EXHIBIT 99.2
INDEPENDENT AUDITORS' REPORT
Board of Directors
Capstar Hotel Company:
We have audited the accompanying balance sheet of Metrotown Hotel Limited
Partnership as of December 31, 1996 and the related statements of operations,
partners' capital and cash flows for the year then ended. These financial
statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of the Metrotown Hotel Limited
Partnership as of December 31, 1996 and the results of its operations and its
cash flows for the year then ended, in conformity with generally accepted
accounting principles.
KPMG
Chartered Accountants
Montreal, Canada
August 27, 1997
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METROTOWN HOTEL LIMITED PARTNERSHIP
BALANCE SHEETS
JUNE 30, 1997 (UNAUDITED) AND DECEMBER 31, 1996
1997 1996
------------ ------------
(UNAUDITED)
ASSETS
Current assets:
Cash................................................................................ $ 219,675 $ 171,000
Receivables......................................................................... 64,333 64,005
Inventories......................................................................... 43,075 43,152
Prepaid expenses.................................................................... 71,775 11,787
------------ ------------
398,858 289,944
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Property and equipment (note 2)....................................................... 5,126,305 5,329,782
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$ 5,525,163 $ 5,619,726
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LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Accounts payable and accrued expenses............................................... $ 339,004 $ 351,816
Long-term debt (note 3)............................................................... -- 2,790,340
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Total liabilities............................................................... 339,004 3,142,156
Partners' capital..................................................................... 5,186,159 2,477,570
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$ 5,525,163 $ 5,619,726
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See accompanying notes to financial statements.
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METROTOWN HOTEL LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1997 (UNAUDITED) AND YEAR ENDED DECEMBER 31, 1996
1997 1996
------------ ------------
(UNAUDITED)
Revenue:
Rooms............................................................................... $ 1,135,473 $ 2,348,211
Food and beverage................................................................... 881,911 1,720,380
Other operating departments......................................................... 22,218 49,127
Other income........................................................................ 5,973 36,465
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2,045,575 4,154,183
Operating costs and expenses:
Rooms............................................................................... $ 322,583 $ 724,395
Food and beverage................................................................... 643,711 1,436,832
Other operating departments......................................................... 12,550 28,517
Undistributed operating expenses:
General and administrative.......................................................... 559,127 1,251,276
Management fees..................................................................... 61,342 125,061
Franchise fees...................................................................... 35,118 70,125
Depreciation........................................................................ 134,896 320,295
Interest on long-term debt.......................................................... 18,274 188,245
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1,787,601 4,144,746
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Net income............................................................................ $ 257,974 $ 9,437
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See accompanying notes to financial statements.
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METROTOWN HOTEL LIMITED PARTNERSHIP
STATEMENTS OF PARTNERS' CAPITAL
SIX MONTHS ENDED JUNE 30, 1997 (UNAUDITED) AND YEAR ENDED DECEMBER 31, 1996
Balance at January 1, 1996...................................................... $2,584,041
Distributions................................................................... (108,203)
Net income...................................................................... 9,437
Translation adjustments......................................................... (7,705)
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Balance at December 31, 1996.................................................... 2,477,570
Contributions (unaudited)....................................................... 2,769,060
Distributions (unaudited)....................................................... (255,045)
Net income (unaudited).......................................................... 257,974
Translation adjustments (unaudited)............................................. (63,400)
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Balance at June 30, 1997........................................................ $5,186,159
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See accompanying notes to financial statements.
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METROTOWN HOTEL LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1997 (UNAUDITED) AND YEAR ENDED DECEMBER 31, 1996
1997 1996
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(UNAUDITED)
Cash provided by (used in):
Operations:
Income for the year................................................................... $ 257,974 $ 9,437
Add (deduct):
Item not affecting working capital:
Depreciation.................................................................... 134,896 320,295
Net changes in non-cash working capital balances relating to operations:
Receivables..................................................................... (1,357) (1,281)
Inventories..................................................................... (617) 6,606
Prepaid expenses................................................................ (60,178) (3,929)
Accounts payable and accrued liabilities........................................ (7,158) (53,723)
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323,560 277,405
Financing:
Contributions from Limited Partner.................................................... 2,769,060 --
Remittances to Limited Partner........................................................ (255,045) (108,203)
Principal repayment of loan payable................................................... (2,769,060) (46,693)
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(255,045) (154,896)
Investment:
Additions to property and equipment................................................... (16,056) (77,754)
Effect of exchange rate changes......................................................... (3,784) 824
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Increase (decrease) in cash during the year............................................. 48,675 45,579
Cash, beginning of year................................................................. 171,000 125,421
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Cash, end of year....................................................................... $ 219,675 $ 171,000
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Cash paid for interest.................................................................. $ 18,274 $ 188,245
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See accompanying notes to financial statements.
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METROTOWN HOTEL LIMITED PARTNERSHIP
Notes to Financial Statements
June 30, 1997 (Unaudited) and December 31, 1996
The Limited Partnership was formed on January 1, 1987, under the laws of the
Province of British Columbia and owns and operates the Holiday Inn Metrotown, a
Hotel located in Burnaby, British Columbia.
(1) SIGNIFICANT ACCOUNTING POLICIES
(a) Basis of presentation:
The financial statements have been prepared using the accrual basis of
accounting.
These financial statements have been translated from Canadian to US dollars.
The assets and liabilities were translated at exchange rates prevailing at the
balance sheet dates. Income and expenses were translated at average exchange
rates prevailing during the corresponding periods. Gains or losses on
translation are included in partners' capital.
(b) Inventories:
Inventories of food, beverage and supplies are valued at the lower of cost,
as determined on a first in, first out basis, and replacement cost.
(c) Property and equipment:
Buildings are carried at cost. Depreciation is provided on a declining
balance basis over the estimated useful life of 25 years.
Furnishings and equipment are carried at cost. Depreciation is provided on a
straight-line basis over the estimated useful lives of 10 to 15 years.
Furnishings and equipment include the value of linen, cutlery, glassware and
similar supplies in use at the hotel. The hotel depreciates 50% of the cost of
these items on a straight-line basis during the first sixty months of their use.
The remaining 50% of the cost of these items is not depreciated and replacements
are charged to expense.
(d) Use of estimates:
Management has made a number of estimates and assumptions related to the
reporting of assets and liabilities and revenues and expenses and the disclosure
of contingent assets and liabilities to prepare these combined financial
statements in conformity with generally accepted accounting principles. Actual
results could differ from those estimates.
(e) Income taxes:
The financial statements contain no provision for federal income taxes since
the Limited Partnership's income, losses, deductions, and credits for tax
purposes are reported on the income tax returns of the partners.
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METROTOWN HOTEL LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
2. PROPERTY AND EQUIPMENT:
1997 1996
------------ ------------
ACCUMULATED NET BOOK NET BOOK
COST DEPRECIATION VALUE VALUE
------------ ------------ ------------ ------------
(UNAUDITED)
Property................................................. $ 768,018 $ -- $ 768,018 $ 780,560
Buildings................................................ 4,929,652 1,377,932 3,551,720 3,682,665
Furnishings and equipment................................ 1,633,722 827,155 806,567 866,557
------------ ------------ ------------ ------------
$ 7,331,392 $ 2,205,087 $ 5,126,305 $ 5,329,782
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Management periodically evaluates the potential permanent impairment of the
net carrying value of the hotel. If the net carrying value of the hotel exceeds
its fair value, the excess is charged to operations. No impairment losses were
recorded in 1997 or 1996.
3. LONG-TERM DEBT:
1997 1996
------------ ------------
(UNAUDITED)
$2,790,340 (Cdn$3,800,000) mortgage on the hotel property, bearing interest at a fixed
rate of 6.469%, entirely repayable upon maturity in February 1997 and guaranteed by
the Limited Partnership, the general partner Metrotown Hotel Inc. and the Limited
Partner............................................................................. $ -- $ 2,790,340
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Subsequent to December 31, 1996, the Limited Partner, on behalf of the
Limited Partnership, repaid the long-term debt.
4. RELATED PARTY TRANSACTIONS:
The hotel incurred the following expenses with related parties:
1997 1996
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(UNAUDITED)
Management fees to Limited Partner......................................................... $ 51,430 $ 165,518
Rental fees to Limited Partner............................................................. 20,470 35,198
Interest paid on loan payable to Limited Partner........................................... -- 2,825
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5. FAIR VALUE OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES:
The Limited Partnership has determined that the carrying value of its
short-term financial assets and liabilities approximate fair values as at June
30, 1997 (unaudited) and December 31, 1996 because of the short-term maturity of
those instruments.
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