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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10K
(Mark one)
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
--------- EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1995
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OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
--------- EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 0-15097.
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WESTIN HOTELS LIMITED PARTNERSHIP
- --------------------------------------------------------------------------------
(Exact name of Registrant as specified in its charters)
Delaware 91-1328985
- --------------------------------------- ------------------------------------
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or
organization)
2001 Sixth Avenue, Seattle, Washington 98121
- ---------------------------------------- ------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number,
including area code (206) 443-5000
------------------------------------
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Units of limited partnership interests
- --------------------------------------------------------------------------------
(Title of Class)
There is no public market for Units of limited partnership interests in the
Westin Hotels Limited Partnership.
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.
--------
Indicate by check mark whether the Registrant (1) has 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 Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
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Indicate the number of shares (units) outstanding of each of the issuer's
classes of common stock (units), as of the latest practicable date (applicable
only to corporate issuers).
135,600 limited partnership units issued and outstanding
DOCUMENTS INCORPORATED BY REFERENCE
None.
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PART I
ITEM 1. BUSINESS.
GENERAL DEVELOPMENT OF BUSINESS
Westin Hotels Limited Partnership (the "Partnership") and its subsidiary
limited partnerships, The Westin St. Francis Limited Partnership (the "St.
Francis Partnership") and the Westin Chicago Limited Partnership (the "Chicago
Partnership"), each a Delaware limited partnership (collectively the
"Partnerships"), were formed on April 25, 1986 for the purpose of acquiring two
hotels, The Westin St. Francis in San Francisco, California and The Westin
Hotel, Chicago in downtown Chicago, Illinois (individually a "Hotel",
collectively the "Hotels"). The Westin St. Francis and The Westin Hotel, Chicago
had been owned by subsidiaries of Westin Hotel Company ("Westin") and have been
managed by Westin as part of Westin's international hotel system since 1945 and
1964, respectively. Westin Realty Corp. ("Westin Realty") is the sole general
partner of the Partnership, St. Francis Hotel Corporation ("St. Francis Corp.")
is the sole general partner of the St. Francis Partnership, and 909 North
Michigan Avenue Corporation ("909 Corp.") is the sole general partner of the
Chicago Partnership. Each general partner (individually a "General Partner,"
collectively the "General Partners") is a subsidiary of Westin. The St. Francis
Partnership and Chicago Partnership are collectively referred to as the "Hotel
Partnerships."
FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
The Partnerships, which commenced operations on August 28, 1986, are
engaged solely in the business of owning and operating the Hotels. Therefore,
the Partnerships are engaged in only one industry segment.
DESCRIPTION OF BUSINESS
The Hotels are managed by Westin and are operated as part of Westin's
international hotel system. The hotel business in general is highly competitive.
To the extent hotel capacity expands or demand for hotel accommodations
decreases in San Francisco and Chicago, where the Partnerships operate the
Hotels, competition will increase. The demand for particular accommodations and
related services are subject to various factors including, but not limited to,
seasonal variance, changes in economic conditions, and changes in travel
patterns and preferences (which may be affected by airline schedules, weather
conditions or availability). Specific information regarding competitive
conditions at each of the Hotels is set forth in Item 2 below.
On May 12, 1995, Aoki Corporation, the former owner of Westin, sold all of
the stock of Westin, which it had held indirectly through its wholly owned
subsidiary, Caesar Park Hotels & Resorts, Inc. (formerly Caesar Park Hotel
Investment, Inc.). Westin was sold to a limited liability company formed
specifically for the purpose of this acquisition by Starwood Capital Group,
L.P., affiliates of Goldman, Sachs & Co., and The Edward Thomas Companies.
Nomura Asset Capital Corporation provided the financing. Goldman, Sachs & Co. is
an international investment banking firm and has been an investor in both real
estate and corporate ventures through its Whitehall Funds and GS Capital
Partners Fund. Starwood Capital Group, L.P. is a private firm that invests on
behalf of its principals, primarily high net worth and institutional partners.
The Edward Thomas Companies is a Beverly Hills-based hotel company that owns and
operates hotels, including Shutters on the Beach in Santa Monica.
The sale of Westin did not change the structure of the General Partners'
and Limited Partners' ownership interests in either the Partnership or Hotel
Partnerships.
Neither the Partnership nor the Hotel Partnerships have any employees.
Administrative and Hotel personnel are employees of either Westin or the Hotels'
respective General Partners. The Partnerships reimburse Westin and the General
Partners for the costs of such employees. However, neither the Partnership nor
the Hotel Partnerships are directly responsible for the payment of executive
compensation to the officers of the General Partners.
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ITEM 2. PROPERTIES.
The Partnerships' properties consist of The Westin St. Francis in San
Francisco, California, and The Westin Hotel, Chicago in Chicago, Illinois. Each
is a first-class hotel bearing the Westin name and located in a premier central
urban location, providing guests with convenient access to business districts,
shopping areas and convention facilities. It may be noted that while Westin
manages hotels located at the airports of these cities, neither is in direct
competition with the Hotels.
THE WESTIN ST. FRANCIS
Description. During 1995, some of the floors at The Westin St. Francis were
reconfigured to better meet guests' needs. The result is that the Hotel now
contains 1,192 guest rooms, with 613 rooms in the main building and 579 rooms in
the 32-story tower. Four separate restaurants and lounges are located within the
Hotel, including the Compass Rose. Victor's, located on the 32nd floor, is
currently being renovated and will open this summer as a premier banquet
facility. Concierge services, jewelry and gift boutiques, clothing shops, art
galleries, a florist and a hair salon for men and women are all available within
the Hotel.
Location. The Westin St. Francis is located on historic Union Square in
downtown San Francisco, approximately 12 miles north of the San Francisco
International Airport and within easy walking distance of the George R. Moscone
Convention Center, Chinatown and the central business and financial district of
San Francisco. The world-famous San Francisco cable cars stop directly in front
of the Hotel.
Capital Improvements. During 1995, the Hotel embarked on an aggressive
renovation program. The Hotel spent $21.2 million on capital improvements. Of
this amount, $2.7 million was spent on the main building facade restoration,
$0.4 million on renovations to food and beverage outlets, $10.7 million on rooms
renovations, and the remaining $7.4 million in other areas including fire/life
safety upgrades and ADA (Americans with Disabilities Act) compliance.
The Hotel has budgeted $15.5 million for capital improvements in 1996, of
which $2.7 million is to be spent on guest rooms, $2.8 million on food and
beverage outlets, $5.4 million in other areas including fire/life safety
upgrades and ADA compliance, and $4.6 million on the facade project. For further
discussion regarding the funding of these capital expenditures, see Item 7 -
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - Liquidity and Capital Resources."
Competitive Conditions. The competition in San Francisco's hospitality
industry remained strong during 1995. As the Moscone Convention Center was being
built, new hotels were added and existing hotels expanded to meet projected
future demand. The Hotel's competitive segment now totals 7,235 rooms. San
Francisco has seen no new additions since 1991 and none are projected for 1996.
A number of hotels have undergone renovations within the past few years,
including the most recent, a multi-million dollar renovation to the Fairmont.
THE WESTIN HOTEL, CHICAGO
Description. The Westin Hotel, Chicago has 740 guest rooms including 43
suites. The Hotel operates the Chelsea as an all purpose food and beverage
facility and provides retail space for a specialty store and a gift shop.
Location. The Westin Hotel, Chicago, is located on a prime site in downtown
Chicago at the north end of the famous "Magnificent Mile." The Hancock Center is
situated directly south of The Westin Hotel, Chicago, as is the Water Tower
Place, offering a variety of shopping and entertainment possibilities. The Hotel
is 18 miles from O'Hare International Airport and 12 miles from the Midway
Airport.
Capital Improvements. In 1995, the Hotel's extensive rooms renovation was
substantially completed. The Hotel spent $6.3 million for capital expenditures.
Of this amount, $3.7 million was spent for guest room improvements, $0.9 million
for the lobby renovation, $1.1 million on food and beverage outlets, focusing
primarily on banquet facilities, and the remaining $0.6 million on various other
projects including fire/life safety upgrades.
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The Hotel has budgeted $3.1 million for capital improvements during 1996,
of which $0.7 million will be spent on the facade, $1.3 million for ADA
compliance and updating of systems, $0.9 million for food and beverage outlets.
For discussion regarding the funding of these capital expenditures see Item 7 -
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - Liquidity and Capital Resources."
Competitive Conditions. Chicago's hospitality industry experienced
continuing strong competition during the past two years, which is expected to
continue in 1996 as first-class hotel chains view a presence in Chicago as an
essential part of their hotel networks. Additionally, the proposed expansion of
the McCormick Place convention and meeting center, originally scheduled to be
completed in 1994, which will now be completed in April 1997, encouraged
development within the Chicago market. Historically, increased demand has not
been able to fully support these large increases in supply; however, during 1995
and continuing into 1996, it is anticipated that demand will continue to improve
in this market. There were no new additions to the Chicago market in 1995, but
construction of a 1,200 room hotel, expected to open in 1998, is scheduled to
begin in 1996.
MORTGAGE LOANS
On August 21, 1986, mortgage loans in the amount of $83,325,000 with
respect to The Westin St. Francis and $32,825,000 with respect to The Westin
Hotel, Chicago (collectively the "Mortgage Loans") were refinanced by Teacher
Retirement System of Texas (Lender). The Hotels were acquired subject to the
Mortgage Loans. The Mortgage Loans require that the Hotel Partnerships not
further encumber the Hotels without prior consent of the Lender. On June 2,
1994, the General Partner, on behalf of Westin Hotels Limited Partnership,
successfully completed a restructuring of the Mortgage Loans and entered into a
Restructuring Agreement with the Lender. See discussion regarding the terms of
the Restructuring Agreement under Item 7 - "Management's Discussion and Analysis
of Financial Condition and Results of Operations - Liquidity and Capital
Resources" below and Note (5) of the Notes to Consolidated Financial Statements.
INSURANCE
Each Hotel is covered by comprehensive general liability insurance, fire
and extended property insurance (including earthquake coverage), business
interruption, workers' compensation, employer's liability insurance, and such
other insurance as is customarily obtained for similar properties.
The Hotels currently participate in a Westin insurance program whereby
general liability and workers compensation insurance coverage premiums are paid
through Westin to Aetna Casualty and Surety Company and Westel Insurance
Company, the latter being a wholly owned subsidiary of Westin.
ITEM 3. LEGAL PROCEEDINGS.
Because of the nature of the hotel business, the Hotel Partnerships, along
with Westin as the Hotels' manager, are subject to various claims and legal
actions incidental to the ordinary course of their operations, including such
matters as contract and lease disputes and complaints alleging personal injury,
property damage and employment discrimination. The General Partner believes that
the outcome of any such pending claims or proceedings, individually or in the
aggregate, will not have a material adverse effect upon the business, financial
condition, or results of operations of the Partnership.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED UNITHOLDER MATTERS.
As of March 25, 1996, there were 8,929 holders of record of the 135,600
Units.
There is no public market for the Units, and it is not anticipated that a
public market for the Units will develop. The transfer of Units, or any interest
therein, is subject to a variety of restrictions. Limited Partners may not
transfer their interests in the Partnership if, in the opinion of the
Partnership's counsel, such transfers might violate the registration
requirements of the Securities Act of 1933, as amended, or the laws of any other
jurisdiction or agency applicable to the transfers, cause the Partnership to be
regarded as an association taxable as a corporation, result in the dissolution
or termination of the Partnership or result in a Hotel Partnership's not being
able to obtain or continue in effect any license permitting the service or sale
of alcoholic beverages in its Hotel. The assignee must also meet certain other
requirements set forth in the Amended and Restated Agreement of Limited
Partnership of Westin Hotels Limited Partnership before it may be recognized as
a substituted Limited Partner, including the payment of all reasonable expenses
connected with the transfer of any interest. The Limited Partners or their
representatives must furnish, as to voluntary transfers, sufficient information
to counsel to permit the foregoing determination to be made.
Cash distributions, if any, are distributed to the Partners on a quarterly
basis not later than 75 days after the end of the Partnership's fiscal quarter.
Limited Partners have received no cash distributions during the past five years.
In addition, cash distributions to the limited partners are prohibited for 1996,
and future distributions must be based on the Hotels achieving certain
performance levels as specifically outlined in the Restructuring Agreement. See
Note (2) of the Notes to Consolidated Financial Statements.
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ITEM 6. SELECTED FINANCIAL DATA.
The following table sets forth selected financial information for the
Partnership.
<TABLE>
<CAPTION>
Years Ended December 31,
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1995 1994 1993 1992 1991
---- ---- ---- ---- ----
(In Thousands of Dollars Except per Unit Amounts)
<S> <C> <C> <C> <C> <C>
Operating Revenues:
Rooms $ 60,907 $ 60,181 $ 58,300 $ 58,164 $ 57,615
Food & Beverage 27,124 30,611 27,954 28,763 30,543
Other 9,213 8,596 7,972 7,772 7,011
---------- ---------- ---------- ---------- ----------
Total Operating Revenues 97,244 99,388 94,226 94,699 95,169
---------- ---------- ---------- ---------- ----------
Operating Expenses:
Rooms 17,931 18,511 17,693 17,618 16,772
Food and beverage 22,842 25,637 24,410 25,554 26,405
Administrative, general and
marketing 16,120 16,083 15,305 16,189 15,957
Management fees 2,188 5,309 4,992 5,032 5,079
Other 24,169 21,392 27,467 29,333 28,392
---------- ---------- ---------- ---------- ----------
Total Operating Expenses 83,250 86,932 89,867 93,726 92,605
---------- ---------- ---------- ---------- ----------
Operating Profit $ 13,994 $ 12,456 $ 4,359 $ 973 $ 2,564
---------- ---------- ---------- ---------- ----------
Net Income (Loss) $ 1,713 $ 1,444 $ (8,675) $ (12,258) $ (10,497)
---------- ---------- ---------- ---------- ----------
Net Income (Loss) per Unit $ 12.63 $ 10.65 $ (63.97) $ (90.40) $ (77.41)
Total Assets $ 246,698 $ 234,293 $ 214,217 $ 223,332 $ 234,508
Long-term Obligations $ 153,760 $ 141,659 $ 125,855 $ 127,182 $ 128,235
Deferred Incentive
Management Fees $ 16,249 $ 16,249 $ 13,089 $ 11,395 $ 9,677
Distributions Paid per Unit $ - $ - $ - $ - $ -
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
GENERAL
The Hotels' primary market focus is on business travelers, conventions and
other groups and, in the case of The Westin St. Francis, tourism. The Hotels'
business activities generally follow national economic trends. The level of
tourist business is influenced by the general global economic environment and
political climate and, to a lesser extent, by the strength of the U.S. dollar in
relation to foreign currencies. Both The Westin St. Francis and The Westin
Hotel, Chicago continue to experience seasonal trends, with the lowest occupancy
levels occurring the first quarter, followed by increasing occupancies
throughout the remainder of the year. In 1995, however, operating results were
impacted by the renovations being undertaken at both Hotels, as discussed under
Item 7 - "Management's Discussion and Analysis of Financial Condition and
Results of Operations - Liquidity and Capital Resources" below. See Note (9) of
the Notes to Consolidated Financial Statements, included under Item 8 "Financial
Statements and Supplementary Data" below, for additional quarterly information.
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RESULTS OF OPERATIONS
This section analyzes significant fluctuations in items affecting the
consolidated statements of operations for the years ended December 31, 1995,
1994, and 1993. The table below presents key statistics used in the analysis:
<TABLE>
<CAPTION>
Years Ended December 31,
Combined 1995 1994 1993
-------- ---- ---- ----
<S> <C> <C> <C>
Average room rate (ARR) $ 124.99 $ 118.36 $ 115.88
Occupancy rate 69.0% 71.8% 71.1%
Profit margin as a percentage of revenues:
Rooms 70.6% 69.2% 69.7%
Food and beverage 15.8% 16.2% 12.7%
</TABLE>
1995 Compared with 1994
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During 1995, the Partnership realized net income totaling $1,713,000,
up $269,000 over 1994 levels of $1,444,000. Significantly lower
management fees, down $3,121,000 from 1994 levels, were the greatest
single contributor to the earnings improvement. Operating profits improved by
$1,538,000 as the improved profitability in the areas of rooms and other
operating departments was partially offset by declines in food and beverage
operations resulting from slower banquet business at both Hotels.
Combined rooms revenues showed a 1.2% improvement of $726,000, to
$60,907,000 over 1994 levels. The Westin Hotel, Chicago achieved significantly
higher rooms revenues, up 7.8% over 1994 to $20,237,000 as the average room rate
increased 11.7%, reflecting the Hotel's renovated rooms product and higher
demand in the Chicago market. The Westin Hotel, Chicago's improvement was
partially offset, however, by the 1.8% decline in rooms revenue at The Westin
St. Francis, as the Hotel experienced a 3 percentage point drop in the occupancy
rate, as rooms were renovated and group business declined since the Hotel was
unable to book this segment during the renovation period.
Combined food and beverage revenues declined by 11.4% to $27,124,000,
reflecting slower banquet activity at each Hotel. The Hotels' food and beverage
declines reflected the previously mentioned slower group business resulting from
the renovations. In addition, The Westin St. Francis' results were further
impacted by an unusually slow social calendar in San Francisco.
The combined rooms profits improved by 3.1% to $42,976,000 due to the
significant improvement at The Westin Hotel, Chicago. The Hotel achieved a
$1,532,000 increase in rooms profit as The Westin Hotel, Chicago's profitability
benefited from the 11.7% increase in the average room rate. The Westin St.
Francis experienced a slight decline in the rooms profit (0.8%) as the cost
savings measures implemented at the Hotel were insufficient to offset the
decline in rooms revenues previously discussed.
Despite the improved profitability in food and beverage operations at The
Westin Hotel, Chicago, the Hotels' combined food and beverage profits of
$4,282,000 declined by $692,000, as The Westin St. Francis was only able to
partially offset lost banquet revenues by cost efficiencies.
Combined profits from other operating departments improved $587,000 to
$6,431,000 as revenues increased $617,000 and costs were virtually kept at 1994
levels. Management fees declined $3,121,000 from 1994 levels to $2,188,000 as no
incentive management fee accrued as provided for in the management contract.
Taxes and insurance increased $2,223,000 over 1994 levels due to the impact of
the one-time property tax rebate which occurred in 1994. Interest expense
related to the subordinated loan from the General Partner increased to
$2,456,000, $1,814,000 greater than 1994 levels, as the loan was fully funded to
$25,000,000 during 1995 and interest accrued for 12 months as compared to 6
months in 1994.
1994 Compared with 1993
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In 1994, the Partnership realized net income totaling $1,444,000, a
$10,119,000 improvement over the 1993 net loss of $8,675,000.
This improvement resulted from significantly higher operating profits due to
revenue improvements in all operating areas and lower interest expense
resulting from the debt restructuring, which is discussed in greater
detail under "Liquidity and Capital Resources" below. The operating profit
benefited from greater demand in the respective markets for both
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Hotels. The greatest improvement was in the area of food and beverage
operations, although both Hotels achieved significant growth in rooms revenues.
The Partnership also benefited from a one-time property tax rebate for The
Westin St. Francis, which occurred during the third quarter, and lower
depreciation and amortization expense.
Combined rooms revenues showed a 3.2% improvement as combined occupancy
levels improved 0.7 percentage points, reflecting growth in demand in both
markets, and the combined average room rate improved by 2.1% reflecting not only
greater demand, but also the impact of the partially completed rooms renovations
at The Westin Hotel, Chicago. The Westin Hotel, Chicago experienced the greatest
strengthening in rooms revenues as the Hotel achieved a 9.2% improvement in
rooms revenues to $18,781,000, up $1,582,000 from the 1993 level. The Westin St.
Francis also achieved slightly higher rooms revenues of $41,400,000, up $299,000
from the 1993 level, due to higher occupancy levels. Occupancy was
0.6 percentage points higher than 1993 levels of 74.3%, as The Westin
St. Francis benefited from some major conventions that took place in
San Francisco during 1994.
Combined food and beverage revenues improved significantly (9.5%) to
$30,611,000 as banquet business increased at both Hotels, but most significantly
at The Westin St. Francis following completion of the ballroom renovation.
Revenues from the Hotels' other food outlets also improved. The Westin St.
Francis achieved an 8.3% improvement in food and beverage revenues to
$22,344,000 while The Westin Hotel, Chicago's revenues of $8,267,000,
represented a 12.9% improvement over the 1993 level.
Combined rooms profits reached $41,670,000, a 2.6% improvement over 1993
levels. The Westin Hotel, Chicago's 10.3% improvement was partially offset by
the slight (0.7%) decrease at The Westin St. Francis. The Westin Hotel,
Chicago's improvement primarily resulted from the Hotel's higher average room
rate, while The Westin St. Francis' results were adversely affected by labor
increases which increased related rooms costs, thereby reducing rooms profits.
Combined food and beverage profits increased by $1,430,000 to $4,974,000,
reflecting improvements at both Hotels, but most significantly at The Westin St.
Francis where food and beverage profit rose by $1,127,000.
Profits from other operating departments contributed $5,844,000 to the
operating profit, up $496,000 compared with 1993, as the Hotels continued to
realize cost efficiencies while increasing revenues. The $3,078,000 reduction in
taxes and insurance included a one-time property tax rebate of $2,100,000 for
The Westin St. Francis. The $3,350,000 reduction in depreciation and
amortization expense reflects the impact of the full depreciation during 1993 of
equipment placed in service at the inception of the Partnership. The $775,000
increase in administrative and general expense reflects higher credit card
commissions, labor costs and professional fees.
LIQUIDITY AND CAPITAL RESOURCES
The Partnership had cash and cash equivalents of $10,345,000 at December
31, 1995, a $2,743,000 increase from December 31, 1994. During 1995, net cash
contributed by operating activities equaled $11,882,000; of this amount,
Available Net Cash Flow totaling $8,734,000 was funded into the Furniture,
Fixture and Equipment (FF&E) Reserve Accounts as stipulated in the Restructuring
Agreement.
The FF&E Reserve Accounts are funded by the proceeds of the Partnership's
subordinated loan from the General Partner and Available Net Cash Flow as
stipulated in the Restructuring Agreement and are included in restricted cash in
the Consolidated Financial Statements. During 1995, the funding of the
$25 million subordinated loan from the General Partner was completed by the
$7,500,000 contribution to the FF&E Reserve Account for The Westin St. Francis.
This additional funding, along with the $8,734,000 from Available Net Cash Flow,
comprises the $16,234,000 increase in restricted cash for 1995.
Fourth quarter net capital expenditures totaling $5,101,000, the majority
of which occurred at The Westin St. Francis, were primarily funded from the FF&E
Reserve Accounts. During 1995, a total of $27,393,000 was expended for capital
improvements at the Partnership's Hotels.
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The 1995 capital budget was adjusted downward from the original levels
approved by the Lender. As stipulated by the Restructuring Agreement, variances
from the original estimated amounts reflect timing adjustments and were either
approved by the Lender or were within the limits required by the Restructuring
Agreement. Of this amount, The Westin St. Francis spent $21.2 million for
capital improvements during 1995, of which $10.7 million was spent on guest
rooms, $0.4 million on food and beverage outlets, $7.4 million in other areas
including fire/life safety upgrades and ADA compliance, and $2.7 million on the
facade project. During 1995, the main building guest rooms were completed and
the Hotel began work on the Tower guest rooms. The Westin Hotel, Chicago spent
$6.3 million for capital improvements in 1995. Of this amount, $3.7 million was
spent on rooms renovations, $1.5 million for equipment and other renovations
including the lobby and facade, and $1.1 million for food and beverage outlets.
Expenditures in 1996 will total approximately $18.6 million. The Hotels
will continue work on the facades and food and beverage outlets and complete the
fire/life safety upgrades. The major portion of these expenditures are slated
for work at The Westin St. Francis where anticipated outlays for capital
expenditures will total approximately $15.5 million. The Westin St. Francis will
spend approximately $5.4 million on fire/life safety upgrades, ADA compliance
work, and other equipment; $4.6 million for the facade; $2.7 million to finish
the guest room renovations; and $2.8 million on converting less profitable
outlet space to banquet facilities and updating the Dutch Kitchen. The Westin
Hotel, Chicago expects to spend $3.1 million for capital in 1996, of which $0.7
million will be spent on the facade; $0.9 million for banquet facilities and
miscellaneous projects; and $1.2 million for other projects including ADA
compliance and systems updating. At this time, the General Partner anticipates
that future Available Net Cash Flow from operations and funds currently on
deposit in the FF&E Reserve Accounts will provide adequate funding for these
expenditures. As in prior years, the General Partner will continue to closely
monitor the Partnership's cash flow and timing of capital expenditures. The
facade restoration at The Westin St. Francis will continue beyond 1996, with a
current projected 1998 completion date.
The General Partner believes that the Partnership's liquidity will improve
significantly as a result of the Restructuring Agreement. However, as stipulated
in the Restructuring Agreement, no cash distributions to the Limited Partners
were made during 1995. Furthermore, since the Hotels did not achieve the levels
of performance as specifically outlined in the Restructuring Agreement which
would have allowed the resumption of distributions at this time, no
distributions will be made in 1996. However, barring any unforeseen adverse
occurrence, the General Partner anticipates that the Partnership will be in a
position to resume distributions to the Limited Partners sometime in 1997 and
thereafter from available cash flow. It is important to note that in order for
this to occur, Limited Partner distributions must be based on the Hotels first
achieving certain performance levels as specified in the Restructuring
Agreement.
When the Partnership was formed in 1986, it was anticipated that a sale or
refinancing of the Hotels would be explored after eight years of Partnership
operations. Beginning with 1994, the Partnership Agreement directed the General
Partner to actively review opportunities to sell or refinance the Hotel
properties on behalf of the Partnership. During 1994, the General Partner
emphasized restructuring the debt to stabilize both Hotels and to allow them to
remain competitive in their respective markets. In 1995, the General Partner
focused on the renovations at both Hotels to support their future profitability.
During 1996, the General Partner will continue its emphasis on the renovations
occurring at both Hotels. The real estate market for luxury hotels continues to
improve and the General Partner will closely monitor these market conditions.
The General Partner anticipates that this direction will best improve the
Partnership's overall financial position and ultimately optimize the value of
the Partnership's properties in the real estate market.
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The following documents are filed as part of this report:
Independent Auditors' Reports.........................11 - 12
Consolidated Balance Sheets...........................13 - 14
Consolidated Statements of Operations......................15
Consolidated Statements of Partners' Equity................16
Consolidated Statements of Cash Flows......................17
Notes to Consolidated Financial Statements............18 - 22
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
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INDEPENDENT AUDITORS' REPORT
To the Partners of
Westin Hotels Limited Partnership:
We have audited the accompanying consolidated balance sheet of Westin
Hotels Limited Partnership (a Delaware limited partnership) and subsidiaries as
of December 31, 1995, and the related consolidated statements of operations,
partners' equity and cash flows for the year 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 audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the 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 audit provides 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 Westin Hotels Limited
Partnership and subsidiaries as of December 31, 1995, and the results of their
operations and their cash flows for the year then ended in conformity with
generally accepted accounting principles.
/s/ Arthur Andersen LLP
Seattle, Washington,
February 9, 1996
-11-
<PAGE> 12
INDEPENDENT AUDITORS' REPORT
The Partners
Westin Hotels Limited Partnership:
We have audited the accompanying consolidated balance sheet of Westin
Hotels Limited Partnership and Subsidiaries (the Partnership) as of December 31,
1994 and the related consolidated statements of operations, partners' equity and
cash flows for each of the years in the two-year period ended December 31, 1994.
These consolidated financial statements are the responsibility of the
Partnership's management. Our responsibility is to express an opinion on the
consolidated 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 consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Westin
Hotels Limited Partnership and Subsidiaries at December 31, 1994 and the results
of their operations and their cash flows for each of the years in the two-year
period ended December 31, 1994, in conformity with generally accepted accounting
principles.
/s/ KPMG Peat Marwick LLP
Seattle, Washington
February 28, 1995
-12-
<PAGE> 13
WESTIN HOTELS LIMITED PARTNERSHIP
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1995 AND 1994
(In Thousands of Dollars)
ASSETS
<TABLE>
<CAPTION>
1995 1994
---- ----
CURRENT ASSETS:
<S> <C> <C>
Cash and cash equivalents $ 10,345 $ 7,602
Guest and trade accounts receivable, less allowance for
doubtful accounts of $213 in 1995 and $216 in 1994 4,745 5,461
Other receivables 109 138
Inventories 516 639
Prepaid expenses and other current assets 1,677 1,553
--------- ---------
TOTAL CURRENT ASSETS 17,392 15,393
PROPERTY AND EQUIPMENT, at cost:
Buildings and improvements 161,731 155,517
Furniture, fixtures and equipment 80,844 65,433
Expendable supplies 2,031 2,031
--------- ---------
244,606 222,981
Less accumulated depreciation and amortization 89,412 84,255
--------- ---------
155,194 138,726
Construction in progress 7,562 3,193
Land 62,599 62,599
--------- ---------
PROPERTY AND EQUIPMENT, net 225,355 204,518
RESTRICTED CASH 3,555 14,352
OTHER ASSETS 396 30
--------- ---------
TOTAL ASSETS $ 246,698 $ 234,293
========= =========
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
-13-
<PAGE> 14
WESTIN HOTELS LIMITED PARTNERSHIP
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1995 AND 1994
(In Thousands of Dollars)
LIABILITIES AND PARTNERS' EQUITY
<TABLE>
<CAPTION>
1995 1994
---- ----
CURRENT LIABILITIES:
<S> <C> <C>
Accounts payable:
Trade and other $ 2,491 $ 2,827
Westin and affiliates 613 820
--------- ----------
Total accounts payable 3,104 3,647
Accrued expenses 7,859 8,888
Current maturities of long-term obligations 172 161
Other current liabilities 715 640
--------- ----------
TOTAL CURRENT LIABILITIES 11,850 13,336
LONG-TERM OBLIGATIONS 125,662 123,517
LONG-TERM OBLIGATION TO GENERAL PARTNER 28,098 18,142
DEFERRED INCENTIVE MANAGEMENT FEES
PAYABLE TO WESTIN 16,249 16,249
--------- ----------
TOTAL LIABILITIES 181,859 171,244
MINORITY INTERESTS 3,436 3,359
PARTNERS' EQUITY (DEFICIT):
General Partner (1,795) (1,590)
Limited Partners (135,600 Units issued and outstanding) 63,198 61,280
--------- ----------
TOTAL PARTNERS' EQUITY 61,403 59,690
--------- ----------
COMMITMENTS
TOTAL LIABILITIES AND PARTNERS' EQUITY $ 246,698 $ 234,293
========== ==========
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
-14-
<PAGE> 15
WESTIN HOTELS LIMITED PARTNERSHIP
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1995, 1994, AND 1993
(In Thousands of Dollars Except per Unit Data)
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
OPERATING REVENUES:
Rooms $ 60,907 $ 60,181 $ 58,300
Food and beverage 27,124 30,611 27,954
Other operating departments 9,213 8,596 7,972
--------- --------- ---------
TOTAL OPERATING REVENUES 97,244 99,388 94,226
--------- --------- ---------
OPERATING EXPENSES:
Rooms 17,931 18,511 17,693
Food and beverage 22,842 25,637 24,410
Other operating departments 2,782 2,752 2,624
Administrative and general 9,301 9,141 8,366
Management fees 2,188 5,309 4,992
Advertising and business promotion 6,819 6,942 6,939
Property maintenance and energy 7,994 8,332 8,168
Local taxes and insurance 5,768 3,545 6,623
Rent 789 475 414
Depreciation and amortization 6,836 6,288 9,638
--------- --------- ---------
TOTAL OPERATING EXPENSES 83,250 86,932 89,867
--------- --------- ---------
OPERATING PROFIT 13,994 12,456 4,359
--------- --------- ---------
OTHER INCOME (EXPENSE):
Interest income 919 638 185
Interest expense (10,665) (10,568) (13,278)
Interest expense on long-term obligation
to General Partner (2,456) (642) -
Other, net (2) (385) 36
--------- --------- ---------
NET OTHER EXPENSE (12,204) (10,957) (13,057)
--------- --------- ---------
INCOME (LOSS) BEFORE MINORITY INTERESTS 1,790 1,499 (8,698)
MINORITY INTERESTS (77) (55) 23
--------- --------- ---------
NET INCOME (LOSS) $ 1,713 $ 1,444 $ (8,675)
========= ========= =========
NET INCOME (LOSS) PER UNIT $ 12.63 $ 10.65 $ (63.97)
========= ========= =========
(135,600 Units issued and outstanding)
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
-15-
<PAGE> 16
WESTIN HOTELS LIMITED PARTNERSHIP
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF PARTNERS' EQUITY
YEARS ENDED DECEMBER 31, 1995, 1994, AND 1993
(In Thousands of Dollars)
<TABLE>
<CAPTION>
General Limited
Partner Partners
------- --------
<S> <C> <C>
BALANCE AT DECEMBER 31, 1992 $ (1,160) $ 68,081
Net loss (258) (8,417)
---------- ----------
BALANCE AT DECEMBER 31, 1993 (1,418) 59,664
Net income (loss) (172) 1,616
---------- ----------
BALANCE AT DECEMBER 31, 1994 (1,590) 61,280
Net income (loss) (205) 1,918
---------- ----------
BALANCE AT DECEMBER 31, 1995 $ (1,795) $ 63,198
========== ==========
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
-16-
<PAGE> 17
WESTIN HOTELS LIMITED PARTNERSHIP
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1995, 1994, AND 1993
(In Thousands of Dollars)
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
OPERATING ACTIVITIES:
<S> <C> <C> <C>
Net income (loss) $ 1,713 $ 1,444 $ (8,675)
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation and amortization 6,836 6,288 9,638
Interest on long-term obligations not
currently payable 4,498 2,305 -
Interest earned on restricted cash (512) (198) -
Decrease (increase) in receivables 745 (1,752) 445
Decrease in inventories 123 7 14
(Increase) decrease in prepaid expenses and
other current assets (124) (510) 234
(Decrease) increase in accounts payable (543) 688 (317)
(Decrease) increase in accrued expenses and
other current liabilities (954) 240 (595)
Incentive management fees not currently payable - 3,160 1,694
Minority interests 77 55 (23)
Other 23 5 92
--------- --------- ---------
Net cash provided by operating activities 11,882 11,732 2,507
--------- --------- ---------
INVESTING ACTIVITIES:
Proceeds from sale of equipment 83 15 21
Acquisition of property and equipment (27,393) (6,677) (4,693)
Increase in restricted cash (16,234) (20,299) -
Decrease in restricted cash to fund acquisition of
property and equipment 27,520 6,132 -
(Increase) decrease in other assets (366) 1 -
---------- --------- ---------
Net cash used in investing activities (16,390) (20,828) (4,672)
---------- ---------- ----------
FINANCING ACTIVITIES:
Increase in long-term obligation to General Partner 7,500 17,500 -
Repayment of long-term obligations (249) (5,308) (1,367)
---------- ---------- ----------
Net cash provided by (used in) financing
activities 7,251 12,192 (1,367)
--------- --------- ----------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 2,743 3,096 (3,532)
CASH AND CASH EQUIVALENTS AT BEGINNING
OF YEAR 7,602 4,506 8,038
--------- --------- ---------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 10,345 $ 7,602 $ 4,506
========= ========= =========
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
-17-
<PAGE> 18
WESTIN HOTELS LIMITED PARTNERSHIP
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) BASIS OF PRESENTATION
The accompanying consolidated financial statements include the accounts of
Westin Hotels Limited Partnership, a Delaware limited partnership (the
"Partnership"), and its subsidiary limited partnerships, The Westin St. Francis
Limited Partnership and The Westin Chicago Limited Partnership (the "Hotel
Partnerships"). The Westin St. Francis Limited Partnership owns and operates The
Westin St. Francis in downtown San Francisco, California, and The Westin Chicago
Limited Partnership owns and operates The Westin Hotel, Chicago in downtown
Chicago, Illinois (individually a "Hotel", collectively the "Hotels"). All
significant intercompany transactions and accounts have been eliminated. Certain
of the prior years' amounts have been reclassified to conform with the 1995
presentation.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the consolidated
financial statements and the reported amounts of revenues and expenses during
the reporting period.
(b) CASH EQUIVALENTS AND RESTRICTED CASH
For purposes of the Consolidated Statements of Cash Flows, cash equivalents
consist of highly liquid debt instruments bearing floating interest rates and
other short-term investments purchased with original maturities of three months
or less. Restricted cash consists of amounts deposited in interest-bearing money
market accounts. The Partnership's carrying amount is a reasonable estimate of
fair value of cash equivalents and restricted cash.
(c) INVENTORIES
Inventories, principally food and beverage and supplies, are valued at the
lower of cost (first-in, first-out) or replacement market.
(d) PROPERTY AND EQUIPMENT
Depreciation of property and equipment is provided principally on the
straight-line method over the assets' estimated useful lives as follows:
Buildings and improvements 40 years
Furniture, fixtures and equipment 7 to 12 years
Expendable supplies 5 years
An annual group method of depreciation is used under which individual
assets are not specifically identified for purposes of determining retirements,
and fully depreciated asset groups are written off when evidence indicates they
are no longer in use. Proceeds from miscellaneous sales of property and
equipment are credited to accumulated depreciation.
Expendable supplies (linens, china, silverware and glassware) have been
depreciated to 50% of the cost of initial stock. Replacements are expensed when
purchased.
Amortization of capitalized lease property and equipment is provided on the
straight-line method over the shorter of the assets' estimated useful lives or
the lease terms.
Maintenance and repairs, including the cost of minor replacements, are
charged to property maintenance expense accounts. Costs of additions and
betterment of property are capitalized in property and equipment accounts.
-18-
<PAGE> 19
(e) INCOME TAXES
The Partnership does not record any provision for Federal and state income
taxes in its consolidated financial statements. All items of income, gain, loss,
deduction or credit for Federal and state income tax purposes are allocated to
the partners of the Partnership for inclusion in their individual income tax
returns. The reported amounts of the Partnership's net assets and liabilities
exceeded the related tax bases by approximately $43,036,000 and $36,270,000 at
December 31, 1995 and 1994, respectively.
(f) STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 121 (SFAS 121)
During 1995, the Financial Accounting Standards Board issued SFAS 121,
"Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets To Be
Disposed Of." SFAS 121 requires that long-lived assets held and used by an
entity be reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amounts of these assets may not be recoverable and
that long-lived assets held for sale be adjusted to fair market value. The
Partnership must adopt SFAS 121 no later than January 1996. Management does not
believe that adopting SFAS 121 will have a significant impact on the
Partnership's financial position or results of operations.
(2) ORGANIZATION
The Partnership was formed on April 25, 1986, to invest in hotel properties
by acquiring limited partnership interests in the Hotel Partnerships. The
Partnership will continue until December 31, 2036, unless terminated sooner
under the provisions of the Partnership agreement.
Westin Realty Corp. ("Westin Realty"), a wholly owned subsidiary of Westin
Hotel Company ("Westin"), is the sole general partner of the Partnership. On
August 28, 1986, Westin Realty acquired all of the limited partnership interests
in the Hotel Partnerships (which represented 91.62% of the fair value of the
Hotel Partnerships' net assets) and contributed these interests, valued at
$135,600,000, to the Partnership in exchange for all of the limited partnership
interests in the Partnership. Westin Realty then sold these limited partnership
interests in a public offering. The remaining 8.38% interest in the Hotel
Partnerships was retained by the predecessor owners, subsidiaries of Westin.
On May 12, 1995, Aoki Corporation sold all of the stock of Westin, which it
held indirectly through its wholly owned subsidiary, Caesar Park Hotels &
Resorts, Inc. (formerly Caesar Park Hotel Investment, Inc.). Westin was sold to
a limited liability corporation formed specifically for the purpose of this
acquisition by Starwood Capital Group, L.P., affiliates of Goldman, Sachs & Co.,
and The Edward Thomas Companies. The sale of Westin does not change the
structure of the general partner's and limited partners' interests in the
Partnership. An affiliate of Westin Realty owns a total of 20 Limited
Partnership Units, representing less than a 1% ownership interest.
The Hotel Partnerships' profits and losses are generally allocated 99% to
the Hotel Partnership and 1% to minority interests. Partnership profits and
losses are further allocated 99% to the limited partners and 1% to the general
partner, with the exception of depreciation expense, which is allocated 92.55%
to the limited partners and 7.45% to the general partner. Because of the
allocation of depreciation expense, the general partner's share of profits and
losses since inception is a net loss, resulting in a deficit balance in the
general partner equity account. The Partnership agreement specifies that if a
deficit balance exists after liquidation of the Hotel Partnerships' assets, the
general partner would be obligated to contribute cash to the Partnership equal
to the lesser of the deficit balance or the aggregate amount distributed at
liquidation to the Hotel general partners by the Hotel Partnerships.
Except for the following restrictions outlined in the June 1994 mortgage
restructuring agreement, net cash flow of the Partnership as defined in the
Partnership agreement is distributed first to the limited partners until certain
preferential distributions are achieved and then allocated to both the general
and limited partners depending on factors related to the source of the net cash
flow and cash distributions as specified in the Partnership agreement. The
Restructuring Agreement prohibits cash distributions to the limited partners for
1995. The agreement permits distributions in 1996 subject to the Hotels
achieving certain performance levels in the two years prior to 1996, and permits
distributions in 1997 subject to the Hotels achieving certain
-19-
<PAGE> 20
performance levels in the three years prior to 1997. The Hotels, however, did
not achieve the required performance levels to allow a distribution in 1996.
Distributions in 1997 are subject to the Hotels achieving certain performance
levels in the three years prior to 1997.
(3) RESTRICTED CASH
During 1995, the remaining $7,500,000 of the $25,000,000 subordinated loan
from Westin Realty was funded to the Partnership. These proceeds have been
deposited in the Furniture, Fixture and Equipment (FF&E) Reserve Accounts. In
1995, $8,734,000 of Available Net Cash Flow from operations (as defined in the
mortgage restructuring agreement) was deposited to the FF&E Reserve Accounts.
The FF&E Reserve Accounts are classified as Restricted Cash on the Consolidated
Balance Sheets.
(4) ACCRUED EXPENSES
Accrued expenses include the following at December 31:
<TABLE>
<CAPTION>
1995 1994
---- ----
(In Thousands of Dollars)
<S> <C> <C>
Salaries and wages $ 2,990 $ 3,170
Estimated property and other taxes 3,806 4,538
Accrued interest 886 877
Other 177 303
---------- ----------
Total $ 7,859 $ 8,888
========== ==========
</TABLE>
(5) LONG-TERM OBLIGATIONS
Long-term obligations include the following at December 31:
<TABLE>
<CAPTION>
1995 1994
---- ----
(In Thousands of Dollars)
<S> <C> <C>
Mortgage loan, plus accrued interest of $2,958,000 in 1995
and $917,000 in 1994, bearing effective interest at 8.55% $125,440 $123,398
Capital lease obligations 394 280
-------- --------
125,834 123,678
Less current maturities 172 161
-------- --------
Total $125,662 $123,517
======== ========
Subordinated note, payable to the General Partner,
bearing interest at prime plus 1% (9.5% at
December 31, 1995 and December 31, 1994) $ 28,098 $ 18,142
======== ========
</TABLE>
On June 2, 1994, an agreement to restructure the Hotel Partnerships'
existing mortgage loans was completed. The parties to this restructuring were
the mortgage lender, Westin Realty, Westin as manager for the Hotels, and the
Hotel Partnerships.
The terms of the agreement provided for reductions in the interest rates on
the outstanding balances of the mortgage loans for the following time periods:
(i) 7.0% per annum for the period from December 1, 1993 through November 30,
1995; (ii) 7.5% per annum for the period from December 1, 1995 through November
30, 1997; and (iii) 10.0% per annum for the period from December 1, 1997 through
November 30, 1998, and then 10.25% per annum thereafter. This results in
effective interest rates of approximately 8.55% from December 1, 1993 through
maturity in the year 2001. The agreement also required a $5,000,000 payment in
1994. The mortgage loans, as restructured, provide for the suspension of
additional principal payments through December 1, 1998.
In addition, the agreement provided for a subordinated loan of $25,000,000
to the Partnership by Westin Realty. This loan accrues interest at an annual
rate of prime plus 1%. Principal and interest are payable only
-20-
<PAGE> 21
upon the earlier to occur of the expiration of 15 years or a refinancing or sale
of either Hotel. At December 31, 1995, $25,000,000 had been funded to the
Partnership.
Aggregate quarterly payments on the mortgage loans are as follows: interest
payments of $2,297,000 for 1996 and 1997, $3,062,000 for 1998, and interest and
principal payments of $3,410,000 for the remaining years through September,
2001, at which time the remaining outstanding principal balance is due. From
December 1, 1993 through December 31, 1997, interest payments are less than the
interest accrued on the mortgage loans. Accordingly, the excess of interest
accrued over interest paid is added to the outstanding principal balance. This
excess totaled $3,972,000 at December 31, 1995 and $1,931,000 at December 31,
1994. Mortgage loans are secured by first mortgage liens on substantially all
Hotel Partnership assets.
Scheduled principal payments on long-term obligations are $172,000 in 1996,
$153,000 in 1997, $1,349,000 in 1998, $2,830,000 in 1999, $3,080,000 in 2000,
and $146,348,000 thereafter.
Interest paid by the Partnership totaled $8,615,000 in 1995, $8,859,000 in
1994 and $13,192,000 in 1993.
The Partnership entered into capital lease agreements with related
obligations of $363,000 in 1995. No new capital lease agreements were entered
into in 1994.
Given current real estate market conditions and economic uncertainties, it
is not practicable to estimate the fair value of the Partnership's mortgage
loans. Determining the fair value of the subordinated note is not practicable
due to uncertainty as to when the note will be paid.
(6) OPERATING LEASES
Minimum annual rental expense for operating leases in effect at December
31, 1995 are as follows:
<TABLE>
<CAPTION>
<S> <C>
1996 $ 683,000
1997 386,000
1998 314,000
1999 237,000
2000 240,000
Thereafter 4,285,000
----------
$6,145,000
==========
</TABLE>
(7) COMMITMENTS
The Partnership has entered into certain purchase commitments related to
the Hotels' renovations. At December 31, 1995, outstanding commitments for The
Westin St. Francis totaled approximately $6,688,000.
(8) RELATED PARTY TRANSACTIONS
Westin Realty is responsible for the management and administration of the
Partnership. In accordance with the Partnership agreement, the Partnership
reimburses Westin Realty for expenses in connection with such services, which
totaled $482,000 in 1995, $624,000 in 1994 and $390,000 for 1993.
Westin, as manager of the Hotels, received a base management fee equal to
2.25% of Hotel gross operating revenues in 1995 and 1994 and 3.5% of Hotel gross
operating revenues in 1993. Base management fees totaled $2,188,000 in 1995,
$2,149,000 in 1994 and $3,298,000 in 1993. Westin also earns an incentive
management fee based on an escalating percentage of annual net operating cash
flow of the Partnership, as defined in the Partnership agreement. The percentage
applied to net operating cash flow was 20% in 1994 and 15% in 1993. No incentive
management fee was earned in 1995. Incentive management fees totaled $3,160,000
in 1994 and $1,694,000 in 1993. Any incentive management fee not currently
payable bears no interest and is deferred and subsequently payable from the
proceeds of a sale or refinancing of the Hotels or net cash flow after 1996.
Therefore, determining the fair value of the liability is not practicable due to
uncertainty as to when the liability will be paid. In any event, the fair value
of the liability does not exceed the carrying amount.
-21-
<PAGE> 22
Westin also receives a marketing fee, representing the Partnership's share
of the aggregate costs and expenses incurred by Westin in providing advertising,
public relations, sales and reservation services to all Westin hotels. The
marketing fees totaled $1,848,000 in 1995, $1,888,000 in 1994 and $1,790,000 in
1993. The Partnership also reimburses Westin for the services of certain
full-time Hotel employees. All costs incurred for services provided to the Hotel
Partnership by Hotel employees have been recognized as an expense of the
Partnership.
As disclosed in Note (5), at December 31, 1995, the subordinated note from
Westin Realty to the Partnership totals $28,098,000, which includes $3,098,000
of accrued interest. At December 31, 1994, the balance was $18,142,000 and
included $642,000 of accrued interest.
(9) SUMMARIZED QUARTERLY FINANCIAL DATA (UNAUDITED)
Summarized quarterly financial data is as follows:
<TABLE>
<CAPTION>
First Second Third Fourth Total
----- ------ ----- ------ -----
(In Thousands of Dollars Except per Unit Amounts)
<S> <C> <C> <C> <C> <C>
1995 Quarters:
Operating revenue $ 19,931 $ 25,522 $ 25,310 $ 26,481 $ 97,244
Operating profit (loss) $ (208) $ 3,627 $ 4,815 $ 5,760 $ 13,994
Net income (loss) $ (3,056) $ 525 $ 1,671 $ 2,573 $ 1,713
Net income (loss) per Unit $ (22.54) $ 3.87 $ 12.32 $ 18.98 $ 12.63
1994 Quarters:
Operating revenue $ 21,217 $ 25,265 $ 25,189 $ 27,717 $ 99,388
Operating profit $ 561 $ 4,152 $ 4,749 $ 2,994 $ 12,456
Net income (loss) $ (2,674) $ 1,856 $ 2,135 $ 127 $ 1,444
Net income (loss) per Unit $ (19.72) $ 13.69 $ 15.74 $ .94 $ 10.65
</TABLE>
-22-
<PAGE> 23
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The Partnerships have no directors or officers. Business policy-making
functions of the Partnerships are carried out through the directors and officers
of the General Partners.
Westin Realty's directors and officers and their current positions are:
<TABLE>
<S> <C>
Frederick Kleisner Chairman, Chief Executive Officer, and President
Richard Mahoney Director, Vice President, Chief Financial Officer and Treasurer
Merrick Kleeman Director
Stuart Rothenberg Director
John Ceriale Vice President
Douglas C. Sutten Vice President
Kevin Hylton Vice President and Assistant Treasurer
Catherine L. Walker Vice President and Secretary
Ruth E. Valine Assistant Secretary
</TABLE>
Merrick Kleeman and Stuart Rothenberg became Directors in June 1995,
replacing James Treadway and Kuniomi Yonemura, who are no longer affiliated with
Westin. Frederick Kleisner became a Director and Officer in September 1995.
Richard Mahoney became a Director and Officer in October 1995, replacing Raymond
J. Whitty, who is no longer affiliated with Westin. John Ceriale became an
Officer in October 1995. Other Officers assumed their current offices at the
following times: Mr. Sutten, May 1986; Mr. Hylton, February 1988; Ms. Walker,
December 1990, and Ms. Valine, May, 1989.
Frederick Kleisner, 51, joined Westin in August 1995 and currently serves
as President and Chief Operating Officer. Prior to joining Westin, Mr. Kleisner
served as Group President, Operations for Interstate Hotels Corporation, North
America's largest franchisee of hotels, from 1990 to 1995.
Richard Mahoney, 43, joined Westin in September 1995 and currently serves
as Executive Vice President and Chief Financial Officer. Prior to joining
Westin, Mr. Mahoney was Senior Vice President and Chief Financial Officer of
Premier Cruise Lines from 1993 to 1995. From 1989 to 1993, he served as Senior
Vice President and Controller of The Continental Companies.
Merrick Kleeman, 32, was named Director of Westin Realty Corp. in June 1995
and serves as a director of Westin Hotel Company. He currently serves as an
executive officer of Starwood Capital Group, L.P., its successors and affiliated
entities. Mr. Kleeman joined Starwood in August 1992.
Stuart Rothenberg, 32, was named Director of Westin Realty Corp. in June
1995 and serves as a director of Westin Hotel Company. Mr. Rothenberg joined
Goldman Sachs as an associate in the Real Estate Department in 1987. He
currently serves as Vice President of Real Estate Acquisitions for Goldman's
Whitehall Real Estate Funds.
John Ceriale, 44, joined Westin in September 1995 and currently serves as
Senior Vice President. Mr. Ceriale was formerly the Vice President of Operations
of Fairmont Hotels from 1991 to 1995 and General Manager of the company's
flagship property, the Fairmont Hotel in San Francisco.
Douglas C. Sutten, 42, was named Vice President of Westin in 1989. From
1985, when he joined Westin, until 1989, Mr. Sutten was Westin's Director of
Taxation.
Kevin Hylton, 39, has been Vice President and Corporate Controller of
Westin since 1988. From 1984, when he joined Westin, until 1988, Mr. Hylton was
Financial Reporting Controller of Westin.
Catherine Walker, 42, was named Senior Vice President, General Counsel, and
Assistant Secretary of Westin in December 1990 and elected Secretary in May
1991. Ms. Walker joined Westin's legal department in 1985.
Ruth E. Valine, 45, was named Legal Administrator of Westin in February
1989. Upon joining Westin in 1979, until February 1989, she held the title of
Legal Assistant.
-23-
<PAGE> 24
Robert Grusky, David T. Hamamoto, Merrick Kleeman, Stuart M. Rothenberg,
Daniel H. Stern and Barry S. Sternlicht failed to file Form 3 within 10 days
following May 1995, the month when they were first elected as directors of
Westin Realty Corp. and the Hotel General Partners. This filing was completed in
July 1996.
The following persons are directors and/or officers of both Hotel General
Partners, as indicated:
Frederick Kleisner President, Director
Richard Mahoney Vice President, Treasurer and Director
Merrick Kleeman Director
Stuart Rothenberg Director
John Ceriale Vice President
Douglas C. Sutten Vice President
Kevin Hylton Vice President and Assistant Treasurer
Catherine L. Walker Vice President and Secretary
Ruth E. Valine Assistant Secretary
ITEM 11. EXECUTIVE COMPENSATION.
As noted in Item 10 above, the Partnerships have no directors, officers or
other employees. However, under the respective Agreements of Limited Partnership
for the Partnerships, Westin Realty, as General Partner of the Partnership, is
responsible for the administration and management of the Partnership, and St.
Francis Corp. and 909 Corp., as General Partners of the Hotel Partnerships, are
responsible for the administration and management of the Hotel Partnerships. The
General Partners, however, receive no fees for providing these services to the
Partnership. Moreover, neither the Partnership nor the Hotel Partnerships are
directly responsible for the payment of any executive compensation to the
officers of the General Partners.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
As of December 31, 1995, no person owned of record, or to the Partnership's
knowledge owned beneficially, more than 5% of the total number of Units.
The officers and directors of the General Partners, as a group,
beneficially own no Units. An affiliate of Westin Realty owns a total of 20
Limited Partnership Units, representing less than a 1% ownership interest.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
All of the directors and principal officers of Westin Realty, except Ms.
Valine, are directors and/or principal officers of Westin. The Partnership has
engaged various subsidiaries of Westin to provide services to the Hotels. See
Note (8) of the Notes to Consolidated Financial Statements included under Item 8
- - "Financial Statements and Supplementary Data."
-24-
<PAGE> 25
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) 1. FINANCIAL STATEMENTS.
The following documents are filed as part of this report:
Independent Auditors' Reports......................11 - 12
Consolidated Balance Sheets........................13 - 14
Consolidated Statements of Operations...................15
Consolidated Statements of Partners' Equity.............16
Consolidated Statements of Cash Flows...................17
Notes to Consolidated Financial Statements.........18 - 22
(a) 2. FINANCIAL STATEMENT SCHEDULES.
Financial statement schedules are omitted for the reason that they are not
required, or because the required information is shown in the consolidated
financial statements or notes thereto.
(a) 3. EXHIBITS.
4. Instruments defining the rights of security holders.
4.1 Amended and Restated Agreement of Limited Partnership of Westin
Hotels Limited Partnership. (1)
4.2 Amended and Restated Agreement of Limited Partnership of The
Westin St. Francis Limited Partnership. (1)
4.3 First Amendment to Amended and Restated Agreement of Limited
Partnership of The Westin St. Francis Limited Partnership. (3)
4.4 Amended and Restated Agreement of Limited Partnership of The
Westin Chicago Limited Partnership. (1)
4.5 First Amendment to Amended and Restated Agreement of Limited
Partnership of The Westin Chicago Limited Partnership. (3)
10. Material contracts
10.1 Restructuring Agreement dated as of June 2, 1994. (3)
10.2 Amended and Restated Management Agreements between The Westin
St. Francis Limited Partnership and Westin Hotel Company, and
between The Westin Chicago Limited Partnership and Westin Hotel
Company, for property management services. (2)
10.3 First Amendments to Amended and Restated Management Agreements
of The Westin St. Francis Limited Partnership and of The Westin
Chicago Limited Partnership. (3)
10.4 Contribution Agreement between St. Francis Hotel Corporation and
The Westin St. Francis Limited Partnership, and between 909
North Michigan Avenue Corporation and The Westin Chicago Limited
Partnership, for contribution of Hotel assets and the transfer
of limited partnership interests. (2)
10.5 Promissory Note of St. Francis Hotel Corporation dated August
21, 1986 to Teacher Retirement System of Texas. (1)
10.6 First Amendment to Promissory Note of St. Francis Hotel
Corporation dated as of June 2, 1994. (3)
10.7 Deed of Trust, Financing Statement, Security Agreement and
Fixture filing dated August 21, 1986 respecting The Westin St.
Francis. (1)
-25-
<PAGE> 26
10.8 First Amendment to Deed of Trust, Financing Statement, Security
Agreement and Fixture Filing dated as of June 2, 1994. (3)
10.9 Promissory Note of 909 North Michigan Avenue Corporation dated
August 21, 1986 to Teacher Retirement System of Texas. (1)
10.10 First Amendment to Promissory Note of 909 North Michigan Avenue
Corporation dated as of June 2, 1994. (3)
10.11 Mortgage and Security Agreement dated August 21, 1986 for The
Westin Hotel, Chicago. (1)
10.12 First Amendment to Mortgage and Security Agreement dated as of
June 2, 1994. (3)
10.13 St. Francis FF&E Escrow Agreement dated as of June 2, 1994. (3)
10.14 Chicago FF&E Escrow Agreement dated as of June 2, 1994. (3)
10.15 Promissory Note dated June 2, 1994 in favor of Westin Realty
Corp. by Westin Hotels Limited Partnership. (3)
10.16 Loan Agreement dated as of June 2, 1994 between Westin Hotels
Limited Partnership and Westin Realty Corp. (3)
- --------------------
(1) Incorporated by reference to Exhibits 4.1, 4.2, 4.3, 10.3, 10.4, 10.5
and 10.6, respectively, to the Partnership's 1986 Annual Report on Form
10-K.
(2) Incorporated by reference to Exhibits 10.1 and 10.2, respectively, of
the Partnership's Registration Statement on Form S-11 (No. 33-3918).
(3) Incorporated by reference to Exhibits 4.3, 4.5, 10.1, 10.3, 10.6, 10.8,
10.10, 10.12, 10.13, 10.14, 10.15, and 10.16, respectively, to the
Partnership's Form 10-Q for the period ending June 30, 1994.
(b) REPORTS ON FORM 8-K.
None.
-26-
<PAGE> 27
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized on March 25, 1996.
WESTIN HOTELS LIMITED PARTNERSHIP
(a Delaware limited partnership)
By: WESTIN REALTY CORP.,
Its sole General Partner
By: /s/ Richard Mahoney
----------------------------------
Richard Mahoney, Director,
Vice President, Chief Financial
Officer and Treasurer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signatures Title Date
---------- ----- ----
<S> <C> <C>
/s/ Frederick Kleisner Chairman, Chief Executive March 25, 1996
- -------------------------------------------- Officer, and President
Frederick Kleisner
/s/ Richard Mahoney Director, Vice President, March 25, 1996
- -------------------------------------------- Chief Financial Officer and
Richard Mahoney Treasurer (Chief Accounting
Officer)
/s/ Merrick Kleeman Director March 25, 1996
- --------------------------------------------
Merrick Kleeman
/s/ Stuart Rothenberg Director March 25, 1996
- --------------------------------------------
Stuart Rothenberg
</TABLE>
-27-
<PAGE> 28
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized on March 25, 1996.
THE WESTIN ST. FRANCIS LIMITED PARTNERSHIP
(a Delaware limited partnership)
By: ST. FRANCIS HOTEL CORPORATION,
Its sole General Partner
By: /s/ Richard Mahoney
--------------------------------------
Richard Mahoney, Director,
Vice President and Treasurer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signatures Title Date
---------- ----- ----
<S> <C> <C>
/s/ Frederick Kleisner President and Director March 25, 1996
- --------------------------------------------
Frederick Kleisner
/s/ Richard Mahoney Director, Vice President, March 25, 1996
- -------------------------------------------- and Treasurer
Richard Mahoney
/s/ Merrick Kleeman Director March 25, 1996
- --------------------------------------------
Merrick Kleeman
/s/ Stuart Rothenberg Director March 25, 1996
- --------------------------------------------
Stuart Rothenberg
</TABLE>
-28-
<PAGE> 29
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized on March 25, 1996.
THE WESTIN CHICAGO LIMITED PARTNERSHIP
(a Delaware limited partnership)
By: 909 NORTH MICHIGAN AVENUE CORPORATION,
Its sole General Partner
By: /s/ Richard Mahoney
------------------------------------
Richard Mahoney, Director,
Vice President and Treasurer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signatures Title Date
---------- ----- ----
<S> <C> <C>
/s/ Frederick Kleisner President and Director March 25, 1996
- --------------------------------------------
Frederick Kleisner
/s/ Richard Mahoney Director, Vice President, March 25, 1996
- -------------------------------------------- and Treasurer
Richard Mahoney
/s/ Merrick Kleeman Director March 25, 1996
- --------------------------------------------
Merrick Kleeman
/s/ Stuart Rothenberg Director March 25, 1996
- --------------------------------------------
Stuart Rothenberg
</TABLE>
-29-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED STATEMENTS OF OPERATIONS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 10,345
<SECURITIES> 0
<RECEIVABLES> 5,067
<ALLOWANCES> 213
<INVENTORY> 2,193
<CURRENT-ASSETS> 17,392
<PP&E> 314,767
<DEPRECIATION> 89,412
<TOTAL-ASSETS> 246,698
<CURRENT-LIABILITIES> 11,850
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 61,403
<TOTAL-LIABILITY-AND-EQUITY> 246,698
<SALES> 0
<TOTAL-REVENUES> 97,244
<CGS> 0
<TOTAL-COSTS> 43,555
<OTHER-EXPENSES> 39,695
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 12,204
<INCOME-PRETAX> 1,713
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,713
<EPS-PRIMARY> 12.63
<EPS-DILUTED> 0.00
</TABLE>
