SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of Earliest Event Reported) March 29, 1996
HMH PROPERTIES, INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware
(State or Other Jurisdiction of Incorporation)
52-1822042 33-95058
(I.R.S. Employer Identification Number) (Commission File Number)
10400 Fernwood Road, Bethesda, Maryland 20817
(Address of Principle Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code (301) 380-9000
(Former Name or Former Address, if changed since last report.)
<PAGE>
Item 2.Acquisition and Disposition of Assets
The Registrant hereby amends its Current Report on Form 8-K dated March 29, 1996
by filing financial statements of an acquired business, the Washington Dulles
Marriott Suites Hotel (the "Hotel"), which was previously owned by Worldgate
Hotel One Associates Limited Partnership, and certain pro forma financial
information for HMH Properties, Inc.
Item 7.Financial Statements and Exhibits
(a) Financial statements of the Worldgate Hotel One Associates Limited
Partnership
<TABLE>
<CAPTION>
Page
<S> <C>
Report of Independent Public Accountants 1
Balance Sheet as of December 31, 1995 2
Statement of Operations for the year ended December 31, 1995 3
Statement of Changes in Partners' Deficit
for the year ended December 31, 1995 4
Statement of Cash Flows for the year ended December 31, 1995 5
Notes to Financial Statements 6
Balance Sheet as of March 22, 1996 10
Statements of Operations for the twelve weeks ended March 22, 1996
and March 24, 1995 11
Statments of Cash Flows for the twelve weeks ended
March 22, 1996 and March 24, 1995 12
Notes to Financial Statements 13
</TABLE>
(b) Pro Forma financial information as of December 29, 1995 and for the year
ended December 29, 1995 of the Registrant reflecting the acquisition of the
Hotel was previously filed in the Registrant's Form 10-K filed with the
Commission on March 20, 1996. Pro Forma financial information as of March 22,
1996 and for the twelve weeks ended March 22, 1996 are included herein.
<TABLE>
<CAPTION>
Page
<S> <C>
Pro Forma Condensed Consolidated Financial Data 14
Pro Forma Condensed Consolidated Balance Sheet as of March 22, 1996 15
Pro Forma Condensed Consolidated Statement of Operations
for the twelve weeks ended March 22, 1996 16
Notes to Pro Forma Condensed Consolidated Financial Data 17
</TABLE>
<PAGE>
SIGNATURES
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 hereunto duly authorized.
HMH PROPERTIES, INC.
By: /s/ Donald D. Olinger
-------------------------
Donald D. Olinger
Date: June 12, 1996 Vice President and Corporate Controller
<PAGE>
Report of Independent Public Accountants
To the Partners of
Worldgate Hotel One Associates Limited Partnership:
We have audited the accompanying balance sheet of Worldgate Hotel One Associates
Limited Partnership (a Virginia limited partnership) as of December 31, 1995,
and the related statements of operations, changes in partners' deficit and cash
flows for the year then ended. These financial statements are the responsibility
of the Partnership's management. Our responsibility is to express an opinion on
these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform an audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
On March 29, 1996, the Partnership sold its only income-producing asset, the
hotel, to a wholly-owned subsidiary of Host Marriott Corporation, as described
in Note 1.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Worldgate Hotel One Associates
Limited Partnership as of December 31, 1995, and the results of its operations
and its cash flows for the year then ended, in conformity with generally
accepted accounting principles.
Arthur Andersen LLP
Washington, D.C.,
May 15, 1996
- 1-
<PAGE>
Worldgate Hotel One Associates Limited Partnership
Balance Sheet
As of December 31, 1995
<TABLE>
<CAPTION>
Assets
<S> <C>
Real estate, less accumulated depreciation
(Notes 1, 4, and 5) $25,642,573
Cash and cash equivalents
Charles E. Smith Management, Inc., Agency cash account 53,466
Receivable from Marriott International 155,545
Other assets:
Deferred charges, less accumulated amortization
(Note 3) 912,995
Hotel improvement fund 40,782
------
$26,805,361
===========
Liabilities and Partners' Deficit
Liabilities:
Mortgage payable (Note 5) $19,750,008
Loans payable to partners (Note 7) 20,964,730
Note payable to affiliated partnership (Note 7) 2,040,735
Accrued interest payable (Note 7) 5,192,919
Accounts payable and accrued expenses (Note 7) 11,636
------
47,960,028
----------
Commitments and contingencies (Notes 6 and 7)
Partners' deficit:
General (2,644,334)
Limited (18,510,333)
-----------
(21,154,667)
-----------
$26,805,361
===========
</TABLE>
The accompanying notes are an integral part of this statement.
-2-
<PAGE>
Worldgate Hotel One Associates Limited Partnership
Statement of Operations
For The Year Ended December 31, 1995
<TABLE>
<CAPTION>
<S> <C>
Income from rental operations (Note 6) $ 3,106,526
-----------
Operating expenses:
Depreciation and amortization (Notes 3 and 4) 1,645,834
Consulting fees (Note 7) 91,520
Other expenses 35,432
Repairs and maintenance 17,911
------
1,790,697
---------
Income before interest expense and interest income 1,315,829
Interest expense and interest income:
Mortgage interest (Note 5) 2,152,286
Interest on related-party notes and loans payable (Note 7) 2,130,854
Interest income (8,178)
------
4,274,962
---------
Net loss $(2,959,133)
===========
</TABLE>
The accompanying notes are an integral part of this statement.
-3-
<PAGE>
Worldgate Hotel One Associates Limited Partnership
Statement of Changes in Partners' Deficit
For the Year Ended December 31, 1995
<TABLE>
<CAPTION>
Total General Limited
----- ------- -------
<S> <C> <C> <C>
Balance, December 31, 1994 $(18,195,534) $(2,274,442) $(15,921,092)
Net loss (2,959,133) (369,892) (2,589,241)
---------- -------- ----------
Balance, December 31, 1995 $(21,154,667) $(2,644,334) $(18,510,333)
============ =========== ============
</TABLE>
The accompanying notes are an integral part of this statement.
-4-
<PAGE>
Worldgate Hotel One Associates Limited Partnership
Statement of Cash Flows
For the Year Ended December 31, 1995
<TABLE>
<CAPTION>
<S> <C>
Cash flows from operating activities:
Net loss $(2,959,133)
Adjustments to reconcile net loss to net cash
provided by operating activities
Depreciation and amortization 1,645,834
Amortization of deferred loan fees 86,037
Increase in receivable from Marriott International (73,773)
Decrease in accounts payable and accrued expenses (208)
Increase in accrued interest payable 1,958,103
---------
Net cash provided by operating activities 656,860
-------
Cash flows from investing activities:
Increase in hotel improvement fund (11,029)
Purchase of real estate (70,802)
-------
Net cash used in investing activities (81,831)
-------
Cash flows from financing activities:
Principal payments on mortgage payable (1,749,996)
Borrowings from partners 961,000
-------
Net cash used in financing activities (788,996)
--------
Net decrease in cash and cash equivalents (213,967)
Cash and cash equivalents, beginning of year 267,433
-------
Cash and cash equivalents, end of year $ 53,466
=========
Cash paid for interest $ 2,238,058
===========
</TABLE>
The accompanying notes are an integral part of this statement.
-5-
<PAGE>
Worldgate Hotel One Associates Limited Partnership
Notes to Financial Statements
As of December 31, 1995
1. Organization: Worldgate Hotel One Associates Limited Partnership (the
"Partnership") was formed on December 1, 1987, under the laws of the
Commonwealth of Virginia. The Partnership was organized to own, develop, and
maintain for investment the Washington Dulles Marriott Suites(the "Hotel")
containing 254 rooms and banquet facilities located in Fairfax County, Virginia.
The Partnership leases the Hotel to Marriott International, Inc. ("Marriott")
under a lease agreement that expires in 2025 (see Note 6).
The partnership agreement specifies that all profit and losses of the
Partnership shall be shared by the general and limited partners in proportion to
their respective ownership percentages. The general partners own 12.5 percent of
the Partnership, and as such, the contractual method has been used to allocate
losses among partners.
On March 29, 1996, the Partnership sold its real estate (Note 4) to a
wholly-owned subsidiary of Host Marriott Corporation, HMH Properties, Inc. Total
proceeds of $28.3 million were used to pay closing costs and repay the mortgage
loan, a note payable to an affiliated partnership, accrued interest payable and
a portion of the loans payable to partners. As a result of the sale, the
Partnership recognized a gain of approximately $883,000 in 1996. If the sale had
been completed on December 31, 1995, the (unaudited) pro forma balance sheet
following the settlement would be as follows. No pro forma income statement is
presented as the Partnership is not expected to have material operations
subsequent to the sale.
<TABLE>
<CAPTION>
Pro Forma Balance Sheet
As of December 31, 1995
(unaudited)
-----------
<S> <C>
Real estate $ --
Cash and cash equivalents 53,466
Deferred charges, net --
Receivables 155,545
-------
Total assets 209,011
=======
Mortgage payable $ --
Loans payable, partners 20,277,905
Note payable, affiliated partnership --
Accounts payable and accrued expenses 203,137
-------
20,481,042
Partners' deficit (20,272,031)
-----------
Total liabilities and partners' deficit $ 209,011
============
</TABLE>
- 6 -
<PAGE>
2. Summary of Significant Accounting Policies:
Real Estate
Real estate is recorded at cost which includes financing costs, interest costs,
and real estate taxes incurred during the original construction period. Ordinary
repairs and maintenance are expensed as incurred; major replacements and
improvements are capitalized. Depreciation is computed using the straight-line
method over the estimated useful asset lives: 40 years for buildings and
improvements, 20 years for land improvements, and 5 to 10 years for furniture,
fixtures, and equipment.
Deferred Charges
Deferred charges consist of loan fees and lease acquisition costs. Lease
acquisition costs are being amortized on a straight-line basis over the life of
the related lease. Loan fees are being amortized over the life of the related
loan using the effective interest rate method.
Fair Value of Financial Instruments
Based on the borrowing rates currently available to the Partnership for
mortgages with similar terms and remaining maturities, the fair value of the
mortgage note payable is not materially different from the mortgage payable
balance. The fair value of loans payable to partners is approximately $685,000
as of December 31, 1995. The fair value of the amount shown as note payable to
affiliated partnership is not estimable as similar terms are not available from
third-parties.
Income Taxes
These financial statements contain no provision for Federal or state income
taxes, since the entity is a partnership, and therefore, all Federal and state
income tax liabilities and/or tax benefits are passed through to the individual
partners in accordance with the partnership agreement and the Internal Revenue
Code.
Cash and Cash Equivalents
Charles E. Smith Management, Inc., as agent, maintains commingled cash and cash
equivalent accounts of affiliated partnerships for which it provides property
management services. The $53,466 reflected as cash and cash equivalents, as of
December 31, 1995, represents the Partnership's undivided interest in the
commingled cash and cash equivalents accounts. Cash equivalents consist of
overnight repurchase agreements backed by U.S. government obligations and other
U.S. government obligation money funds.
- 7 -
<PAGE>
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
3. Deferred Charges:
<TABLE>
<S> <C>
Loan fees $ 344,147
Lease acquisition costs 984,115
-------
1,328,262
Less - Accumulated amortization 415,267
-------
$ 912,995
===========
</TABLE>
Amortization expense was $174,445 in 1995.
4. Real Estate:
<TABLE>
<S> <C>
Land $ 2,885,000
Building and land improvements 21,941,972
Furniture, fixtures, and equipment 9,959,704
Artwork 155,474
-------
34,942,150
Less - Accumulated depreciation 9,299,577
---------
$25,642,573
===========
</TABLE>
Depreciation expense was $1,557,426 in 1995.
5. Mortgage Payable:
The Partnership was liable under a mortgage loan in the original principal
amount of $24 million. The mortgage loan required monthly interest payments at
the prime rate (8.5 percent at December 31, 1995) plus 100 basis points plus
monthly principal curtailments of $145,833 beginning January 1, 1995. The
mortgage loan was due in full on January 1, 1997. The mortgage loan was repaid
in full on March 29, 1996 with proceeds from the sale of the real estate. The
real estate was pledged as collateral.
- 8 -
<PAGE>
6. Rental Operations:
The Partnership has a lease agreement with Marriott, which expires in 2025.
Marriott has the option of extending the term of the agreement for two
successive renewal periods of ten years each.
During 1993, the Partnership amended its lease agreement with Marriott. Under
the terms of the revised lease, the annual rent is equal to the lesser of cash
flow or the interest rate on the Partnership's debt times the total development
and loan procurement costs (approximately $37 million) until January 1, 1997.
Beginning January 1, 1997, the annual rental also includes the repayment of the
total development and loan procurement costs to the extent that cash flow is
sufficient. Marriott is also entitled to 50 percent of any excess proceeds from
the refinancing of the mortgage loan (Note 5). Marriott is responsible for the
payment of all real estate taxes.
7. Related-Party Transactions:
The Partnership conducts business with its partners and with certain entities in
which certain partners of the Partnership exercise control. The following is a
description of transactions with the partners and these entities.
The rental agent, Charles E. Smith Management, Inc., an affiliate, provided
consulting services under an agreement that was terminated during 1996 in
connection with the sale of the real estate. The Partnership was required
to pay consulting fees based on a percentage of gross revenues of the
hotel, as defined in the agreement. For 1995, these fees approximated
$91,520.
The amount shown as note payable to affiliated partnership,
represents amounts borrowed from Plaza Associates Limited Partnership
("Plaza"), a related entity, whose general partners are also general
partners in the Partnership. The unsecured note bore interest at the prime
rate plus 50 basis points and was due on demand. Interest expense was
payable monthly in arrears. The Partnership's general partners were jointly
and severally liable for the note. Interest expense incurred on this note
was approximately $193,000 in 1995, of which approximately $32,000 was
unpaid and included in accrued interest payable in the accompanying
financial statements as of December 31, 1995. The note and all accrued
interest payable related to this note were repaid on March 29, 1996 with
proceeds from the sale of the real estate.
The amount shown as loans payable to partners, represents amounts borrowed
from the general partners. The unsecured loans bear interest at either the
prime rate or the prime rate plus 50 basis points and are due on demand.
Interest is due when the notes are paid. Interest expense related to these
loans was approximately $1,937,000 in 1995. Cumulative interest due as of
December 31, 1995, was approximately $5,000,000 and is included in accrued
interest payable in the accompanying financial statements. All accrued
interest payable and approximately $685,000 of the loans were repaid on
March 29, 1996 with proceeds from the sale of the real estate.
- 9 -
<PAGE>
Worldgate Hotel One Associates Limited Partnership
Balance Sheet
As of March 22, 1996
(Unaudited)
<TABLE>
<CAPTION>
Assets
<S> <C>
Real estate, less accumulated depreciation $25,281,014
Receivable from Marriott International 122,835
Other assets:
Deferred charges, less accumulated amortization 882,775
Hotel improvement fund 24,432
------
$26,311,056
===========
Liabilities and Partners' Deficit
Liabilities:
Mortgage payable $19,312,509
Loans payable to partners 20,964,729
Note payable to affiliated partnership 2,040,735
Note payable to related parties 299,001
Accrued interest payable 5,433,933
Accounts payable and accrued expenses 209,259
------
48,260,166
----------
Commitments and contingencies
Partners' deficit:
General (2,743,639)
Limited (19,205,471)
-----------
(21,949,110)
-----------
$26,311,056
===========
</TABLE>
The accompanying notes are an integral part of this statement.
- 10 -
<PAGE>
Worldgate Hotel One Associates Limited Partnership
Statements of Operations
For the Twelve Weeks Ended March 22, 1996 and March 24, 1995
(Unaudited)
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Income from rental operations $ 544,298 $ 597,235
----------- -----------
Operating expenses:
Depreciation and amortization 420,728 416,800
Other expenses 20,081 11,209
Consulting fees 18,933 18,369
Repairs and maintenance 430 10,687
--- ------
460,172 457,065
------- -------
Income before interest expense and interest income 84,126 140,170
Interest expense and interest income:
Mortgage interest 418,594 490,066
Interest on related-party notes and loans payable 460,317 506,951
Interest income (342) (1,291)
---- ------
878,569 995,726
------- -------
Net loss $ (794,443) $ (855,556)
=========== ===========
</TABLE>
The accompanying notes are an integral part of this statement.
- 11 -
<PAGE>
Worldgate Hotel One Associates Limited Partnership
Statements of Cash Flows
For the Twelve Weeks Ended March 22, 1996 and March 24, 1995
(Unaudited)
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net loss $(794,443) $(855,556)
Adjustments to reconcile net loss to net cash
provided by operating activities
Depreciation and amortization 397,537 395,181
Amortization of deferred loan fees 23,191 21,628
(Increase) decrease in receivable
from Marriott International 32,710 (122,819)
Decrease in accounts payable and accrued expenses (74,331) (24,854)
Increase in accrued interest payable 432,397 458,691
------- -------
Net cash provided by (used in) operating activities 17,061 (127,729)
------ -------
Cash flows from investing activities:
(Increase) decrease in hotel improvement fund 16,350 (3,870)
Purchase of real estate (28,949) (16,499)
------ ------
Net cash used in investing activities (12,599) (20,369)
------ ------
Cash flows from financing activities:
Principal payments on mortgage payable (437,499) (437,499)
Borrowing from related parties 299,000 --
Borrowings from partners 80,571 318,164
------ -------
Net cash used in financing activities (57,928) (119,335)
------ -------
Net decrease in cash and cash equivalents (53,466) (267,433)
Cash and cash equivalents, beginning of period 53,466 267,433
------ -------
Cash and cash equivalents, end of period $ 0 $ 0
===== =====
Cash paid for interest $ 454,940 $ 563,237
========= =======
</TABLE>
The accompanying notes are an integral part of this statement.
- 12 -
<PAGE>
Worldgate Hotel One Associates Limited Partnership
Notes to the Unaudited Financial Statements
1. Worldgate Hotel One Associates Limited Partnership (the "Partnership) was
formed on December 1, 1987, under the laws of the Commonwealth of Virginia. The
Partnership was organized to own, develop, and maintain for investment the
Dulles Suites Marriott (the "Hotel") containing 254 rooms and banquet facilities
located in Fairfax County, Virginia.
On March 29, 1996 the Partnership sold its real estate to a wholly-owned
subsidiary of Host Marriott Corporation, HMH Properties, Inc. Total proceeds of
$28.3 million which were used to pay closing costs and repay the mortgage loan,
a note payable to an affiliated partnership, accrued interest payable and a
portion of the loans payable to partners.
Certain information and footnote dislcosures normally included in financial
statements presented in accordance with generally accepted accounting principles
have been condensed or omitted. The Partnership believes the disclosures made
are adequate to make the information presented not misleading. However, the
financial statements should be read in conjunction with the Partnership's
audited finacial statements contained elsewhere herein.
2. In the opinion of the Partnership, the accompanying 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 22, 1996 and the results of operations and cash flows
for the twelve weeks ended March 22, 1996 and March 24, 1995. Interim results
are not necessarily indicative of fiscal year perfomance because of the impact
of seasonal and short-term variations.
- 13 -
<PAGE>
HMH PROPERTIES, INC.
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL DATA
The unaudited Pro Forma Condensed Consolidated Statement of Operations of HMH
Properties, Inc. (the "Company") for the twelve weeks ended March 22, 1996
reflects the acquisition of the Washington Dulles Marriott Suites Hotel (the
"Hotel") and the sale and leaseback of 34 limited service properties as if such
transactions had been completed on December 30, 1995.
The unaudited Pro Forma Condensed Consolidated Balance Sheet of the Company
reflects the second quarter 1996 acquisition of the Hotel and the second quarter
sale and leaseback of 13 Courtyard properties and 13 Residence Inn properties,
as if such transactions had been completed on March 22, 1996. (Eight limited
service properties were sold and leased back on March 22, 1996). In conjunction
with the sale and leaseback, a subsidiary of Host Marriott Corporation will
purchase the Company's rights to the deferred proceeds and obligations under the
leases for the Courtyard properties at their fair market value.
The Pro Forma Condensed Consolidated Financial Data of the Company are unaudited
and presented for informational purposes only and may not reflect the Company's
future results of operations and financial position or what the results of
operations and financial position of the Company would have been had such
transactions occurred as of the dates indicated. The unaudited Pro Forma
Condensed Consolidated Financial Data and notes thereto should be read in
conjunction with the Company's Consolidated Financial Statements and Notes
thereto contained elsewhere herein.
- 14 -
<PAGE>
HMH PROPERTIES, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
As of March 22, 1996
(in millions)
<TABLE>
<CAPTION>
Pro Forma
Historical Adjustments Pro Forma
---------- ----------- ---------
<S> <C> <C> <C>
ASSETS
Property and equipment $ 932 $ 28 (a) $ 730
(230) (b)
Note receivable from affiliate 145 145
Investment in affiliate 18 18
Due from hotel managers 28 28
Other assets 95 26 (b) 103
(18) (c)
Cash and cash equivalents 67 (28) (a) 266
227 (b)
--- --- ---
$ 1,285 $ 5 $ 1,290
======= ====== =======
LIABILITIES AND SHAREHOLDER'S EQUITY
Senior Notes $ 600 $ $ 600
Notes secured by real estate assets 99 99
Other notes 34 34
--- ---
Total debt 733 733
Deferred income taxes 82 4 (c) 86
Other liabilities 81 23 (b) 62
(29) (c)
(13) (c)
--- --- ---
Total liabilities 896 (15) 881
Shareholder's equity 389 20 (c) 409
--- --- ---
$ 1,285 $ 6 $ 1,291
======= ====== =======
</TABLE>
See Notes to the Pro Forma Condensed Consolidated Financial Data.
- 15 -
<PAGE>
HMH PROPERTIES, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
For the Twelve Weeks Ended March 22, 1996
(in millions)
<TABLE>
<CAPTION>
Pro Forma
Historical Adjustments Pro Forma
---------- ----------- ---------
<S> <C> <C> <C>
Revenues:
Hotels $ 46 $ 1 (d) $ 42
(5)(f)
Equity in earnings of affiliate 1 -- 1
--- --- ---
47 (4) 43
--- --- ---
Operating costs and expenses
Hotels 26 1 (d) 27
3 (e)
(3) (f)
--- --- ---
26 1 27
--- --- ---
Operating profit before corporate
expenses and interest 21 (5) 16
Corporate expenses (2) (2)
Interest expense (15) (15)
Interest income 4 4
--- --- ---
Income (loss) before income taxes 8 (5) 3
(Provision) benefit for income taxes (3) 2 (g) (1)
--- --- ---
Net income (loss) $ 5 $ (3) $ 2
====== ====== ====
</TABLE>
See Notes to the Pro Forma Condensed Consolidated Financial Data.
- 16 -
<PAGE>
HMH PROPERTIES, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL DATA
A. Represents the adjustment to record the 1996 acquisition of the Hotel
as follows:
- Record property and equipment of $28 million
- Record the use of cash of $28 million
B. Represents the adjustment to record the sale of the 13 Courtyard and 13
Residence Inn properties as follows:
- Reduce property and equipment by the net book value of assets sold of
$230 million
- Record the net cash proceeds of $227 million
- Record the deferred proceeds of $26 million
- Record the deferred gain of $23 million
C. Represents the adjustment to record the sale of the Company's rights to the
deferred proceeds and obligations under the leases for the Courtyard
properties at their fair market value of $13 million to Host Marriott
Corporation as follows:
- Reduce the deferred proceeds by $18 million
- Reduce the deferred gain by $29 million
- Reduce the intercompany payable to parent by $13 million
- Increase in equity of $20 million net of taxes of $4 million as a
result of the transaction.
D. Represents the adjustment to record the revenue and operating costs for the
acquisition of the Hotel, including depreciation expense reflecting the
Company's basis in the assets.
E. Represents the adjustments to eliminate the depreciation expense and record
the incremental lease expense for the 1996 sale/leaseback of the 18
Residence Inns.
F. Represents the adjustment to eliminate the revenues and the operating costs
for the 1996 sale/leaseback of the 16 Courtyard properties and the transfer
of the lease and residual interest to Host Marriott Corporation.
G. Represents the income tax impact of pro forma adjustments at statutory
rates.
- 17 -
