Exhibit 99.2
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MARRIOTT HOTEL PROPERTIES LIMITED PARTNERSHIP
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1998 Second Quarter Report
Limited Partner Quarterly Update
Presented for your review is the 1998 Second Quarter Report for Marriott Hotel
Properties Limited Partnership (the "Partnership"). The 1998 Second Quarter Form
10-Q immediately follows this letter. Discussion of the Partnership's
performance and Hotel operations is included in Item 2, Management's Discussion
and Analysis of Financial Condition and Results of Operations. You are
encouraged to review this report in its entirety. If you have any further
questions regarding your investment, please contact Host Marriott Partnership
Investor Relations at (301) 380-2070.
Host Marriott Corporation's Conversion to a Real Estate Investment Trust
As previously reported to you, Host Marriott Corporation ("Host Marriott"),
parent company of the General Partner of the Partnership, announced on April 17,
1998, that its Board of Directors authorized Host Marriott 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 formed 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 limited partnership
interests. The Operating Partnership units would be redeemable by the limited
partner for freely traded Host Marriott shares (or the cash equivalent thereof)
at any time after one year from the closing of the merger. In connection with
the REIT conversion, the Operating Partnership filed a Registration Statement on
Form S-4 (the "Form S-4") with the Securities and Exchange Commission on June 2,
1998. Limited partners will be able to vote on this Partnership's participation
in the merger later this year through a consent solicitation.
In order to assist you with your financial planning, we are providing you with
the preliminary valuation information on your Partnership units as disclosed in
the Form S-4. The estimated exchange value is $141,425 per Partnership unit (the
"Estimated Exchange Value"). The Estimated Exchange Value is subject to
adjustment to reflect various closing and other adjustments and the final
valuation information will be set forth in the final Form S-4 you will receive
later this year through a consent solicitation.
The Estimated Exchange Value is being provided to you at this time for
information purposes only. We have not attempted to provide you with all of the
detail relating to the methodologies, variables, assumptions and estimates used
in determining the Estimated Exchange Value. The final valuation likely will
differ from the Estimated Exchange Value set forth above and such difference may
be material. The consent solicitation that will be mailed to you to solicit your
approval of a merger of the Partnership will contain the final valuation for a
Partnership unit as well as a discussion of the methodologies, variables,
assumptions and estimates used.
The solicitation period is expected to commence in late September and the
merger, if approved, would close by the end of the year (although there is no
assurance that this will be the case). Please notify the General Partner in
writing of any address changes in order to facilitate the prompt delivery of the
consent solicitation documents to you.
Secondary Market Activity
There has been an increase in the number of third party solicitations for this
Partnership's limited partner units. We are not in a position to advise you as
to whether you should accept such offers. However, in addition to reviewing the
information provided in this report, we encourage you to consult with your
financial and tax advisors when deciding if you should sell your Partnership
units. Due to the allocation of tax losses and income to you over the life of
the Partnership as well as any cash distributions paid to you, your tax basis in
this investment may be significantly lower than your original investment amount.
Therefore, there may be negative tax effects resulting from the sale of these
units that may impact your decision to sell. Once you have begun the sale
process we will do whatever is in our power to facilitate the transfer of your
units. Please note, the General Partner does not charge a fee in connection with
the transfer of Partnership units. If you wish to effect a transfer, please
contact our transfer agent, Trust Company of America/Gemisys at 1-800-797-6812
for the necessary documents.
Cash Distributions
On May 4, 1998, the Partnership made a cash distribution of $1,500 per limited
partner unit. This distribution represented $540 per limited partner unit from
1997 operations and $960 per limited partner unit related to first quarter 1998
operations. On August 4, 1998, the Partnership made an interim cash distribution
of $8,000 per limited partner unit from 1998 operations.
Orlando World Center Expansion
As previously reported, the Partnership is expanding the Orlando World Center.
The expansion includes a 500-room tower with a new parking garage, expansion of
the existing JW's Steakhouse restaurant, redesign of the existing golf course
and construction of 15,000 square feet of additional meeting space. Renovation
of the golf course began on May 4, 1998 and is expected to be completed in
January 1999. Construction of the parking garage began on July 22, 1998.
Construction of the 500-room tower is expected to begin during the fourth
quarter 1998. The entire project is expected to be completed in the spring of
2000.
On April 15, 1998, the Partnership successfully completed the financing for the
expansion of the Orlando World Center hotel. The lender is obligated to provide
up to $88 million to fund the costs related to the construction of the
expansion. During the construction period, the Partnership is required to make
monthly payments of principal and interest with such interest payments funded by
the construction loan while principal payments will be funded by hotel
operations. The loan bears interest at a fixed interest rate of 7.48%. Upon
completion of the expansion, the Partnership will be required to pay principal
and interest at the fixed interest rate of 7.48% amortized over the remaining
term of the loan. The loan matures on January 1, 2008. As of June 19, 1998, the
Partnership has received construction loan advances of $2.5 million which were
used to pay construction costs.