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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 MARCH 27, 1998
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 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
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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<PAGE>
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Marriott Hotel Properties II Limited Partnership
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TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
PAGE NO.
Item 1. Financial Statements
Condensed Statement of Operations
Twelve Weeks Ended March 27, 1998 and March 28, 1997..........................3
Condensed Balance Sheet
March 27, 1998 and December 31, 1997..........................................4
Condensed Statement of Cash Flows
Twelve Weeks Ended March 27, 1998 and March 28, 1997..........................5
Notes to Condensed Financial Statements........................................6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations...........................................9
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.....................................................12
Item 6. Exhibits and Reports on Form 8-K......................................13
<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>
Twelve Weeks Ended
March 27, March 28,
1998 1997
<S> <C> <C>
REVENUES............................................................................$ 19,348 $ 19,538
OPERATING COSTS AND EXPENSES
Depreciation and amortization.................................................... 2,969 3,106
Incentive management fees........................................................ 2,842 2,901
Property taxes................................................................... 1,584 1,394
Base management fees............................................................. 1,211 1,190
Ground rent ..................................................................... 553 503
Insurance and other.............................................................. 275 228
9,434 9,322
OPERATING PROFIT.................................................................... 9,914 10,216
Interest expense................................................................. (4,415) (4,490)
Interest income.................................................................. 282 351
INCOME BEFORE EQUITY IN INCOME OF SANTA CLARA PARTNERSHIP........................... 5,781 6,077
EQUITY IN INCOME OF SANTA CLARA PARTNERSHIP......................................... 1,060 428
NET INCOME..........................................................................$ 6,841 $ 6,505
ALLOCATION OF NET INCOME
General Partner..................................................................$ 68 $ 65
Limited Partners................................................................. 6,773 6,440
$ 6,841 $ 6,505
NET INCOME PER LIMITED PARTNER UNIT (745 Units).....................................$ 9,091 $ 8,644
See Notes to Condensed Financial Statements.
3
</TABLE>
<PAGE>
MARRIOTT HOTEL PROPERTIES II LIMITED PARTNERSHIP
CONDENSED BALANCE SHEET
(in thousands)
<TABLE>
March 27, December 31,
1998 1997
(unaudited)
<S> <C> <C>
ASSETS
Property and equipment, net.................................................... $ 195,803 $ 197,512
Due from Marriott Hotel Services, Inc.......................................... 11,988 7,063
Other assets................................................................... 10,334 8,510
Deferred financing costs, net.................................................. 5,593 5,663
Restricted cash reserves....................................................... 15,784 20,307
Cash and cash equivalents...................................................... 13,110 10,363
$ 252,612 $ 249,418
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES
Mortgage debt................................................................ $ 220,690 $ 221,814
Investment in Santa Clara Partnership........................................ 8,522 8,737
Due to Marriott International, Inc. ........................................ 4,561 3,567
Accounts payable and accrued expenses......................................... 861 4,163
Total Liabilities.......................................................... 234,634 238,281
PARTNERS' CAPITAL
General Partner.............................................................. 324 256
Limited Partners.............................................................. 17,654 10,881
Total Partners' Capital.................................................... 17,978 11,137
$ 252,612 $ 249,418
See Notes to Condensed Financial Statements.
4
</TABLE>
<PAGE>
MARRIOTT HOTEL PROPERTIES II LIMITED PARTNERSHIP
CONDENSED STATEMENT OF CASH FLOWS
(Unaudited)
(in thousands)
<TABLE>
Twelve Weeks Ended
March 27, March 28,
1998 1997
<S> <C> <C>
OPERATING ACTIVITIES
Net income ......................................................................$ 6,841 $ 6,505
Noncash items.................................................................... 2,824 2,748
Change in operating accounts..................................................... (4,174) (3,393)
Cash provided by operating activities...................................... 5,491 5,860
INVESTING ACTIVITIES
Additions to property and equipment, net......................................... (1,260) (1,746)
Change in property improvement fund.............................................. (1,824) (39)
Cash used in investing activities.......................................... (3,084) (1,785)
FINANCING ACTIVITIES
Change in restricted lender reserves, net........................................ 1,464 0
Repayment of mortgage debt....................................................... (1,124) 0
Payment of financing costs....................................................... 0 (34)
Cash provided by (used in) financing activities............................ 340 (34)
INCREASE IN CASH AND CASH EQUIVALENTS............................................... 2,747 4,041
CASH AND CASH EQUIVALENTS at beginning of period.................................... 10,363 16,372
CASH AND CASH EQUIVALENTS at end of period..........................................$ 13,110 $ 20,413
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for mortgage interest..................................................$ 4,552 $ 4,572
See Notes to Condensed Financial Statements.
5
</TABLE>
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 for the fiscal year ended
December 31, 1997. 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 March 27, 1998, and the results of operations and cash
flows for the twelve weeks ended March 27, 1998 and March 28, 1997. Interim
results are not necessarily indicative of fiscal year performance because of
seasonal and short-term variations.
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.
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 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
Corporation ("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. Certain reclassifications were made to the prior year financial
statements to conform to the 1998 presentation.
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 certain
other costs, which are disclosed separately in the condensed statement of
operations.
6
<PAGE>
Partnership revenues generated by the Hotels for 1998 and 1997 consist of
(in thousands):
<TABLE>
Twelve Weeks Ended
March 27, March 28,
1998 1997
<S> <C> <C>
HOTEL SALES
Rooms......................................................................$ 26,438 $ 25,905
Food and beverage.......................................................... 11,593 11,603
Other...................................................................... 2,353 2,161
40,384 39,669
HOTEL EXPENSES
Departmental direct costs
Rooms.................................................................... 4,648 4,495
Food and beverage........................................................ 7,929 7,717
Other hotel operating expenses............................................. 8,459 7,919
21,036 20,131
HOTEL REVENUES................................................................$ 19,348 $ 19,538
</TABLE>
5. Summarized financial information for the Santa Clara Partnership for
1998 and 1997 is as follows (in thousands):
<TABLE>
Twelve Weeks Ended
March 27, March 28,
1998 1997
<S> <C> <C>
Condensed Statement of Operations
REVENUES......................................................................$ 6,614 $ 4,987
OPERATING COSTS AND EXPENSES
Incentive management fee................................................... 1,071 784
Depreciation and amortization.............................................. 716 670
Base management fee........................................................ 393 326
Property taxes............................................................. 123 122
Ground rent, insurance and other........................................... 121 95
2,424 1,997
OPERATING PROFIT.............................................................. 4,190 2,990
Interest expense........................................................... (849) (864)
Interest income............................................................ 49 14
NET INCOME....................................................................$ 3,390 $ 2,140
</TABLE>
<TABLE>
March 27, December 31,
1998 1997
<S> <C> <C>
Condensed Balance Sheet
Property and equipment, net..............................................$ 27,944 $ 28,688
Due from Marriott Hotel Services, Inc.................................... 2,891 2,059
Other assets............................................................. 3,321 2,619
Cash and cash equivalents................................................ 2,115 3,177
Total Assets.........................................................$ 36,271 $ 36,543
Mortgage debt............................................................$ 43,146 $ 43,366
Due to Marriott Hotel Services, Inc...................................... 518 970
Accounts payable and accrued expenses.................................... 409 482
Partners' deficit........................................................ (7,802) (8,275)
Total Liabilities and Partners' Deficit..............................$ 36,271 $ 36,543
</TABLE>
7
<PAGE>
6. On April 17, 1998, Host Marriott, parent company of the General Partner
of the Partnership, announced that its Board of Directors has authorized the
company to reorganize its business operations to qualify as a real estate
investment trust (REIT) to become effective as of January 1, 1999. As part of
the REIT conversion, Host Marriott expects to form a new operating partnership
(the Operating Partnership) and limited partners in certain Host Marriott
full-service hotel partnerships and joint ventures, including the Partnership,
are expected to be given an opportunity to receive, on a tax-deferred basis,
Operating Partnership units in the new Operating Partnership in exchange for
their current Partnership interest.
8
<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. 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.
RESULTS OF OPERATIONS
Revenues. Partnership revenues for the first quarter of 1998 decreased 1%
to $19.3 million compared to $19.5 million in the first quarter of 1997 due to a
significant decrease in revenues at the New Orleans Hotel. REVPAR, or revenue
per available room, represents the combination of the average daily room rate
charged and the average daily occupancy achieved and is a commonly used
indicator of hotel performance (although it is not a GAAP, or generally accepted
accounting principles, measure of revenue). REVPAR increased 6% as a result of a
10% increase in the combined average room rate to approximately $154 partially
offset by a 3.0 percentage point decrease in combined average occupancy to the
low-80's.
The following chart summarizes REVPAR for each Partnership Hotel for the
twelve weeks ended March 27, 1998 and March 28, 1997 and the percentage change
from the prior year:
<TABLE>
1998 1997
REVPAR % Change REVPAR % Change
<S> <C> <C>
San Antonio $ 137 8% $ 126 6%
New Orleans $ 107 (8%) $ 117 15%
San Ramon $ 108 25% $ 86 8%
Santa Clara $ 140 18% $ 119 27%
Combined Average $ 123 6% $ 116 12%
</TABLE>
Revenues at the New Orleans Marriott Hotel decreased 17%, or $1,595,000,
for the first quarter when compared to the same period in 1997. The decrease is
primarily due to a 9%, or $995,000, decrease in room revenues coupled with a
13%, or $202,000, decline in food and beverage revenues and a 6% increase in
other operating expenses. Room revenues decreased due to an 8% decrease in
REVPAR resulting from an 8.4 percentage point decrease in average occupancy to
the low-70's partially offset by a 3% increase in the average room rate to
approximately $149. Both the drop in average occupancy and decrease in food and
beverage revenues were primarily due to non-recurring sales generated by Super
Bowl XXXI which took place in New Orleans during the first quarter of 1997.
Occupancy was strong due to heavy demand before, during and after the Super Bowl
and the Hotel's food and beverage outlets especially benefited from this higher
volume. Other
9
<PAGE>
operating expenses increased primarily due to increased advertising expenses and
legal costs incurred to appeal an increased real estate tax assessment. In an
effort to replace lost roomnights due to the major conventions rotating to other
cities in 1998, Hotel management has targeted small groups of 50 rooms or less
which has enabled them to increase the average room rate. The lobby and
restaurant were renovated recently at an approximate cost of $2.1 million and,
as previously discussed, the total rooms refurbishment of all guest rooms is
scheduled to be completed in early summer.
The Marriott Rivercenter in San Antonio reported an 11%, or $921,000,
increase in first quarter revenues compared to the same period in 1997. This
increase is due to a 9%, or $762,000, increase in room revenues. Room revenues
increased due to an 8% increase in REVPAR resulting from a 6% increase in the
average room rate to approximately $153 combined with 2.0 percentage point
increase in average occupancy to the high-80's. The increase in average room
rate is primarily due to a slight shift in customer mix from group business to
transient business. In addition, Hotel management has reduced the number of
special corporate accounts, replacing this business with higher rated transient
business. The Hotel is planning a major renovation of its ballroom this year at
an estimated cost of $3.5 million.
Revenues at the San Ramon Marriott Hotel increased 33%, or $485,000, during
the first quarter of 1998 when compared to the first quarter of 1997. The
increase is due to a 30%, or $613,000, increase in room revenues. Room revenues
increased due to a significant increase in REVPAR. REVPAR increased 25% when
compared to 1997 results due to a 23% increase in the average room rate to
approximately $132 combined with a 1.3 percentage point increase in average
occupancy to the low-80's. The increase in the average room rate is due to Hotel
management's continued success in increasing the corporate rate. Hotel's
management anticipates average occupancy may decline slightly during the
remainder of 1998, but has instituted aggressive cost containment strategies to
counter the softened demand.
The Santa Clara Marriott Hotel reported a 33%, or $1,626,000, increase in
first quarter 1998 revenues when compared to the same period in 1997. The
increase is primarily due to a 19%, or $1,103,000, increase in room revenues
coupled with a 67%, or $490,000, increase in food and beverage revenues. Room
revenues increased due to a 18% increase in REVPAR. REVPAR increased due to a
21% increase in the average room rate to approximately $175, partially offset by
a 2.3 percentage point decrease in average occupancy to the low-80's. The
increase in the average room rate is due to an increase in the corporate rate in
conjunction with an overall increase in corporate and group demand. Food and
beverage revenues increased primarily due to heavier utilization of the catering
facilities by existing groups and the implementation of a new service charge for
meeting room rental. Hotel management is planning to offset softened average
occupancy in the Santa Clara market by initiating special corporate rates and
pursuing room contracts with local technology companies.
Operating Costs and Expenses. In first quarter 1998, operating costs and
expenses increased $112,000 to $9.4 million. As a percentage of revenues,
operating costs and expenses represented 49% and 48% of revenues for first
quarter 1998 and first quarter 1997, respectively.
Operating Profit. In first quarter 1998, operating profit decreased
$302,000 to $9.9 million primarily due to changes in revenues and operating
costs and expenses discussed above. As a percentage of total revenues, operating
profit represented 51% and 52% of revenues for first quarter 1998 and first
quarter 1997, respectively.
10
<PAGE>
Interest Expense. Interest expense decreased slightly for the first quarter
of 1998 when compared to the same period in 1997 due to a lower principal
balance on the Partnership's Mortgage Debt as a result of the principal
amortization that began in the fourth quarter of 1997.
Equity in Income of Santa Clara Partnership. In first quarter 1998, equity
in income of the Santa Clara Partnership increased $632,000 to $1.1 million
primarily due to improved hotel operations at the Santa Clara Hotel combined
with a slight decrease in interest expense on the Santa Clara Mortgage Debt.
Net Income. In first quarter 1998, net income increased $336,000 to $6.8
million, or 35% of revenues, from $6.5 million, or 33% of revenues, in first
quarter 1997 primarily due to an increase in equity in income of Santa Clara
Partnership, partially offset by a decrease in operating profit.
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.
Mortgage Debt The Partnership's mortgage debt 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 were required during the first
loan year (October 1996 through September 1997) and then principal amortization
based on a 20-year amortization schedule began 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.
Principal Sources and Uses of Cash The Partnership's principal sources of
cash are cash from operations and cash distributions from the Santa Clara
Partnership. Its principal uses of cash are to pay debt service on the
Partnership's Mortgage Debt, to fund the property improvement funds of the
Hotels, to establish reserves required by the lender and to make cash
distributions to the partners. Additionally, in 1997, the Partnership utilized
cash to pay financing costs incurred in connection with the refinancing of the
Partnership's Mortgage Debt and the Santa Clara Partnership's Mortgage Debt.
Total cash provided by operating activities was $5.5 million and $5.9
million for the twelve weeks ended March 27, 1998 and March 28, 1997,
respectively. The decrease was due to a change in operating accounts partially
offset by an increase in net income.
Cash used in investing activities increased to $3.1 million for the quarter
ended March 27, 1998 from $1.8 million for the quarter ended March 28, 1997,
primarily due to an increase in property and equipment expenditures at the New
Orleans Hotel associated with the refurbishment of all of the guest rooms.
Contributions to the property improvement funds of the Hotels were $2.1 million
and $1.8 million for the twelve weeks ended March 27, 1998 and March 28, 1997,
respectively.
11
<PAGE>
Cash provided by financing activities was $340,000 for the twelve weeks
ended March 27, 1998, while cash used in financing activities was $34,000 for
the twelve weeks March 28, 1997. The change in financing activities is primarily
due to a net increase in the restricted lender reserves, partially offset by
cash utilized to make principal payments on the Partnership's mortgage debt. The
change in the reserve accounts includes $1.7 million of capital expenditure
reimbursements reduced by $194,000 of interest earned on the lender reserves.
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.
Including the final 1997 distribution made in April 1998 of $9,864 per limited
partner unit, the Partnership distributed $26,621 per limited partner unit from
1997 operating cash flow. This represents a 26.6% annual return on invested
capital. In addition, in May 1998, the Partnership made a cash distribution of
$5,000 per limited partner unit from first quarter 1998 operating cash flow.
Prospectively, the Partnership expects to increase distribution frequency from
its historic bi-annual distributions if operating results and forecasts indicate
it is warranted.
The Partnership is required to maintain the Hotels and the Santa Clara
Hotel in good condition. Under each of the Partnership Hotels and the Santa
Clara Hotel management agreements, the Partnership is required to make annual
contributions to the property improvement funds which provide funding for
replacement of furniture, fixtures and equipment. The General Partner believes
the property improvement funds, as adjusted in the case of the New Orleans
Hotel, and the capital reserves established in conjunction with the refinancing,
will be adequate for the future capital repairs and replacement needs of the
Hotels and the Santa Clara Hotel. As previously reported, a 2% increase to 7% in
the contribution percentage for the New Orleans Marriott Hotel was made in 1997
and will be made in 1998 to allow for adequate funding of the total rooms
refurbishment of the New Orleans Hotel's guest rooms. This project is underway
and will encompass the replacement of the carpeting, bedspreads, upholstery,
drapes and other similar items and also the dressers, chairs, beds and other
furniture. The project is scheduled to be completed in July 1998 at a cost of
approximately $13.0 million.
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 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 Corporation, Host Marriott Corporation,
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
12
<PAGE>
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 plaintiff's motion to enjoin the tender offer and consent
solicitation. The defendants moved to dismiss this consolidated action and to
stay discovery. While the defendants' 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. This case is styled Leonard Rosenblum, as Trustee of the Sylvia
Bernice Rosenblum Trust, et al. v. Marriott MHP Two Corporation, et al., Case
No. 96-8377-CIV-HURLEY. Although the District Court denied these motions, it
required the Florida plaintiff to file a second amended complaint. Subsequently,
the Florida plaintiff filed yet a third amended complaint. The defendants'
motion to dismiss the fraud and derivative claims of the third amended complaint
has been pending since July 21, 1997. In addition, the defendants have sought to
deny class certification in this case, because, among other things, the Florida
plaintiff failed to seek certification for nearly two years. MacKenzie Patterson
filed its Florida complaint on December 18, 1997, styled MacKenzie Patterson
Special Fund 2, L.P., et al. v. Marriott MHP Two Corporation, et al., Case No.
97-8989-CIV-HURLEY, and the defendants have moved to dismiss this latest effort
on jurisdictional grounds and because MacKenzie Patterson failed to plead its
fraud and derivative claims properly. The defendants believe that the latest
Florida complaints are equally without merit and intend to continue vigorously
defending these actions. As previously stated, the Partnership is named only as
a nominal defendant in both lawsuits. Accordingly, final resolution of these
matters will not have any adverse effect on 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
A Form 8-K was filed with the Securities and Exchange Commission on
May 8, 1998. In this filing, Item 5 - Other Events discloses the
announcement by Host Marriott, parent company of the General Partner
of the Partnership, that Host Marriott's Board of Directors has
authorized Host Marriott to reorganize its business operations to
qualify as a real estate investment trust, effective as of January 1,
1999. A copy of the press release was included as an Item 7 - Exhibit
in this Form 8-K filing.
13
<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
May 11, 1998 By: /s/Patricia K. Brady
Patricia K. Brady
Vice President and Chief Accounting Officer
<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 Limited Partnership
<MULTIPLIER> 1,000
<CURRENCY> U.S. Dollar
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-27-1998
<EXCHANGE-RATE> 1.00
<CASH> 28,894
<SECURITIES> 15,927 <F1>
<RECEIVABLES> 11,988
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 56,809
<PP&E> 297,003
<DEPRECIATION> (101,200)
<TOTAL-ASSETS> 252,612
<CURRENT-LIABILITIES> 13,944
<BONDS> 220,690
0
0
<COMMON> 0
<OTHER-SE> 17,978
<TOTAL-LIABILITY-AND-EQUITY> 252,612
<SALES> 0
<TOTAL-REVENUES> 20,690 <F2>
<CGS> 0
<TOTAL-COSTS> 9,434
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,415
<INCOME-PRETAX> 6,841
<INCOME-TAX> 0
<INCOME-CONTINUING> 6,841
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,841
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1> This is other assets.
<F2> This includes equity in income of Santa Clara Partnership and interest
income.
</FN>
</TABLE>
