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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 20, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File No. 0-28222
MARRIOTT HOTEL PROPERTIES II LIMITED PARTNERSHIP
(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
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (301) 380-2070
Securities registered pursuant to Section 12(b) of the Act:
Not Applicable
Securities registered pursuant to Section 12(g) of the Act:
Units of Limited Partnership Interest
(Title of Class)
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 x/ No
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<TABLE>
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TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
PAGE NO.
Item 1. Financial Statements (Unaudited)
<S> <C>
Condensed Statement of Operations
Twelve Weeks and Twenty-Four Weeks Ended
June 20, 1997 and June 14, 1996 ........................1
Condensed Balance Sheet
June 20, 1997 and December 31, 1996........................2
Condensed Statement of Cash Flows
Twenty-Four Weeks Ended June 20, 1997 and June 14, 1996....3
Notes to Condensed Financial Statements........................4
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations..................................7
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.............................................10
Item 6. Exhibits and Reports on Form 8-K..............................10
</TABLE>
<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 20, June 14, June 20, June 14,
1997 1996 1997 1996
----------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
REVENUES
Hotel..................................................$ 17,046 $ 16,768 $ 36,584 $ 33,812
Interest income........................................ 606 482 957 924
----------- ---------- ----------- -----------
17,652 17,250 37,541 34,736
----------- ---------- ----------- -----------
OPERATING COSTS AND EXPENSES
Interest expense....................................... 4,337 3,701 8,827 7,711
Depreciation and amortization.......................... 2,936 3,021 6,042 5,911
Incentive management fees.............................. 2,509 2,515 5,410 5,067
Property taxes......................................... 1,366 1,263 2,760 2,561
Base management fees................................... 1,113 1,066 2,303 2,146
Ground rent ........................................... 490 480 993 953
Insurance and other.................................... 239 323 467 533
----------- ---------- ----------- -----------
12,990 12,369 26,802 24,882
----------- ---------- ----------- -----------
INCOME BEFORE EQUITY IN INCOME OF
SANTA CLARA PARTNERSHIP................................ 4,662 4,881 10,739 9,854
EQUITY IN INCOME OF
SANTA CLARA PARTNERSHIP................................ 684 223 1,112 570
----------- ---------- ----------- -----------
NET INCOME................................................$ 5,346 $ 5,104 $ 11,851 $ 10,424
=========== ========== =========== ===========
ALLOCATION OF NET INCOME
General Partner........................................$ 53 $ 51 $ 119 $ 104
Limited Partners....................................... 5,293 5,053 11,732 10,320
----------- ---------- ----------- -----------
....................................................$ 5,346 $ 5,104 $ 11,851 $ 10,424
=========== ========== =========== ===========
NET INCOME PER LIMITED PARTNER
UNIT (745 Units).......................................$ 7,105 $ 6,783 $ 15,748 $ 13,852
=========== ========== =========== ===========
</TABLE>
See Notes To Condensed Financial Statements.
1
<PAGE>
Marriott Hotel Properties II Limited Partnership
Condensed Balance Sheet
(in thousands)
<TABLE>
<CAPTION>
June 20, December 31,
1997 1996
(unaudited)
ASSETS
<S> <C> <C>
Property and equipment, net...................................................$ 195,548 $ 198,826
Due from Marriott International, Inc.......................................... 8,380 7,447
Deferred financing and organization costs, net................................ 5,826 5,932
Other assets.................................................................. 12,241 10,348
Restricted cash reserves...................................................... 14,954 12,815
Cash and cash equivalents..................................................... 18,104 16,372
------------- ---------------
........................................................................$ 255,053 $ 251,740
============= ===============
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES
<S> <C> <C>
Mortgage debt.................................................................$ 222,500 $ 222,500
Investment in Santa Clara Partnership......................................... 8,230 8,360
Due to Marriott International, Inc. ......................................... 3,666 2,882
Accounts payable and accrued expenses......................................... 2,073 1,390
------------- ---------------
Total Liabilities.......................................................... 236,469 235,132
------------- ---------------
PARTNERS' CAPITAL
General Partner............................................................... 331 311
Limited Partners.............................................................. 18,253 16,297
------------- ---------------
Total Partners' Capital.................................................... 18,584 16,608
------------- ---------------
........................................................................$ 255,053 $ 251,740
============= ===============
</TABLE>
See Notes To Condensed Financial Statements.
2
<PAGE>
Marriott Hotel Properties II Limited Partnership
Condensed Statement of Cash Flows
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Twenty-Four Weeks Ended
June 20, June 14,
1997 1996
------------- --------
<S> <C> <C>
OPERATING ACTIVITIES
Net income ...................................................................$ 11,851 $ 10,424
Noncash items................................................................. 5,087 5,532
Change in operating accounts.................................................. 546 (385)
------------- -------------
Cash provided by operations............................................. 17,484 15,571
------------- -------------
INVESTING ACTIVITIES
Additions to property and equipment, net...................................... (2,764) (4,152)
Additions to restricted cash reserves......................................... (2,139) (17,326)
Change in property improvement fund........................................... (1,922) 694
Distributions from Santa Clara Partnership.................................... 982 970
------------- -------------
Cash used in investing activities....................................... (5,843) (19,814)
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FINANCING ACTIVITIES
Distributions................................................................. (9,875) (3,473)
Payment of financing costs.................................................... (34) (346)
Repayment of mortgage debt.................................................... -- (9,193)
------------- -------------
Cash used in financing activities....................................... (9,909) (13,012)
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INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS................................. 1,732 (17,255)
CASH AND CASH EQUIVALENTS at beginning of period................................. 16,372 21,601
------------- -------------
CASH AND CASH EQUIVALENTS at end of period.......................................$ 18,104 $ 4,346
============= =============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for mortgage interest...............................................$ 9,246 $ 7,089
============= =============
</TABLE>
See Notes To Condensed Financial Statements.
3
<PAGE>
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 included in the
Partnership's Form 10-K filed on March 31, 1997 for the fiscal year ended
December 31, 1996.
In the opinion of the Partnership, the accompanying unaudited condensed
financial statements reflect all adjustments (which include only normal
recurring adjustments) necessary to present fairly the financial
position of the Partnership as of June 20, 1997, and the results of
operations for the twelve weeks and twenty-four weeks ended June 20,
1997 and June 14, 1996 and cash flows for the twenty-four weeks ended
June 20, 1997 and June 14, 1996. 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"). On June 13, 1996, MHPII
Acquisition Corp. (the "Company"), a wholly-owned subsidiary of Host
Marriott Corporation ("Host Marriott"), completed a tender offer for the
limited partnership units in the Partnership. The Company purchased 377
units for an aggregate consideration of $56,550,000 or $150,000 per unit.
Subsequent to the tender offer, the Company purchased an additional ten
units in the Partnership. As a result of these transactions, the Company
became the majority limited partner in the Partnership, owning 387 units
or approximately 52% of the total units outstanding. The sole general
partner of the Partnership and the Santa Clara Partnership, with a 1%
interest in each, is Marriott MHP Two Corporation (the "General Partner"),
a wholly-owned subsidiary of Host Marriott. The remaining 49% interest in
the Santa Clara Partnership is owned by HMH Properties, Inc., a
wholly-owned subsidiary of Host Marriott. 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.
3. For financial reporting purposes, net income of the Partnership is
allocated 99% to the Limited Partners and 1% to the General Partner.
Significant differences exist between the net income for financial
reporting purposes and the net income 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. Hotel revenues represent house profit of the Partnership's Hotels since
the Partnership has delegated substantially all of the operating decisions
related to the generation of house profit of the Hotels to Marriott Hotel
Services, Inc. (the "Manager"). House profit reflects hotel operating
results which flow to the Partnership as property owner and represents
gross hotel sales less property-level expenses, excluding depreciation and
amortization, base and incentive management fees, property taxes, ground
rent, insurance and other costs, which are disclosed separately in the
condensed statement of operations.
4
<PAGE>
Partnership revenues generated by the Hotels for the twelve and
twenty-four weeks ended June 20, 1997 and June 14, 1996 consist of (in
thousands):
<TABLE>
<CAPTION>
Twelve Weeks Ended Twenty-Four Weeks Ended
June 20, June 14, June 20, June 14,
1997 1996 1997 1996
------------ ------------- ------------- -------------
<S> <C> <C> <C> <C>
HOTEL REVENUES
Rooms.....................................$ 24,479 $ 24,321 $ 50,384 $ 47,836
Food and beverage......................... 10,469 9,391 22,072 19,786
Other..................................... 2,159 1,817 4,320 3,909
------------ ------------- ------------- -------------
........................................ 37,107 35,529 76,776 71,531
------------ ------------- ------------- -------------
HOTEL EXPENSES
Departmental direct costs
Rooms................................... 4,656 4,351 9,151 8,656
Food and beverage....................... 7,235 6,701 14,952 13,752
Other hotel operating expenses 8,170 7,709 16,089 15,311
------------- ------------- ------------- -------------
........................................ 20,061 18,761 40,192 37,719
------------ ------------- ------------- -------------
REVENUES....................................$ 17,046 $ 16,768 $ 36,584 $ 33,812
============ ============= ============= =============
</TABLE>
5. Summarized financial information for the Santa Clara Partnership for the
twelve and twenty-four weeks ended June 20, 1997 and June 14, 1996 (in
thousands):
<TABLE>
<CAPTION>
Twelve Weeks Ended Twenty-Four Weeks Ended
June 20, June 14, June 20, June 14,
1997 1996 1997 1996
------------ ------------- ------------- -------------
Condensed Statement of Operations
<S> <C> <C> <C> <C>
REVENUES....................................$ 5,260 $ 4,112 $ 10,247 $ 8,231
------------ ------------- ------------- -------------
OPERATING COSTS AND EXPENSES
Interest expense.......................... 835 752 1,699 1,395
Depreciation and amortization............. 464 636 1,134 1,259
Incentive management fee.................. 826 631 1,610 1,259
Base management fee....................... 342 286 668 569
Property taxes............................ 122 116 244 231
Ground rent, insurance and other.......... 47 71 128 141
------------ ------------- ------------- ------------
........................................ 2,636 2,492 5,483 4,854
------------ ------------- ------------- -------------
NET INCOME..................................$ 2,624 $ 1,620 $ 4,764 $ 3,377
============ ============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
June 20, December 31,
1997 1996
Condensed Balance Sheet
<S> <C> <C>
Property and equipment, net.............................................$ 29,803 $ 30,144
Due from Marriott International, Inc.................................... 2,559 2,170
Other assets............................................................ 1,990 1,230
Cash and cash equivalents............................................... 1,855 1,933
--------------- --------------
Total Assets..........................................................$ 36,207 $ 35,477
=============== ==============
Mortgage debt...........................................................$ 43,500 $ 43,500
Due to Marriott International, Inc...................................... 827 749
Accounts payable and accrued expenses 379 522
Partners' deficit....................................................... (8,499) (9,294)
--------------- --------------
Total Liabilities and Partners' Deficit...............................$ 36,207 $ 35,477
=============== ==============
</TABLE>
5
<PAGE>
6. Pursuant to the terms of the Mortgage Debt, the Partnership is required to
establish with the lender a separate escrow account for payments of
insurance premiums and real estate taxes (the "Tax and Insurance Escrow
Reserves") for each mortgaged property if the credit rating of Marriott
International Inc. ("MII") is downgraded by Standard and Poors Rating
Services. The Manager is a wholly owned subsidiary of MII. On April 1,
1997, MII's credit rating was downgraded and the Partnership subsequently
transferred $1.8 million into the Tax and Insurance Escrow Reserves from
the Manager's existing tax and insurance reserve account. In addition,
the Mortgage Debt requires the Partnership to fund an additional month's
debt service of $2,262,000 into the debt service reserve account over a
six-month period as a result of this downgrade. During the twelve weeks
ended June 20, 1997, $177,000 was funded out of Partnership cash from
operations into this reserve. The additional month's debt service will be
fully funded by November 1997. The tax and insurance escrow reserves and
the debt service reserve are shown as restricted cash and the resulting
tax and insurance liability is included with accounts payable and accrued
expenses in the accompanying balance sheet.
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
FORWARD-LOOKING STATEMENTS
Certain matters discussed herein are forward-looking statements within the
meaning of the Private Litigation Reform Act of 1995 and as such may involve
known and unknown risks, uncertainties, and other factors which may cause the
actual results, performance, or achievements of the Partnership to be different
from any future results, performance, or achievements expressed or implied by
such forward- looking statements. Although the Partnership believes the
expectations reflected in such forward-looking statements are based upon
reasonable assumptions, it can give no assurance that its expectations will be
attained. These risks are detailed from time to time in the Partnership's
filings with the Securities and Exchange Commission. The Partnership undertakes
no obligation to publicly release the result of any revisions to these
forward-looking statements that may be made to relect any future events or
circumstances.
CAPITAL RESOURCES AND LIQUIDITY
The Partnership's financing needs have historically been funded through loan
agreements with independent financial institutions. The General Partner believes
that the Partnership will have sufficient capital resources and liquidity to
continue to conduct its operations in the ordinary course of business, although
there can be no assurance of the Partnership's ability to do so.
Principal Sources and Uses of Cash
For the twenty-four weeks ended June 20, 1997 and June 14, 1996, cash provided
by operations was $17.5 million and $15.6 million, respectively. This increase
is primarily due to the increase in revenues discussed below.
Year-to-date, $5.8 million was used in investing activities compared with $19.8
million for the same period in 1996. This decrease is primarily due to the
establishment of reserves in the second quarter of 1996 in conjunction with the
refinancing of the Mortgage Debt. Pursuant to the Partnership's loan agreement,
an additional reserve was established for real estate taxes and insurance
premiums during the second quarter of 1997. An additional month's debt service
of approximately $1.9 million is also required to be funded into the reserves by
November 1997. These additional reserves resulted from the downgrade of MII's
credit rating as discussed in Note 6.
Financing activities utilized $9.9 million and $13.0 million in 1997 and 1996,
respectively. The decrease in cash used for financing activities is primarily a
result of the principal paydown of the Mortgage Debt during 1996 partially
offset by an increase in cash distributions in 1997. The increase in cash
distributions was primarily due to a one time distribution of $4,873 per limited
partner unit, approximately $3.6 million representing the excess of the cash
reserves after payment of all transaction costs related to the Mortgage Debt
refinancing.
The General Partner believes that cash from Hotel operations and the reserves
established in conjunction with the refinancing will continue to meet the short
and long-term operational and capital needs of the Partnership. The General
Partner will make its interim cash distribution from 1997 operations by August
29, 1997. The General Partner expects distributions to be higher than prior year
levels as the Partnership no longer has the significant reserve
requirements. Prospectively, the Partnership expects to increase
distribution frequency from its historic bi-annual distributions.
7
<PAGE>
Capital Expenditures
The General Partner believes the property improvement fund, as adjusted in the
case of the New Orleans Marriott Hotel, will be adequate for the future capital
repairs and replacement needs of the Hotels. As previously reported, a 2%
increase in the contribution percentage for the New Orleans Marriott Hotel will
be made in 1997 and 1998 to allow for adequate funding of the combined softgoods
and casegoods refurbishment of all rooms scheduled for 1998. This project is
expected to cost approximately $13.0 million.
Mortgage Debt
The Partnership's mortgage debt was refinanced on September 23, 1996 and
consists of a $222.5 million nonrecourse mortgage loan (the "Mortgage Debt")
which accrues interest at a fixed rate of 8.22%. For the twelve and twenty-four
weeks ended June 14, 1996, the Partnership's weighted average interest rate was
7.2% and 7.5%, respectively. Payments of interest only are required during the
first loan year (October 1996 through September 1997) and then principal
amortization based on a 20-year amortization schedule begins with the second
loan year. This principal amortization is expected to improve the financial
condition of the Partnership by reducing the Partnership's long-term
indebtedness. The General Partner expects cash flows from the Partnership Hotels
and the Santa Clara Hotel will be more than sufficient to provide for the
Partnership's debt service.
RESULTS OF OPERATIONS
Total partnership revenues increased 2% and 8% for the twelve and twenty-four
week periods ended June 20, 1997, respectively, when compared to 1996 results.
The slight increase in revenues for the twelve weeks ended June 20, 1997 is
primarily due to increases in revenues at the San Antonio and Santa Clara Hotels
partially offset by a decrease in revenues at the New Orleans Hotel. The
increase in revenues for the twenty-four week period is primarily due to
significant increases in revenues at the New Orleans and Santa Clara Hotels.
REVPAR, or revenues per available room, increased 3% for the quarter when
compared to the same period in 1996. This increase is due to a 7% increase in
combined average room rate to approximately $134 partially offset by a 3.1
percentage point decrease in combined average occupancy to 83%. On a
year-to-date basis, REVPAR increased 8% as combined average room rate increased
8% to approximately $137 while combined average occupancy remained stable at
83%.
The Santa Clara Marriott Hotel reported a 28%, or $1,171,000, increase in
revenues for the twelve weeks ended June 20, 1997 when compared to the same
period in 1996 primarily due to a 24%, or $1,181,000, increase in room revenues
combined with a 38%, or $247,000, increase in food and beverage revenues. Food
and beverage revenues increased due to an increase in banquet and lounge sales.
Room revenues increased due to a 22% increase in REVPAR. The increase in REVPAR
is due to a 24% increase in average room rate to approximately $144 partially
offset by a 1.3 percentage point decrease in average occupancy to 86%. For the
twenty-four week period ended June 20, 1997, revenues increased 25%, or
$2,078,000, when compared to 1996 results primarily due to a 27% increase in
room revenues. The increase in room revenues is attributable to a 24% increase
in REVPAR. REVPAR increased due to a 24% increase in average room rate to
approximately $144 with average occupancy remaining stable at 84%. The increase
in average room rate, both for the twelve and twenty-four week periods, is due
to Hotel's management success in driving room rates in the transient and group
business segment. The transient business segment has experienced a higher level
of demand which has enabled management to increase room rates. For the
twenty-four weeks ended June 20, 1997, transient roomnights have increased by
approximately 8,000 roomnights, an 11% increase when compared to the prior year.
Room rates in the group business segment have increased as a result of Hotel
management strictly limiting rate discounting. The outlook for the remainder of
1997 continues to remain positive as demand for rooms remains high.
8
<PAGE>
Revenues at the Marriott Rivercenter in San Antonio increased 11%, or $815,000,
for the twelve weeks ended June 20, 1997 when compared to the same period in
1996 primarily due to a 42%, or $619,000, increase in food and beverage
revenues. In addition, REVPAR for the twelve weeks increased 4% due to a 4%
increase in average room rate to approximately $144 coupled with a stable
average occupancy of 87%. For the twenty-four weeks ended June 20, 1997,
revenues increased 7%, or $1,119,000, primarily due to an increase in both room
and food and beverage revenues. Room revenues increased 4%, or $687,000, due to
a 5% increase in REVPAR. This increase in REVPAR was caused by a 3% increase in
average room rate to approximately $144 coupled with a 1.7 percentage point
increase in average occupancy to 87%. Average rate is up due to a 12% increase
in the transient average rate. Hotel management was able to increase this rate
as demand was strong in the group business segment which allowed the Hotel to
hold out for premium rates in the transient business segment. Group room nights
have increased approximately 8,400 nights, an 8% increase over the prior year.
Food and beverage revenues increased 20%, or $679,000. For the twelve and
twenty-four week periods, the increase in food and beverage revenues is
primarily due to increases in banquet sales of 24% and 14%, respectively, which
resulted from a shift in customer mix to catering corporate business. The
remainder of 1997 is expected to continue to be strong as Hotel management will
continue to focus on driving rate in response to strong local demand.
The San Ramon Marriott reported a 5%, or $71,000, increase in revenues for the
twelve weeks ended June 20, 1997 when compared to the same period in 1996. This
increase is due to a 16%, or $303,000, increase in room revenues partially
offset by a 23%, or $82,000, decrease in food and beverage revenues. Room
revenues increased primarily due to a 15% increase in REVPAR as average room
rate increased 12% to approximately $109 coupled with a 2.3 percentage point
increase in average occupancy to 88%. For the twenty-four week period, revenues
increased 5%, or $146,000, primarily due to a 12%, or $444,000, increase in room
revenues offset by a 16%, or $120,000, decrease in food and beverage revenues.
Room revenues increased as a result of a 12% increase in REVPAR. REVPAR
increased due to a 12% increase in the average room rate to approximately $108.
Average occupancy remained stable at approximately 84%. The increase in average
room rate was achieved primarily as a result of increases in corporate and
transient rates. For the twelve and twenty-four week periods ended June 20,
1997, the decrease in food and beverage revenues was attributable to an overall
increase in the minimum wage that affected all food and beverage areas. Hotel
managment expects room demand to remain strong through the end of 1997.
Revenues at the New Orleans Marriott Hotel decreased 8%, or $609,000, for the
twelve weeks ended June 20, 1997 primarily due to a 6% decrease in room
revenues. Room revenues decreased primarily due to a 5% decrease in REVPAR as
average occupancy declined 7.3 percentage points to 78% partially offset by a 4%
increase in average room rate to approximately $129. The decline in average
occupancy is due to a city-wide decrease in convention business. For the
quarter, group roomnights decreased by approximately 5,800 roomnights, a 9%
decline when compared to the same period in 1996. For the twenty-four week
period, revenues at the Hotel increased $1,643,000 or 11%. The increase is
primarily due to a 5%, or $921,000, increase in room revenues combined with a
27%, or $529,000, increase in food and beverage revenues. Room revenues
increased due to a 5% increase in REVPAR. The increase in REVPAR is due to a 6%
increase in average room rate to approximately $137 slightly offset by a 1.0
percentage point decrease in the average occupancy to 79%. Average room rate
increased as Hotel management was able to maximize room rates during the strong
occupancy periods that occured at the Hotel as a result of Superbowl XXXI taking
place in New Orleans this year. In addition, food and beverage revenues
increased as a result of this event. As previously reported, 1997 operating
results will be challenged due to fewer city-wide conventions, however, Hotel
management is optimistic about achieving strong operating results through
strategic rate structuring.
Interest Expense. Interest expense increased for the twelve and twenty-four week
periods ended June 20, 1997 when compared to the same period in 1996 due to an
increase in the interest rate on the Partnership's Mortgage Debt as a result of
the refinancing.
9
<PAGE>
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 condition 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, MHPII Acquisition Corp. ("MHPII
Acquisition"), a wholly-owned subsidiary of Host Marriott, Host Marriott, 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 MHPII Acquisition's tender offer. The complaint sought certification as a
class-action, to enjoin the tender offer and its associated 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 to enjoin the tender offer and consent
solicitation. The defendants have moved to dismiss this consolidated action and
to stay discovery. The Chancery Court heard oral arguments on the motion to
dismiss on April 23, 1997, but has not yet rendered a decision. 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 denied these motions, but required the
plaintiffs to file a second amended complaint. Subsequently, the plaintiffs
filed a third amended complaint. The defendants believe that this latest
complaint is equally without merit and intend to continue vigorously defending
this action. As previously stated, the Partnership is named only as a nominal
defendant in this lawsuit. Accordingly, final resolution of this matter will not
have any adverse effect on the business, financial condition or results of
operations of the Partnership.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits- None
b. Reports on Form 8-K- None
10
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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: By:
---------------------------------------------
Patricia K. Brady
Vice President and Chief Accounting Officer
11
<PAGE>
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: August 4, 1997 By: /s/Patricia K. Brady
-----------------------------
Patricia K. Brady
Vice President and Chief Accounting Officer
12
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
first quarter Form 10-Q and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<CIK> 0000845240
<NAME> MARRIOTT HOTEL PROPERTIES II L.P.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> Dec-31-1996
<PERIOD-START> Jan-01-1997
<PERIOD-END> Jun-20-1997
<CASH> 33,058
<SECURITIES> 18,067<F1>
<RECEIVABLES> 8,380
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 59,505
<PP&E> 297,640
<DEPRECIATION> (102,092)
<TOTAL-ASSETS> 255,053
<CURRENT-LIABILITIES> 13,969
<BONDS> 222,500
0
0
<COMMON> 0
<OTHER-SE> 18,584
<TOTAL-LIABILITY-AND-EQUITY> 255,053
<SALES> 0
<TOTAL-REVENUES> 38,653<F2>
<CGS> 0
<TOTAL-COSTS> 17,975
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,827
<INCOME-PRETAX> 11,851
<INCOME-TAX> 0
<INCOME-CONTINUING> 11,851
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11,851
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>THIS IS OTHER ASSETS
<F2>THIS INCLUDES EQUITY IN INCOME OF SANTA CLARA PSHIP
</FN>
</TABLE>
