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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 14, 1996
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File No. 0-28222
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MARRIOTT HOTEL PROPERTIES II LIMITED PARTNERSHIP
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(Exact name of registrant as specified in its charter)
Delaware 52-1604506
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(State of Organization) (I.R.S. Employer
Identification Number)
10400 Fernwood Road, Bethesda, MD 20817-1109
- - - --------------------------------------- -----------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (301) 380-2070
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, and (2) has been subject to such filing requirements
for the past 90 days. Yes _____ No _____ (Not Applicable. The Partnership
became subject to Section 13 reporting on April 17, 1996.)
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Marriott Hotel Properties II Limited Partnership
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TABLE OF CONTENTS
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PAGE NO.
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PART I - FINANCIAL INFORMATION
Financial Statements
Item 1.
Condensed Statement of Operations
Twelve Weeks and Twenty-Four Weeks Ended
June 14, 1996 and June 16, 1995............................. 1
Condensed Balance Sheet
June 14, 1996 and December 31, 1995......................... 2
Condensed Statement of Cash Flows
Twenty-Four Weeks Ended
June 14, 1996 and June 16, 1995............................. 3
Notes to Condensed Financial Statements...................... 4-6
Item 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition.......................... 7-9
PART II - OTHER INFORMATION
Item 1. Legal Proceedings............................................. 10
Item 5. Other Information............................................. 10
Item 6. Exhibits and Reports on Form 8-K.............................. 11
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Marriott Hotel Properties II Limited Partnership
Condensed Statement of Operations
(Unaudited)
(in thousands, except per Unit amounts)
<TABLE>
<CAPTION>
Twelve Weeks Ended Twenty-Four Weeks Ended
June 14, June 16, June 14, June 16,
1996 1995 1996 1995
-------- -------- -------- --------
<S> <C> <C> <C> <C>
REVENUES................... $16,768 $15,533 $33,812 $32,741
OPERATING COSTS AND
EXPENSES
Interest expense.......... 3,701 4,097 7,711 8,147
Depreciation and
amortization............. 3,021 3,038 5,911 5,928
Incentive management fees. 2,515 2,319 5,067 4,931
Property taxes............ 1,263 1,277 2,561 2,560
Base management fees...... 1,066 1,006 2,146 2,077
Ground rent, insurance
and other................ 321 208 562 601
------- ------- ------- -------
11,887 11,945 23,958 24,244
------ ------- ------- -------
INCOME BEFORE EQUITY IN
INCOME OF SANTA CLARA
PARTNERSHIP 4,881 3,588 9,854 8,497
EQUITY IN INCOME
OF SANTA CLARA PARTNERSHIP 223 2 570 175
------- ------- ------- -------
NET INCOME................. $ 5,104 $ 3,590 $10,424 $ 8,672
======= ======= ======= =======
ALLOCATION OF NET INCOME
General Partner........... $ 51 $ 36 $ 104 $ 87
Limited Partners.......... 5,053 3,554 10,320 8,585
------- ------- ------- -------
$ 5,104 $ 3,590 $10,424 $ 8,672
======= ======= ======= =======
NET INCOME PER LIMITED
PARTNER UNIT (745 Units).. $ 6,783 $ 4,770 $13,852 $11,523
======= ======= ======= =======
</TABLE>
See Notes To Condensed Financial Statements.
1
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Marriott Hotel Properties II Limited Partnership
Condensed Balance Sheet
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
June 14, December 31,
1996 1995
-------- ------------
<S> <C> <C>
ASSETS
Property and equipment, net..................... $202,231 $203,990
Due from Marriott International, Inc. .......... 8,696 7,275
Property improvement fund....................... 11,246 11,940
Deferred financing and organization costs, net.. 346 114
Restricted cash reserves........................ 26,519 9,193
Cash and cash equivalents....................... 4,346 21,601
-------- --------
$253,384 $254,113
======== ========
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES
Mortgage debt................................... $213,307 $222,500
Due to Marriott International, Inc. ............ 3,187 2,615
Investment in Santa Clara Partnership........... 8,644 8,244
Accounts payable and accrued expenses........... 974 433
-------- --------
Total Liabilities.............................. 226,112 233,792
-------- --------
PARTNERS' CAPITAL
General Partner................................. 418 348
Limited Partners................................ 26,854 19,973
-------- --------
Total Partners' Capital........................ 27,272 20,321
-------- --------
$253,384 $254,113
======== ========
</TABLE>
See Notes To Condensed Financial Statements.
2
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Marriott Hotel Properties II Limited Partnership
Condensed Statement of Cash Flows
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Twenty-Four Weeks Ended
June 14, June 16,
1996 1995
-------- --------
<S> <C> <C>
OPERATING ACTIVITIES
Net income............................................... $ 10,424 $ 8,672
Noncash items............................................ 5,532 6,162
Change in operating accounts............................. (385) (637)
-------- -------
Cash provided by operations........................... 15,571 14,197
-------- -------
INVESTING ACTIVITIES
Additions to restricted cash reserves.................... (17,326) (1,705)
Additions to property and equipment...................... (4,152) (3,583)
Distributions from Santa Clara
Partnership............................................. 970 652
Change in property improvement fund...................... 694 218
-------- -------
Cash used in investing activities..................... (19,814) (4,418)
-------- -------
FINANCING ACTIVITIES
Repayment of mortgage debt............................... (9,193) --
Distributions............................................ (3,473) (3,473)
Payment of financing costs............................... (346) --
-------- -------
Cash used in financing activities..................... (13,012) (3,473)
-------- -------
(DECREASE)/INCREASE IN CASH AND CASH
EQUIVALENTS.............................................. (17,255) 6,306
CASH AND CASH EQUIVALENTS at beginning of
period................................................... 21,601 17,764
-------- -------
CASH AND CASH EQUIVALENTS at end of period $ 4,346 $24,070
======== =======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION
Cash paid for mortgage interest.......................... $ 7,089 $ 7,163
======== =======
</TABLE>
See Notes To Condensed Financial Statements.
3
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Marriott Hotel Properties II Limited Partnership
Notes to Condensed Financial Statements
(Unaudited)
1. The accompanying condensed financial statements have been prepared by
Marriott Hotel Properties II Limited Partnership (the "Partnership") without
audit. Certain information and footnote disclosures normally included in
financial statements presented in accordance with generally accepted
accounting principles have been condensed or omitted from the accompanying
statements. The Partnership believes the disclosures made are adequate to
make the information presented not misleading. However, the condensed
financial statements should be read in conjunction with the Partnership's
financial statements and notes thereto for the fiscal year ended December 31,
1995 which are included in the Partnership's Form 10 registration statement.
In the opinion of the Partnership, the accompanying condensed unaudited
financial statements reflect all adjustments (which include only normal
recurring adjustments) necessary to present fairly the financial position of
the Partnership as of June 14, 1996 and December 31, 1995, the results of
operations for the twelve weeks and twenty-four weeks ended June 14, 1996 and
June 16, 1995 and cash flows for the twenty-four weeks ended June 14, 1996
and June 16, 1995. Interim results are not necessarily indicative of fiscal
year performance because of seasonal and short-term variations.
2. The Partnership owns the New Orleans, San Antonio Rivercenter and San Ramon
Marriott Hotels (the "Hotels"). In addition, the Partnership owns a 50%
limited partnership interest in the Santa Clara Marriott Hotel Limited
Partnership (the "Santa Clara Partnership") which owns the Santa Clara
Marriott Hotel (the "Santa Clara Hotel"). The Partnership's income from the
Santa Clara Partnership is reported as Equity in Income of the Santa Clara
Partnership. In arriving at equity in income from the Santa Clara
Partnership, the Partnership is allocated 100% of the interest expense
related to the debt incurred to purchase the Santa Clara Partnership
interest. Summarized financial information for the Santa Clara Partnership
is presented in Note 5 below.
3. For financial reporting purposes, net profits and net losses of the
Partnership are allocated 99% to the Limited Partners and 1% to the General
Partner. Significant differences exist between the net profits and net
losses for financial reporting purposes and the net profits and net losses
reported for Federal income tax purposes. These differences are due
primarily to the use, for income tax purposes, of accelerated depreciation
methods and shorter depreciable lives of the assets and differences in the
timing of recognition of incentive management fee expense.
4. Revenue primarily represent house profit from the Hotels. House profit
reflects the net revenues flowing to the Partnership and represents hotel
operating results less property level expenses excluding depreciation,
property taxes, base and incentive management fees, ground rent, insurance
and certain other costs which are classified as operating costs and expenses.
Partnership revenues generated by the Hotels for the twelve and twenty-four
weeks ended consist of:
<TABLE>
<CAPTION>
Twelve Weeks Ended Twenty-Four Weeks Ended
June 14, June 16, June 14, June 16,
1996 1995 1996 1995
----------- ----------- ---------- ----------
(in (in
thousands) thousands)
<S> <C> <C> <C> <C>
HOTEL REVENUES
Rooms................ $ 24,321 $ 22,492 $ 47,836 $ 45,922
Food and beverage.... 9,391 9,328 19,786 19,678
Other................ 1,817 1,691 3,909 3,622
------- ------- -------- --------
35,529 33,511 71,531 69,222
------- ------- -------- --------
HOTEL EXPENSES
Departmental direct
costs
Rooms............... 4,351 4,304 8,656 8,650
Food and beverage... 6,701 6,409 13,752 13,141
Other hotel
operating expenses.. 7,709 7,265 15,311 14,690
------- ------- -------- --------
18,761 17,978 37,719 36,481
- - - --------------------------- ------- ------- -------- --------
REVENUES................ $16,768 $15,533 $ 33,812 $ 32,741
======= ======= ======== ========
</TABLE>
4
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<TABLE>
<CAPTION>
5. Summarized financial information for the Santa Clara Partnership is as follows:
Twelve Weeks Ended Twenty-Four Weeks Ended
June 14, June 16, June 14, June 16,
1996 1995 1996 1995
-------- -------- -------- --------
(in thousands) (in thousands)
Condensed Statement of
Operations
- - - ---------------------------
<S> <C> <C> <C> <C>
REVENUES................. $ 4,112 $ 3,406 $ 8,231 $ 6,792
OPERATING COSTS AND
EXPENSES
Interest expense...... 752 712 1,395 1,442
Depreciation and
amortization......... 636 636 1,259 1,259
Incentive management
fees................. 631 511 1,259 1,021
Base management fees.. 286 253 569 500
Property taxes........ 116 117 231 235
Ground rent,
insurance and other.. 71 39 141 100
------- ------- -------- --------
2,492 2,268 4,854 4,557
- - - --------------------------- ------- ------- -------- --------
NET INCOME............... $ 1,620 $ 1,138 $ 3,377 $ 2,235
======= ======= ======== ========
June 14, December
1996 31, 1995
-------- --------
(in thousands)
Condensed Balance Sheet
- - - ---------------------------
Property and equipment,
net...................... $ 29,162 $ 28,406
Other assets.............. 4,016 3,590
Cash and cash equivalents. 2,390 1,614
-------- --------
Total Assets........... $ 35,568 $ 33,610
======== ========
Mortgage debt............. $ 43,500 $ 43,500
Due to Marriott
International, Inc. ..... 1,852 1,086
Accounts payable and
accrued expenses......... 221 117
Partners' deficit......... (10,005) (11,093)
-------- --------
Total Liabilities and
Partners' Deficit..... $ 35,568 $ 33,610
======== ========
</TABLE>
6. On March 21, 1996, the Mortgage Debt and the Santa Clara Mortgage Debt
matured. An extension was entered into between the Partnership and the Santa
Clara Partnership and the current lenders that extends the maturity date on
the two loans for an additional six months until an agreement can be reached
with another lender. On July 10, 1996, the General Partner signed a
commitment letter with Nomura Asset Capital Corporation and believes that the
Partnership and the Santa Clara Partnership will be able to refinance the
loans before the end of the six month extension. Under the terms of the
extension, interest accrued at the London interbank offered rate ("LIBOR")
plus 187.5 basis points through June 18, 1996 and accrues at LIBOR plus 225
basis points through September 21, 1996. No principal amortization is
required during the extension period. However, under the terms of the
extension, the Partnership applied the $9.2 million accumulated in the
primary lender reserve account to pay down the principal balance of the
Mortgage Debt to $213.3 million and deposited $19.1 million into the primary
lender reserve account. The deposit represented the balance ($16.8 million)
from the reserve account previously established by the General Partner in
1992 and cash flow from the Partnership for the first two periods of 1996
($2.3 million). Such payments were made in the second quarter. During the
extension period, the Partnership also is required to deposit into the
primary lender reserve account all cash flow from the
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Partnership's Hotels plus all the Partnership's cash flow from the Santa
Clara Partnership, net of (i) $500,000 per accounting period, (ii) debt
service and (iii) current incentive management fees paid. The $500,000 per
accounting period will be deposited into a separate expense reserve account
which will be used by the Partnership to fund administrative expenses and
refinancing costs, any owner-funded capital expenditures of the Partnership,
as well as the Partnership's share of any such costs incurred by the Santa
Clara Partnership in the six month extension period. As of June 14, 1996,
the balances in the primary lender reserve and in the expense reserve totaled
$25.5 million and $1.0 million, respectively. In connection with the
contemplated refinancing of the Mortgage Debt, the General Partner may use
funds in the reserve accounts for costs and expenses associated with the
refinancing, to pay down principal, to establish escrow accounts (if
required), or for distribution to the limited partners.
7. In the first quarter of 1996, the Partnership adopted Statement of Financial
Accounting Standards ("SFAS") No. 121 "Accounting for the Impairment of Long-
Lived Assets and for Long-Lived Assets to Be Disposed Of". Adoption of SFAS
No. 121 did not have an effect on its financial statements.
8. On June 13, 1996, MHP II Acquisition Corp. (the "Company"), a wholly-owned
subsidiary of Host Marriott Corporation ("Host"), completed its tender offer
for the limited partnership units in Marriott Hotel Properties II Limited
Partnership (the "Partnership"). The Company purchased 377 units for an
aggregate consideration of $56,550,000 or $150,000 per unit. As a result of
this transaction, the Company became the majority limited partner in the
Partnership, owning 382 units or approximately 51% of the total units
outstanding. Additionally, in a Partnership vote held in conjunction with
the tender offer, the limited partners approved certain amendments to the
partnership agreement that were conditions to the tender offer.
6
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
CAPITAL RESOURCES AND LIQUIDITY
The Partnership's financing needs have historically been funded through a loan
agreement with a third party financial institution. The General Partner
believes that the Partnership will have sufficient capital resources and
liquidity to continue to conduct its business in the ordinary course.
Mortgage Debt
- - - -------------
The Partnership is financed with Mortgage Debt of $222.5 million which is non-
recourse to the Partnership. The Mortgage Debt matured March 21, 1996. The
Mortgage Debt was extended for a six month term until September 21, 1996.
During the extension, interest accrued at the London interbank offered rate
("LIBOR") plus 187.5 basis points through June 18, 1996 and accrues at LIBOR
plus 225 basis points until September 21, 1996. No principal amortization is
required during the extension period. However, under the terms of the amendment
extending the Partnership's Mortgage Debt, the Partnership applied $9.2 million
that it had accumulated in the primary lender reserve account to pay down the
principal balance of the Mortgage Debt to $213.3 million. In addition, $16.8
million from the reserve account previously established by the General Partner
in anticipation of this refinancing and cash flow from the Partnership for the
first two periods of 1996 ($2.3 million) was transferred to the primary lender
reserve account. Such payments were made during the second quarter.
During the extension period, the Partnership also is required to deposit into
the primary lender reserve account all cash flow from the Partnership's Hotels
plus all the Partnership's cash flow from the Santa Clara Partnership, net of
(i) $500,000 per accounting period, (ii) debt service and (iii) current
incentive management fees. The $500,000 per accounting period will be deposited
into a separate expense reserve account which will be used by the Partnership to
fund administrative expenses and refinancing costs, any owner-funded capital
expenditures of the Partnership, as well as the Partnership's share of any such
costs incurred by the Santa Clara Partnership during the six month extension
period. As of June 14, 1996, the balances in the primary lender reserve and the
expense reserve totaled $25.5 million and $1.0 million, respectively. In
connection with the contemplated refinancing of the Mortgage Debt discussed
below, the General Partner may use funds in the reserve accounts for costs and
expenses associated with the refinancing, to establish escrow accounts or for
distribution to the limited partners. In addition, if the General Partner were
able to finance more than the current balance of the Mortgage Debt, excess
financing proceeds also might be available for distribution. There can be no
assurance that any such distributions would be made.
On July 10, 1996, the General Partner signed a commitment letter with Nomura
Asset Capital Corporation ("NACC") to refinance at least $213.3 million of the
Mortgage Debt of the Partnership and an additional $9.2 million through a
commercial mortgage-backed securities transaction. The financing will be non-
recourse to the Partnership and will be secured by first mortgages on the
Hotels. The securitized financing will have a term of 11 years, substantially
restrict the ability of the Partnership to sell the Hotels during such term and
prohibit the Partnership from prepaying any debt for an extended period without
paying a substantial premium during such term. In addition, the interest rate
will be fixed for the entire term of the Mortgage Debt at a spread over the
yield of an interpolated 11-year U.S. Treasury security. Based on the yield of
recent 11-year U.S. Treasury securities, the rate would be approximately 8.25%
to 8.50%. Unlike the existing Mortgage Debt, the refinancing will require
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principal amortization over 20 years with the first year being interest only.
This required principal amortization combined with an interest rate which is
higher than the interest rates on the existing Mortgage Debt will increase
future debt service. In addition, the Santa Clara Mortgage Debt of $43.5
million will be refinanced under substantially identical terms.
Capital Sources and Uses of Cash
- - - --------------------------------
For the twenty-four weeks ended June 14, 1996 and June 16, 1995, cash provided
by operations was $15.6 million and $14.2 million, respectively. The increase
is primarily due to an increase in sales, discussed below. Year-to-date, $19.8
million was utilized for investing activities compared with $4.4 million for the
same period in 1995. The increase is primarily the result of cash transfers to
the primary lender reserve and the expense reserve. Financing activities
utilized $13.0 million and $3.4 million in 1996 and 1995, respectively. The
increase is primarily due to the $9.2 million principal paydown on the Mortgage
Debt, according to the terms of the extension agreement.
The General Partner believes that cash from Hotel operations will continue to
meet the short and long-term operational and capital needs of the Partnership.
The General Partner does expect to make a cash distribution during 1996. In
addition, the General Partner and the manager believe the property improvement
fund will be adequate for the future capital repairs and replacement needs of
the Hotels.
In the first quarter of 1996, the Partnership adopted Statement of Financial
Accounting Standards ("SFAS") No. 121 "Accounting for the Impairment of Long-
Lived Assets and for Long-Lived Assets to Be Disposed Of". Adoption of SFAS No.
121 did not have an effect on its financial statements.
RESULTS OF OPERATIONS
Total Partnership revenues increased 8% and 3% for the second quarter and year-
to-date, respectively, when compared to 1995 results. The increase in second
quarter and year-to-date revenues is primarily due to significant increases in
revenues at the San Antonio and Santa Clara Hotels. REVPAR, or revenue per
available room, increased 10% for the quarter when compared to the same period
in 1995. The increase in REVPAR for the quarter is due to a 4.4 percentage
point increase in combined average occupancy to 86% combined with a 4% increase
in combined average room rate to $125. On a year-to-date basis, REVPAR
increased 6% due to a 6% increase in combined average room rate to $128 while
combined average occupancy increased slightly to 83%.
Revenues at the Marriott Rivercenter in San Antonio Hotel increased 3% for the
second quarter when compared to the same period in 1995 primarily due to a 5%
increase REVPAR. The increase in REVPAR is due a 2.3 percentage point increase
in average occupancy to 88% combined with a 2% increase in average room rate to
$138. On a year-to-date basis, Hotel revenues increased 6% primarily due to a
6% increase in REVPAR combined with a $387,000 increase in food and beverage
profits. The increase in food and beverage profits is primarily due to an
increase in hospitality functions. The increase in REVPAR is due to 6% increase
in average room rate to $140 while average occupancy remained stable at 86%.
The increase in average room rate is the result of Hotel management's continued
success with aggressive pricing strategies. Westin and Adams Mark hotels have
announced plans to build a 400 and 500 room hotel, respectively, which are
scheduled to open in late 1997 or early 1998. Hotel management does not expect
that this new supply will have a significant impact on Hotel operations.
The New Orleans Marriott Hotel reported a 12% increase in revenues for the
second quarter when compared to the same period in 1995. The increase is due to
a 10% increase in REVPAR which was slightly offset by a $219,000 decrease in
food and beverage profits. REVPAR increased due to a 5.8 percentage point
increase in average occupancy to 86% combined with a 2% increase in average room
8
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rate to $125. Year-to-date revenues at the Hotel decreased 1% when compared to
1995 results primarily due to a 31%, or $851,000, decrease in food and beverage
profits which was slightly offset by a 1% increase in REVPAR. Food and beverage
profits declined for the second quarter and year-to-date due to a shift in the
group business market from corporations and associations to more cost conscious
groups. REVPAR increased due to a 3% increase in average room rate to $130
which was partially offset by a 1.3 percentage point decline in average
occupancy to 80%. The increase in average room rate is due to Hotel
management's successful employment of strategic rate structuring which has
included driving transient room rates and limiting rate discounting. The year-
to-date decline in average occupancy is due to a city-wide decrease in
convention business when compared to the same period in 1995. Hotel management
is optimistic about the remainder of the year based on advanced roomnights
booked for the remainder of 1996.
The San Ramon Marriott Hotel reported a 16% increase in second quarter revenues
when compared to the same period in 1995. The increase is primarily due to a
13% increase in REVPAR for the second quarter, as average room rate increased 9%
to $97 and average occupancy increased 3.3 percentage points to 86%. On a year-
to-date basis, Hotel revenues increased 13% when compared to 1995 primarily due
to a 13% increase in REVPAR. The increase in REVPAR is the result of a 9%
increase in average room rate to $97 combined with a 2.8 percentage point
increase in average occupancy to 84%. The increase in average room rate for the
quarter and year-to-date is the result of a successful decision by Hotel
management to increase the corporate rate. Occupancy levels have benefited from
an increase in transient demand. This trend is expected to continue for the
remainder of the year.
Revenues at the Santa Clara Marriott Hotel increased 21% for the second quarter
and year-to-date, respectively, when compared to the same period in 1995 due to
significant increases in REVPAR. For the quarter, REVPAR increased 21% as
average room rate increased 13% to $116 combined with a 6.1 percentage point
increase in average occupancy to 87%. On a year-to-date basis, REVPAR increased
20%. The increase in REVPAR is due to a 13% increase in average room rate to
$116 combined with a 4.9 percentage point increase in average occupancy to 84%.
Year-to-date and quarterly average room rates have increased due to Hotel
management's success with aggressive pricing strategies which included
increasing the corporate rate. Average occupancy benefited from increased
demand for rooms in Silicon Valley, as well as the employment of length of stay
restrictions by Hotel management. The remainder of 1996 is expected to be
strong as Hotel management will continue to focus on customer mix management, as
well as strategic rate structuring.
Year-to-date Partnership interest expense decreased 5.3% to $7.7 million from
$8.1 million for the comparable period in 1995. For the second quarter 1996,
interest expense decreased 9.7% when compared to the second quarter 1995. The
decrease in year-to-date and second quarter Partnership interest expense is due
to a decline in interest rates. The Partnership did not experience any other
significant variances during the twelve and twenty-four weeks ended June 14,
1996.
9
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Partnership and the Partnership Hotels are involved in routine
litigation and administrative proceedings arising in the ordinary
course of business, some of which are expected to be covered by
liability insurance and which collectively are not expected to have a
material adverse effect on the business, financial conditions or
results of operations of the Partnership.
On April 23, 1996, MacKenzie Patterson Special Fund 2, L.P.
("MacKenzie Patterson"), a limited partner of the Partnership, filed a
purported class-action lawsuit in the Circuit Court for Montgomery
County, Maryland, against the Partnership, as a nominal defendant, the
Company, Host, the General Partner and the directors of the General
Partner, alleging, among other things, that the defendants had
violated their fiduciary duties in connection with the tender offer.
The complaint sought certification as a class-action, to enjoin the
Offer and the Consent Solicitation, and damages. Subsequently,
MacKenzie Patterson dismissed the Montgomery County action and refiled
in Delaware State Chancery Court. In separate lawsuits, filed on April
24, 1996, in Delaware State Chancery Court and on May 10, 1996, in the
Circuit Court for Palm Beach County, Florida, two other limited
partners of the Partnership sought similar relief. The Chancery
Court consolidated the two Delaware lawsuits and on June 12, 1996,
entered an order denying the Delaware plaintiffs' motion has yet been
set on to enjoin the Offer and Consent Solicitation. The defendants
have moved to dismiss this consolidated action and to stay discovery.
Neither a briefing schedule nor a hearing on these motions. The
defendants removed the Florida action to federal court in Florida and
filed motions to dismiss, or in the alternative, to stay the action
pending resolution of the Delaware action. The District Court has not
yet set a hearing on these motions.
ITEM 5. OTHER INFORMATION
On June 13, 1996, MHP II Acquisition Corp. (the "Company"), a wholly-
owned subsidiary of Host Marriott Corporation ("Host"), completed its
tender offer for the limited partnership units in Marriott Hotel
Properties II Limited Partnership (the "Partnership"). The Company
purchased 377 units for an aggregate consideration of $56,550,000 or
$150,000 per unit. As a result of this transaction, the Company
became the majority limited partner in the Partnership. Additionally,
in a Partnership vote held in conjunction with the tender offer, the
limited partners approved certain amendments to the partnership
agreement that were conditions to the tender offer. A copy of the
Second Amended and Restated Agreement of Limited Partnership of
Marriott Hotel Properties II Limited Partnership was included in the
Partnership's Form 8-K filed with the Securities and Exchange
Commission on June 24, 1996.
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits - None
b. Reports on Form 8-K -
A Form 8-K was filed with the Securities and Exchange Commission
on June 24, 1996. In this filing, Item 5 - Other Events disclose
the completion of the tender offer for a majority of the limited
partnership units in the Partnership by MHP II Acquisition Corp a
wholly owned direct subsidiary of Host Marriott Corporation and
the approval of various amendments to the Partnership Agreement.
A copy of the Second Amended and Restated Agreement of Limited
Partnership of Marriott Hotel Properties II Limited Partnership
was included as an Item 7 - Exhibit in this Form 8-K filing.
11
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SIGNATURE
---------
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.
MARRIOTT HOTEL PROPERTIES II
LIMITED PARTNERSHIP
By: MARRIOTT MHP TWO CORPORATION
General Partner
Date: July 26, 1996 By: /s/Bruce F. Stemerman
---------------------- -------------------------------
Bruce F. Stemerman
President and Chief Accounting Officer
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<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE SECOND
QUATER 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-14-1996
<CASH> 30,865
<SECURITIES> 11,592<F1>
<RECEIVABLES> 8,696
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 51,153
<PP&E> 290,800
<DEPRECIATION> (88,569)
<TOTAL-ASSETS> 253,384
<CURRENT-LIABILITIES> 12,805
<BONDS> 213,307
0
0
<COMMON> 0
<OTHER-SE> 27,272
<TOTAL-LIABILITY-AND-EQUITY> 253,384
<SALES> 0
<TOTAL-REVENUES> 34,382<F2>
<CGS> 0
<TOTAL-COSTS> 16,247
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,711
<INCOME-PRETAX> 10,424
<INCOME-TAX> 0
<INCOME-CONTINUING> 10,424
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10,424
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>THIS IS OTHER ASSETS.
<F2>THIS INCLUDES EQUITY IN INCOME OF SANTA CLARA PARTNERSHIP.
</FN>
</TABLE>
