Exhibit 99.7
TO THE LIMITED PARTNERS OF
MARRIOTT RESIDENCE INN II
LIMITED PARTNERSHIP
Presented for your review is the 1999 Annual Report for the Marriott Residence
Inn II Limited Partnership (the "Partnership"). A discussion of the
Partnership's performance and Inn operations is included in the Form 10-K, Item
7, Management's Discussion and Analysis of Financial Condition and Results of
Operations, which is included herein. The estimate of 2000 tax information is
included in this letter. The Partnership's Supplementary Unaudited Information
is contained in Item 13, Certain Relationships and Related Transactions, of the
Partnership's 10-K. As in the past, we encourage you to review the information
contained in this report.
Litigation Update
On March 9, 2000, Host Marriott Corporation ("Host Marriott"), Marriott
International, Inc. ("MII") and certain other defendants (collectively the
"Defendants") entered into a settlement agreement with counsel to the plaintiffs
to resolve the litigation filed by limited partners in several partnerships
sponsored by Host Marriott, including the Partnership. The settlement is subject
to numerous conditions, including participation thresholds, court approval and
various consents.
Under the terms of the settlement, the limited partners of the Partnership who
elect to participate would be paid $228.38 per Unit, or a pro rata portion
thereof, in exchange for the dismissal of the litigation and a complete release
of all claims. This amount will be reduced by the amount of attorneys' fees and
expenses awarded by the court to the plaintiffs' lawyers. We understand that the
plaintiffs' lawyers intend to request from the court an award of attorneys' fees
and reimbursement of costs and expenses of approximately $75.38 per Unit. In the
event the Texas court approves the plaintiffs' lawyers request, each
participating limited partner could expect to receive a net amount of
approximately $153 per Unit, or a pro rata portion thereof for fractional Units.
In addition to this cash payment, the Manager would waive $22,693,000 of
deferred management fees.
Limited partners who opt out of the settlement would receive no payment but
would retain their individual claims against the Defendants. The Defendants may
terminate the settlement if the holders of more than 10% of the Partnership's
70,000 limited partner Units choose not to participate, if the holders of more
than 10% of the limited partner units in any one of the other partnerships
involved in the settlement choose not to participate or if certain other
conditions are not satisfied. The Manager will continue to manage the
Partnership's Inns under long-term agreements.
The details of the settlement will be contained in a court-approved notice and
purchase offer/consent solicitation to be sent to the Partnership's limited
partners. For additional information, see Item 3, Legal Proceedings, in the
Partnership's Form 10-K included herein.
Transfer and Sale of Limited Partnership Units
During the period of the pending settlement, transfers due to sales of the
Partnership Units have been suspended. Please contact the General Partner prior
to signing any sale agreements or if you have any questions regarding the
transfer or sale of Partnership Units.
Impact of Capital Expenditures on Cash Distributions
As an owner of 23 extended-stay properties in today's market, the Partnership
must concentrate on the impact of increased competition on its goals to provide
liquidity and maximize the value of your investment. To ensure the Inns remain
competitive, there will be a continuing focus on the renovation and
refurbishment of the properties during 2000 and beyond.
These renovations are part of the routine capital expenditure cycle for
maintaining Inns that are 10 to 16 years old. In light of the increased
competition in the extended-stay market, the Manager has also proposed
additional improvements that are intended to enhance the overall value and
competitiveness of the Inns. These proposed improvements include design,
structural and technological improvements to modernize and enhance the
functionality and appeal of the Inns. Based upon information provided by the
Manager, approximately $56 million may be required over the next five years for
the routine renovations and all of the proposed additional improvements. The
General Partner is reviewing the Manager's proposed renovations and improvements
to identify those projects that have the greatest value to the Partnership.
However, if all projects were implemented, the overall cost of these future
capital expenditures would be expected to exceed the Partnership's available
funds.
As we have previously communicated to you, there was no cash available for
distribution from 1999 operations. In addition, based on the anticipated capital
expenditure needs of the Inns over the next few years, it appears unlikely that
cash distributions will be possible for 2000 and 2001.
Partnership Debt
During 1999, the Partnership paid approximately $1.6 million in principal on the
mortgage debt, leaving a principal balance of $136 million at December 31, 1999.
Inn Operations
The combined operations of the Partnership Inns remained flat in 1999.
Partnership revenues increased by $299,000 when compared to 1998. REVPAR, or
revenue per available room, is a commonly used indicator of Inn performance
which measures daily suite revenue generated on a per suite basis. On a combined
basis, REVPAR for the year remained at approximately $75 due to the stable
combined average suite rate of $91 and combined average occupancy of 83%. The
chart below summarizes REVPAR for years 1997 through 1999 and the percentage
increase from the prior year.
1999 1998 1997
---------------------- ---------------------- ------------------
REVPAR % Decrease REVPAR % Increase REVPAR % Increase
------ ---------- ------ ---------- ------ ----------
$75.38 (.24%) $75.56 1% $74.47 4%
During 1999 extended-stay hotel competitors continued to increase their presence
in the market. In response, the Manager continued to heighten its efforts to
become the pre-eminent leader in this hospitality category, focusing on
customers that prefer a quality residential experience. The Manager is
continuing to monitor the introduction and growth of new extended-stay brands
including Homewood Suites by Hilton, Hawthorne Suites, Summerfield Suites,
Extended Stay America and AmeriSuites. In addition, a renewed focus will be
placed on strengthening each Inn's sales efforts in order to solidify the
existing relationships shared with current clients and to establish new ones.
Estimated 2000 Tax Information
Based on current projections, estimated taxable income of $70 will be allocated
to each limited partner unit for the year ending December 31, 2000. This
estimate will be updated in the third quarter 2000 report.
Conclusion
You are encouraged to review this Report in its entirety. If you have any
further questions regarding your investment, please contact Host Marriott
Investor Relations at the address or telephone number listed below.
Sincerely,
RIBM TWO LLC
General Partner
/s/ Robert E. Parsons, Jr.
Robert E. Parsons, Jr.
President
April 17, 2000
Host Marriott Corporation For transfer or re-registration information:
Investor Relations GEMISYS, INC.
10400 Fernwood Road, Department 903 Transfer Department
Bethesda, MD 20817-1109 7103 South Revere Parkway
Telephone 301/380-2070 Englewood, CO 80112
Facsimile: 301/380-5370 Telephone: 800/797-6812
Monday through Friday, 9am to 4pm, Eastern time