Exhibit 99.2
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DESERT SPRINGS MARRIOTT
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LIMITED PARTNERSHIP
1998 Second Quarter Report
Limited Partner Quarterly Update
Presented for your review is the 1998 Second Quarter Report for Desert Springs
Marriott 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.
Partnership Cash Distributions
As you are aware, the Partnership made a distribution in May 1998 in the amount
of $2,500 per limited partner unit. This amount represents funds from 1997
operations. The 1998 third quarter update, to be mailed in November, will inform
you of our expectations for any distributions that can be made from 1998
operations. It is too early in the operating year to make such a determination
at this time. Pursuant to the terms of the new financing agreement, any
distribution from 1998 operations will be made at approximately the same time in
1999 that it was distributed this year.
Host Marriott Corporation's Conversion to a Real Estate Investment Trust
As previously reported, 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 Desert Springs Marriott Limited Partnership, are
expected to be given an opportunity to receive, on a tax-deferred basis,
Operating Partnership units in the 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
the 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 $40,880 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 1998, 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.