Securities and Exchange Commission
Washington, D.C. 20549
Form 8-K
Current Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): December 8, 1999
Marriott Residence Inn II Limited Partnership
(Exact name of registrant as specified in its charter)
Delaware 033-24935 52-1605434
(State or other jurisdiction of (Commission File Number) (I.R.S.Employer
incorporation or organization) Identification No.)
10400 Fernwood Road, Bethesda, MD 20817-1109
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code: 301-380-2070
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ITEM 5. OTHER EVENTS
On December 8, 1999, the General Partner sent to the Limited Partners of
the Partnership a letter that accompanied the Partnership's Quarterly Report on
Form 10-Q. Such letter is being filed as an exhibit to this Current Report on
Form 8-K.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(c) Exhibits
99.6 Letter from the General Partner to the Limited Partners of the
Partnership that accompanied the Partnership's Quarterly Report on
Form 10-Q for the Quarter Ended September 10, 1999.
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SIGNATURE
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the registrant has duly caused this Form 8-K to be signed on its behalf by the
undersigned, hereunto duly authorized, on this 8th day of December, 1999.
MARRIOTT RESIDENCE INN II
LIMITED PARTNERSHIP
By: RIBM TWO LLC
General Partner
December 10, 1999 By: /s/ Earla L. Stowe
Name: Earla L. Stowe
Title: Vice President
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EXHIBIT INDEX
Exhibit No.: 99.6 Description
Letter from the General Partner to the Limited Partners of the Partnership
that accompanied the Partnership's Quarterly Report on Form 10-Q for the quarter
ended September 10, 1999.
Exhibit 99.6
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Marriott Residence Inn II
Limited Partnership
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1999 THIRD QUARTER REPORT
LIMITED PARTNER QUARTERLY UPDATE
Presented for your review is the 1999 Third Quarter Report for Marriott
Residence Inn II Limited Partnership (the "Partnership"). A discussion of the
Partnership's performance and Inn operations is included in the attached Form
10-Q, Item 2, Management's Discussion and Analysis of Financial Condition and
Results of Operations. You are encouraged to review this report in its entirety.
If you have any further questions regarding your investment, please contact Host
Marriott Partnership Investor Relations at (301) 380-2070.
Strategy for Liquidity
During 1999, the General Partner has worked with a major investment banking firm
to explore alternatives to provide liquidity for the partners in the Partnership
while securing the highest possible value for the limited partners. More than 70
prospective purchasers were contacted and Partnership financial information was
made available to a number of them for their review and analysis on a
confidential basis. It is the General Partner's opinion that the offers received
do not reflect the full value of the Inns. The inability to obtain an acceptable
offer at this time is a result of slow revenue growth this year and an
expectation of moderate or low profit growth in the near future, as well as a
general over-supply in the Partnership's lodging markets and a shift of equity
and debt capital out of the lodging sector. Some industry analysts indicate that
new construction starts in the limited service segment have peaked. If this is
the case, the market should see a trend toward supply and demand growth
equilibrium. The rate of general economic growth as well as changes in specific
market conditions will be additional variables affecting this trend. The General
Partner continues to evaluate alternatives for liquidity. However, the General
Partner can make no assurances as to the outcome of these efforts.
Transfer and Sale of Limited Partnership Units
As you know, the Partnership Units are a non-traded security. In most cases, the
Partnership Agreement does allow limited partners to transfer Partnership Units
to related parties. In addition, you may, under certain circumstances, sell your
Partnership Units to a third party; however, the General Partner must consent to
such a sale. Please note there are certain tax and legal limitations to
transferring Partnership Units including significant tax effects resulting from
the sale of these Units that may impact your decision to sell. In addition to
consulting with your advisors, we recommend that limited partners contact the
General Partner about such limitations before entering into any agreement to
sell your Partnership Units.
If you do wish to request a transfer of your Partnership Units, please contact
our Transfer Agent at 800-797-6812. You will be supplied with the necessary
documents. Please note that the General Partner does not charge any fee for
effecting a transfer.
Inn Operations
The combined operations of the Partnership's 23 Inns declined in the third
quarter 1999 when compared to the third quarter 1998. For a detailed discussion
of Inn operations, please refer to Item 2 of the Form 10-Q.
Residence Inn by Marriott continues to be highly competitive and report stable
system-wide operating results when compared to the prior year due to successful
marketing efforts and a continued guest commitment. 1999 has been a challenge as
extended-stay hotel competitors continue to increase their presence in the
market. In response, during 1999 the Manager continues to heighten its efforts
to become the pre-eminent leader in this hospitality category, focusing on
customers that prefer a quality residential experience. The Manager is
continuing to monitor the introduction and growth of new extended-stay brands
including Homewood Suites, Hawthorne Suites, Summerfield Suites, Staybridge by
Holiday Inn and Hilton Residential Suites. In addition, a renewed focus will be
placed on strengthening each Inn's sales efforts in order to solidify the
existing relationships shared with current clients and to establish new ones.
Impact of Capital Expenditures on Cash Distributions
As an owner of 23 extended-stay properties, the Partnership must concentrate on
the impact of increased competition on its goals to provide liquidity and
maximize the value of your investment. To ensure our Inns remain competitive,
there will be a continuing focus on the renovation and refurbishment of the
properties during 1999 and beyond.
These renovations are part of the routine capital expenditure cycle for
maintaining Inns that are 10 to 16 years old. In light of the increased
competition in the extended-stay market described above, the Manager has also
proposed additional improvements that are intended to enhance the overall value
and competitiveness of the Inns. These proposed improvements include design,
structural and technological improvements to modernize and enhance the
functionality and appeal of the Inns. Based upon information provided by the
Manager, approximately $56 million may be required over the next five years for
the routine renovations and all of the proposed additional improvements. The
General Partner is reviewing the Manager's proposed renovations and improvements
to identify those projects that have the greatest value to the Partnership.
However, if all projects were implemented, the overall cost of these future
capital expenditures would be expected to exceed the Partnership's available
funds.
As we have previously communicated to you, there will be no cash available for
distribution from 1999 operations. In addition, based on the anticipated capital
expenditure needs of the Inns over the next few years, it appears unlikely that
cash distributions will be possible for 2000 and 2001.
Amounts Paid to the General Partner and Marriott International, Inc.
The chart below summarizes amounts paid (in thousands) to the General Partner
and Marriott International, Inc. for the thirty-six weeks ended September 10,
1999 (unaudited):
<TABLE>
<S> <C>
Marriott International, Inc.:
Residence Inn system fee................................................$ 1,937
Chain services and Marriott Rewards Program............................. 1,276
Marketing fund contribution............................................. 1,207
Base management fee..................................................... 1,019
Incentive management fee................................................ 109
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$ 5,548
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General Partner:
Administrative expenses reimbursed......................................$ 78
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</TABLE>
Estimated 1999 Tax Information
Based on current projections, estimated taxable income of $90 will be allocated
to each limited partner unit for the year ending December 31, 1999.
The 1999 tax information, used for preparing your Federal and state income tax
returns, will be mailed no later than March 15, 2000. To ensure confidentiality,
we regret that we are unable to furnish your tax information over the telephone.
Unless otherwise instructed, we will mail your tax information to your address
as it appears on this report. Therefore, to avoid delays in delivery of this
important information, please notify the Partnership in writing of any address
changes by January 31, 2000.
We appreciate your continued support and invite you to visit Residence Inns as
you travel throughout the United States.
