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 June 30, 1996
or
Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the Transition period from ______ to ______
Commission File Number: 0-16991
HOTEL PROPERTIES L.P.
Exact Name of Registrant as Specified in its Charter
Delaware 13-3430078
State or Other Jurisdiction of
Incorporation or Organization I.R.S. Employer Identification No.
3 World Financial Center, 29th Floor,
New York, NY Attn.: Andre Anderson 10285
Address of Principal Executive Offices Zip Code
(212) 526-3237
Registrant's Telephone Number, Including Area Code
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 ____
Balance Sheets
At June 30, At December 31,
1996 1995
Assets
Real estate, at cost:
Land $ 22,569,415 $ 22,569,415
Buildings 72,576,984 72,561,033
Furniture, fixtures and equipment 46,721,347 43,838,735
------------- -------------
141,867,746 138,969,183
Less accumulated depreciation (43,941,247) (40,612,178)
------------- -------------
97,926,499 98,357,005
Cash and cash equivalents 1,628,204 1,004,565
Restricted cash 1,122,445 825,437
Restricted cash - loan reserve 2,533,030 2,538,618
Due from hotel managers, net 549,157 534,669
Replacement reserve receivable 2,955,142 3,478,655
Rent receivable 1,052,284 684,266
Deferred charges - refinancing costs,
net of accumulated amortization of
$325,450 in 1996 and $162,725 in 1995 1,301,802 1,464,527
------------- -------------
Total Assets $ 109,068,563 $ 108,887,742
============= =============
Liabilities and Partners' Capital
Liabilities:
Accounts payable and accrued expenses $ 33,576 $ 50,045
Due to affiliates 20,510 18,462
Mortgage loans payable 81,059,059 81,714,517
Mortgage loans interest payable 607,943 0
Refinancing fee payable 412,500 412,500
Deferred management fees 4,187,505 4,187,505
Deferred interest payable 1,849,185 1,849,185
------------- ------------
Total Liabilities 88,170,278 88,232,214
Partners' Capital:
General Partner 0 0
Limited Partners (3,464,700 limited
partnership units authorized, issued
and outstanding) 20,898,285 20,655,528
------------- ------------
Total Partners' Capital 20,898,285 20,655,528
------------- -------------
Total Liabilities and Partners' Capital $ 109,068,563 $ 108,887,742
============= =============
Statement of Partners' Capital
For the six months ended June 30, 1996
Limited General
Partners Partner Total
Balance at December 31, 1995 $ 20,655,528 $ 0 $ 20,655,528
Net income 242,757 0 242,757
------------ --- ------------
Balance at June 30, 1996 $ 20,898,285 $ 0 $ 20,898,285
============ === ============
Statements of Operations
Three months ended Six months ended
June 30, June 30,
1996 1995 1996 1995
Income
Rent:
Operating profit $ 2,337,325 $ 2,374,872 $ 4,630,086 $ 4,467,753
Replacement escrow 1,415,167 1,365,229 2,672,058 2,517,602
Interest 96,220 94,064 192,817 180,845
----------- ----------- ----------- -----------
Total Income 3,848,712 3,834,165 7,494,961 7,166,200
----------- ----------- ----------- -----------
Expenses
Interest 1,826,815 2,131,507 3,662,479 4,278,722
Depreciation and amortization 1,771,539 1,788,412 3,491,794 3,668,600
Asset management fee 0 149,049 0 285,086
General and administrative 37,710 51,163 68,649 79,046
Professional fees 11,971 13,570 29,282 29,398
----------- ----------- ----------- -----------
Total Expenses 3,648,035 4,133,701 7,252,204 8,340,852
----------- ----------- ----------- -----------
Net Income (Loss) $ 200,677 $ (299,536) $ 242,757 $(1,174,652)
=========== =========== =========== ===========
Net Income (Loss) Allocated:
To the General Partner $ 0 $ (2,996) $ 0 $ (11,747)
To the Limited Partners 200,677 (296,540) 242,757 (1,162,905)
----------- ----------- ----------- -----------
$ 200,677 $ (299,536) $ 242,757 $(1,174,652)
=========== =========== =========== ===========
Per limited partnership unit
(3,464,700 outstanding) $.06 $(.09) $.07 $(.34)
----------- ----------- ----------- -----------
Statements of Cash Flows
For the six months ended June 30, 1996 1995
Cash Flows From Operating Activities:
Net income (loss) $ 242,757 $ (1,174,652)
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Rental income from replacement escrow (2,672,058) (2,517,602)
Depreciation and amortization 3,491,794 3,668,600
Increase (decrease) in cash arising from changes
in operating assets and liabilities:
Due from hotel managers, net (14,488) (14,423)
Rent receivable (368,018) (466,820)
Accounts payable and accrued expenses (16,469) (27,235)
Due to affiliates 2,048 (3,409)
Mortgage loans interest payable 607,943 0
Deferred management fees 0 285,086
Deferred interest payable 0 332,877
------------ ------------
Net cash provided by operating activities 1,273,509 82,422
------------ ------------
Cash Flows From Investing Activities:
Proceeds from restricted cash 112,387 306,759
Proceeds from replacement reserve receivable 2,786,176 2,748,698
Additions to real estate, net (2,898,563) (3,055,457)
Net cash used for investing activities 0 0
------------ ------------
Cash Flows From Financing Activities:
Funding of loan reserve 0 (1,490,562)
Net interest from restricted cash - loan reserve 5,588 0
Deferred charges - refinancing costs 0 (957,525)
Principal payments on mortgage loans payable (655,458) (500,000)
------------ ------------
Net cash used for financing activities (649,870) (2,948,087)
------------ ------------
Net increase (decrease) in cash and cash equivalents 623,639 (2,865,665)
Cash and cash equivalents, beginning of period 1,004,565 3,409,299
------------ ------------
Cash and cash equivalents, end of period $ 1,628,204 $ 543,634
============ ============
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for interest $ 3,054,536 $ 3,945,845
------------ ------------
Supplemental Disclosure of Noncash Financing Activities:
Loan refinancing costs of $641,870 were funded through accounts payable and
refinancing fee payable in 1995.
Notes to the Financial Statements
The unaudited financial statements should be read in conjunction with the
Partnership's annual 1995 audited financial statements within Form 10-K.
The unaudited financial statements include all adjustments which are, in the
opinion of management, necessary to present a fair statement of financial
position as of June 30, 1996 and the results of operations and cash flows for
the six months ended June 30, 1996 and 1995 and the statement of partner's
capital for the six months ended June 30, 1996. Results of operations for the
periods are not necessarily indicative of the results to be expected for the
full year.
No significant events have occurred subsequent to fiscal year 1995, and no
material contingencies exist which would require disclosure in this interim
report per Regulation S-X, Rule 10- 01, Paragraph (a)(5).
Part I, Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Liquidity and Capital Resources
On June 28, 1995 (the "Effective Date"), the Partnership refinanced and amended
its $80,438,000 mortgage loans payable and the $2,531,417 revolving credit
loans payable (collectively, the "Loan") with The Equitable Life Assurance
Society of the United States ("Equitable"), and terminated its Asset Management
Agreement with Equitable Real Estate Investment Management, Inc. ("EREIM").
The Loan, which matured on June 2, 1995, was extended under the existing terms
to the Effective Date. At closing, the Partnership made a $500,000 principal
payment, and the Loan was consolidated into a new mortgage loan with Equitable
totaling $82,469,417 (the "New Mortgage"). The New Mortgage is collateralized
by four separate deeds of trust with respect to the Hotels and has a term of
five years.
Under the terms of the New Mortgage, the Partnership is required to make
monthly payments of principal and interest in the amount of $741,999 at a fixed
rate of 9% per annum based on a 20-year amortization term. Payments commenced
on August 1, 1995 and continue until maturity on June 2, 2000, at which time
the entire outstanding principal balance is due. The New Mortgage may be
prepaid in whole or in part at any time prior to June 2, 1998 in connection
with a sale or refinancing of one or more of the Hotels without paying a
prepayment premium. Subsequent to June 2, 1998, prepayment of the New Mortgage
will be subject to a prepayment premium as set forth in the New Mortgage
agreement.
As a condition of the New Mortgage, the Partnership entered into an escrow
agreement with Equitable requiring the Partnership to provide additional
collateral for the New Mortgage. In addition to an initial deposit of $1.25
million, the Partnership agreed to direct Marriott to forward rent from
operating profit generated by the Hotels ("Rent"), subsequent to the Effective
Date, to an escrow account (the "Loan Reserve") maintained by Equitable's
escrow agent. As of June 30, 1996, the Loan Reserve balance was maintained at
$2.5 million, and there were no defaults on the New Mortgage. The Loan Reserve
may be used by the Partnership to meet Marriott's request for additional funds
for FF&E or building additions or expansions in excess of those available in
the Hotels' reserve accounts. In each case, Marriott is obligated to
contribute a portion of such funds.
At June 30, 1996, the Partnership's real estate, at cost, was $141,867,746,
compared to $138,969,183 at December 31, 1995. The increase is due to
improvements completed at all of the Hotels, including room renovations at the
Tan-Tar-A and St. Louis Hotels.
The Partnership's cash balance is invested in an interest- bearing account and
is used as a working capital reserve for operating expenses, debt service and
Partnership liabilities. At June 30, 1996, the Partnership had cash and cash
equivalents of $1,628,204, compared to $1,004,565 at December 31, 1995. The
increase is primarily due to net cash provided by operating activities
exceeding cash used for financing activities, largely due to the accrual of the
June debt service interest payment.
A reserve account for each of the Properties has been established to cover
certain costs of improvements, replacements, refurbishments and renewals, as
well as furniture, fixtures and equipment ("FF&E") upgrades. For the Los
Angeles Hotel, the St. Louis Hotel and Tan-Tar-A Hotel, the reserve is
maintained on behalf of the Partnership at each Property and is classified as
"Replacement reserve receivable" on the Partnership's balance sheet.
Replacement reserve receivable totaled $2,955,142 at June 30, 1996, compared to
$3,478,655 at December 31, 1995. The decrease in 1996 is attributable to
expenditures exceeding contributions to the reserve. The reserve for the
Nashville Hotel, which totaled $1,122,445 at June 30, 1996, compared to
$825,437 at December 31, 1995, is held by the Partnership and is classified as
"Restricted cash" on the Partnership's balance sheet. The increase in 1996 is
attributable to contributions to the reserve exceeding expenditures. Rent
receivable was $1,052,284 at June 30, 1996, compared to $684,266 at December
31, 1995. The increase is due to the timing of payments.
At June 30, 1996, Mortgage loans interest payable was $607,943, compared to $0
at December 31, 1995. The increase is due to the accrual of interest payable
resulting from a difference in the timing of interest payments.
Prior to 1994, distributions were paid on a quarterly basis from Net Cash Flow
to Unitholders based on the seasonal performance of the Hotels. The General
Partner suspended the payment of cash distributions commencing with the fourth
quarter distribution in 1994. This action was taken in order to increase
Partnership cash reserves to provide for the various costs of securing
replacement financing related to the maturity of the Partnership's outstanding
indebtedness in June 1995. Distributions will remain suspended until, at a
minimum, certain requirements are met under the terms of the New Mortgage. In
addition to the Loan Reserve requirement, the Partnership is also required,
among other things, to receive rents from the Hotels equal to, at a minimum,
110% of debt service for the previous consecutive 12 months before cash
distributions can be resumed. Since a significant portion of the Partnership's
cash reserves were depleted to cover costs associated with the refinancing and
establishing the Loan Reserve, the General Partner intends to utilize a portion
of future cash flow generated in excess of debt service requirements to
replenish the Partnership's working capital reserves. Once the Partnership's
debt service coverage requirements are met and the working capital reserves are
replenished, the General Partner will be in a position to evaluate the
Partnership's cash flow from operations, along with its future cash
requirements, to determine if cash distributions may be resumed at such time.
It is expected that future distributions, if any, would be reinstated on an
annual basis rather than the previous quarterly schedule.
The primary source of ongoing cash and liquidity is from rental revenue under
the operating leases and the Partnership's cash reserves. The Partnership
knows of no trends, demands, commitments, events or uncertainties, other than
the Partnership's cash requirements pursuant to the terms of the New Mortgage,
that will result in or that are reasonably likely to result in the
Partnership's liquidity increasing or decreasing in any material way, other
than the normal seasonal fluctuation in hotel operations which, in turn, causes
fluctuations in rental income throughout the year.
Results of Operations
For the six-month period ended June 30, 1996, net cash generated by operating
activities was $1,273,509, compared with $82,422 for the corresponding period
in 1995. The increase primarily is due to the change from net loss in 1995 to
net income in 1996, as well as an increase in accrued interest payable
resulting from a difference in the timing of interest payments between the two
periods. The Partnership generated net income of $200,677 and $242,757 for the
three- and six- month periods ended June 30, 1996, respectively, compared to
net losses of $299,536 and $1,174,652, respectively, for the corresponding
periods in 1995. The change from net loss to net income is due to an increase
in rental income from improved Hotel operations and interest income, as well as
a decrease in Partnership expenses. After adding back the non-cash items of
depreciation and amortization and subtracting the amount of rental income from
the FF&E replacement escrow, the Partnership had an adjusted net operating
income of $557,049 for the three-month period ended June 30, 1996, compared
with an adjusted net operating income of $123,647 for the three-month period
ended June 30, 1995. For the six-month period ended June 30, 1996, the
Partnership had an adjusted net operating income of $1,062,493, compared to an
adjusted net operating loss of $23,654 for the six-month period ended
June 30, 1995.
Total Partnership income for the three- and six-month periods ended
June 30, 1996 was $3,848,712 and $7,494,961, respectively, compared to
$3,834,165 and $7,166,200, respectively, for the three- and six-month periods
ended June 30, 1995. The increase for the six-month period is due primarily
to higher rents from operating profit earned at the Los Angeles and St. Louis
Hotels. The increase for both periods is also due largely to higher rent from
replacement escrow and higher interest income. Rent from replacement escrow,
which is calculated as a percentage of the Hotels' gross revenues, increased
to $1,415,167 and $2,672,058 for the three- and six- month periods ended
June 30, 1996, respectively, from $1,365,229 and $2,517,602, respectively, for
the three- and six- month periods ended June 30, 1995. The increases are due
to an increase in gross revenues at the Hotels. Interest income totaled
$96,220 and $192,817 for the three- and six-month periods ended June 30, 1996,
respectively, compared to $94,064 and $180,845, respectively, for the three-
and six-month periods ended June 30, 1995. The increases primarily are
attributable to higher restricted cash balances in 1996.
Total Partnership expenses for the three- and six-month periods ended
June 30, 1996 were $3,648,035 and $7,252,204, respectively, compared to
$4,133,701 and $8,340,852, respectively, for the three- and six-month periods
ended June 30, 1995. The decreases are due primarily to lower interest
expense, lower depreciation and amortization, lower general and administrative
expenses, and the elimination of the asset management fees as a result of the
termination of the Asset Management Agreement. Interest expense decreased to
$1,826,815 and $3,662,479 for the three- and six-month periods ended
June 30, 1996, respectively, from $2,131,507 and $4,278,722, respectively, for
the three- and six-month periods ended June 30, 1995, as a result of the New
Mortgage which provides for principal amortization and bears a lower interest
rate than the original mortgage loan, as well as the payment of the revolving
credit loan and termination of the Asset Management Agreement pursuant to the
refinancing. General and administrative expenses totaled $37,710 and $68,649,
respectively, for the three- and six-month periods ended June 30, 1996,
compared with $51,163 and $79,046, respectively, for the three- and six-month
periods ended June 30, 1995. The decrease is due primarily to the 1995
payment of the Los Angeles Commercial Rent Tax, which was partially offset by
higher accounting and Partnership administrative expenses being recognized in
1996.
The following summarizes the Hotels' performance for the period from January 1
to June 14 of the indicated years (i.e., the first six Marriott accounting
periods):
1996 1995 % Change
Weighted Average Occupancy 77.9% 76.7% 1.6
Weighted Average Room Rate $86.96 $83.52 4.1
Total Hotel Sales $51,686,685 $49,002,118 5.5
Hotel Operating Profit $8,155,650 $ 7,142,370 14.2
Rent Earned by the Partnership
(for the six-month period ended
June 30) $4,630,086 $4,467,753 3.6
Part II Other Information
Items 1-5 Not applicable.
Item 6 Exhibits and reports on Form 8-K.
(a) Exhibits -
(27) Financial Data Schedule
(b) Reports on Form 8-K - No reports on Form 8- K were filed
during the quarter ended June 30, 1996.
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.
HOTEL PROPERTIES L.P.
BY: EHP/GP INC.
General Partner
Date: August 14, 1996 BY: /s/ Jeffrey C. Carter
---------------------
Director, President and
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-mos
<FISCAL-YEAR-END> Dec-31-1996
<PERIOD-END> Jun-30-1996
<CASH> 5,283,679
<SECURITIES> 0
<RECEIVABLES> 4,556,583
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 141,867,746
<DEPRECIATION> (43,941,247)
<TOTAL-ASSETS> 109,068,563
<CURRENT-LIABILITIES> 662,029
<BONDS> 81,059,059
<COMMON> 0
0
0
<OTHER-SE> 20,898,285
<TOTAL-LIABILITY-AND-EQUITY> 109,068,563
<SALES> 0
<TOTAL-REVENUES> 7,494,961
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 3,589,725
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,662,479
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 242,757
<EPS-PRIMARY> .07
<EPS-DILUTED> .07
</TABLE>
