Exhibit 99.1
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MARRIOTT RESIDENCE INN
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LIMITED PARTNERSHIP
1998 First Quarter Report
Limited Partner Quarterly Update
Presented for your review is the 1998 First Quarter Report for the Marriott
Residence Inn Limited Partnership. In 1997, the Partnership began filing
periodic reports with the Securities and Exchange Commission (SEC). The
Partnership will continue to file what are known as Form 10-Q's each quarter,
and a Form 10-K annually. The Form 10-Q immediately follows this update and
replaces the quarterly report format previously used by the Partnership.
Potential Transaction
In December 1997, Host Marriott Corporation on behalf of the General Partner,
RIBM One Corporation, filed a preliminary Prospectus/Consent Solicitation
Statement (the "S-4") with the SEC which proposed the consolidation (the
"Consolidation") of this Partnership and five other limited partnerships into a
publicly traded real estate investment trust ("REIT"). The General Partner has
been working to resolve various open issues concerning the proposed
Consolidation.
In addition, there are existing REIT's which are active in the moderate price
and extended stay hotel segment that have expressed an interest in the six
limited partnerships. Therefore, the General Partner has had preliminary
discussions with some of these companies. Although no agreements have yet been
reached, the General Partner continues to pursue the possibility of a potential
transaction involving the Partnership's assets or a merger of the Partnership
with an existing publicly traded company.
The General Partner has retained Merrill Lynch to advise the Partnership with
respect to the Partnership's strategic alternatives, including the original
Consolidation plan and other available alternatives. The General Partner intends
to continue to explore these alternatives and determine which path to pursue,
obviously subject to appropriate partner approval.
Cash Distributions and Capital Expenditure Budgets
During the first quarter of 1998, the Partnership distributed $50 per limited
partner unit which represents a 5% annualized return on invested capital. The
distribution was made entirely from 1997 cash from operations.
Based on current 1998 operating forecasts, we anticipate that 1998 cash
available for distribution will be comparable to 1997 levels. It is expected
that the Partnership will make one distribution after year end and that the
distribution will be net of a reserve established by the General Partner for the
future capital needs of the Partnership's Inns, as discussed below.
Based upon current capital expenditure budgets, the Partnership's property
improvement fund is forecasted to be insufficient beginning in 1998. This
shortfall is primarily due to the need to complete total suite refurbishments at
the majority of the Partnership's Inns in the next several years. As a result,
the General Partner established a reserve (the "Capital Reserve") in 1996 for
the future capital needs of the Partnership's Inns. As of March 27, 1998, the
Capital Reserve balance was $2.8 million. The current property improvement fund
shortfall estimate of $3.6 million through 1999 will be funded by utilizing $2.6
million from the Capital Reserve, with the remaining $1 million to be funded by
increasing the property improvement fund contribution rate from 5% to 6% in 1998
and 5.5% in 1999. The proposed financing of the property improvement fund
shortfall is subject to approval by the Partnership's mortgage lenders. As
always, we will continue to work with the Manager to promote efficient use of
the property improvement fund.
Inn Operations
Partnership revenues increased 12% during the first quarter of 1998 when
compared to the same period in 1997 due to an 8% increase in REVPAR from $72 to
approximately $78. REVPAR is a commonly used indicator of market performance for
hotels which represents the combination of daily room rate charged and the
average daily occupancy achieved. REVPAR does not include food and beverage or
other ancillary revenues generated by the property. The increase in REVPAR is
due to a 7% increase in the combined average suite rate from $89 to
approximately $95 combined with an increase in average occupancy of just under
one percentage point to approximately 82%. For the quarter, REVPAR increased at
13 of the Partnership's 15 Inns.
Amounts Paid to the General Partner and Marriott International, Inc.
The chart below summarizes amounts paid (in thousands) to the General Partner
and Marriott International, Inc. for the twelve weeks ended March 27, 1998
(unaudited):
Marriott International, Inc.:
Residence Inn system fee.................................................$ 558
Marketing fund contribution.............................................. 349
Deferred base management fee............................................. 327
Base management fee...................................................... 293
Chain services and Marriott Rewards Program.............................. 289
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$ 1,816
General Partner:
Administrative expenses reimbursed.......................................$ 103
Capital distribution..................................................... 33
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$ 136
Further details of the First Quarter 1998 Inn operations are contained in the
Partnership's Form 10-Q, Item 2, Management's Discussion and Analysis of
Financial Condition and Results of Operations.
You are encouraged to review the enclosed Form 10-Q in its entirety. If you have
any further questions regarding your investment, please contact Host Marriott
Partnership Investor Relations at (301) 380-2070.