed the purchase of the equity in
the Grand Hotel, a 263-room luxury hotel, located in Washington, D.C., for an
additional $13.5 million. The Company had purchased a mortgage interest in the
hotel in September 1995 for $19.5 million.
On March 22, 1996, the Company acquired the 257-room Midland Hotel,
located in Chicago, Illinois, for $21 million in cash.
On April 24, 1996, the Company completed the acquisition of the 442-room
Clarion hotel, located at the San Francisco Airport, in Millbrae, California for
approximately $30.5 million in cash.
On April 26, 1996, the Company completed the acquisition of three
Doubletree Guest Suite hotels, containing 822 suites, located in Irving, Texas;
Ft. Lauderdale, Florida; and Tampa, Florida for approximately $75 million in
cash.
15
<PAGE> 16
The Company, in June 1996, acquired the 251-suite Doubletree Guest Suites
hotel and the 177-room Days Inn, both located at the Philadelphia Airport in
Philadelphia, Pennsylvania. The aggregate purchase price for both properties
inclusive of $2 million in cash reserves was approximately $22.5 million,
including $1.8 million in Limited Partnership units in Realty and Operating
convertible into paired shares.
On August 12, 1996, the Company completed the acquisition of 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.
On August 16, 1996, the Company completed the acquisition of eight
properties and on September 11, 1996 purchased the ninth and final property of a
portfolio of nine up-scale, full-service hotels from Hotels of Distinction
Ventures, Inc. for an aggregate purchase price of approximately $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").
On August 29, 1996, the Company completed the acquisition of the 294-room
Marriott Forrestal Village Hotel in Princeton, New Jersey for approximately
$19.6 million in cash.
On September 20, 1996, the Company completed a joint venture with an
affiliate of Doral Hotels and Resorts to recapitalize the 121-room Doral Tuscany
and the 199-room Doral Court both located in New York, New York. The
transaction, valued at $35 million, included the assumption of approximately $27
million of first mortgage debt provided by Sumitomo Trust and Banking Company.
NOTE 4. MORTGAGE NOTES RECEIVABLE
On August 22, 1996, the Company completed the purchase for $17.4 million
of approximately $24.8 million (principal and accrued interest) of debt of which
$17.65 million is secured by the 305 - room Holiday Inn in Milpitas, CA.
16
<PAGE> 17
NOTE 5. OFFERINGS
On April 12, 1996, the Company completed a public offering of 2,000,000
paired shares (the "April 1996 Offering"). Net proceeds from the April 1996
Offering of approximately $62.4 million were used, in part, to fund the
acquisitions of the 442-room Clarion Hotel located at the San Francisco Airport
(acquired on April 24, 1996) and the Doubletree Guest Suite hotels located in
Irving, Texas; Ft. Lauderdale, Florida; and Tampa, Florida (all three properties
were acquired on April 26, 1996).
On August 12, 1996, the Company completed a public offering of 10,000,000
paired shares and on August 23,1996 the underwriter exercised its over-allotment
option to purchase 799,575 paired shares (together, the "August 1996 Offering").
Net proceeds from the August 1996 Offering of approximately $365.0 million were
used to fund the acquisition of the Teachers Portfolio and partially fund the
acquisition of the HOD Portfolio.
NOTE 6. INVESTMENTS
On January 24, 1996, the Company completed the acquisition of an interest
in the 960-room Boston Park Plaza Hotel Complex in Boston, Massachusetts. The
Company formed two limited liability companies in partnership with Donald
Saunders Family L.L.C. ("Saunders"). The Trust contributed approximately $41.6
million in exchange for a 58.2% interest in each of the limited liability
companies, while Saunders contributed its existing interest in the asset for the
remaining 41.8% interest in each of the limited liability companies. The Company
has accounted for this transaction under the equity method of accounting.
NOTE 7. HOTEL ASSETS HELD FOR SALE
At September 30, 1996, the Company's portfolio included five hotel
properties which were held for sale. The five properties include the 300-room
King 8 Hotel & Gambling Hall in Las Vegas, Nevada, the 151-room Bay Valley
resort in Bay City, Michigan, the 166-room Best Western in Las Cruces, New
Mexico, the 175-room Best Western Airport in El Paso, Texas and the 142-room
Best Western in Savannah, Georgia. During the nine months ended September 30,
1996 the Company sold the Best Western Columbus North in Columbus, Ohio for
approximately $3.1 million and the Bourbon Street Hotel and Casino in Las Vegas,
Nevada for approximately $7.7 million.
NOTE 8. INTEREST RATE HEDGING AGREEMENTS
On January 17, 1996, the Trust entered into two interest rate hedging
agreements known as Treasury locks, which had the effect of fixing the base rate
of interest at 5.7% for debt the Company intended to issue in October, 1996 with
an aggregate notional principal amount of $100 million and a term to maturity of
seven years. On October 4, 1996, the Trust extended the settlement date to
February, 1997 and the base rate increased to 5.8%. The actual interest rate
will be determined by reference to this base rate.
17
<PAGE> 18
At settlement, the Trust will pay or receive an amount which will be
capitalized and amortized over the term of the related debt of seven years. Such
amount is not anticipated to have a material effect on the Trust's liquidity or
operating results. If the Trust did not issue any such debt, such amount would
still be payable or receivable and would be treated as a loss or gain,
accordingly. Such a gain or loss could have a material effect on the Trust's
results from operations; however due to Management's current intention to issue
$100 million of debt in February of 1997, with a term to maturity of seven
years, no such gain or loss is anticipated.
On August 14, 1996, the Trust entered into another Treasury Lock, which
has the effect of fixing the base rate of interest at 6.67% for debt the Company
intends to issue in March, 1997 with an aggregate notional principal amount of
$150 million and a term to maturity of ten years. The actual interest rate will
be determined by reference to this base rate.
At settlement, the Trust will pay or receive an amount which will be
capitalized and amortized over the term of the related debt of ten years. Such
amount is not anticipated to have a material effect on the Trust's liquidity or
operating results. If the Trust did not issue any such debt, such amount would
still be payable or receivable and would be treated as a loss or gain,
accordingly. Such a gain or loss could have a material effect on the Trust's
results from operations; however due to Management's current intention to issue
$150 million of debt in March of 1997, with a term to maturity of ten years, no
such gain or loss is anticipated.
NOTE 9. SHAREHOLDERS' EQUITY
At December 31, 1995, there were outstanding warrants to purchase 276,662
paired shares at an exercise price of $101.70 per paired share (as adjusted for
the one for six reverse stock split in June 1995) through September 15, 1996.
Such warrants could also be converted into paired shares on a 600:1 basis. On
September 16, 1996 the warrants expired and each 600 warrants were automatically
converted into one paired share. In lieu of fractional shares, holders were paid
cash in an amount equal to the same fraction of the market value of a single
paired share on that date of $40.625 per paired share.
NOTE 10. SUBSEQUENT EVENTS
In October, 1996 the Company acquired for $10.25 million first mortgage
and other notes secured by the 480-room Sheraton Hotel in Stamford, Connecticut.
The notes have a principal balance of approximately $116 million, and a balance
of approximately $34 million of accrued interest as of September 30, 1996.
On November 7, 1996 the Company completed the sale of the King 8 Hotel and
Casino in Las Vegas, Nevada for $21.8 million. The $21.8 million purchase price
is comprised of $18.8 million for the real property (including approximately
$11.6 million in cash and $7.2 million in a 3 1/2 year note secured by a first
mortgage) and $3 million for personal property and casino equipment. The sale of
the real property was completed however the personal property and casino
equipment will be sold in a separate transaction expected to close in the next
18 months following receipt by the purchaser of required gaming approvals. A
subsidiary of the Corporation, Hotel Investors Corporation of Nevada, will lease
the real property from the purchaser and will continue to operate the hotel and
casino while the purchaser completes it application for the gaming licenses.
18
<PAGE> 19
NOTE 11. IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
In March and October 1995, the Financial Accounting Standards Board issued
Statements of Financial Accounting Standards No. 121 "Accounting for the
Impairment of Long Lived Assets and for Long Lived Assets to be Disposed Of" and
No. 123 "Accounting for Stock-Based Compensation", respectively. These
statements shall be effective for financial statements for fiscal years
beginning after December 15, 1995. Management believes that adoption of Standard
No. 121 will not have a material effect on its financial position or results of
operations. Management intends to adopt the disclosure method of Standard No.
123 and, accordingly, there will be no impact on the Company's financial
position or results of operations.
19
<PAGE> 20
STARWOOD LODGING TRUST AND STARWOOD LODGING CORPORATION
UNAUDITED COMBINED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three months ended September 30,
--------------------------------
Pro Forma
1996 1995
------------- ------------
<S> <C> <C>
REVENUE
Hotel ......................................... $ 99,574,000 $ 33,227,000
Gaming ........................................ 5,593,000 6,559,000
Interest from mortgage and other notes ........ 2,843,000 2,868,000
Income from joint ventures and
rents from leased hotel properties ........ 872,000 221,000
Other ......................................... 509,000 377,000
Loss on sale of hotel assets .................. (1,037,000) (12,000)
------------- ------------
108,354,000 43,240,000
------------- ------------
EXPENSES
Hotel operations .............................. 69,934,000 22,406,000
Gaming operations ............................. 5,624,000 6,018,000
Interest ...................................... 6,062,000 460,000
Depreciation and amortization ................. 13,921,000 4,557,000
Administrative and operating .................. 4,644,000 1,387,000
------------- ------------
100,185,000 34,828,000
------------- ------------
Income from operations before minority interest 8,169,000 8,412,000
Minority interest in Partnerships ............. 2,070,000 2,531,000
------------- ------------
Income from operations ........................ $ 6,099,000 $ 5,881,000
============= ============
Income from operations per paired share ....... $ 0.28 $ 0.43
============= ============
</TABLE>
See accompanying notes to the pro forma statements of operations.
20
<PAGE> 21
STARWOOD LODGING TRUST AND STARWOOD LODGING CORPORATION
UNAUDITED COMBINED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Nine months ended September 30,
-------------------------------
Pro Forma
1996 1995
------------- -------------
<S> <C> <C>
REVENUE
Hotel ......................................... $ 203,079,000 $ 96,805,000
Gaming ........................................ 19,336,000 20,375,000
Interest from mortgage and other notes ........ 7,604,000 8,004,000
Income from joint ventures and
rents from leased hotel properties ........ 3,545,000 608,000
Other ......................................... 2,561,000 1,334,000
Loss on sale of hotel assets .................. (1,384,000) (125,000)
------------- -------------
234,741,000 127,001,000
------------- -------------
EXPENSES
Hotel operations .............................. 139,587,000 65,702,000
Gaming operations ............................. 17,816,000 18,351,000
Interest ...................................... 13,688,000 999,000
Depreciation and amortization ................. 27,373,000 13,647,000
Administrative and operating .................. 10,009,000 3,847,000
------------- -------------
208,473,000 102,546,000
------------- -------------
Income from operations before minority interest 26,268,000 24,455,000
Minority interest in Partnerships ............. 7,558,000 7,358,000
------------- -------------
Income from operations ........................ $ 18,710,000 $ 17,097,000
============= =============
Income from operations per paired share ....... $ 1.08 $ 1.24
============= =============
</TABLE>
See accompanying notes to the pro forma statements of operations.
21
<PAGE> 22
STARWOOD LODGING TRUST AND
STARWOOD LODGING CORPORATION
NOTES TO THE UNAUDITED COMBINED PRO FORMA
STATEMENTS OF OPERATIONS FOR THE
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1995
NOTE 1. BASIS OF PRESENTATION
Starwood Lodging Trust (the "Trust") and Starwood Lodging Corporation (the
"Corporation") (together, the "Company") 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 "Company" refer to the Trust
and the Corporation, and all references to the "Trust" and to 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.
Due to the impact of certain events which occurred in 1995, the historical
results of operations and earnings per share for the three and nine months ended
September 30, 1995 are not indicative of subsequent and future results of
operations and earnings per share. The Unaudited Combined Pro Forma Statements
of Operations included as part of the financial statements for the three and
nine months ended September 30, 1995 give effect, as of the beginning of the
period presented, to the following: the public offering on July 6, 1995 (the
"1995 Offering") by the Trust and the Corporation of 11,787,500 paired shares
raising net proceeds of approximately $245.7 million; the acquisition of the
462-room Sheraton Colony Square in Atlanta, Georgia; the acquisition of the
224-room Embassy Suites in Tempe, Arizona; the acquisition of the 168-room Omni
hotel in Chapel Hill, North Carolina. 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 the
period presented, or to project results for any future period.
NOTE 2. NET INCOME PER PAIRED SHARE
Net income per paired share has been computed using the pro forma weighted
average number of paired shares and equivalent paired shares outstanding for
each period presented. Paired share information has been adjusted to reflect a
one-for-six reverse stock split effective June 19, 1995.
22
<PAGE> 23
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following Management's Discussion and Analysis should be read in
conjunction with the Management's Discussion and Analysis included in the
Company's Joint Annual Report on Form 10-K/A for the year ended December 31,
1995.
HISTORICAL RESULTS OF OPERATIONS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER
30, 1996 AND 1995
The following discussion and analysis of the historical results of
operations for the three and nine months ended September 30,1996 and 1995 give
effect to transactions on the actual date they were consummated.
THE TRUST:
Rents from the Corporation, which are based largely on hotel revenues,
increased $16.4 million and $28.7 million for the three and nine months ended
September 30, 1996, respectively as compared to the corresponding periods of
1995. The increase was primarily the result of rents earned by Trust on 30
hotels containing approximately 8,900 rooms (the "Acquired Hotels") acquired
during the twelve months ended September 30, 1996. The investment in 30 hotels
(the 364-room Terrace Garden Inn, and 180-room Lenox Inn acquired in October
1995; the 206-room Holiday Inn Calverton acquired in November 1995; the 263-room
Westin, Washington DC acquired in January 1996; the 442-room Clarion Hotel, and
the three Doubletree Guest Suites hotels (822 suites) acquired in April, 1996;
the 251-suite Doubletree Guest Suites hotel acquired in June, 1996; the 177-room
Days Inn acquired in July, 1996; the Teachers Portfolio, the HOD portfolio and
the 294-room Princeton Marriott acquired in August 1996; and the 121-room Doral
Tuscany and 199-room Doral Court acquired in September, 1996) accounted for
increased rents of $15.5 million and $22.0 million for the three and nine months
ended September 30, 1996, respectively, as compared to the corresponding periods
in 1995. In addition, rents earned by the Trust from continuously owned
properties leased by the Corporation increased by $900,000 and $6.7 million for
the three and nine months ended September 30, 1996, respectively, as compared to
the corresponding periods in 1995.
Interest from the Corporation increased by $795,000 and $3.3 million for
the three and nine months ended September 30, 1996, respectively, as compared to
the corresponding periods of 1995. The increase in interest income was primarily
a result of interest on the first mortgage of the Milwaukee Marriott Hotel which
was purchased by Trust in July 1995.
Interest from mortgage and other notes amounted to $3.4 million and $8.1
million for the three and nine months ended September 30, 1996, respectively, as
compared to $2.8 million and $7.9 million, respectively for the corresponding
periods in 1995. The increase resulted from the purchase during the quarter, of
debt, a portion of which is secured by the 305-room Holiday Inn in Milpitas,
California, offset in part by principal amortization.
Income from joint ventures and rents from other leased hotel properties
increased by $1.6 million to $2.2 million for the nine months ended September
30, 1996, as compared to the corresponding period in 1995. The increase
primarily resulted from the Trust's 58.2% investment in the 960-room Boston Park
Plaza.
23
<PAGE> 24
Other income for the nine months ended September 30, 1996 includes a
$290,000 gain (net of related expenses) realized in connection with the sale of
securities which were purchased in contemplation of acquiring a portfolio of
hotel properties. Also included in other income is $314,500 recorded as a result
of the Ross Litigation settlement (see Item 3 of Part I of the Company's Form
10-K/A for the year ended December 31, 1995).
Interest expense increased by $5.6 and $2.9 million for the three and nine
months ended September 30, 1996, respectively as compared to the corresponding
periods of 1995. The increase was due to borrowings under lines of credit used
to acquire the above mentioned properties offset by the repayment of
approximately $206.5 million of existing indebtedness in connection with the
1995 Offering.
Depreciation and amortization expense increased by $9.4 million and $12.4
million during the three and nine months ended September 30, 1996, respectively
as compared to the corresponding periods of 1995, principally due to the
acquisition of the Acquired Hotels and to the amortization of financing costs.
Administrative and operating expenses for the nine months ended September
30, 1996 increased by $1.7 million to $2.9 million as compared to $1,178,000,
for the corresponding period of 1995. The increase resulted from costs incurred
relating to the investigation of hotels which ultimately were not acquired.
Administrative and operating expenses includes payments of approximately
$270,000 to Jeffrey C. Lapin, the former President and COO of the Trust pursuant
to his separation agreement.
Minority interest represents primarily the interest of Starwood Capital
Group, L.P. ("Starwood Capital") and certain affiliates of Starwood Capital in
Realty for the three and nine months ended September 30, 1996.
THE CORPORATION:
Hotel revenues increased by $67.2 million and $121.1 million for the three
and nine months ended September 30, 1996, respectively as compared to the
corresponding periods of 1995. The addition of the Acquired Hotels and the
addition of the 257-room Midland Hotel in Chicago, Illinois resulted in
increases in hotel revenues of $59.6 million and $85.7 million for the three and
nine months ended September 30, 1996, respectively. The remaining increase of
$7.6 million and $35.4 million for the three and nine months ended September 30,
1996, respectively is attributable to other continuously owned properties and
properties acquired prior to the end of the third quarter of 1995.
Hotel gross margin for the third quarter of 1996 was $29.6 million, or
29.8% of hotel revenues, as compared to $10.5 million, or 32.4% of hotel
revenues, for the third quarter of 1995. Hotel gross margin for the nine months
ended September 30, 1996 was $63.5 million, or 31.4% of hotel revenues, as
compared to $25.7 million, or 31.4% of hotel revenues, for the corresponding
period in 1995. The decrease in gross margin in the third quarter was primarily
due to the increase in the food and beverage revenue component of total hotel
revenue resulting from the Company's continued investment in full-service hotels
offset, in part, by increases in REVPAR and the termination of third-party
management agreements.
24
<PAGE> 25
Gaming revenues for the third quarter of 1996 as compared to the
corresponding period of 1995 decreased by $966,000. Gaming revenues for the nine
months ended September 30, 1996 as compared to the corresponding period of 1995
decreased by $1.0 million to $19.3 million.
Gaming gross margin for the third quarter of 1996 was ($31,000) or (1%) of
gaming revenues, as compared to $541,000 or 8.3% of gaming revenues, for the
third quarter of 1995. Gaming gross margin for the nine months ended September
30, 1996 was $1.5 million or 7.9% of gaming revenues, as compared to $2.0
million or 9.9% of gaming revenues, for the corresponding period in 1995.
The decrease in gaming revenues and the decline in gaming gross margin
predominately resulted from operations at the Bourbon Street Hotel and Casino
which was sold on September 13, 1996.
Management fees and other income for the nine months ended September 30,
1996 includes $314,500 of income recorded as a result of the Ross Litigation
settlement (see Item 3 of Part I of the Company's Form 10-K/A for the year ended
December 31, 1995) and $678,000 of management fee income from the joint venture
that owns the Boston Park Plaza hotel.
Income from joint venture represents income, after rents to the Trust,
from the Corporation's 58.2% investment in the 960-room Boston Park Plaza.
Administrative and operating expenses for the three and nine months ended
September 30, 1996, increased by $3.5 million to $4.5 million or 4.2% of
revenues and by $4.5 million to $7.1 million or 3.2% of revenues, respectively,
as compared to $981,000 or 2.5% of revenues and $2.7 million or 2.6% of
revenues, respectively, for the corresponding periods of 1995. The increases
were primarily a result of increases in payroll costs commensurate with the
Company's growth, as well as the assumption of management of hotels previously
provided by third-party operators. Administrative and operating expenses for the
three and nine months ended September 30, 1996 included a $1.5 million charge
relating to costs relating to the relocation of the corporate office from Los
Angeles, California to Phoenix, Arizona.
Depreciation and amortization expense increased by $522,000 and $4.8
million for the three and nine months ended September 30, 1996, respectively, as
compared to the corresponding periods of 1995. The increases were primarily a
result of depreciation relating to the Acquired Hotels.
Minority interest represents primarily the interest of Starwood Capital
and certain affiliates of Starwood Capital in Operating for the three and nine
months ended September 30, 1996.
25
<PAGE> 26
Net income for the nine months ended September 30, 1996 includes an
extraordinary gain of $1.5 million before minority interest resulting from early
extinguishment of debt. The extraordinary gain resulted from the early payoff at
a discount of a note secured by the Milwaukee Marriott. In addition, the
Corporation purchased the remaining equity interest for $240,000 and became the
100% owner of the hotel. Net income for the third quarter and nine months ended
September 30, 1996 also includes a $1.5 million charge resulting from the
relocation of the Company's corporate offices to Phoenix, Arizona from Los
Angeles, California in July.
For information with respect to rent and interest to the Trust during the
three and nine months ended September 30, 1996 and 1995, see "Trust" immediately
above.
26
<PAGE> 27
COMBINED HISTORICAL RESULTS OF OPERATIONS FOR THE THREE AND NINE MONTHS ENDED
SEPTEMBER 30, 1996 AND COMBINED PRO FORMA RESULTS OF OPERATIONS FOR THE THREE
AND NINE MONTHS ENDED SEPTEMBER 30, 1995
INCOME FROM OPERATIONS
Combined income from operations for the third quarter of 1996 was $6.1
million, or $0.28 per paired share, on combined revenues of $108.4 million,
compared to combined pro forma income from operations of $5.9 million, or $0.43
per paired share, on combined revenues of $43.2 million for the corresponding
period in 1995.
Combined income from operations for the nine months ended September 30,
1996 was $19.8 million, or $1.14 per paired share, on combined revenues of
$234.7 million, compared to combined pro forma net income of $17.1 million, or
$1.24 per paired share, on combined revenues of $127.0 million for the
corresponding period in 1995.
EXTERNAL GROWTH
During the quarter ended September 30, 1996 the Company acquired equity
and debt interests in 21 hotels containing 6,485 rooms at a combined cost of
approximately $520 million. During the nine months ended September 30, 1996, the
Company acquired equity interests in 29 hotels as follows: the 263-room Grand
Hotel (renamed The Westin Hotel) in Washington, DC (January 1996); a 58.2%
interest in the 960-room Boston Park Plaza Hotel Complex in Boston,
Massachusetts (January 1996); the 257-room Midland Hotel in Chicago, Illinois
(March 1996); the 442-room Clarion Hotel located at the San Francisco Airport in
Millbrae, California (April 1996), the 260-room Doubletree Guest Suites hotel in
Tampa, Florida, the 254-room Doubletree Guest Suites hotel in Cypress Creek,
Florida, and the 308-room Doubletree Guest Suites hotel in Irving, Texas (April
1996), the 251-room Doubletree Guest Suites hotel and the 177-room Days Inn,
both located at the Philadelphia Airport in Philadelphia, Pennsylvania (June
1996); the Teachers Portfolio (August 1996); the HOD Portfolio (August 1996);
the 294-room Marriott in Princeton, New Jersey (August 1996); and the 199-room
Doral Court and 121-room Doral Tuscany in New York, New York (September 1996).
INTERNAL GROWTH
On a same-store-sales basis, including all hotels acquired prior to
September 30, 1996, revenue per available room (REVPAR) for the third quarter of
1996 increased 11.4% (10.7% if the Dallas Park Central, which is undergoing a
substantial renovation and had occupancy of 11.3% for the quarter, is included),
from $62.90 to $70.04 over the same period in 1995. The increase in REVPAR
resulted from an increase in average daily rate (ADR) of 14.6%, from $82.01 to
$94.02, while the occupancy rate decreased by 2.2 percentage points.
On a same-store-sales basis, including all hotels acquired prior to
September 30, 1996, REVPAR for the nine months ended September 30, 1996
increased 10.7%, from $59.60 to $65.96 over the same period in 1995. The
increase in REVPAR resulted from an increase in ADR of 11.9%, from $80.33 to
$89.87 offset by a slight decrease in the occupancy rate from 74.2% to 73.4%.
27
<PAGE> 28
The overall increase in REVPAR for the third quarter and nine months ended
September 30, 1996 was largely attributable to the strong increase in REVPAR at
the Company's upscale hotels. These hotels experienced an increase in REVPAR of
12.7% and 12.3% for the third quarter and nine months ended September 30, 1996,
respectively, as compared to the corresponding periods of 1995. ADR for the
Company's upscale hotels increased 14.8%, for the third quarter and 11.5% for
the nine months ended September 30, 1996, as compared to the corresponding
periods of 1995.
28
<PAGE> 29
The following tables summarize average occupancy, ADR and REVPAR on a
year-over-year basis for the Company's owned and operated (including third party
managed hotels), nongaming hotels for the three and nine months ended September
30, 1996 and 1995:
<TABLE>
<CAPTION>
Three Months Ended
September 30,
----------------------
All Nongaming Hotels (excluding 1996 1995
- -------------------------------- ----- -----
Dallas Park Central):
- --------------------
<S> <C> <C>
Occupancy rate ......................... 74.5% 76.7%
ADR .................................... $94.02 $82.01
REVPAR ................................. $70.04 $62.90
REVPAR % change ........................ 11.4%
</TABLE>
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
----------------------
All Nongaming Hotels (excluding 1996 1995
- -------------------------------- ----- -----
Dallas Park Central):
- --------------------
<S> <C> <C>
Occupancy rate ......................... 73.4% 74.2%
ADR .................................... $89.87 $80.33
REVPAR ................................. $65.96 $59.60
REVPAR % change ........................ 10.7%
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended
September 30,
----------------------
Upscale Hotels: 1996 1995
- -------------- ----- -----
<S> <C> <C>
Occupancy rate ......................... 74.9% 76.3%
ADR .................................... $99.39 $86.57
REVPAR ................................. $74.44 $66.04
REVPAR % change ........................ 12.7%
</TABLE>
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
----------------------
Upscale Hotels: 1996 1995
- -------------- ----- -----
<S> <C> <C>
Occupancy rate ......................... 74.0% 73.5%
ADR .................................... $97.83 $87.77
REVPAR ................................. $72.41 $64.50
REVPAR % change ........................ 12.3%
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended
September 30,
----------------------
Midscale/Economy Hotels 1996 1995
- ------------------------ ----- -----
(excluding Dallas Park Central):
- --------------------------------
<S> <C> <C>
Occupancy rate ......................... 72.9% 78.1%
ADR .................................... $72.70 $64.91
REVPAR ................................. $52.97 $50.69
REVPAR % change ........................ 4.5%
</TABLE>
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
----------------------
Midscale/Economy Hotels 1996 1995
- ------------------------ ----- -----
(excluding Dallas Park Central):
- --------------------------------
<S> <C> <C>
Occupancy rate ......................... 71.6% 76.3%
ADR .................................... $66.42 $60.05
REVPAR ................................. $47.57 $45.83
REVPAR % change ........................ 3.8%
</TABLE>
29
<PAGE> 30
Management believes that increases in REVPAR resulted primarily from
increases in demand due to continued favorable economic conditions which have
created increased business and leisure travel throughout the United States,
while the supply of hotel rooms has not increased as rapidly, particularly in
major urban locations. Revenue increases for the quarter were greatest at the
recently acquired city center properties in Atlanta, New York, and Washington.
REVPAR declined significantly at the Dallas Park Central which was virtually
closed for renovation. REVPAR at the Harvey Hotel in Wichita, which is managed
by a third party, declined 29%.
Management believes that there are several important factors that have
contributed to the improved profitability of hotel properties, including
increased ADR and effective cost management. Because a substantial portion of
the hotels' operating costs and expenses are generally fixed, the Company
derives substantial operating leverage from increases in revenue. However, the
Company's continued investment in full-service properties has led to a larger
component of food and beverage revenue when compared to the same period last
year. Consequently, gross margins for the third quarter of 1996 declined to 30%
from 32% in the corresponding quarter in 1995. Gross margins for the nine months
ended September 30, 1996 remained constant at 31% when compared to the same
period in 1995.
SELF MANAGEMENT
In the nine months ended September 30, 1996, consistent with its business
objective to capture the economic benefits otherwise retained by a third-party
operator, the Company assumed management of a total of 19 hotels including 18
acquired during the period and one property continuously owned by Realty. In
addition, from October 1 through November 8, 1996 the Company assumed management
of eight additional hotels acquired in the twelve months ending September 30,
1996. Management believes that the assumption of direct control over the
operations of these hotels will allow the Company to effectively use the
experience of management to improve operations.
RENOVATIONS
During the quarter the Company completed a $1.9 million renovation of the
Riverside Inn in Portland, Oregon and a $1.6 million renovation of the Terrace
Garden Inn in Atlanta, Georgia. The $12 million renovation of the Dallas Park
Central is well advanced with completion expected in the first quarter of 1997.
Other significant renovations in progress at the end of the quarter include the
Sheraton Colony Square in Atlanta, Georgia ($6.5 million total renovation), the
Westin Hotel in Washington, D.C. ($6.0 million total renovation), the Meany
Tower Hotel in Seattle, Washington ($5.0 million total renovation), the Clarion
Hotel located at the San Francisco Airport ($5.0 million total renovation) and
the Radisson Hotel in Gainesville, Florida ($3.0 million total renovation). The
Company expects to complete these renovation projects in 1997.
SEASONALITY AND DIVERSIFICATION
Demand is affected by normally recurring seasonal patterns. Generally, the
Company's portfolio of hotels as a whole has performed better in the second and
third quarters due to decreased travel in the winter months. Future acquisitions
may further affect the seasonality of the Company's current portfolio.
30
<PAGE> 31
The Company has continued to implement a business strategy of franchise
and geographic diversification.
OTHER INCOME AND ADMINISTRATIVE AND OPERATING EXPENSES
Other income for the nine months ended September 30, 1996 includes
$678,000 of management fee income from the Boston Park Plaza and a $290,000 gain
(net of related expenses) realized in connection with the sale of securities,
which were purchased in contemplation of acquiring a portfolio of hotel
properties. Also included in other income is $629,000 recorded in connection
with the Ross Litigation settlement (see Item 3 of Part I of the Company's Form
10-K/A for the year ended December 31, 1995).
Administrative and operating expenses for the three and nine months ended
September 30, 1996 increased by $3.2 million to $4.6 million or 4% of revenue
and by $6.2 million to $10.0 million or 4% of revenues, respectively, as
compared to $1.4 million or 3.2% of revenues and $3.8 million or 3.0% of
revenues, respectively, for the corresponding periods of 1995. The increase was
primarily a result of an increase in payroll costs due to additions to the
corporate staffs commensurate with the Company's growth, as well as the
assumption of management of hotels from third-party operators. Administrative
and operating expenses for the quarter and nine months ended September 30, 1996
includes a $1.5 million charge resulting from the relocation of the Company's
corporate offices to Phoenix, Arizona from Los Angeles, California.
Administrative and operating expenses also includes payments of approximately
$270,000 to Jeffrey C. Lapin, the former President and Chief Operating Officer
of the Trust pursuant to his separation agreement. The increase in
administrative and operating expenses also resulted from costs relating to the
potential acquisition of hotels which ultimately were not acquired.
31
<PAGE> 32
COMBINED LIQUIDITY AND CAPITAL RESOURCES
Cash Flow Provided by Operating Activities. The principal source of cash
to be used to fund the Company's operating expenses, interest expense, recurring
capital expenditures and distribution payments by the Trust will be cash flow
provided by operating activities. The Company anticipates that cash flow
provided by operating activities will provide the necessary funds on a short and
long term basis to meet operating cash requirements including all distributions
to shareholders by the Trust. During the first quarter, the Trust paid a
distribution of $0.47 per share for the fourth quarter of 1995. During the
second quarter, the Trust paid the distribution of $0.47 per share for the
quarter ending March 31, 1996. During the third quarter, the Trust paid the
distribution of $0.49 per share for the quarter ended June 30, 1996 and declared
a distribution of $0.49 per share for the quarter ended September 30, 1996.
Cash Flows from Investing and Financing Activities. Additionally, the
Company intends to finance the acquisition of additional hotel properties, hotel
renovations and capital improvements and provide for general corporate purposes
through three loan facilities with affiliates of Lehman Brothers Inc. (one of
which is now managed by Bank of Boston) and one loan facility with an affiliate
of Goldman Sachs and, when market conditions warrant, to issue additional equity
or debt securities.
In March 1996, Realty entered into a loan facility (the "Term Loan") with
an affiliate of Lehman Brothers Inc. The 12-month Term Loan was put in place to
fund the acquisition in March 1996, of the 257-room Midland Hotel in Chicago
and, in April 1996, the facility was increased to $94 million. The Term Loan is
secured by certain properties of the Company on a cross-collateralized basis. As
of September 30, 1996, Realty had borrowed $74 million under the Term Loan,
which accrues interest at a rate equal to the one-two-or three-month LIBOR, at
the Company's option, plus (a) 1.95 % for the first $20 million and (b) 1.75 %
for the balance of the Term Loan. The Term Loan may be retired from the proceeds
of public or private issuances of equity or debt securities by the Company.
In July 1996, the maturity date of the Mortgage Loan Funding Facility (the
"Repo Facility") which the Company had entered into in July 1995 with an
affiliate of Lehman Brothers, Inc. was extended from January 25, 1997 to July
25, 1997. As of September 30, 1996, Realty had borrowed $71 million under the
Repo Facility.
In August 1996, the Company entered into a loan facility (the "Goldman
Loan") with an affiliate of Goldman Sachs for a one-year (extendible to 18
months) loan of up to $300 million to fund a portion of the acquisition cost of
the HOD Portfolio and for general corporate purposes. The Goldman Loan bears
interest at one-month LIBOR plus 1.75% and is secured by interests in the
Teachers Portfolio and the HOD Portfolio. At September 30, 1996, the Company had
borrowed $140 million under the Goldman Loan.
On April 12, 1996, the Company completed a public offering of 2,000,000
paired shares at a net price to the Company of $31.50 per paired share. The net
proceeds of approximately $62.4 million were used, in part, to fund the
acquisition of the 442-room Clarion Hotel at the San Francisco Airport and the
three Doubletree Guest Suite hotels located in Irving, Texas; Ft. Lauderdale,
Florida; and Tampa, Florida.
32
<PAGE> 33
On August 12, 1996, the Company completed a public offering of 10,000,000
paired shares and on August 23, 1996 the underwriter exercised its
over-allotment option to purchase 799,575 paired shares. Net proceeds from the
offering of approximately $365.0 million were used to fund the acquisition of
the Teachers Portfolio and the balance was used to fund a portion of the
acquisition of the HOD Portfolio. The remaining portion of the HOD Portfolio was
funded through the Goldman Loan discussed above.
As previously discussed, during the quarter, the Company completed a $1.9
million renovation of the Portland Riverside Inn, in Portland, Oregon and a $1.6
million renovation of the Terrace Garden Inn in Atlanta, Georgia. The $12
million renovation of the Dallas Park Central is well advanced with completion
expected in the first quarter of 1997. Other significant renovations in progress
at the end of the third quarter include the Sheraton Colony Square in Atlanta,
Georgia; the Westin Hotel in Washington, D.C.; the Meany Tower Hotel in Seattle,
Washington; the Clarion Hotel at the San Francisco Airport and the Radisson
Hotel in Gainesville, Florida. The Company expects to complete these renovations
in 1997 for approximately $25.5 million. Major and minor renovations of other
hotels are also being contemplated. Sources of capital for major building
renovations and expansions are expected to be: (i) excess funds from operations,
(ii) additional debt financing, and (iii) additional equity raised in the public
and private markets. As of the date of the filing of this report, since January
1, 1995, the Company has invested over $726 million in hotel assets
(approximately $743 million including capital expenditures for the nine months
ended September 30, 1996). As part of its investment strategy, the Company plans
to acquire additional hotels. Future acquisitions are expected to be funded
through further draws under a three-year, $135 million secured revolving credit
facility with affiliates of Lehman Brothers Inc. and managed by Bank of Boston
(the "Acquisition Facility"), and the Goldman Loan and the issuance of
additional equity or debt securities. The Company intends to incur additional
indebtedness in a manner consistent with its policy of maintaining a Ratio of
Debt-to-Total Market Capitalization of not more than 50%. Management of each of
the Trust and of the Corporation believes that it will have access to capital
resources sufficient to satisfy the cash requirements of each of the Trust and
the Corporation and to expand and develop their business in accordance with
their strategy for future growth.
33
<PAGE> 34
FUNDS FROM OPERATIONS
Management believes that funds from operations ("FFO") is one measure of
financial performance of an equity REIT such as the Trust. Combined FFO (as
defined by the National Association of Real Estate Investment Trusts)(1) for the
quarter ended September 30, 1996 almost doubled to $25.3 million, compared to
combined historical FFO of $12.7 million for the corresponding period in 1995
and grew by 95% compared to pro forma FFO of $13.0 million for the corresponding
period in 1995. The following table shows the calculation of historical and pro
forma combined FFO for the quarter ended September 30, 1996:
<TABLE>
<CAPTION>
Three Months Ended
September 30,
-----------------------------------------
Pro Forma Historical
1996 1995 1995
----------- ----------- -----------
<S> <C> <C> <C>
Income before extraordinary item and minority
interest ........................................... $ 8,169,000 $ 8,412,000 $ 8,642,000
Real estate related depreciation and amortization, net
of amortization of financing costs ................. 13,169,000 4,557,000 3,997,000
Real estate related depreciation-Boston Park Plaza ... 1,424,000 -- --
Loss on sales of hotel assets ........................ 1,037,000 12,000 12,000
Corporate relocation costs ........................... 1,500,000 -- --
----------- ----------- -----------
FFO $25,299,000 $12,981,000 $12,651,000
=========== =========== ===========
</TABLE>
For the nine months ended September 30, 1996 combined FFO grew by 150% to
$56.6 million, compared to combined historical FFO of $22.7 million for the
corresponding period in 1995 and grew by 50% compared to pro forma FFO of $37.8
million for the corresponding period in 1995. The following table shows the
calculation of historical and pro forma combined FFO for the nine months ended
September 30, 1996:
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
-----------------------------------------
Pro Forma Historical
1996 1995 1995
----------- ----------- -----------
<S> <C> <C> <C>
Income before extraordinary item and
minority interest .................................. $26,268,000 $24,445,000 $12,348,000
Real estate related depreciation and amortization, net
of amortization of financing costs ................. 25,860,000 13,233,000 10,182,000
Real estate related depreciation-Boston Park Plaza ... 1,621,000 -- --
Loss on sales of hotel assets ........................ 1,384,000 125,000 125,000
Corporate relocation costs ........................... 1,500,000 -- --
----------- ----------- -----------
FFO $56,633,000 $37,813,000 $22,655,000
=========== =========== ===========
</TABLE>
34
<PAGE> 35
FFO includes $201,000 and $430,000 of interest income recognized in excess
of the actual cash received on mortgage notes receivable (as a result of the
notes having been purchased at a discount) for the quarter ended September 30,
1996 and 1995, respectively, and $719,000 and $975,000 for the nine months ended
September 30, 1996 and 1995, respectively.
(1) With respect to the presentation of FFO, management elected early adoption
of the "new definition" as recommended in the March 1995 NAREIT White
Paper on FFO beginning January 1, 1995. Management and industry analysts
generally consider funds from operations to be one measure of the
financial performance of an equity REIT that provides a relevant basis for
comparison among REITs and it is presented to assist investors in
analyzing the performance of the Company. FFO is defined as income before
minority interest (computed in accordance with generally accepted
accounting principles), excluding gains (losses) from debt restructuring
and sales of property, and real estate related depreciation and
amortization (excluding amortization of financing costs). FFO does not
represent cash generated from operating activities in accordance with
generally accepted accounting principles and is not necessarily indicative
of cash available to fund cash needs. FFO should not be considered an
alternative to net income as an indication of the Company's financial
performance or as an alternative to cash flows from operating activities
as a measure of liquidity.
35
<PAGE> 36
PART II. - OTHER INFORMATION
Item 1. Legal proceedings
None.
Item 2. Changes in Securities
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 11 - Combined statement regarding computation of per share
earnings.
(b) Reports on Form 8-K.
On August 12, 1996, the Trust and and the Corporation filed a Joint
Current Report on Form 8-K to report the acquisition of the Teachers
Portfolio and the HOD Portfolio.
36
<PAGE> 37
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 thereunto duly authorized.
STARWOOD LODGING TRUST STARWOOD LODGING CORPORATION
Registrant Registrant
/s/ RONALD C. BROWN /s/ ALAN M. SCHNAID
- ----------------------------------- -----------------------------------------
Ronald C. Brown Alan M. Schnaid
Senior Vice President and Vice President and Corporate Controller
Chief Financial Officer (Principal Accounting Officer)
(Principal Financial Officer)
Date: November _____, 1996.
37
<PAGE> 1
STARWOOD LODGING TRUST AND STARWOOD LODGING CORPORATION
COMBINED STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1996 Exhibit 11
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, 1996 September 30, 1996
------------------ ------------------
<S> <C> <C>
Net income $ 6,099,000 $19,787,000
Weighted average paired shares
assuming no dilution 21,700,000 17,193,000
Common equivalent shares
Additional shares applicable to stock
options based on the weighted average
market price 233,000 140,000
Weighted average paired shares
applicable to net income per common ----------- -----------
and common equivalent paired shares 21,933,000 17,333,000
----------- -----------
Additional shares applicable to stock
options based on the market close
price at the end of the period 92,000 102,000
Weighted average paired shares ----------- -----------
assuming full dilution 22,025,000 17,435,000
----------- -----------
Net income per common and common
equivalent paired shares $ 0.28 $ 1.14
=========== ===========
Net income per common paired shares
assuming full dilution $ 0.28 $ 1.13
=========== ===========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE RELATED
BALANCE SHEETS AND STATEMENTS OF OPERATIONS AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH ON THE JOINT ANNUAL REPORT ON FORM 10K.
</LEGEND>
<CIK> 0000316206
<NAME> STARWOOD LODGING CORPORATION
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JUL-01-1996
<PERIOD-END> SEP-30-1996
<EXCHANGE-RATE> 1
<CASH> 18,446,000
<SECURITIES> 0
<RECEIVABLES> 32,198,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 7,175,000
<PP&E> 115,685,000
<DEPRECIATION> 0
<TOTAL-ASSETS> 173,504,000
<CURRENT-LIABILITIES> 36,098,000
<BONDS> 0
0
0
<COMMON> 266,000
<OTHER-SE> 29,758,000
<TOTAL-LIABILITY-AND-EQUITY> 173,504,000
<SALES> 105,167,000
<TOTAL-REVENUES> 106,187,000
<CGS> 0
<TOTAL-COSTS> 75,558,000
<OTHER-EXPENSES> 30,432,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,896,000
<INCOME-PRETAX> (1,509,000)
<INCOME-TAX> (1,509,000)
<INCOME-CONTINUING> (1,509,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,509,000)
<EPS-PRIMARY> (0.07)
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE RELATED
BALANCE SHEETS AND STATEMENTS OF OPERATIONS AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH ON THE JOINT ANNUAL REPORT ON FORM 10K.
</LEGEND>
<CIK> 0000048595
<NAME> STARWOOD LODGING TRUST
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JUL-01-1996
<PERIOD-END> SEP-30-1996
<EXCHANGE-RATE> 1
<CASH> 12,852,000
<SECURITIES> 0
<RECEIVABLES> 22,604,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 9,117,000
<PP&E> 1,095,281,000
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,139,854,000
<CURRENT-LIABILITIES> 23,115,000
<BONDS> 0
0
0
<COMMON> 266,000
<OTHER-SE> 565,496,000
<TOTAL-LIABILITY-AND-EQUITY> 1,139,854,000
<SALES> 0
<TOTAL-REVENUES> 27,789,000
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 11,900,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,021,000
<INCOME-PRETAX> 7,608,000
<INCOME-TAX> 7,608,000
<INCOME-CONTINUING> 7,608,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,608,000
<EPS-PRIMARY> 0.35
<EPS-DILUTED> 0
</TABLE>
