<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark one)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
----- EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
--------------------
OR
_____ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the to transition period from _____________ to ________________
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
--------------
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 ___
---
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
<PAGE>
WESTIN HOTELS LIMITED PARTNERSHIP
AND SUBSIDIARIES
REPORT ON FORM 10-Q
For the Quarter Ended September 30, 1997
INDEX
<TABLE>
<CAPTION>
Part l. FINANCIAL INFORMATION Page No.
- ------------------------------- --------
<S> <C>
Item 1. Consolidated Financial Statements:
Consolidated Balance Sheets 3
Consolidated Statements of Operations 4
Consolidated Statement of Partners' Equity 5
Consolidated Statements of Cash Flows 6
Notes to Consolidated Financial Statements 7 - 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9 - 12
Part II. OTHER INFORMATION
- ---------------------------
Item 6. Exhibits and Reports on Form 8-K 13 - 14
SIGNATURES 15
- ----------
</TABLE>
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<PAGE>
PART I. FINANCIAL INFORMATION
------------------------------
WESTIN HOTELS LIMITED PARTNERSHIP
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
<TABLE>
<CAPTION>
September 30, 1997 December 31, 1996
------------------ -----------------
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents,
including restricted cash
of $20 in 1997 and $540 in 1996 $ 10,602 $ 14,752
Guest and trade accounts receivable,
less allowance for doubtful
accounts of $285 in 1997
and $232 in 1996 13,432 6,511
Other receivables 266 450
Inventories 535 516
Prepaid expenses and other
current assets 2,440 1,281
-------- --------
TOTAL CURRENT ASSETS 27,275 23,510
PROPERTY AND EQUIPMENT, at cost, net of
accumulated depreciation of $103,527 in
1997 and $97,355 in 1996 233,833 233,257
RESTRICTED CASH 7,557 6,018
OTHER ASSETS 704 363
-------- --------
TOTAL ASSETS $269,369 $263,148
======== ========
LIABILITIES AND PARTNERS' EQUITY
CURRENT LIABILITIES:
Accounts payable:
Trade and other $ 2,139 $ 1,937
Westin and affiliates 887 1,171
-------- --------
Total accounts payable 3,026 3,108
Accrued expenses 10,104 9,274
Current maturities of long-term
obligations 187 159
Other current liabilities 1,107 1,353
-------- --------
TOTAL CURRENT LIABILITIES 14,424 13,894
LONG-TERM OBLIGATIONS 128,168 127,085
LONG-TERM OBLIGATION TO GENERAL
PARTNER 33,017 30,795
DEFERRED INCENTIVE MANAGEMENT FEES PAYABLE
TO WESTIN 21,681 19,425
-------- --------
TOTAL LIABILITIES 197,290 191,199
COMMITMENTS AND CONTINGENCIES
MINORITY INTERESTS 3,683 3,568
PARTNERS' EQUITY (DEFICIT):
General Partner (2,230) (2,026)
Limited Partners (135,600 Units 70,626 70,407
issued and outstanding) -------- --------
TOTAL PARTNERS' EQUITY 68,396 68,381
-------- --------
TOTAL LIABILITIES AND PARTNERS'
EQUITY $269,369 $263,148
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements
-3-
<PAGE>
WESTIN HOTELS LIMITED PARTNERSHIP
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in Thousands Except per Unit Data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -----------------
1997 1996 1997 1996
-------- -------- ------- -------
<S> <C> <C> <C> <C>
OPERATING REVENUES:
Rooms $23,174 $19,701 $61,287 $52,310
Food and beverage 7,801 6,389 23,096 18,814
Other operating departments 2,782 2,709 7,952 7,806
------- ------- ------- -------
TOTAL OPERATING REVENUES 33,757 28,799 92,335 78,930
------- ------- ------- -------
OPERATING EXPENSES:
Rooms 5,881 5,114 16,434 14,230
Food and beverage 6,062 5,345 17,863 15,271
Other operating departments 792 744 2,368 2,102
Administrative and general 2,266 1,975 6,937 6,353
Management fees 2,106 1,314 6,242 3,838
Advertising and business promotion 2,228 1,861 6,199 5,497
Property maintenance and energy 2,283 2,201 6,369 6,203
Local taxes and insurance 2,111 1,945 6,615 5,489
Rent 201 191 606 567
Depreciation and amortization 2,291 2,096 6,725 5,885
------- ------- ------- -------
TOTAL OPERATING EXPENSES 26,221 22,786 76,358 65,435
------- ------- ------- -------
OPERATING PROFIT 7,536 6,013 15,977 13,495
------- ------- ------- -------
OTHER INCOME (EXPENSE):
Interest income 293 199 809 507
Interest expense (2,518) (2,702) (7,931) (8,101)
Interest expense on long-term obligation
to General Partner (772) (685) (2,222) (1,995)
Other, net (47) (1) (62) (69)
------- ------- ------- -------
NET OTHER EXPENSE (3,044) (3,189) (9,406) (9,658)
------- ------- ------- -------
INCOME BEFORE
MINORITY INTERESTS 4,492 2,824 6,571 3,837
MINORITY INTERESTS (61) (43) (115) (84)
------- ------- ------- -------
NET INCOME $ 4,431 $ 2,781 $ 6,456 $ 3,753
======= ======= ======= =======
NET INCOME PER UNIT
(135,600 Units issued and outstanding) $ 32.68 $ 20.51 $ 47.61 $ 27.68
======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
-4-
<PAGE>
WESTIN HOTELS LIMITED PARTNERSHIP
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF PARTNERS' EQUITY
(Dollars in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
General Limited
Partner Partners
--------- ---------
<S> <C> <C>
BALANCE AT DECEMBER 31, 1996 $ (2,026) $ 70,407
Cash Distribution -- (6,441)
Net income (loss) (204) 6,660
--------- ---------
BALANCE AT SEPTEMBER 30, 1997 $ (2,230) $ 70,626
========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
-5-
<PAGE>
WESTIN HOTELS LIMITED PARTNERSHIP
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended September 30,
-----------------------
1997 1996
------- --------
<S> <C> <C>
OPERATING ACTIVITIES:
Funds provided by operations $18,809 $ 14,827
Net change in receivables, inventories,
prepaid expenses and other current
assets, net of accounts payable,
accrued expenses and other
current liabilities (7,413) (1,117)
------- --------
Net cash provided by operating
activities 11,396 13,710
------- --------
INVESTING ACTIVITIES:
Acquisition of property and
equipment, net of sales (7,298) (12,352)
Increase in restricted cash (9,148) (13,068)
Decrease in restricted cash to fund
acquisition of property and equipment 7,877 11,994
(Increase) decrease in other assets (417) 26
------- --------
Net cash used in investing (8,986) (13,400)
activities ------- --------
FINANCING ACTIVITIES:
Cash distribution (6,441) -
Repayment of long-term obligations (119) (131)
------- --------
Net cash used in financing
activities (6,560) (131)
------- --------
NET (DECREASE) INCREASE IN CASH AND
CASH EQUIVALENTS (4,150) 179
CASH AND CASH EQUIVALENTS AT BEGINNING
OF YEAR 14,752 10,345
------- --------
CASH AND CASH EQUIVALENTS AT END OF
PERIOD $10,602 $ 10,524
======= ========
</TABLE>
The accompanying notes are an intergral part of these consolidated financial
statements
-6-
<PAGE>
WESTIN HOTELS LIMITED PARTNERSHIP
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(1) 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 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 Michigan Avenue, Chicago (formerly The Westin Hotel,
Chicago) in downtown Chicago, Illinois. All significant intercompany
transactions and accounts have been eliminated. Certain of the prior periods'
amounts have been reclassified to conform with the 1997 presentation.
The consolidated financial statements and related information for the periods
ended September 30, 1997 and September 30, 1996 are unaudited. In the opinion of
management, all adjustments necessary for a fair statement of the results of
these interim periods have been included. All such interim adjustments are of a
normal recurring nature. The results of operations for the periods ended
September 30, 1997 and September 30, 1996 should not be regarded as indicative
of the results that may be expected for the full year.
(2) FURTHER INFORMATION
Reference is made to "Notes to Consolidated Financial Statements" contained in
the Partnership's Annual Report on Form 10-K filed for 1996 for information
regarding significant accounting policies, Partnership organization, restricted
cash, accrued expenses, long-term obligations, operating leases, commitments and
contingencies, and related party transactions.
(3) LONG-TERM OBLIGATIONS
On May 27, 1997, an agreement to restructure the existing mortgage loans on
The Westin St. Francis and The Westin Michigan Avenue, Chicago was completed.
The parties to this restructuring agreement are The Teacher Retirement System of
Texas (the lender), The Westin St. Francis Limited Partnership, The Westin
Chicago Limited Partnership, Westin Hotels Limited Partnership, St. Francis
Hotel Corporation (general partner of The Westin St. Francis Limited
Partnership), 909 North Michigan Avenue Hotel Corporation (general partner of
The Westin Chicago Limited Partnership), Westin Realty Corp. (general partner of
the Partnership) and Westin Hotel Company (the management company).
The agreement provides for an extension of the maturity date for each of the
Hotel's existing mortgage loans from August 31, 2001 to November 30, 2006. The
interest rates on the principal balances of the original mortgage loans will be
reduced to 8.85% per annum from 10.0% per annum for the period from December 1,
1997 through November 30, 1998 and to 8.85% per annum from 10.25% per annum from
December 1, 1998 through maturity. The restructuring resulted in a decrease in
the effective interest rate on the mortgage loans from 8.55% per annum to 8.06%
per annum from the date of the agreement through maturity.
Through November 30, 1999, the restructured loans require the payment of
interest only each quarter in arrears. From December 1, 1999 to November 30,
2006 the loans require blended payments of principal and interest each quarter
in arrears in such amount necessary to repay the principal balance of each note
(together with interest at the fixed interest rate) on the basis of a 25 year
amortization schedule. On the maturity date, the entire principal balance plus
all accrued and unpaid interest will be due and payable.
The prepayment provisions have been amended. Under the terms and conditions of
this restructuring, the prepayment penalty for The Westin Michigan Avenue,
Chicago loan has been reinstated except in the case of a repayment resulting
from a sale to a third party. The termination date for the prepayment penalty
for The Westin St. Francis loan generally has been extended to the year 2006
from the year 2001. With respect to a hotel sale to a third party, however,
there will be no prepayment penalty if the sale occurs after August 31, 2001.
-7-
<PAGE>
(4) ACCRUED EXPENSES
In July 1997, The Westin St. Francis received notification of an increase of
approximately $1,000,000 in property taxes for the tax years ended June 30, 1997
and 1996. Management intends to appeal the additional tax; however, the ultimate
disposition of the proceeding cannot be predicted with any certainty, and The
Westin St. Francis recorded an additional provision of $500,000 for property
taxes during the nine months ended September 30, 1997.
(5) ACQUISITION OF WESTIN HOTEL COMPANY
On September 9, 1997, Starwood Lodging Trust and Starwood Lodging Corp.
("Starwood") announced the execution of a definitive agreement to acquire Westin
Hotels and Resorts ("Westin"), which includes Westin Realty Corp. and Westin
Hotel Company. The sale of Westin will not change the structure of the ownership
of either the Partnership or the Hotel Partnerships nor will it have any
material effect on the management of the Hotels. Moreover, Starwood has no
beneficial ownership interest in the Partnership as a limited partner.
-8-
<PAGE>
WESTIN HOTELS LIMITED PARTNERSHIP
AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The primary market focus of The Westin St. Francis and The Westin Michigan
Avenue, Chicago (individually a "Hotel", collectively the "Hotels") is on
business travelers, tourists, conventions and other groups. In January 1997 the
Westin Hotel, Chicago was renamed The Westin Michigan Avenue, Chicago to
distinguish it from The Westin River North, Chicago, also located in downtown
Chicago. Both The Westin St. Francis and The Westin Michigan Avenue, Chicago
experience seasonal trends, with the lowest occupancy levels occurring during
the first quarter, followed by increased occupancies throughout the remainder of
the year.
Westin Hotel Company owns 100% of Westin Realty Corp., the sole General
Partner of Westin Hotels Limited Partnership (the "Partnership"), as well as
100% of the St. Francis Hotel Corporation and 909 North Michigan Avenue
Corporation, the respective general partners of the subsidiary limited
partnerships, The Westin St. Francis Limited Partnership and The Westin Chicago
Limited Partnership, that directly own and operate the Hotels.
On September 9, 1997, Starwood Lodging Trust and Starwood Lodging Corp.
("Starwood") announced the execution of a definitive agreement to acquire Westin
Hotels and Resorts ("Westin"), which includes Westin Realty Corp. and Westin
Hotel Company. The sale of Westin will not change the structure of the ownership
of either the Partnership or the Hotel Partnerships nor will it have any
material effect on the management of the Hotels. Moreover, Starwood has no
beneficial ownership interest in the Partnership as a limited partner.
RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------- ------------------
Consolidated 1997 1996 1997 1996
------------------------ ------ ------ ------ ------
<S> <C> <C> <C> <C>
REVPAR (Revenue
Per Available Room) $130.58 $110.84 $116.38 $ 98.82
Operating Profit as a
Percentage of Revenues:
Rooms 74.6% 74.0% 73.2% 72.8%
Food and Beverage 22.3% 16.3% 22.7% 18.8%
EBITDA (In Thousands) $10,073 $ 8,307 $23,449 $19,818
</TABLE>
EBITDA is net earnings (loss) before interest expense, depreciation and
amortization, and minority interests. The General Partner considers EBITDA to be
a measure of the Partnership's operating performance due to the significance of
the Partnership's long-lived assets and because such data can be used to measure
the Partnership's ability to service debt, fund capital expenditures and pay
cash distributions. EBITDA is not intended to represent cash flow from
operations as defined by generally accepted accounting principles and such
information should not be considered as an alternative to net income, cash flow
from operations or any other performance measure prescribed by generally
accepted accounting principles.
Three months ended 1997 compared with 1996
- ------------------------------------------
For the third quarter of 1997, the Partnership reported an operating profit of
$7.5 million, a 25.3% or $1.5 million increase over the same 1996 period. These
results were due primarily to strong increases in REVPAR
-9-
<PAGE>
growth and food and beverage profits. EBITDA for the third quarter of 1997
increased 21.3% to $10.1 million from $8.3 million in 1996.
In the third quarter of 1997, consolidated rooms revenues increased to $23.2
million, 17.6% or $3.5 million over the third quarter of 1996. Consolidated
REVPAR reached $130.58, a 17.8% increase over the same 1996 quarter. The Westin
St. Francis attained a 14.0% increase in average room rate to $164.74 for the
third quarter of 1997, up from $144.49 in 1996, and a 4.1 percentage point
increase in occupancy rate to 84.4% leading to a 19.9% increase in REVPAR to
$139.08. The Westin St. Francis experienced increases in both occupancies and
average room rate in the group segment and an increase in average room rate
offset the decline in occupancies in the transient segment resulting in a $2.5
million improvement in rooms revenue over the same 1996 period. The Westin
Michigan Avenue, Chicago attained a 9.1% increase in average room rate from
$128.41 to $140.14 and a 3.6 percentage point increase in occupancy rate to
83.4% for a 14.1% increase in REVPAR to $116.92. The Westin Michigan Avenue,
Chicago achieved a $1.0 million increase in rooms revenues over the third
quarter of 1996 due to an overall increase in average room rate and an increase
in occupancies in the group segment offsetting the decline in occupancies in the
transient segment.
Rooms profits consolidated for the third quarter of 1997 increased to $17.3
million, a $2.7 million or 18.6% gain over 1996. Both Hotels achieved slight
increases in their profit margins as a result of the Hotels focus on improved
control over room expenses.
Consolidated food and beverage revenues for the third quarter of 1997 were
$7.8 million vs. $6.4 million in 1996. The Westin St. Francis attained a 24.6%
or $1.1 million increase over 1996 whereas The Westin Michigan Avenue, Chicago
attained a 16.3% or $0.3 million increase due to the higher business levels in
the group segment which directly impacts banquet business.
Third quarter 1997 consolidated food and beverage profits of $1.7 million
reflect a 66.6% improvement over 1996. The fact that the consolidated food and
beverage costs rose only 13.4% when compared to the 22.1% increase in revenues
reflects the success of cost containment strategies at both Hotels.
Operating expenses for the third quarter increased to $26.2 million, a 15.1%
increase over 1996. The most significant increase was attributable to incentive
management fees which increased as a result of improved Partnership Net
Operating Cash Flow, as defined.
Nine months ended 1997 compared with 1996
- -----------------------------------------
For the nine month period ended September 30, 1997, operating profit of $16.0
million represents an increase of 18.4% or $2.5 million over the same 1996
period as the Hotels reap the benefits of the continuing favorable industry
trends for upscale domestic lodging. EBITDA rose to $23.4 million, 18.3% over
1996.
Consolidated rooms revenues for the 1997 year-to date increased to $61.3
million which is a $9.0 million improvement over 1996. The Westin St. Francis
contributed $6.5 million to the gain and The Westin Michigan Avenue, Chicago
contributed $2.5 million. Consolidated REVPAR for the nine month period ended
September 30, 1997 increased to $116.38 from $98.82 in 1996, a 17.8%
improvement. The Westin St. Francis experienced a 16.5% jump in average room
rate from $140.95 to $164.20 and a 1.9 percentage point gain in occupancy from
75.8% to 77.7% for REVPAR growth of 19.3%. The Westin Michigan Avenue, Chicago,
experienced an 8.5% jump in average room rate from $125.62 to $136.25 and a 4.0
percentage point gain in occupancy from 68.3% to 72.3% for REVPAR growth of
14.8%. Results were strongest for the group segment where there were increases
in both the occupancy level and the average room rate at both Hotels. In the
transient segment, increases in the average room rate offset the decline in the
occupancy levels at both Hotels.
Consolidated rooms profits increased to $44.9 million for the nine month
period ended September 30, 1997, a 17.8% improvement over the same 1996 period.
The Westin St. Francis achieved a 0.8 percentage point increase in its rooms
profit margin which offset the slight (0.3 percentage point) decline at The
Westin Michigan Avenue, Chicago.
-10-
<PAGE>
Consolidated food and beverage revenues for the year-to-date 1997 were $23.1
million vs. $18.8 million for the year-to-date 1996 reflecting the healthy
increase in food and beverage business. The greatest portion of this improvement
came from banquet business due to an increase in prices and business levels.
Both Hotels also reported increases in their total outlet revenues due to the
higher occupancy levels. At The Westin St. Francis, year-to-date food and
beverage revenues were $3.3 million greater than 1996, $2.7 million of which
came from banquet sales. At The Westin Michigan Avenue, Chicago, almost all of
its $1.0 million gain came from banquet sales.
Consolidated food and beverage profits for the nine month period ended
September 30, 1997, was $5.2 million, which is a 47.7% increase over the same
1996 period. The Westin St. Francis' food and beverage profit increase of $1.2
million was a 57.7% improvement over 1996 and The Westin Michigan Avenue,
Chicago's incremental food and beverage profit of $0.5 million is a 33.0%
improvement over 1996 and reflects the successful control of the associated food
and beverage expenses by both Hotels.
Other operating departments contributed $5.6 million to 1997 year-to-date
operating profit. At both Hotels, increases in revenues from the
telecommunications departments due to increased pricing and occupancies were
offset by a decline in revenues from their respective garages.
Management fees increased $2.4 million during the first nine months of 1997
over the same period in 1996. This increase resulted from improved Partnership
Net Operating Cash Flow, as defined. Advertising and business promotion for
year-to-date 1997 increased $0.7 million due primarily to increased national
advertising and marketing fees. Of the $1.1 million increase in local taxes and
insurance, $0.5 million was the result of an additional property tax accrual
based upon a notice of assessment of property taxes at The Westin St. Francis.
(See Footnote No. 4 of the Consolidated Financial Statements.)
Liquidity and Capital Resources
- -------------------------------
As of September 30, 1997, the Partnership had cash and cash equivalents of
$10.6 million, a $4.2 million decrease from December 31, 1996. Total net cash
provided by operating activities for the nine months ended September 30, 1997
equaled $11.4 million.
The Hotels mortgage loans were restructured under an agreement (the "1994
Restructuring Agreement") entered into in 1994. Pursuant to the 1994
Restructuring Agreement, the Partnership is required to make quarterly deposits
to the FF&E Reserve Accounts of 5.0% of gross revenue through maturity of the
mortgage loan in 2006 to fund capital improvements. Therefore, on or before
November 14, 1997, $1.7 million will be deposited in the FF&E Accounts. During
the nine months ended September 30, 1997, The Westin St. Francis and The Westin
Michigan Avenue, Chicago, expended $4.4 million and $3.5 million, respectively,
from their FF&E Reserve Accounts. The consolidated balance of the Hotels' FF&E
Reserve Accounts is included in Restricted Cash on the Consolidated Balance
Sheets.
Commencing in 1996, the 1994 Restructuring Agreement terms require that both
Hotels make deposits into Tax Escrow Accounts for payment of real and personal
property taxes. The consolidated balance of these Tax Escrow Accounts is
included in Cash and Cash Equivalents under Current Assets on the Consolidated
Balance Sheets.
The Hotels will spend approximately $10.1 million for capital expenditures in
1997. The Westin St. Francis will spend approximately $5.1 million on capital
improvements in 1997, of which $0.6 million is to be spent on renovating suites,
$0.6 million on food and beverage banquet rooms, $1.3 million in other areas
including EDP equipment, ADA compliance, and fire/life safety upgrades, and $2.6
million on the facade project. The Westin Michigan Avenue, Chicago expects to
spend $5.0 million for capital improvements during 1997. This Hotel will
renovate its tower rooms at a cost of $1.9 million, which will enhance the
Hotel's ability to compete in the highly competitive Chicago market. In
addition, $0.7 million will be spent on the facade, sidewalks and planters, $1.2
million for EDP equipment and updating of engineering systems, and $1.2 million
for food and beverage outlets.
On May 27, 1997 an agreement to restructure the existing mortgage loans on the
Partnership's Hotels (the "1997 Restructuring Agreement") was completed. The
interest rates on the principal balances of the original mortgage loans will be
reduced to 8.85% per annum from 10.0% per annum for the period from
-11-
<PAGE>
December 1, 1997 to November 30, 1998 and to 8.85% per annum from 10.25% per
annum from December 1, 1998 through maturity. The 1997 Restructuring Agreement
provides for an extension of the maturity date for each of the Hotel's existing
mortgage loans from August 31, 2001 to November 30, 2006. Through November 30,
1999 the restructured loans require the payment of interest only each quarter in
arrears. From December 1, 1999 to November 30, 2006 the loans require blended
payments of principal and interest each quarter in arrears in such amount
necessary to repay the principal balance of each note (together with interest at
the fixed interest rate) on the basis of a 25 year amortization schedule. On the
maturity date, the entire principal balance plus all accrued and unpaid interest
will be due and payable. Under the terms of the mortgage loans, as restructured,
the Partnership is scheduled to make interest payments of $9.2 million in 1997.
The General Partner anticipates that the cash flow from operations will
provide the funds necessary for 1997 operating and interest expenses and that
the contributions to the FF&E Reserve Accounts will provide adequate funding for
1997 capital expenditures. The General Partner also believes that existing cash
and net cash to be provided from operations will be sufficient for distributions
to the limited partners. Therefore, on September 15, 1997 the General Partner
issued cash distributions of $47.50 per Unit or $6.4 million. An additional
distribution of $47.50 per Unit payable December 15, 1997 has been announced by
the General Partner. In accordance with the Partnership agreement, one-half of
the 1997 incentive management fees will be paid to Westin Hotel Company. The
General Partner estimates that incentive management fees totaling $2.9 million
will be paid to Westin in 1997, $1.9 million of which was paid on September 15,
1997.
In 1997 the General Partner will continue to focus on the completion of
renovations at both Hotels and on the improvement of the Hotels' operations in
order to bolster the value of the Hotels. The General Partner will review the
opportunities to sell or refinance the Hotel properties when it reasonably
believes that such action is in the best interest of the Partnership. As the
real estate market for upscale hotel properties continues to improve, the
General Partner will monitor the market conditions for appropriate opportunities
to sell or refinance the properties. By the end of 2001, the General Partner
must use its best efforts to sell or refinance the Hotel properties.
-12-
<PAGE>
PART II. OTHER INFORMATION
--------------------------
ITEM 5. OTHER INFORMATION
Since our letter to the limited partners dated June 16, 1997, additional
offers to purchase Units of Westin Hotels Limited Partnership have been mailed
to the limited partners. The latest of these, dated October 17, 1997, was from
Kalmia Investors, LLC ("Kalmia") for "$650 cash per Unit, less the amount of any
distributions declared or paid from any source by the Partnership with respect
to the Units after October 1, 1997.". Kalmia states that this "offer is limited
to the purchase of an additional 2,199 Units". This amount, when consolidated
with their current holdings, would give them an ownership interest of less than
5% of the Units.
Relying on the protections of the 5% safe harbor pursuant to Section 7704 of
the Internal Revenue Code, on April 21, 1997, when sales of Partnership Units
reached 6,848, the General Partner suspended Unit sales for the remainder of
1997. The General Partner is, however, continuing to accept paperwork for Unit
sales for processing in 1998. To date we have received requests for the transfer
of 2,483 Units via sales in 1998. Of these, 950 Unit sales were through Limited
Partnership Exchanges. The average price of these sales was $577.16 per Unit.
The majority of the remaining sales requests were in conjunction with previous
tender offers and range in price from $310 to $585 per unit.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) 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 Second Restructuring Agreement dated as of May
27, 1997. (4)
10.3 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)
10.4 First Amendments to Amended and Restated Management
Agreements of The Westin St. Francis Limited Partnership
and of The Westin Chicago Limited Partnership.(3)
10.5 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)
10.6 Promissory Note of St. Francis Hotel Corporation dated
August 21, 1986 to Teacher Retirement System of Texas. (1)
10.7 First Amendment to Promissory Note of St. Francis Hotel
Corporation dated as of June 2, 1994. (3)
-13-
<PAGE>
10.8 Second Amendment to Promissory Note of St. Francis Hotel
Corporation dated as of May 27, 1997. (4)
10.9 Deed of Trust, Financing Statement, Security Agreement and
Fixture filing dated August 21, 1986 respecting The Westin
St. Francis. (1)
10.10 First Amendment to Deed of Trust, Financing Statement,
Security Agreement and Fixture Filing dated as of
June 2, 1994. (3)
10.11 Second Amendment to Deed of Trust, Financing Statement,
Security Agreement and Fixture Filing (With Assignment of
Rents and Leases) dated as of May 27, 1997. (4)
10.12 Promissory Note of 909 North Michigan Avenue Corporation
dated August 21, 1986 to Teacher Retirement System of
Texas. (1)
10.13 First Amendment to Promissory Note of 909 North Michigan
Avenue Corporation dated as of June 2, 1994. (3)
10.14 Second Amendment to Promissory Note of 909 North Michigan
Avenue Corporation dated as of May 27, 1997. (4)
10.15 Mortgage and Security Agreement dated August 21, 1986 for
The Westin Hotel, Chicago. (1)
10.16 First Amendment to Mortgage and Security Agreement dated
as of June 2, 1994. (3)
10.17 Second Amendment to Mortgage and Security Agreement dated
as of May 27, 1997. (4)
10.18 St. Francis FF&E Escrow Agreement dated as of June 2,
1994. (3)
10.19 Chicago FF&E Escrow Agreement dated as of June 2, 1994. (3)
10.20 Promissory Note dated June 2, 1994 in favor of Westin
Realty Corp. by Westin Hotels Limited Partnership. (3)
10.21 Loan Agreement dated as of June 2, 1994 between Westin
Hotels Limited Partnership and Westin Realty Corp. (3)
27. Financial Data Schedule.
____________________
(1) Incorporated by reference to Exhibits 4.1, 4.2, 4.3, 10.4, 10.5, 10.6 and
10.7, respectively, to the Partnership's 1986 Annual Report on Form 10-K.
(2) Incorporated by reference to Exhibits 10.1 and 10.3, 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, 10.4, 10.7, 10.10,
10.13, 10.16, 10.18, 10.19, 10.20 and 10.21, respectively, to the
Partnership's Form 10-Q for the period ended June 30, 1994.
(4) Incorporated by reference to Exhibit 10.2, 10.8, 10.11, 10.14, and 10.17,
respectively, to the Partnership's Form 10-Q for the period ended June 30,
1997.
(b) REPORTS ON FORM 8-K.
On September 15, 1997, the Partnership filed a report on Form 8-K dated
September 9, 1997, announcing the execution of a definitive agreement by
Starwood Lodging Trust and Starwood lodging Corp. to acquire Westin Hotels
and Resorts, which includes Westin Hotel Co.
-14-
<PAGE>
SIGNATURES
Pursuant to the requirements 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 in the City of Seattle, State of
Washington, on the 3/rd/ day of November, 1997.
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
-15-
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0
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