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 Quarter ended September 12, 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
- ----------------------- -----------------------------------
(State of Organization) (I.R.S. Employer Identification No.)
10400 Fernwood Road, Bethesda, MD 20817-1109
- --------------------------------------- ------------------------------------
(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 OF CONTENTS
PART I - FINANCIAL INFORMATION
PAGE NO.
Item 1. Financial Statements (Unaudited)
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Condensed Statement of Operations
Twelve Weeks and Thirty-Six Weeks Ended
September 12, 1997 and September 6, 1996................................................1
Condensed Balance Sheet
September 12, 1997 and December 31, 1996..................................................2
Condensed Statement of Cash Flows
Thirty-Six Weeks Ended September 12, 1997 and September 6, 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..........................................................................11
Item 6. Exhibits and Reports on Form 8-K...........................................................11
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PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Marriott Hotel Properties II Limited Partnership
Condensed Statement of Operations
(Unaudited)
(in thousands, except per Unit amounts)
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Twelve Weeks Ended Thirty-Six Weeks Ended
September 12, September 6, September 12, September 6,
1997 1996 1997 1996
-------------- ------------- -------------- ---------
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REVENUES
Hotel..........................................$ 11,113 $ 11,793 $ 47,697 $ 45,605
Interest income................................ 625 531 1,582 1,455
------- ------- ------- -------
11,738 12,324 49,279 47,060
------- ------- ------- -------
OPERATING COSTS AND EXPENSES
Interest expense............................... 4,338 3,831 13,165 11,542
Depreciation and amortization.................. 2,919 3,140 8,961 9,051
Incentive management fees...................... 1,427 1,611 6,837 6,678
Property taxes................................. 1,363 1,264 4,123 3,825
Base management fees........................... 888 890 3,191 3,036
Ground rent ................................... 466 417 1,459 1,370
Insurance and other............................ 243 304 710 837
------- ------- ------- -------
11,644 11,457 38,446 36,339
------- ------- ------- -------
INCOME BEFORE EQUITY IN INCOME OF
SANTA CLARA PARTNERSHIP........................ 94 867 10,833 10,721
EQUITY IN INCOME (LOSS) OF
SANTA CLARA PARTNERSHIP........................ 238 (22) 1,350 548
------- ------- ------- -------
NET INCOME.........................................$ 332 $ 845 $ 12,183 $ 11,269
======== ======= ======= =======
ALLOCATION OF NET INCOME
General Partner................................$ 3 $ 8 $ 122 $ 113
Limited Partners............................... 329 837 12,061 11,156
------- ------- ------- -------
$ 332 $ 845 $ 12,183 $ 11,269
======= ======= ======= =======
NET INCOME PER LIMITED PARTNER
UNIT (745 Units)...............................$ 442 $ 1,123 $ 16,189 $ 14,974
======= ======== ========= =======
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See Notes To Condensed Financial Statements.
1
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Marriott Hotel Properties II Limited Partnership
Condensed Balance Sheet
(in thousands)
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September 12, December 31,
1997 1996
(unaudited)
ASSETS
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Property and equipment, net................................................. $ 193,275 $ 198,826
Due from Marriott Hotel Services, Inc........................................ 7,647 7,447
Deferred financing and organization costs, net............................... 5,756 5,932
Other assets................................................................. 13,240 10,348
Restricted cash reserves..................................................... 17,345 12,815
Cash and cash equivalents.................................................... 10,297 16,372
--------------- --------------
$ 247,560 $ 251,740
=============== ==============
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LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES
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Mortgage debt................................................................$ 222,500 $ 222,500
Investment in Santa Clara Partnership........................................ 8,821 8,360
Due to Marriott Hotel Services, Inc.......................................... 3,541 2,882
Accounts payable and accrued expenses........................................ 2,587 1,390
--------------- --------------
Total Liabilities......................................................... 237,449 235,132
--------------- --------------
PARTNERS' CAPITAL
General Partner.............................................................. 246 311
Limited Partners............................................................. 9,865 16,297
--------------- --------------
Total Partners' Capital................................................... 10,111 16,608
--------------- --------------
$ 247,560 $ 251,740
=============== ==============
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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)
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Thirty-Six Weeks Ended
September 12, September 6,
1997 1996
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OPERATING ACTIVITIES
Net income....................................................................$ 12,183 $ 11,269
Noncash items................................................................. 7,863 8,764
Change in operating accounts.................................................. (591) 115
------------- -------------
Cash provided by operations................................................ 19,455 20,148
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INVESTING ACTIVITIES
Additions to restricted cash reserves......................................... (2,296) (20,415)
Additions to property and equipment, net...................................... (3,410) (5,413)
Change in property improvement fund........................................... (2,921) 500
Distributions from Santa Clara Partnership.................................... 1,811 640
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Cash used in investing activities.......................................... (6,816) (24,688)
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FINANCING ACTIVITIES
Distributions................................................................. (18,680) (3,473)
Payment of financing costs.................................................... (34) (1,471)
Repayment of mortgage debt.................................................... -- (9,193)
------------- -------------
Cash used in financing activities.......................................... (18,714) (14,137)
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DECREASE IN CASH AND CASH EQUIVALENTS............................................ (6,075) (18,677)
CASH AND CASH EQUIVALENTS at beginning of period................................. 16,372 21,601
------------- -------------
CASH AND CASH EQUIVALENTS at end of period.......................................$ 10,297 $ 2,924
============= =============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for mortgage interest...............................................$ 13,920 $ 11,207
============= =============
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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 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 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 September 12, 1997, and the results of operations
for the twelve weeks and thirty-six weeks ended September 12, 1997 and
September 6, 1996 and cash flows for the thirty-six weeks ended September
12, 1997 and September 6, 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 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
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Partnership revenues generated by the Hotels for the twelve and thirty-six
weeks ended September 12, 1997 and September 6, 1996 consist of (in
thousands):
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Twelve Weeks Ended Thirty-Six Weeks Ended
September 12, September 6, September 12, September 6,
1997 1996 1997 1996
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HOTEL REVENUES
Rooms.....................................$ 19,634 $ 19,801 $ 70,018 $ 67,637
Food and beverage......................... 8,220 8,049 30,292 27,835
Other..................................... 1,739 1,827 6,059 5,736
--------- --------- ----------- ----------
29,593 29,677 106,369 101,208
--------- --------- ----------- ----------
HOTEL EXPENSES
Departmental direct costs
Rooms................................... 4,367 4,242 13,518 12,899
Food and beverage....................... 6,455 6,318 21,407 20,070
Other hotel operating expenses............ 7,658 7,324 23,747 22,634
---------- ------------- -------------- -------------
18,480 17,884 58,672 55,603
--------- --------- ---------- ---------
REVENUES....................................$ 11,113 $ 11,793 $ 47,697 $ 45,605
=========== ========== =========== ==========
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5. Summarized financial information for the Santa Clara Partnership for the
twelve and thirty-six weeks ended September 12, 1997 and September 6, 1996
(in thousands):
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Twelve Weeks Ended Thirty-Six Weeks Ended
September 12, September 6, September 12, September 6,
1997 1996 1997 1996
-------------- ------------- -------------- ---------
Condensed Statement of Operations
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REVENUES.....................................$ 4,703 $ 3,541 $ 14,950 $ 11,772
OPERATING COSTS AND EXPENSES
Interest expense.......................... 834 781 2,533 2,177
Depreciation and amortization............. 888 638 2,022 1,896
Incentive management fees................. 730 529 2,340 1,788
Base management fees...................... 318 266 986 835
Property taxes............................ 125 113 369 344
Ground rent, insurance and other.......... 79 56 207 197
----------- ----------- -------------- -------------
2,974 2,383 8,457 7,237
------ -------- --------- --------
NET INCOME...................................$ 1,729 $ 1,158 $ 6,493 $ 4,535
============= ============= ============== =============
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September 12, December 31,
1997 1996
Condensed Balance Sheet
<S> <C> <C>
Property and equipment, net...............................................$ 29,626 $ 30,144
Due from Marriott International, Inc...................................... 2,541 2,170
Other assets.............................................................. 1,879 1,230
Cash and cash equivalents................................................. 1,586 1,933
-------------- --------------
Total Assets............................................................$ 35,632 $ 35,477
============== ==============
Mortgage debt.............................................................$ 43,500 $ 43,500
Due to Marriott International, Inc........................................ 1,089 749
Accounts payable and accrued expenses..................................... 307 522
Partners' deficit......................................................... (9,264) (9,294)
-------------- --------------
Total Liabilities and Partners' Deficit.................................$ 35,632 $ 35,477
</TABLE>
5
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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 $1.3 million into the Tax and
Insurance Escrow Reserves from the Manager's existing tax and insurance
reserve account and $460,000 from Partnership cash from operations. 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. As of September 12, 1997, $1.5 million has been 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
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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 reflect 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
The Partnership reported an overall decrease in cash and cash equivalents of
$6.0 million during the thirty-six weeks ended September 12, 1997. This decrease
is primarily due to the increase in distributions as discussed below.
For the thirty-six weeks ended September 12, 1997 and September 6, 1996, cash
provided by operations was $19.5 million and $20.1 million, respectively. This
$693,000 decrease resulted from the increase in Hotel revenues partially offset
by the increase in interest expense.
Year-to-date, $6.8 million was used in investing activities compared with $24.7
million for the same period in 1996. This decrease is primarily due to the
establishment of reserves in 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
1997. An additional month's debt service of $2.3 million is also required to be
funded into the reserves by November 1997. As of September 12, 1997, $760,000
remains to be funded. These additional reserves resulted from the downgrade of
MII's credit rating as discussed in Note 6 to the condensed financial
statements.
Financing activities utilized $18.7 million and $14.1 million in 1997 and 1996,
respectively. This increase is primarily a result of an increase in cash
distributions in 1997 offset by a principal paydown of Mortgage Debt during
1996. The increase in cash distributions is due to the timing of the
distributions as well as a one time distribution of $4,873 per limited partner
unit, approximately $3.6 million. This one time distribution represented 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 will continue to
meet the short and long-term operational needs of the Partnership. The General
Partner will make an interim cash distribution from 1997 operations of $5,057
per limited partner unit on October 31, 1997. The General Partner expects full
year 1997 distributions to be consistent with prior year levels.
7
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Capital Expenditures
The General Partner believes the property improvement fund, as adjusted in the
case of the New Orleans Marriott Hotel, and the reserves established in
conjunction with the refinancing will be adequate for the future capital repairs
and replacement needs of the Hotels. As previously reported, a two percentage
point 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%. 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 sufficient to provide for the Partnership's
debt service.
RESULTS OF OPERATIONS
Total Partnership revenues for the twelve weeks ended September 12, 1997
decreased 6% primarily due to a decrease in revenues at the New Orleans Hotel.
REVPAR, or revenues per available room, increased 2% for the twelve week period
when compared to the same period in 1996. This increase is due to a 6% increase
in combined average room rate to approximately $115 partially offset by a 2.8
percentage point decrease in combined average occupancy to 80%. Total
Partnership revenues increased 5% for the thirty-six weeks ended September 12,
1997 when compared to the same period in 1996. This increase in revenues is
primarily due to significant increases in revenues at the Santa Clara, San
Ramon, and San Antonio Hotels. REVPAR increased 6% for the thirty-six week
period as a result of a 7% increase in combined average room rate to
approximately $130 partially offset by a 1.0 percentage point decrease in
combined average occupancy to 82%.
The Santa Clara Marriott Hotel reported a 33%, or $1,163,000 increase in
revenues for the twelve weeks ended September 12, 1997 when compared to the same
period in 1996 primarily due to a 27%, or $1,266,000 increase in room revenues.
Room revenues increased due to a 23% increase in REVPAR as average room rate
increased 25% to approximately $145 with a slight decrease in average occupancy
to 83%. For the thirty-six week period ended September 12, 1997, revenues
increased 28% or $3,241,000 primarily due to a 27% increase in room revenues
which is primarily attributable to a 24% increase in REVPAR. REVPAR increased
due to a 24% increase in the average room rate to approximately $144 while
average occupancy remained stable at 84%. Both for the twelve and thirty-six
week periods, the increase in the average room rate was driven by Hotel
management's response to the continued demand in the transient business segment
while room supply has remained constant in the Silicon Valley area. Transient
roomnights have increased by approximately 11,000 roomnights for the thirty-six
week period ended September 12, 1997 when compared to the same period in the
prior year. These economic factors have enabled management to increase room
rates in both the transient and group business segments. The outlook for the
remainder of 1997 continues to remain positive as both transient and group
demand in the Silicon Valley is expected to remain strong.
8
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Revenues at the San Ramon Marriott increased 27%, or $361,000, for the twelve
weeks ended September 12, 1997 when compared to the same period in 1996. This
increase is primarily due to a 17%, or $340,000, increase in room revenues. Room
revenues increased primarily due to a 15% increase in REVPAR as average room
rate increased 18% to approximately $113 offset by a 2.4 percentage point
decrease in average occupancy to approximately 86%. For the thirty-six weeks
ended September 12, 1997, revenues increased 12%, or $507,000, primarily due to
a 13%, or $784,000, increase in room revenues. Room revenues increased as a
result of a 13% increase in REVPAR. REVPAR increased as the result of a 14%
increase in the average room rate to approximately $110 partially offset by a
1.0 percentage point decrease in average occupancy to approximately 85%. The
increase in the average room rate, both for the twelve and thirty-six week
periods, was achieved as a result of Hotel management's ability to increase
corporate and transient rates in response to room demand. As previously
reported, the outlook for the remainder of the year remains positive as room
demand is expected to remain strong.
The Marriott Rivercenter in San Antonio reported an increase in revenues of 8%,
or $447,000, for the twelve weeks ended September 12, 1997 when compared to the
same period in 1996. This increase in revenues is primarily due to a 5%, or
$351,000, increase in room revenues combined with a 13%, or $112,000, increase
in food and beverage revenues. Room revenues increased due to a 5% increase in
REVPAR to approximately $106. The increase in REVPAR is due to a 4% increase in
average room rate to approximately $120 partially offset by a 1.0 percentage
point decrease in average occupancy to approximately 88%. For the thirty-six
week period, revenues increased 7%, or $1,566,000, primarily due to a 4%, or
$1,038,000, increase in room revenues combined with a 19%, or $791,000 increase
in food and beverage revenues. The increase in room revenues was driven by a 5%
increase in REVPAR. REVPAR increased due to a 3% increase in average room rate
to approximately $136 combined with a 1.4 percentage point increase in average
occupancy to approximately 88%. The average room rate, for both the twelve and
thirty-six week periods, has increased due to increases in the transient average
rate. As previously reported, Hotel management has been able to increase the
transient rate as demand has remained strong in the group business segment
allowing the Hotel to hold out for premium rates in the transient business
segment. Year-to-date, group roomnights have increased approximately 15,000
roomnights, a 10% increase when compared to the same period in the prior year
The increase in food and beverage revenues for the twelve and thirty-six week
periods is primarily due to an increase in banquet sales as a result of a shift
in customer mix to catering corporate business. The remainder of 1997 is
expected to continue to be strong.
For the twelve weeks ended September 12, 1997, revenues at the New Orleans
Marriott decreased 30%, or $1,487,000 when compared to the same period in 1996
primarily due to a 14%, or $981,000 decrease in room revenues combined with a
29%, or $177,000, decrease in food and beverage revenues. Room revenues
decreased due to an 11% decrease in REVPAR as average room rate decreased 4% to
approximately $100 coupled with a 6.1 percentage point decrease in average
occupancy. Revenues for the thirty-six week period remained stable when compared
to the prior year. On a year-to-date basis, average room rate increased 4% to
approximately $126 while average occupancy decreased 2.7 percentage points
causing REVPAR to remain flat. The decline in average occupancy is due to a
city-wide decrease in convention business as well as an additional 2,000 hotel
rooms added to the city's supply within the past two years. This has impacted
Hotel management's ability to drive rate in the transient business segment. The
average room rate, however, for the thirty-six week period has increased
primarily due to Superbowl XXXI taking place in New Orleans at the beginning of
this year. The strong occupancy that occurred as a result of this event enabled
management to maximize room rates during this period. The remainder of 1997
continues to be a challenge with the additional supply of hotel rooms added to
the market as well as fewer city-wide conventions. As a result, Hotel management
is refocusing on driving in-house group business as opposed to city-wide
business.
Interest Expense. Interest expense increased approximately 13% and 14% for the
twelve and thirty-six week period ended September 12, 1997, respectively, 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. The weighted
average interest rate was 7.5% for both the twelve and thirty-six week period
ended September 6, 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 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 moved to dismiss this consolidated action and to
stay discovery. While the defendant's motion to dismiss was pending, MacKenzie
Patterson filed its own motion to dismiss the consolidated Delaware cases so
that it could join in the Florida action. The Chancery Court entered an order
granting MacKenzie Patterson's motion to dismiss on September 17, 1997. The
defendants removed the Florida action to federal court and filed motions to
dismiss, or in the alternative, to stay the action pending resolution of the
Delaware action. Although the District Court denied these motions, it required
the plaintiffs to file a second amended complaint. Subsequently, the plaintiffs
filed yet 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: October 24, 1997
By:
-----------------------
Patricia K. Brady
Vice President and Chief Accounting Officer
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:October 24, 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
third quarter 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> 9-MOS
<FISCAL-YEAR-END> Dec-31-1996
<PERIOD-START> Jan-01-1997
<PERIOD-END> Sep-12-1997
<CASH> 27,642
<SECURITIES> 18,996<F1>
<RECEIVABLES> 7,647
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 54,285
<PP&E> 298,286
<DEPRECIATION> (105,011)
<TOTAL-ASSETS> 247,560
<CURRENT-LIABILITIES> 14,949
<BONDS> 222,500
0
0
<COMMON> 0
<OTHER-SE> 10,111
<TOTAL-LIABILITY-AND-EQUITY> 247,560
<SALES> 0
<TOTAL-REVENUES> 50,629<F2>
<CGS> 0
<TOTAL-COSTS> 25,281
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 13,165
<INCOME-PRETAX> 12,183
<INCOME-TAX> 0
<INCOME-CONTINUING> 12,183
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 12,183
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>THIS IS OTHER ASSETS
<F2>THIS INCLUDES EQUITY IN INCOME OF SANTA CLARA PSHIP
</FN>
</TABLE>
