Washington, D.C. 20549
Form 8-K
Current Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): June 11, 1998
COURTYARD BY MARRIOTT II LIMITED PARTNERSHIP
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(Exact name of registrant as specified in its charter)
Delaware 0-16728 52-1533559
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(State or other jurisdiction of commission File Number) (I.R.S.Employer
incorporation or organization) Identification No.)
10400 Fernwood Road, Bethesda, MD 20817-1109
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(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code: 301-380-2070
ITEM 5. OTHER EVENTS
On June 11, 1998, September 16, 1998 and December 10, 1998, the General Partner
sent to the Limited Partners of the Partnership a letter that accompanied the
Partnership's Quarterly Reports on Form 10-Q. Such letters are being filed as
exhibits to this Current Report on Form 8-K.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(c) Exhibits
99.1 Letter from the General Partner to the Limited Partners
of the Partnership that accompanied the Partnership's
Quarterly Report on Form 10-Q for the Quarter Ended
March 27, 1998.
99.2 Letter from the General Partner to the Limited Partners of
the Partnership that accompanied the Partnership's
Quarterly Report on Form 10-Q for the Quarter Ended June
19, 1998.
99.3 Letter from the General Partner to the Limited Partners of
the Partnership that accompanied the Partnership's
Quarterly Report on Form 10-Q for the Quarter Ended
September 11, 1998.
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, hereunto duly authorized.
COURTYARD BY MARRIOTT II
LIMITED PARTNERSHIP
By: CBM TWO CORPORATION
General Partner
December 11, 1998 By: /s/ Earla L. Stowe
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Name: Earla L. Stowe
Title: Vice President and
Chief Accounting Officer
EXHIBIT INDEX
Exhibit No.: Description:
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99.1 Letter from the General Partner to the
Limited Partners of the Partnership that
accompanied the Partnership's Quarterly
Report on Form 10-Q for the Quarter Ended
March 27, 1998.
99.2 Letter from the General Partner to the
Limited Partners of the Partnership that
accompanied the Partnership's Quarterly
Report on Form 10-Q for the Quarter Ended
June 19, 1998.
99.3 Letter from the General Partner to the
Limited Partners of the Partnership that
accompanied the Partnership's Quarterly
Report on Form 10-Q for the Quarter Ended
September 11, 1998.
Exhibit 99.1
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COURTYARD BY MARRIOTT II
LIMITED PARTNERSHIP
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1998 First Quarter Report
Limited Partner Quarterly Update
Presented for your review is the first quarter 1998 10-Q for Courtyard by
Marriott II Limited Partnership. As mentioned in the 1997 Annual Report, the
Partnership files a Form 10-Q with the Securities and Exchange Commission
("SEC") each quarter. The first quarter 1998 Form 10-Q immediately follows this
letter and replaces the quarterly report format previously used by the
Partnership. The information presented is essentially the same as the
information given in prior years with certain additional items required by the
rules of the SEC. As in the past, we encourage you to review the information
contained in this report, especially Item 2, Management's Discussion and
Analysis of Financial Condition and Results of Operations. If you have any
further questions regarding your investment, please contact Host Marriott
Partnership Investor Relations at (301) 380-2070.
Potential Transaction
In December 1997, Host Marriott Corporation on behalf of the General Partner,
CBM Two Corporation, filed a preliminary Prospectus/Consent Solicitation
Statement (the "S-4") with the Securities and Exchange Commission 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
On April 15, 1998, the Partnership made the final 1997 cash distribution of
$1,900 per limited partner unit bringing the total for 1997 to $9,000 per unit.
As mentioned in the 1997 Annual Report, we anticipate that cash distributions
for 1998 will be at least equal to the level of the 1997 cash distributions
after reserving $7.8 million for certain capital expenditures required by the
management agreement. However, actual distributions may be higher or lower
depending on actual Hotel operating results. We expect to make interim 1998 cash
distributions in August and November 1998 and a year-end 1998 cash distribution
in April 1999.
Partnership Debt
As previously reported, the Partnership's debt consists of a combination of
commercial mortgage backed securities and senior notes. During the first quarter
ended March 27, 1998, the Partnership repaid $3.5 million on the commercial
mortgage backed securities resulting in a balance of $382.1 million as of March
27, 1998. The $127.4 million senior notes require no principal payments prior to
maturity.
Hotel Operations
The combined operations of the Partnership's 70 Hotels improved in 1998 due to
continuing demand in the lodging industry. For a detailed discussion of hotel
operations, please refer to Item 2 of the Form 10-Q.
During the first quarter 1998, the Courtyard chain shifted their advertisements
to focus on the leisure traveler. There was a heavy concentration in television
and radio advertising and less in printed advertisements. A significant number
of advertisements appeared on ESPN, particularly during the NCAA college
basketball season. Courtyard also sponsored the ESPN NCAA Halftime Report.
For 1998, the outlook continues to be positive. The moderately priced lodging
segment remains highly competitive, reflecting the influx of new competition.
However, Courtyard hotels continue to command a premium share of the markets in
which they are located.
We appreciate your continued support and invite you to visit Courtyard Hotels as
you travel throughout the United States.
Exhibit 99.2
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COURTYARD BY MARRIOTT II
` 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 Courtyard by
Marriott II Limited Partnership. A discussion of the Partnership's performance
and hotel operations is included in the attached Form 10-Q, Item 2, Management's
Discussion and Analysis of Financial Condition and Results of Operations. As
always, we encourage you to read this report in its entirety. If you have any
questions regarding your investment, please contact Host Marriott Partnership
Investor Relations at (301) 380-2070.
Potential Transaction
As previously reported to you, Host Marriott Corporation, on behalf of the
General Partner, CBM Two Corporation, filed a preliminary Prospectus/Consent
Solicitation Statement with the Securities and Exchange Commission in December
1997, which proposed the consolidation (the "Consolidation") of this Partnership
and five other limited partnerships into a publicly traded real estate
investment trust ("REIT").
In addition, we reported to you that there are existing REIT's which are active
in the moderate price and extended stay hotel segment that have expressed an
interest in acquiring the hotels owned by the six limited partnerships. Although
the General Partner has had preliminary discussions with some of these
companies, no agreements have yet been reached.
The General Partner has retained Merrill Lynch to advise the Partnership with
respect to the Partnership's strategic alternatives. The General Partner intends
to continue to explore these alternatives and determine which path to pursue,
obviously subject to appropriate partner approval.
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 April 15, 1998, the Partnership made the final 1997 cash distribution of
$1,900 per limited partner unit bringing the total distributions for 1997 to
$9,000 per unit. The first interim 1998 distribution of $4,000 per limited
partner unit was made on July 27, 1998. Based on the 1998 combined operating
budget, we had anticipated that the cash distributions for 1998 would be equal
to the 1997 levels, after reserving $7.8 million for certain capital
expenditures required by the management agreement. Although operations for the
first half of 1998 have exceeded 1997 operating results for the same period,
1998 operations year-to-date are currently below management's expectations
presented earlier in the year. Therefore, cash distributions for 1998 are
expected to be reduced to $7,500 per unit. However, actual distributions will
depend on hotel operating results for the remainder of the year. If cash is
available for distribution after reserving for the capital expenditures
mentioned above, we will make a second interim 1998 cash distribution in
November 1998 and a year-end 1998 cash distribution in April 1999.
Partnership Debt
As previously reported, the Partnership's debt consists of a combination of
commercial mortgage backed securities and senior notes. During the second
quarter ended June 19, 1998, the Partnership repaid $5.8 million on the
commercial mortgage backed securities resulting in a balance of $379.7 million
as of June 19, 1998. The $127.4 million senior notes require no principal
payments prior to maturity.
Hotel Operations
The combined operations of the Partnership's 70 Hotels improved in 1998 due to
continuing demand in the lodging industry. For a detailed discussion of hotel
operations, please refer to Item 2 of the Form 10-Q.
For the first and second quarter, Courtyard focused communication efforts in USA
Today, radio and television advertising. Courtyards' award winning television
advertising was seen on CNN, The Weather Channel, CNN Airport and ESPN. In
addition, Courtyard hotels now participate in the Marriott Rewards Frequent
Travel Program which offers points to program members when they stay at a
Courtyard Hotel. The points are redeemable for free hotel rooms at most Marriott
lodging products.
The moderately priced lodging segment remains highly competitive, reflecting a
significant influx of new competition. However, Courtyard hotels continue to
command a premium share of the more competitive markets. The addition of the
Marriott Rewards Program has had a positive impact on demand for the Courtyard
product.
We appreciate your continued support and invite you to visit Courtyard Hotels as
you travel throughout the United States.
Exhibit 99.3
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COURTYARD BY MARRIOTT II
LIMITED PARTNERSHIP
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1998 Third Quarter Report
Limited Partner Quarterly Update
Presented for your review is the 1998 Third Quarter Report for Courtyard by
Marriott II Limited Partnership (the "Partnership"). A discussion of the
Partnership's performance and hotel operations is included in the attached Form
10-Q, 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.
Potential Transaction
The General Partner previously advised you that it is reviewing strategic
alternatives that could result in increased liquidity for Limited Partners. In
December 1997, we reported that Host Marriott Corporation ("Host"), on behalf of
the General Partner, filed a preliminary Prospectus/Consent Solicitation
Statement with the Securities and Exchange Commission. This statement proposed
the consolidation (the "Consolidation") of this Partnership and five other
limited partnerships into a publicly traded real estate investment trust
("REIT"). Subsequently, we reported to you that there were existing REITs active
in the moderate price and extended-stay hotel segment that had expressed an
interest in acquiring some of the hotels owned by the six limited partnerships.
The General Partner retained Merrill Lynch to advise the partnerships with
respect to these alternatives.
You may also be aware that although the hotel industry is generally continuing
to report improving operating results, stock prices for the companies that own
hotels, including REITs, have declined significantly from the price levels
experienced early in 1998. There are a number of reasons given by the industry's
analysts for this development ranging from increased supply in certain segments
of the market to general economic concerns and global market trends influencing
the US securities markets. In addition, the availability of bank credit and
public debt has reduced dramatically in recent months. The effect of these
developments is that many of the traditional purchasers of hotels such as those
owned by the Partnership are restricted in their ability to raise capital to
purchase hotels. Although over the past months we have reviewed various
alternatives, to date, there have been no acceptable offers from third parties
to purchase the Partnership's hotels.
These same market conditions have adversely affected the proposed Consolidation
that would form a new REIT focused on limited service hotels. The original
Consolidation plan included an initial public offering of the REIT's common
shares. We have been advised that it would be difficult to raise the appropriate
level of outside equity and that the perceived benefits of the Consolidation are
not achievable at this time. Therefore, we are not pursuing the plan to form a
new REIT.
Based on current market conditions, we are not optimistic that we will identify
an acceptable offer to purchase the hotels in the near future. As market
conditions change, we will reevaluate our strategy as we continue to explore
alternatives to provide liquidity for the Partnership and maximize the value of
your investment. We are continuing to work with Merrill Lynch to explore the
alternatives and will promptly advise you of any developments.
Secondary Market Activity
We are aware of a 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 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 April 15, 1998, the Partnership made the final 1997 cash distribution of
$1,900 per limited partner unit bringing the total distributions for 1997 to
$9,000 per unit. On July 27, 1998, the Partnership distributed $4,000 per
limited partnership unit from 1998 first and second quarter operating results
and on November 6, 1998, the Partnership distributed $1,000 per limited
partnership unit from 1998 third quarter operating results. Based on the 1998
combined operating budget, we had anticipated that the cash distributions for
1998 would be equal to the 1997 levels, after reserving $8.4 million for certain
capital expenditures required by the management agreement. Although operations
for the thirty-six weeks of 1998 have exceeded 1997 operating results for the
same period, 1998 operations year-to-date are currently below management's
expectations presented earlier in the year. Therefore, cash distributions for
1998 are expected to be reduced to $6,500 per unit. However, actual
distributions will depend on hotel operating results for the remainder of the
year. If cash is available for distribution after reserving for the capital
expenditures mentioned above, we will make a year-end 1998 cash distribution in
April 1999.
Partnership Debt
As previously reported, the Partnership's debt consists of a combination of
commercial mortgage backed securities and senior notes. During the year-to-date
period ended September 11, 1998, the Partnership repaid $9.4 million on the
commercial mortgage backed securities resulting in a balance of $376.1 million.
The $127.4 million senior notes require no principal payments prior to maturity.
Hotel Operations
The combined operations of the Partnership's 70 Hotels improved in 1998 due to
continuing demand in the lodging industry. For a detailed discussion of hotel
operations, please refer to Item 2 of the Form 10-Q.
During the third quarter, Courtyard continued to focus on communication efforts
in USA Today, radio and television advertising. Courtyards' award winning
television advertising was seen on CNN, The Weather Channel, CNN Airport and
ESPN. In addition, Courtyard hotels continue to participate in the Marriott
Rewards Frequent Travel Program which offers points to program members when they
stay at a Courtyard Hotel. The points are redeemable for free hotel rooms at
most Marriott lodging products.
The moderately priced lodging segment remains highly competitive, reflecting
significant influx of new competition. However, Courtyard hotels continue to
command a premium share of the more competitive markets. As mentioned
previously, the Marriott Rewards Program has had a positive impact on demand for
the Courtyard product.
We appreciate your continued support and invite you to visit Courtyard Hotels as
you travel throughout the United States.
Estimated 1998 Tax Information
Based on current projections, estimated taxable income of $9,800 will be
allocated to each limited partner unit for the year ending December 31, 1998.
The 1998 tax information, used for preparing your Federal and state income tax
returns, will be mailed no later than March 15, 1999. To ensure confidentiality,
we regret that we are unable to furnish your tax information over the telephone.
Unless otherwise instructed, we will mail your tax information to your address
as it appears on this report. Therefore, to avoid delays in delivery of this
important information, please notify the Partnership in writing of any address
changes by January 31, 1999.