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 March 31, 1997
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 March 31, At December 31,
1997 1996
Assets
Real estate, at cost:
Land $ 22,569,415 $ 22,569,415
Buildings 73,044,857 72,645,014
Furniture, fixtures and equipment 52,291,238 48,892,073
------------- -------------
147,905,510 144,106,502
Less accumulated depreciation (48,947,325) (47,206,347)
------------- -------------
98,958,185 96,900,155
Cash and cash equivalents 1,676,123 3,590,188
Restricted cash 1,318,975 1,297,810
Restricted cash - loan reserve 2,533,302 2,534,317
Due from hotel managers, net 604,269 577,522
Replacement reserve receivable 1,904,300 3,426,722
Rent receivable 1,254,149 488,415
Deferred charges - refinancing costs
net of accumulated amortization of
$569,538 in 1997 and $488,176 in 1996 1,057,714 1,139,076
------------- -------------
Total Assets $ 109,307,017 $ 109,954,205
============= =============
Liabilities and Partners' Capital
Liabilities:
Accounts payable and accrued expenses $ 230,751 $ 85,067
Due to affiliates 11,700 1,000
Mortgage loans payable 79,815,721 80,239,491
Mortgage loans interest payable 598,618 601,796
Promissory note payable 1,043,911 0
Refinancing fee payable 412,500 412,500
Distributions payable 0 1,399,879
Deferred management fees payable 4,187,505 4,187,505
Deferred interest payable 1,849,185 1,849,185
------------- -------------
Total Liabilities 88,149,891 88,776,423
------------- -------------
Partners' Capital:
General Partner 0 0
Limited Partners (3,464,700 limited
partnership units authorized, issued
and outstanding) 21,157,126 21,177,782
------------- -------------
Total Partners' Capital 21,157,126 21,177,782
------------- -------------
Total Liabilities and Partners' Capital $ 109,307,017 $ 109,954,205
============= =============
Statement of Partners' Capital
For the three months ended March 31, 1997
Limited General
Partners Partner Total
Balance at December 31, 1996 $ 21,177,782 $ 0 $ 21,177,782
Net loss (20,656) 0 (20,656)
------------ --- ------------
Balance at March 31, 1997 $ 21,157,126 $ 0 $ 21,157,126
============ === ============
Statements of Operations
For the three months ended March 31, 1997 1996
Income
Rent:
Operating profit $ 2,302,655 $ 2,292,761
Replacement escrow 1,253,840 1,256,891
Interest and other 118,704 96,597
----------- -----------
Total Income 3,675,199 3,646,249
=========== ===========
Expenses
Interest 1,799,048 1,835,664
Depreciation and amortization 1,822,340 1,720,255
General and administrative 64,374 30,939
Professional fees 10,093 17,311
----------- -----------
Total Expenses 3,695,855 3,604,169
----------- -----------
Net Income (Loss) $ (20,656) $ 42,080
=========== ===========
Net Income (Loss) Allocated:
To the General Partner $ 0 $ 0
To the Limited Partners (20,656) 42,080
----------- -----------
$ (20,656) $ 42,080
=========== ===========
Per limited partnership unit
(3,464,700 outstanding) $ (.01) $ .01
----------- -----------
Statements of Cash Flows
For the three months ended March 31, 1997 1996
Cash Flows From Operating Activities:
Net Loss $ (20,656) $ 42,080
Adjustments to reconcile net income to net cash
provided by (used for) operating activities:
Rental income from replacement escrow (1,253,840) (1,256,891)
Depreciation and amortization 1,822,340 1,720,255
Increase (decrease) in cash arising from
changes in operating assets and liabilities:
Due from hotel managers, net (26,747) (9,005)
Rent receivable (765,734) (305,115)
Accounts payable and accrued expenses 145,684 (5,965)
Due to affiliates 10,700 (2,462)
Mortgage loans interest payable (3,178) 610,915
Net cash provided by (used for) ----------- -----------
operating activities (91,431) 793,812
----------- -----------
Cash Flows From Investing Activities:
Proceeds from restricted cash 223,431 41,336
Proceeds from replacement reserve receivable 3,575,577 1,085,847
Additions to real estate (3,799,008) (1,127,183)
----------- -----------
Net cash used for investing activities 0 0
----------- -----------
Cash Flows From Financing Activities:
Net interest from restricted cash - loan reserve 1,015 4,383
Principal payments on mortgage loans payable (423,770) (259,248)
Distributions (1,399,879) 0
----------- -----------
Net cash used for financing activities (1,822,634) (254,865)
----------- -----------
Net increase (decrease) in cash and
cash equivalents (1,914,065) 538,947
Cash and cash equivalents, beginning of period 3,590,188 1,004,565
----------- -----------
Cash and cash equivalents, end of period $ 1,676,123 $ 1,543,512
=========== ===========
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for interest $ 1,802,226 $ 1,224,749
----------- -----------
Supplemental Disclosure of Non-Cash Financing Activities:
In 1997, the Partnership borrowed $1,100,000 under the Promissory note payable
and funded the replacement reserve to make certain non-structural repairs and
renovations at the St. Louis Hotel. During 1997, the Partnership made
promissory note principal payments from the replacement reserve totaling
$56,089.
Notes to the Financial Statements
The unaudited financial statements should be read in conjunction with the
Partnership's annual 1996 audited financial statements within Form 10-K.
The unaudited financial statements include all normal and reoccurring
adjustments which are, in the opinion of management, necessary to present a
fair statement of financial position as of March 31, 1997 and the results of
operations and cash flows for the three months ended March 31, 1997 and 1996
and the statement of partner's capital for the three months ended March 31,
1997. Results of operations for the periods are not necessarily indicative of
the results to be expected for the full year.
Certain prior year amounts have been reclassified to conform to the current
year's presentation.
The following significant event has occurred subsequent to fiscal year 1996
which requires disclosure in this interim report per Regulation S-X, Rule
10-01, Paragraph (a)(5).
Effective as of January 1, 1997, the Partnership began reimbursing certain
expenses incurred by the General Partner and its affiliates in servicing the
Partnership to the extent permitted by the partnership agreement. In prior
years, affiliates of the General Partner had voluntarily absorbed these
expenses.
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 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 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.
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 (the "Loan Reserve"). As of March 31, 1997,
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 Hotel Services, Inc.'s ("Marriott" or the "Hotel Manager")
request for additional funds for furniture, fixtures and equipment ("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 March 31, 1997, the Partnership's real estate, at cost, was $147,905,510,
compared to $144,106,502 at December 31, 1996. The increase is due to
improvements completed at all of the Hotels, including room renovations at the
St. Louis and Los Angeles 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 March 31, 1997, the Partnership had cash and cash
equivalents of $1,676,123, compared to $3,590,188 at December 31, 1996. The
decrease is due to cash used for operating and financing activities, primarily
due to the distribution paid to limited partners on February 14, 1997 and the
timing of debt service payments.
A reserve account for each of the Hotels has been established to cover certain
costs of improvements, replacements, refurbishments and renewals, as well as
FF&E upgrades. For the Los Angeles, St. Louis and Tan-Tar-A Hotels, the
reserve is maintained on behalf of the Partnership at each Hotel and is
classified as "Replacement reserve receivable" on the Partnership's balance
sheet. Replacement reserve receivable decreased from $3,426,722 at December
31, 1996 to $1,904,300 at March 31, 1997 due to expenditures exceeding
contributions to the reserve. For the Nashville Hotel, the reserve is held by
the Partnership and is classified as "Restricted cash" on the Partnership's
balance sheet. Restricted cash increased to $1,318,975 at March 31, 1997,
compared to $1,297,810 at December 31, 1996 as a result of contributions to the
reserve exceeding expenditures. Rent receivable increased to $1,254,149 at
March 31, 1997, compared to $488,415 at December 31, 1996 due to the timing of
receipt of payments. Accounts payable and accrued expenses increased to
$230,751 at March 31, 1997, compared to $85,067 at December 31, 1996 due to the
receipt by the Partnership of a real estate tax refund from the County of Los
Angeles for the 1994 and 1995 tax years. The refund will be paid to the Hotel
Manager.
On October 18, 1996, the Partnership entered into a loan agreement and executed
a promissory note in an amount up to $1,100,000 (the "Line of Credit") with
Marriott International Capital Corporation (the "Lender"). The purpose of such
financing was to provide the Partnership with the required capital to implement
certain upgrades to furniture, fixtures and equipment and to make certain
non-structural repairs and renovations (collectively, the "Renovations") at the
St. Louis Hotel. The Lender will fund to the Partnership from time-to-time
amounts necessary (up to the maximum amount of the Line of Credit) to complete
the Renovations at the St. Louis Hotel. The Line of Credit is unsecured and
non-recourse to the Partnership. During the first quarter of 1997, the
Partnership borrowed $1,100,000 under the Line of Credit and funded the
replacement reserve to make the Renovations.
The Partnership has directed the Hotel Manager, the St. Louis Hotel's tenant,
to make payments on behalf of the Partnership solely from the St. Louis Hotel's
FF&E Replacement Reserve account in an amount equal to $61,986 per period
commencing with the second accounting period in fiscal 1997 until the maturity
of the Line of Credit. The Line of Credit bears interest at a rate of 9% per
annum on all outstanding amounts and can be prepaid by the Partnership without
premium or penalty. The Hotel Manager will fund all interest payments into the
FF&E Replacement Reserve account from the Hotel Manager's own funds prior to
making any interest payments to the Lender. Consequently, the payment from the
tenant will offset the interest as if this were an interestfree loan to the
Partnership. The Partnership made principal payments on the Line of Credit
from the replacement reserve totaling $56,089 to date during 1997.
Prior to 1994, cash distributions were paid on a quarterly basis from net cash
flow provided by operating activities to Unitholders based on the seasonal
performance of the Hotels. The General Partner suspended the payment of cash
distributions in the fourth quarter of 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 remained suspended through 1996 in
order for the Partnership to meet certain requirements under the terms of the
New Mortgage. Due to the satisfaction of such requirements, and improved
operations during 1996 at both the Partnership and Hotel levels, a cash
distribution in the amount of $0.40 per Unit was paid to Limited Partners on
February 14, 1997 from the Partnership's operations during the past year. The
distribution was paid to Limited Partners of record as of each month-end in
1996. This represented a one-time distribution of 1996 annual cash flow and
did not indicate the reinstatement of regular cash distributions. Future
distributions will be evaluated on an annual basis and will be dependent upon
the cash flow generated from Hotel operations in excess of debt service and the
adequacy of cash reserves. There can be no assurance that future cash flow will
be sufficient to fund additional distributions.
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
The Partnership generated a net loss of $20,656 for the three- month period
ended March 31, 1997, compared with net income of $42,080 for the three-month
period ended March 31, 1996. The decrease is due to a slight increase in total
expenses, which was partially offset by an increase in rental operating profit
and interest and other income. 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 adjusted net operating income
of $547,844 for the three-month period ended March 31, 1997, compared with
$505,444 for the three-month period ended March 31, 1996.
Total income for the three-month period ended March 31, 1997 was $3,675,199,
compared with $3,646,249 for the three-month period ended March 31, 1996. The
slight increase is due to higher rents from operating profit earned at the St.
Louis and Los Angeles Hotels and higher interest and other income. Rent from
replacement escrow, which is calculated as a percentage of the Hotels' gross
revenues, was $1,253,840 for the three-month period ended March 31, 1997,
largely unchanged from $1,256,891 for the same period in 1996. Interest and
other income totaled $118,704 for the three-month period ended March 31, 1997,
compared to $96,597 for the three-month period ended March 31, 1996. The
increase is primarily attributable to higher operating and restricted cash
balances during the 1997 period.
Total expenses for the three-month period ended March 31, 1997 were $3,695,855,
compared with $3,604,169 for the three-month period ended March 31, 1996. The
increase is due primarily to increases in depreciation and amortization and
general and administrative expenses, which were partially offset by decreases
in interest expense and professional fees. General and administrative expenses
for the three-month period ended March 31, 1997 were $64,374, compared to
$30,939 for the same period in 1996. During the 1997 period, certain expenses
incurred by the General Partner, its affiliates, and an unaffiliated third
party service provider in servicing the Partnership, which were voluntarily
absorbed by affiliates of the General Partner in prior periods, were reimbursed
to the General Partner and its affiliates. The increase is also due to the
1997 payment of the Los Angeles Commercial Rent Tax for 1996. Interest expense
decreased to $1,799,048 for the three- month period ended March 31, 1997,
compared to $1,835,664 for the three-month period ended March 31, 1996. The
decrease is due to the scheduled amortization of the New Mortgage. Professional
fees totaled $10,093 for the three-month period ended March 31, 1997, compared
to $17,311 for the three-month period ended March 31, 1996. The decrease is
due primarily to lower audit and legal accruals for 1997.
The following table summarizes the Hotels' performance for the period from
January 1 to March 22 of the indicated years (i.e., the first three Marriott
accounting periods):
1997 1996 % Change
Weighted Average Occupancy 76.5% 75.9% 0.8
Weighted Average Room Rate $ 92.76 $ 83.96 10.5
Total Hotel Sales $ 25,877,428 $ 24,049,542 7.6
Hotel Operating Profit 3,820,523 3,196,786 19.5
Rent Earned by the
Partnership 2,302,655 2,292,761 0.4
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 March 31,1997.
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: May 14, 1997
BY: /s/ Jeffrey C. Carter
---------------------
Director, President
and Chief Financial Officer
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<PERIOD-TYPE> 3-mos
<FISCAL-YEAR-END> Dec-31-1997
<PERIOD-END> Mar-31-1997
<CASH> 5,528,400
<SECURITIES> 000
<RECEIVABLES> 3,762,718
<ALLOWANCES> 000
<INVENTORY> 000
<CURRENT-ASSETS> 000
<PP&E> 147,905,510
<DEPRECIATION> (48,947,325)
<TOTAL-ASSETS> 109,307,017
<CURRENT-LIABILITIES> 841,069
<BONDS> 79,815,721
<COMMON> 000
000
000
<OTHER-SE> 21,157,126
<TOTAL-LIABILITY-AND-EQUITY> 109,307,017
<SALES> 000
<TOTAL-REVENUES> 3,675,199
<CGS> 000
<TOTAL-COSTS> 000
<OTHER-EXPENSES> 1,896,807
<LOSS-PROVISION> 000
<INTEREST-EXPENSE> 1,799,048
<INCOME-PRETAX> 000
<INCOME-TAX> 000
<INCOME-CONTINUING> 000
<DISCONTINUED> 000
<EXTRAORDINARY> 000
<CHANGES> 000
<NET-INCOME> (20,656)
<EPS-PRIMARY> (.01)
<EPS-DILUTED> (.01)
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