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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended June 15, 2001 Commission File No. 0-25087
HOST MARRIOTT, L.P.
10400 Fernwood Road
Bethesda, Maryland 20817
(301) 380-9000
Delaware 52-2095412
------------------------ ----------------------
(State of Incorporation) (I.R.S. Employer
Identification Number)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, and (2) has been subject to such filing requirements
for the past 90 days.
Yes X No__
--
Units outstanding
Class at July 27, 2001
--------------------- ----------------
Units of limited partnership interest 284,573,044
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INDEX
-----
Page No.
-------
Part I. FINANCIAL INFORMATION (Unaudited):
Condensed Consolidated Balance Sheets-
June 15, 2001 and December 31, 2000.................................................... 3
Condensed Consolidated Statements of Operations-
Twelve Weeks and Twenty-four Weeks Ended
June 15, 2001 and June 16, 2000........................................................ 5
Condensed Consolidated Statements of Cash Flows-
Twelve Weeks and Twenty-four Weeks Ended
June 15, 2001 and June 16, 2000........................................................ 6
Notes to Condensed Consolidated Financial Statements...................................... 8
Management's Discussion and Analysis of Results of
Operations and Financial Condition..................................................... 20
Quantitative and Qualitative Disclosures about Market Risk................................ 29
PART II. OTHER INFORMATION AND SIGNATURE........................................................... 31
-2-
HOST MARRIOTT, L.P.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in millions)
June 15, December 31,
2001 2000
------- -------
(unaudited)
ASSETS
------
Property and equipment, net............................................................. $ 7,206 $ 7,110
Notes and other receivables (including amounts due from affiliates of $9 million and
$164 million, respectively)......................................................... 56 211
Due from Manager........................................................................ 171 --
Rent receivable......................................................................... 8 65
Investments in affiliates............................................................... 146 128
Other assets............................................................................ 432 439
Restricted cash......................................................................... 130 125
Cash and cash equivalents............................................................... 217 313
----------- -----------
$ 8,366 $ 8,391
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
---------------------------------
Debt
Senior notes........................................................................ $ 2,790 $ 2,790
Mortgage debt....................................................................... 2,313 2,275
Convertible debt obligation to Host Marriott........................................ 492 492
Other............................................................................... 257 257
----------- -----------
5,852 5,814
Accounts payable and accrued expenses................................................... 181 381
Other liabilities....................................................................... 370 312
----------- -----------
Total liabilities.................................................................. 6,403 6,507
----------- -----------
Minority interest....................................................................... 138 139
Limited partnership interests of third parties at redemption value (representing 22.2
million units and 63.4 million units at June 15, 2001 and December 31, 2000,
respectively)....................................................................... 286 823
Partners' Capital
General partner..................................................................... 1 1
Cumulative redeemable preferred limited partner..................................... 339 196
Limited partner..................................................................... 1,196 724
Accumulated other comprehensive (loss) income....................................... 3 1
----------- -----------
Total partners' capital........................................................... 1,539 922
----------- -----------
$ 8,366 $ 8,391
=========== ===========
See Notes to Condensed Consolidated Financial Statements
-3-
HOST MARRIOTT, L.P.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Twelve weeks ended June 15, 2001 and June 16, 2000
(unaudited, in millions)
2001 2000
--------- ---------
REVENUES
Hotel sales
Rooms....................................................................... $ 589 $ --
Food and beverage........................................................... 295 --
Other....................................................................... 73 --
-------- --------
Total hotel sales........................................................ 957 --
Rental income................................................................ 31 186
-------- --------
Total revenues........................................................... 988 186
-------- --------
OPERATING COSTS AND EXPENSES
Hotel operating expenses
Rooms....................................................................... 135 --
Food and beverage........................................................... 208 --
Hotel departmental costs and deductions..................................... 232 --
Management fees and other................................................... 54 --
Other property-level expenses............................................... 67 63
Depreciation and amortization............................................... 102 75
-------- --------
Total hotel operating costs and expenses................................. 798 138
Corporate expenses........................................................... 9 10
Lease repurchase expense..................................................... 5 --
Other expenses............................................................... 6 6
-------- --------
OPERATING PROFIT............................................................... 170 32
Minority interest expense.................................................... (5) (5)
Interest income.............................................................. 12 8
Interest expense............................................................. (112) (104)
Net gains on property transactions........................................... -- 2
Equity in earnings of affiliates............................................. 2 3
-------- --------
INCOME (LOSS) BEFORE INCOME TAXES.............................................. 67 (64)
Provision for income taxes..................................................... (12) (2)
-------- --------
INCOME (LOSS) BEFORE EXTRAORDINARY ITEM........................................ 55 (66)
Extraordinary loss............................................................. -- (2)
-------- --------
NET INCOME (LOSS).............................................................. $ 55 $ (68)
======== ========
Less: Distributions on preferred limited partner units to Host Marriott........ (9) (5)
-------- --------
NET INCOME (LOSS) AVAILABLE TO COMMON UNITHOLDERS.............................. $ 46 $ (73)
======== ========
BASIC EARNINGS (LOSS) PER UNIT................................................. $ .16 $ (.26)
======== ========
DILUTED EARNINGS (LOSS) PER UNIT............................................... $ .16 $ (.26)
======== ========
See Notes to Condensed Consolidated Financial Statements
-4-
HOST MARRIOTT, L.P.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Twenty-four weeks ended June 15, 2001 and June 16, 2000
(unaudited, in millions)
2001 2000
--------- --------
REVENUES
Hotel sales
Rooms............................................................................ $ 1,110 $ --
Food and beverage................................................................ 548 --
Other............................................................................ 137 --
-------- --------
Total hotel sales............................................................. 1,795 --
Rental income...................................................................... 62 361
-------- --------
Total revenues................................................................ 1,857 361
-------- --------
OPERATING COSTS AND EXPENSES
Hotel operating expenses
Rooms............................................................................ 256 --
Food and beverage................................................................ 399 --
Hotel departmental costs and deductions.......................................... 440 --
Management fees and other........................................................ 106 --
Other property-level expenses.................................................... 128 122
Depreciation and amortization.................................................... 179 149
-------- --------
Total hotel operating costs and expenses...................................... 1,508 271
Corporate expenses................................................................. 17 20
Lease repurchase expense........................................................... 5 --
Other expenses..................................................................... 8 12
-------- --------
OPERATING PROFIT....................................................................... 319 58
Minority interest expense.......................................................... (12) (10)
Interest income.................................................................... 20 17
Interest expense................................................................... (222) (208)
Net gains on property transactions................................................. 1 3
Equity in earnings of affiliates................................................... 4 3
-------- --------
INCOME (LOSS) BEFORE INCOME TAXES...................................................... 110 (137)
Provision for income taxes............................................................. (15) (3)
-------- --------
INCOME (LOSS) BEFORE EXTRAORDINARY ITEM................................................ 95 (140)
Extraordinary gain, net of income tax expense of $1 million............................ -- 3
-------- --------
NET INCOME (LOSS)...................................................................... $ 95 $ (137)
======== ========
Less: Distributions on preferred limited partner units to Host Marriott................ (14) (10)
-------- --------
NET INCOME (LOSS) AVAILABLE TO COMMON UNITHOLDERS...................................... $ 81 $ (147)
======== ========
See Notes to Condensed Consolidated Financial Statements
-5-
HOST MARRIOTT, L.P.
CONSENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Twenty-four weeks ended June 15, 2001 and June 16, 2000
(unaudited, in millions)
2001 2000
--------- ---------
BASIC EARNINGS (LOSS) PER UNIT:
Income (loss) from operations before extraordinary item ...................... $ .28 $ (.53)
Extraordinary gain............................................................ -- 0.01
-------- --------
BASIC EARNINGS (LOSS) PER UNIT................................................ $ .28 $ (.52)
======== ========
DILUTED EARNINGS (LOSS) PER UNIT:
Income (loss) from operations before extraordinary item....................... $ .28 $ (.53)
Extraordinary gain............................................................ -- 0.01
-------- --------
DILUTED EARNINGS (LOSS) PER UNIT.............................................. $ .28 $ (.52)
======== ========
-6-
HOST MARRIOTT, L.P.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Twenty-four weeks ended June 15, 2001 and June 16, 2000
(unaudited, in millions)
2001 2000
--------- --------
OPERATING ACTIVITIES
Income (loss) before extraordinary item................................................. $ 95 $ (140)
Adjustments to reconcile to cash from operations:
Depreciation and amortization....................................................... 179 149
Income taxes........................................................................ (11) (20)
Deferred contingent rental income................................................... 15 291
Net gains on property transactions.................................................. (1) (3)
Equity in earnings of affiliates.................................................... (4) (3)
Purchase of Crestline leases........................................................ (204) --
Changes in other operating accounts................................................. 10 (39)
Other............................................................................... -- 13
--------- ---------
Cash provided by operations...................................................... 79 248
--------- ---------
INVESTING ACTIVITIES
Acquisitions............................................................................ (2) (40)
Capital expenditures:
Capital expenditures for renewals and replacements.................................. (102) (106)
New investment capital expenditures................................................. (30) (59)
Other investments................................................................... (12) (20)
Note receivable collections, net........................................................ 10 3
--------- ---------
Cash used in investing activities................................................ (136) (222)
--------- ---------
FINANCING ACTIVITIES
Issuances of debt, net.................................................................. 121 290
Scheduled principal repayments.......................................................... (24) (18)
Debt prepayments........................................................................ (115) (245)
Issuances of common units............................................................... 2 2
Issuances of preferred limited partner units............................................ 144 --
Distributions........................................................................... (159) (129)
Redemption or repurchase of OP Units for cash........................................... -- (47)
Repurchases of Convertible Preferred Securities......................................... -- (15)
Other................................................................................... (8) 14
--------- ---------
Cash used in financing activities................................................ (39) (148)
--------- ---------
DECREASE IN CASH AND CASH EQUIVALENTS................................................... $ (96) $ (122)
========= =========
See Notes to Condensed Consolidated Financial Statements
-7-
HOST MARRIOTT, L.P.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. Organization
Host Marriott, L.P. (the "Operating Partnership" or the "Company" or "Host
LP") is a Delaware limited partnership whose sole general partner is Host
Marriott Corporation ("Host REIT"). Host REIT, a Maryland corporation
operating through an umbrella partnership structure, is a self-managed and
self-administered real estate investment trust ("REIT") with its
operations conducted solely through the Operating Partnership and its
subsidiaries. Host REIT has elected, effective January 1, 1999, to be
treated as a REIT for federal income tax purposes. As of June 15, 2001,
Host REIT owned approximately 92% of the Operating Partnership.
The Work Incentives Improvement Act of 1999 ("REIT Modernization Act")
amended the tax laws to permit REITs, effective January 1, 2001, to lease
hotels to a subsidiary that qualifies as a taxable REIT subsidiary
("TRS"). A wholly owned subsidiary of Host LP, which has elected to be
treated as a TRS for federal income tax purposes, acquired certain
subsidiaries (the "Crestline Lessee Entities") of Crestline Capital
Corporation ("Crestline") owning the leasehold interests with respect to
116 of the Company's full-service hotels effective January 1, 2001. As a
result of the acquisition, the TRS replaced Crestline as the lessee under
the applicable leases, and the Company's operating results reflect
property-level revenues and expenses rather than rental income from
lessees with respect to those 116 full-service properties.
2. Summary of Significant Accounting Policies
The accompanying unaudited condensed consolidated financial statements of
the Company and its subsidiaries have been prepared without audit. Certain
information and footnote disclosures normally included in financial
statements presented in accordance with accounting principles generally
accepted in the United States have been condensed or omitted. The Company
believes the disclosures made are adequate to make the information
presented not misleading. However, the unaudited condensed consolidated
financial statements should be read in conjunction with the consolidated
financial statements and notes thereto included in the Company's annual
report on Form 10-K for the fiscal year ended December 31, 2000.
In the opinion of the Company, the accompanying unaudited condensed
consolidated financial statements reflect all adjustments necessary to
present fairly the financial position of the Company as of June 15, 2001,
the results of its operations for the twelve and twenty-four weeks ended
June 15, 2001, and June 16, 2000, and cash flows for the twenty-four weeks
ended June 15, 2001, and June 16, 2000. Interim results are not
necessarily indicative of fiscal year performance because of the impact of
seasonal and short-term variations.
Certain reclassifications were made to the prior year financial statements
to conform to the current presentation.
The Company consolidates entities in which it owns a controlling financial
interest (generally when it owns over 50% of the voting shares of another
company) and consolidates partnership investments when it owns a general
partnership interest unless minority shareholders or other partners
participate in or have the right to block management decisions.
As previously discussed, the Company, through its wholly owned TRS,
acquired the Crestline Lessee Entities with respect to 116 of the
Company's full-service properties effective January 1, 2001. As a result
of this transaction, the Company no longer leases the properties to a
third party,
-8-
HOST MARRIOTT, L.P.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
and therefore, will not have any rental income with respect to the 116
properties. Therefore, the Company's consolidated results of operations
with respect to those 116 properties reflect, from the effective date of
the transaction, property-level revenues and expenses rather than rental
income from lessees and, therefore, are not comparable to 2000 results.
Subsequent to the end of the quarter, the Company will begin recording the
property level results for four additional properties whose results were
previously included in rental income. The Company acquired the lessees
owning the leasehold interests in four hotels, effectively terminating the
leases for financial reporting purposes for these properties. Rental
income for these four hotels was $12 million and $23 million for the
twelve and twenty-four weeks ended June 15, 2001. See footnote 12 for a
detailed discussion of the acquisitions. As a result, beginning with the
third quarter the Company will report property level results for a total
of 123 properties, which includes properties acquired in the acquisition
of the non-controlled subsidiaries discussed in footnote 6.
The rent due under the remaining leases is the greater of base rent or
percentage rent, as defined. Percentage rent applicable to room, food and
beverage and other types of hotel revenue varies by lease and is
calculated by multiplying fixed percentages by the total amounts of such
revenues over specified threshold amounts. The Company recognizes
percentage rent when all contingencies have been met, that is, when annual
thresholds for percentage rent have been met or exceeded. Percentage rent
received pursuant to the leases but not recognized is included on the
balance sheet as deferred rent. Contingent rental revenue of $8 million
and $168 million, respectively, for the twelve weeks ended June 15, 2001
and June 16, 2000, and $15 million and $291 million, respectively, for the
twenty-four weeks ended June 15, 2001 and June 16, 2000, have been
deferred. Revenue from operations of the Company's hotels not leased to
third parties is recognized when the services are provided.
3. Earnings Per Unit
Basic earnings per unit is computed by dividing net income available to
common unitholders by the weighted average number of common units
outstanding. Diluted earnings per unit is computed by dividing net income
available to common unitholders as adjusted for potentially dilutive
securities, by the weighted average number of common units outstanding
plus other potentially dilutive securities. Dilutive securities may
include units distributed to Host Marriott Corporation for Host Marriott
Corporation common shares granted under comprehensive stock plans and the
Convertible Preferred Securities. Dilutive securities may also include
those common and preferred Operating Partnership Units ("OP Units")
issuable or outstanding that are held by minority partners which are
assumed to be converted. No effect is shown for securities if they are
anti-dilutive.
-9-
HOST MARRIOTT, L.P.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Twelve weeks ended
-----------------------------------------------------------------------
June 15, 2001 June 16, 2000
---------------------------------- ----------------------------------
Income Units Per Unit Income Units Per Unit
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
---------------------------------- ----------------------------------
Net income (loss)............................ $ 55 284.4 $ .19 $ (68) 283.6 $ (.24)
Distributions on preferred limited partner
units and Preferred OP Units............. (9) -- (.03) (5) -- (.02)
--------- ---------- ------- --------- ---------- --------
Basic loss available to common
unitholders per unit........................ 46 284.4 .16 (73) 283.6 (.26)
Assuming distribution of units to Host
Marriott Corporation for Host Marriott
Corporation common shares granted under
the Host Marriott comprehensive stock
plan, less shares assumed purchased at
average market price........................ -- 3.8 -- -- -- --
Assuming conversion of Preferred OP Units... -- -- -- -- -- --
Assuming issuance of minority OP Units
issuable................................... 1 9.3 -- -- -- --
--------- ---------- ------- --------- ---------- --------
Diluted Loss per Unit........................ $ 47 297.5 $ .16 $ (73) 283.6 $ (.26)
========= ========== ======= ========= ========== ========
Twenty-four weeks ended
-----------------------------------------------------------------------
June 15, 2001 June 16, 2000
---------------------------------- ----------------------------------
Income Units Per Unit Income Units Per Unit
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
---------------------------------- ----------------------------------
Net income (loss)............................ $ 95 284.6 $ .33 $ (137) 284.4 $ (.48)
Distributions on preferred limited partner
units and Preferred OP Units............... (14) -- (.05) (10) -- (.04)
--------- ---------- ------- --------- ---------- --------
Basic loss available to common
unitholders per unit........................ 81 284.6 .28 (147) 284.4 (.52)
Assuming distribution of units to Host
Marriott Corporation for Host Marriott
Corporation common shares granted under
the Host Marriott comprehensive stock
plan, less shares assumed purchased at
average market price........................ -- 4.2 -- -- -- --
Assuming conversion of Preferred OP Units... -- -- -- -- -- --
Assuming issuance of minority OP Units
issuable................................... -- -- -- -- -- --
--------- ---------- ------- --------- ---------- --------
Diluted Loss per Unit........................ $ 81 288.8 $ .28 $ (147) 284.4 $ (.52)
========= ========== ======= ========= ========== ========
4. OP Unit Conversions
On May 29, May 7 and February 7, 2001, Blackstone and affiliates
("Blackstone") converted 18.2 million, 10.0 million and 12.5 million OP
Units, respectively, to Host REIT common shares and immediately sold them to
an underwriter for sale on the open market. These units were obtained in
connection with the purchase of the Blackstone luxury hotel portfolio in
1998. As a result of these transactions, Blackstone now owns approximately
1% of the outstanding OP Units of the Operating Partnership, and Host REIT
increased its ownership in the Operating Partnership to approximately 92% of
the outstanding OP Units. The Company received no proceeds as a result of
these transactions.
-10-
HOST MARRIOTT, L.P.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
5. Debt and Equity Issuances and Refinancing
During the first quarter of 2001, the Company borrowed $115 million under
the revolver portion of the Bank Credit Facility to partially fund the
acquisition of the Crestline Lessee Entities and for general corporate
purposes. The Company repaid the $115 million outstanding balance under
the revolver portion of the Bank Credit Facility during the second quarter
of 2001.
On March 27, 2001, Host Marriott sold approximately 6.0 million shares of
10% Class C preferred stock ("Class C Preferred Stock") with a $0.01 par
value for net proceeds of $144 million and the Company issued an
equivalent security, the Class C Preferred Units to Host Marriott. Holders
of the Class C Preferred Stock are entitled to receive cumulative cash
dividends at a rate of 10% per annum of the $25 per share liquidation
preference. Dividends are payable quarterly in arrears commencing April
15, 2001, on which date a pro rata dividend of $0.03 per share was
distributed. A corresponding distribution on the Class C Preferred Units
is also payable quarterly in arrears commencing on the same date.
Beginning March 27, 2006, Host Marriott has the option to redeem the Class
C Preferred Stock for $25.00 per share, plus accrued and unpaid dividends
to the date of redemption.
During the third quarter of 2001, the Company borrowed $60 million under
the revolver portion of the term loan to fund the purchase of minority
interests in seven hotels. As of June 28, 2001, $150 million is
outstanding under the term loan portion of the Bank Credit Facility, and
the available capacity under the revolver is $565 million.
6. Acquisitions and Developments
Effective March 24, 2001, the Company purchased the 5% voting interests in
each of Rockledge Hotel Properties, Inc. ("Rockledge") and Fernwood Hotel
Assets, Inc. ("Fernwood") that were previously held by the Host Marriott
Statutory Employee/Charitable Trust for approximately $2 million. Prior to
this acquisition, the Company held a 95% non-voting interest. As a result
of this acquisition, the Company holds 100% of the voting and non-voting
interests in Rockledge and Fernwood, and its consolidated results of
operations will reflect the revenues and expenses generated by the two
taxable corporations, and its consolidated balance sheets will include the
various assets. The assets consist of three additional full service
hotels; the Saint Louis Marriott Pavilion Downtown in St. Louis, Missouri,
and the JW Marriott Hotel Mexico City and Mexico City Airport Marriott
Hotel, both located in Mexico City, Mexico. The Company also acquired
certain joint venture interests, and related liabilities, held by the two
taxable corporations totaling approximately $356 million in assets and
$262 million in liabilities, including $54 million of third party debt
($26 million of which matures in 2001) as of March 24, 2001.
On April 1, 2001, a 50,000 square foot spa at The Ritz-Carlton, Naples was
placed in service at an approximate development cost of $23 million.
During the second quarter 2001, the carrying value of three properties was
adjusted to reflect a change of status from held for use to held for sale
assets and is recorded in property and equipment. Accordingly, the Company
recorded a $13 million charge to depreciation based on a signed purchase
and sale agreement to reflect the net realizable value of the assets. For
these assets, the related revenue for the twenty-four weeks ended June 15,
2001, and June 16, 2000 was $19.9
-11-
HOST MARRIOTT, L.P.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
million and $2.2 million, respectively and the related expense was $30.7
million and $3.5 million, respectively. The carrying value of the assets
was $53.8 million as of June 15, 2001.
7. Dividends and Distributions Payable
On June 18, 2001, the Board of Directors declared quarterly cash
distributions of $.26 per unit of limited partner interest and $0.625 per
cumulative redeemable preferred limited partner unit. The second quarter
distributions were paid on July 13, 2001 to shareholders and unitholders
of record on June 30, 2001.
8. Geographic Information
As of June 15, 2001, the Company's foreign operations consisted of four
hotel properties located in Canada and two properties located in Mexico.
There were no intercompany sales between these properties and the Company.
The following table presents revenues for each of the geographical areas
in which the Company owns hotels (in millions). As a result of the
acquisition of the Crestline Lessee Entities, effective January 1, 2001
the Company's consolidated results of operations for the twelve weeks and
twenty-four weeks ended June 15, 2001, primarily represent property-level
revenues and expenses, whereas the results for the twelve weeks and
twenty-four weeks ended June 16, 2000 primarily represent rental income.
Twelve Weeks Ended Twenty-four Weeks Ended
---------------------------- --------------------------
June 15, 2001 June 16, 2000 June 15, 2001 June 16, 2000
------------- ------------- ------------- -------------
United States...................................... $ 956 $ 184 $ 1,810 $ 356
International...................................... 32 2 47 5
------------- ------------- ------------- -------------
Total.......................................... $ 988 $ 186 $ 1,857 $ 361
============= ============= ============= =============
9. Comprehensive Income
The Company's other comprehensive income consists of unrealized gains and
losses on foreign currency translation adjustments and the right to
receive cash from Host Marriott Services Corporation subsequent to the
exercise of the options held by certain former and current employees of
Marriott International, pursuant to the distribution agreement between the
Company and Host Marriott Services Corporation. For the twelve weeks and
twenty-four weeks ended June 15, 2001, the comprehensive income totaled
$60 million and $97 million, respectively. The comprehensive loss was $67
million and $137 million for the twelve and twenty-four weeks ended June
16, 2000, respectively. As of June 15, 2001, the Company's accumulated
other comprehensive income was $3 million compared to $1 million as of
December 31, 2000.
10. Summarized Lease Pool Financial Statements
During 2000, almost all the properties of the Company and its subsidiaries
were leased to subsidiaries of Crestline. In conjunction with these
leases, Crestline and certain of its subsidiaries entered into limited
guarantees of the lease obligations of each lessee. The full-service hotel
leases were grouped into four lease pools, with Crestline's guarantee
limited to the greater of 10% of the aggregate rent payable for the
preceding year or 10% of the aggregate rent payable under all leases in
the respective pool. Additionally, the lessee's obligation under each
lease agreement was guaranteed by all other lessees in the respective
lease pool. As a result, the Company believed that the operating results
of each full-service lease pool may have been material to the Company's
financial statements for the year ended December 31, 2000.
-12-
HOST MARRIOTT, L.P.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Effective January 1, 2001, a wholly owned TRS of Host LP replaced
Crestline as the lessee with respect to 116 of the Company's full-service
hotels, and the third party credit concentration ceased to exist.
Financial information of Crestline may be found in its quarterly and
annual filings with the Securities and Exchange Commission. Further
information regarding these leases and Crestline's limited guarantees may
be found in the Company's annual report on Form 10-K for the fiscal year
ended December 31, 2000. The results of operations and summarized balance
sheet data of the lease pools in which the Company's hotels were organized
during 2000 are as follows (in millions):
Twelve Weeks Ended June 16, 2000
--------------------------------
Pool 1 Pool 2 Pool 3 Pool 4 Combined
------ ------ ------ ------ --------
Hotel Sales
Rooms.......................................... $ 152 $ 170 $ 147 $ 159 $ 628
Food and beverage.............................. 69 87 72 91 319
Other.......................................... 16 17 24 22 79
------- ------- ------- ------- -------
Total hotel sales......................... 237 274 243 272 1,026
Operating Costs and Expenses
Rooms.......................................... 35 39 34 34 142
Food and beverage.............................. 52 61 51 62 226
Other.......................................... 59 58 59 61 237
Management fees................................ 13 20 12 20 65
Lease expense.................................. 75 91 83 92 341
Corporate and Interest Expenses................ -- -- -- 1 1
------- ------- ------- ------- -------
Total operating expenses.................. 234 269 239 270 1,012
------- ------- ------- ------- -------
Operating Profit.................................... 3 5 4 2 14
Income taxes................................... (1) (2) (2) (1) (6)
------- ------- ------- ------- -------
Net Income................................ $ 2 $ 3 $ 2 $ 1 $ 8
======= ======= ======= ======= =======
Twenty-four Weeks Ended June 16, 2000
-------------------------------------
Pool 1 Pool 2 Pool 3 Pool 4 Combined
------ ------ ------ ------ --------
Hotel Sales
Rooms.......................................... $ 281 $ 313 $ 272 $ 292 $ 1,158
Food and beverage.............................. 128 153 132 166 579
Other.......................................... 30 30 43 41 144
------- ------- ------- ------- -------
Total hotel sales......................... 439 496 447 499 1,881
Operating Costs and Expenses
Rooms.......................................... 66 76 62 63 267
Food and beverage.............................. 96 111 95 113 415
Other.......................................... 111 109 109 113 442
Management fees................................ 22 35 22 38 117
Lease expense.................................. 137 157 152 167 613
Corporate and Interest Expenses................ 1 1 -- 1 3
------- ------- ------- ------- -------
Total operating expenses.................. 433 489 440 495 1,857
------- ------- ------- ------- -------
Operating Profit.................................... 6 7 7 4 24
Income taxes................................... (2) (3) (3) (2) (10)
------- ------- ------- ------- -------
Net Income................................ $ 4 $ 4 $ 4 $ 2 $ 14
======= ======= ======= ======= =======
-13-
HOST MARRIOTT, L.P.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
As of December 31, 2000
-----------------------
Pool 1 Pool 2 Pool 3 Pool 4 Combined
------ ------ ------ ------ --------
Assets.............................................. $ 37 $ 37 $ 40 $ 44 $ 158
Liabilities......................................... 37 37 40 42 156
Equity.............................................. -- -- -- 2 2
11. Supplemental Guarantor and Non-Guarantor Subsidiary Information
All subsidiaries of the Company guarantee the Senior Notes except those
owning 50 of the Company's full service hotels and HMH HPT RIBM LLC and
HMH HPT CBM LLC, the lessees of the Residence Inn and Courtyard
properties, respectively. The separate financial statements of each
guaranteeing subsidiary (each, a "Guarantor Subsidiary") are not presented
because the Company's management has concluded that such financial
statements are not material to investors. The guarantee of each Guarantor
Subsidiary is full and unconditional and joint and several and each
Guarantor Subsidiary is a wholly owned subsidiary of the Company.
The following condensed combined consolidating information sets forth the
financial position as of June 15, 2001 and December 31, 2000, the results
of operations for the twelve and twenty-four weeks ended June 15, 2001 and
June 16, 2000 and the cash flows for the twenty-four weeks ended June 15,
2001 and June 16, 2000 of the parent, Guarantor Subsidiaries and the
Non-Guarantor Subsidiaries.
-14-
HOST MARRIOTT, L.P.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Supplemental Condensed Combined Consolidating Balance Sheets
(in millions)
June 15, 2001
Guarantor Non-Guarantor
Parent Subsidiaries Subsidiaries Eliminations Consolidated
-------- -------------- -------------- -------------- --------------
Property and equipment, net.................. $ 1,153 $ 2,053 $ 4,000 $ -- $ 7,206
Notes and other receivables.................. 729 102 116 (891) 56
Due from Manager............................. 2 1 176 (8) 171
Rent receivable.............................. 8 20 42 (62) 8
Investments in affiliate..................... 2,440 1,692 -- (3,986) 146
Other assets................................. 68 78 337 (51) 432
Restricted cash.............................. 18 4 108 -- 130
Cash and cash equivalents.................... 58 85 74 -- 217
------- -------- -------- -------- --------
Total assets.............................. $ 4,476 $ 4,035 $ 4,853 $ (4,998) $ 8,366
Debt......................................... $ 2,193 $ 1,301 $ 2,599 $ (733) $ 5,360
Convertible debt obligation to Host
Marriott.................................... 492 -- -- -- 492
Other liabilities............................ 195 309 558 (511) 551
------- -------- -------- -------- --------
Total liabilities......................... 2,880 1,610 3,157 (1,244) 6,403
Minority interests........................... 3 -- 135 -- 138
Limited partner interest of third parties at
redemption value............................ 286 -- -- -- 286
Owner's capital.............................. 1,307 2,425 1,561 (3,754) 1,539
------- -------- -------- -------- --------
Total liabilities and owner's capital..... $ 4,476 $ 4,035 $ 4,853 $ (4,998) $ 8,366
======= ======== ======== ======== ========
December 31, 2000
Guarantor Non-Guarantor
Parent Subsidiaries Subsidiaries Eliminations Consolidated
------- -------------- -------------- -------------- --------------
Property and equipment, net.................. $ 1,181 $ 2,001 $ 3,928 $ -- $ 7,110
Notes and other receivables.................. 311 54 165 (319) 211
Rent receivable.............................. 13 10 42 -- 65
Investments in affiliate..................... 2,618 1,715 -- (4,205) 128
Other assets................................. 242 26 245 (74) 439
Restricted cash.............................. 14 5 106 -- 125
Cash and cash equivalents ................... 244 34 35 -- 313
------- -------- -------- -------- --------
Total assets.............................. $ 4,623 $ 3,845 $ 4,521 $ (4,598) $ 8,391
======= ======== ======== ======== ========
Debt......................................... $ 1,910 $ 1,215 $ 2,360 $ (163) $ 5,322
Convertible debt obligation to Host Marriott. 492 -- -- -- 492
Other liabilities............................ 474 127 322 (230) 693
------- -------- -------- -------- --------
Total liabilities.......................... 2,876 1,342 2,682 (393) 6,507
Minority interests........................... 2 -- 137 -- 139
Limited partner interest of third parties at
redemption value............................ 823 -- -- -- 823
Partners' capital............................ 922 2,503 1,702 (4,205) 922
------- -------- -------- -------- --------
Total liabilities and owner's capital...... $ 4,623 $ 3,845 $ 4,521 $ (4,598) $ 8,391
======= ======== ======== ======== ========
-15-
HOST MARRIOTT, L.P.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Supplemental Condensed Combined Statements of Operations
(in millions)
Twelve Weeks Ended June 15, 2001
Non-
Guarantor Guarantor
Parent Subsidiaries Subsidiaries Eliminations Consolidated
-------- -------------- -------------- -------------- --------------
REVENUES..................................... $ 32 $ 55 $ 1,069 $ (167) $ 989
Depreciation................................. (27) (29) (46) -- (102)
Hotel operating expenses..................... -- -- (629) -- (629)
Property-level expenses...................... (6) (17) (44) -- (67)
Rental expense............................... -- -- (287) 287 --
Minority interest............................ (1) -- (4) -- (5)
Interest expense............................. (38) (28) (56) 10 (112)
Interest income.............................. 7 12 3 (10) 12
Net gains on property transactions........... (1) -- 1 -- --
Equity in earning of affiliates.............. (30) (2) -- 33 1
Corporate expenses........................... 1 (3) (7) -- (9)
Other expenses............................... (6) (4) (1) -- (11)
------ ------- ------- ------- -------
(Loss) income before income taxes............ (69) (16) (1) 153 67
(Provision for) benefit from income taxes.... 4 1 (17) -- (12)
------ ------- ------- ------- -------
(Loss) income before extraordinary item...... (65) (15) (18) 153 55
Extraordinary gain........................... -- -- -- -- --
------ ------- ------- ------- -------
NET INCOME (LOSS)............................ $ (65) $ (15) $ (18) $ 153 $ 55
====== ======= ======= ======= =======
Twelve Weeks Ended June 16, 2000
Non-
Guarantor Guarantor
Parent Subsidiaries Subsidiaries Eliminations Consolidated
-------- -------------- -------------- -------------- --------------
REVENUES..................................... $ 31 $ 45 $ 110 $ -- $ 186
Depreciation................................. (16) (22) (37) -- (75)
Property-level expenses...................... (11) (15) (37) -- (63)
Minority interest............................ (2) -- (3) -- (5)
Interest expense............................. (47) (18) (46) 7 (104)
Interest income.............................. 9 2 4 (7) 8
Net gains on property transactions........... 1 -- 1 -- 2
Equity in earnings of affiliates............. (24) (6) -- 33 3
Corporate expenses........................... (1) (3) (6) -- (10)
Other expenses............................... (3) -- (3) -- (6)
------ ------- ------- ------- -------
(Loss) income before income taxes............ (63) (17) (17) 33 (64)
(Provision for) benefit from income taxes.... (3) -- 1 -- (2)
------ ------- ------- ------- -------
(Loss) income before extraordinary item...... (66) (17) (16) 33 (66)
Extraordinary gain........................... (2) -- -- -- (2)
------ ------- ------- ------- -------
NET INCOME (LOSS)............................ $ (68) $ (17) $ (16) $ 33 $ (68)
====== ======= ======= ======= =======
-16-
HOST MARRIOTT, L.P.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Supplemental Condensed Combined Statements of Operations
(in millions)
Twenty-four Weeks Ended June 15, 2001
Guarantor Non-Guarantor
Parent Subsidiaries Subsidiaries Eliminations Consolidated
------ ------------ ------------ ------------ ------------
REVENUES..................................... $ 61 $ 95 $ 2,013 $ (312) $ 1,857
Depreciation................................. (42) (52) (85) -- (179)
Hotel operating expenses..................... -- -- (1,201) -- (1,201)
Property-level expenses...................... (15) (31) (82) -- (128)
Rental expense............................... -- -- (544) 544 --
Minority interest............................ (3) -- (9) -- (12)
Interest expense............................. (83) (54) (101) 16 (222)
Interest income.............................. 15 15 6 (16) 20
Net gains on property transactions........... (1) -- 2 -- 1
Equity in earnings of affiliates............. (62) (11) -- 77 4
Corporate expenses........................... (1) (5) (11) -- (17)
Other expenses............................... (7) (4) (2) -- (13)
------ ------- ------- ------- -------
(Loss) income before income taxes............ (138) (47) (14) 309 110
(Provision for) benefit from income taxes.... 1 1 (17) -- (15)
------ ------- ------- ------- -------
(Loss) income before extraordinary item...... (137) (46) (31) 309 95
Extraordinary gain........................... -- -- -- -- --
------ ------- ------- ------- -------
NET INCOME (LOSS)............................ $ (137) $ (46) $ (31) $ 309 $ 95
====== ======= ======= ======= =======
Twenty-four Weeks Ended June 16, 2000
Guarantor Non-Guarantor
Parent Subsidiaries Subsidiaries Eliminations Consolidated
------ ------------ ------------ ------------ ------------
REVENUES..................................... $ 57 $ 86 $ 218 $ -- $ 361
Depreciation................................. (31) (43) (75) -- (149)
Property-level expenses...................... (22) (27) (73) -- (122)
Minority interest............................ (3) -- (7) -- (10)
Interest expense............................. (79) (55) (92) 18 (208)
Interest income.............................. 20 8 7 (18) 17
Net gains on property transactions........... -- 1 2 -- 3
Equity in earnings of affiliates............. (68) (15) -- 86 3
Corporate expenses........................... (2) (6) (12) -- (20)
Other expenses............................... (7) (1) (4) -- (12)
------ ------- ------- ------- -------
(Loss) income before income taxes............ (135) (52) (36) 86 (137)
(Provision for) benefit from income taxes.... (5) 1 1 -- (3)
------ ------- ------- ------- -------
(Loss) income before extraordinary item...... (140) (51) (35) 86 (140)
Extraordinary gain........................... 3 -- -- -- 3
------ ------- ------- ------- -------
NET INCOME (LOSS)............................ $ (137) $ (51) $ (35) $ 86 $ (137)
====== ======= ======= ======= =======
-17-
HOST MARRIOTT, L.P.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Supplemental Condensed Combined Statements of Cash Flows
(in millions)
Twenty-four Weeks Ended June 15, 2001
Non-
Guarantor Guarantor
Parent Subsidiaries Subsidiaries Consolidated
-------- -------------- -------------- --------------
OPERATING ACTIVITIES
Cash from operations.................................... $ 30 $ 92 $ (40) $ 82
-------- --------- --------- ---------
INVESTING ACTIVITIES
Acquisitions............................................ (2) -- -- (2)
Capital expenditures and other investments.............. (31) (48) (65) (144)
Other................................................... 10 -- -- 10
-------- --------- --------- ---------
Cash used in investing activities ...................... (23) (48) (65) (136)
-------- --------- --------- ---------
FINANCING ACTIVITIES
Issuances of debt....................................... 115 -- 6 121
Repayment of debt....................................... (116) (2) (21) (139)
Issuances of common units............................... 2 -- -- 2
Issuances of preferred units............................ 144 -- -- 144
Distributions........................................... (159) -- -- (159)
Other................................................... (3) (2) (6) (11)
Transfers to/from Parent................................ (176) 11 165 --
-------- --------- --------- ---------
Cash (used in) provided by financing activities......... (193) 7 144 (42)
-------- --------- --------- ---------
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS.......................................... $ (186) $ 51 $ 39 $ (96)
======== ========= ========= =========
Twenty-four Weeks Ended June 16, 2000
Non-
Guarantor Guarantor
Parent Subsidiaries Subsidiaries Consolidated
-------- -------------- -------------- --------------
OPERATING ACTIVITIES
Cash from operations.................................... $ 9 $ 77 $ 162 $ 248
-------- --------- --------- ---------
INVESTING ACTIVITIES
Acquisitions............................................ (40) -- -- (40)
Capital expenditures and other investments.............. (42) (66) (77) (185)
Other................................................... 2 -- 1 3
-------- --------- --------- ---------
Cash used in investing activities ...................... (80) (66) (76) (222)
-------- --------- --------- ---------
FINANCING ACTIVITIES
Issuances of debt....................................... 207 -- 83 290
Repayment of debt....................................... (165) (2) (96) (263)
Issuances of common units............................... 2 -- -- 2
Distributions........................................... (129) -- -- (129)
Redemption or repurchase of OP Units.................... (47) -- -- (47)
Repurchase of Convertible Preferred Securities.......... (15) -- -- (15)
Other................................................... (4) (6) 24 14
Transfers to/from Parent................................ 112 (23) (89) --
-------- --------- --------- ---------
Cash used in financing activities....................... (39) (31) (78) (148)
-------- --------- --------- ---------
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS.......................................... $ (110) $ (20) $ 8 $ (122)
======== ========= ========= =========
-18-
HOST MARRIOTT, L.P.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
12. Subsequent Events
On June 16, 2001, the Company consummated an agreement with Crestline
Capital Corporation for the acquisiton of their lease agreement with
respect to San Diego Marriott Hotel and Marina (the "San Diego Hotel").
The purchase price was $4.4 million, including legal and professional
fees. Under the terms of the transaction, a wholly owned TRS of the
Company acquired the lease by purchasing the lessee entity, effectively
terminating the lease for financial reporting purposes. As a result of the
acquisition, the Company's consolidated results of operations beginning
June 16, 2001 will represent property-level hotel revenues and expenses
rather than rental income from the lessee for the San Diego Hotel. This
presentation will be consistent with the 116 properties whose lease
agreements were effectively terminated for financial reporting purposes in
the same manner on January 1, 2001.
On June 28, 2001, the Company consummated an agreement to purchase
substantially all of the minority limited partnership interests held by
Wyndham International, Inc. and affiliates ("Wyndham") with respect to
seven full service hotels for $60 million. The Company borrowed $60
million under the revolver portion of the Bank Credit Facility to fund the
purchase. In addition, the lessee entities were acquired by a wholly-owned
TRS of the Company effectively terminating the leases for financial
reporting purposes.
-19-
HOST MARRIOTT, L.P.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Forward-looking Statements
Certain matters discussed herein are forward-looking statements. We have based
these forward-looking statements on our current expectations and projections
about future events. We identify forward-looking statements in this quarterly
report on Form 10-Q by using words or phrases such as "believe," "expect," "may
be," "intend," "predict," "project," "plan," "objective," "will be," "should,"
"estimate," or "anticipate," or the negative thereof or other variations thereof
or comparable terminology. All forward-looking statements involve known and
unknown risks, uncertainties and other factors which may cause our actual
transactions, results, performance or achievements to be materially different
from any future transactions, results, performance or achievements expressed or
implied by such forward-looking statements. Although we believe the expectations
reflected in such forward-looking statements are based upon reasonable
assumptions, we can give no assurance that we will attain these expectations or
that any deviations will not be material. Except as other required by the
federal securities laws, we disclaim any obligations or undertaking to publicly
release any updates or revisions to any forward-looking statement contained in
this quarterly report on Form 10-Q to reflect any change in our expectations
with regard thereto or any change in events, conditions or circumstances on
which any such statement is based.
Results of Operations
During 2000, our revenues primarily represented rental income from Crestline and
other third-party lessees. As a result of the previously discussed acquisition
of the Crestline lessees by our TRS, beginning in 2001, our consolidated results
of operations primarily reflect hotel-level revenues and operating costs and
expenses. In order to provide a clearer understanding and comparability of our
results of operations, in addition to our discussion of the historical results
we have also presented unaudited pro forma condensed consolidated statements of
operations for the twelve and twenty-four weeks ended June 16, 2000, adjusted to
reflect the acquisition of the Crestline Lessee Entities as if it occurred on
January 1, 2000, and a discussion of the results thereof compared to our
historical results for the twelve and twenty-four weeks ended June 15, 2001,
beginning on page 23.
2001 Compared to 2000 (Historical)
Revenues. Revenues increased $802 million for the twelve weeks ended June 15,
2001 when compared to the twelve weeks ended June 16, 2000, and increased $1,496
million for the twenty-four weeks ended June 15, 2001, when compared to the
twenty-four weeks ended June 15, 2000. As discussed above, our revenues and
operating profit are not comparable to 2000, due to the acquisition of the
Crestline Lessee Entities by our TRS.
The table below presents gross hotel sales for the twelve weeks ended June 15,
2001 and June 16, 2000 and the twenty-four weeks ended June 15, 2001 and June
16, 2000. For 2000, gross hotel sales were used as the basis for calculating
rental income. The data is presented in order to facilitate an investor's
understanding and comparative analysis of the operations of our properties.
-20-
HOST MARRIOTT, L.P.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Twelve Weeks Ended Twenty-four Weeks Ended
--------------------------------- --------------------------------
June 15, 2001 June 16, 2000 June 15, 2001 June 16, 2000
------------- ------------- ------------- -------------
(in millions) (in millions)
Hotel sales
Rooms............................... $ 686 $ 710 $ 1,310 $ 1,323
Food and beverage................... 314 330 590 604
Other............................... 81 82 154 153
--------------- --------------- --------------- ---------------
Total hotel sales................ $ 1,081 $ 1,122 $ 2,054 $ 2,080
=============== =============== =============== ===============
The $26 million decrease in hotel sales for the twenty-four weeks ended June 15,
2001 reflects the decrease in REVPAR for our comparable properties of 3.2% to
$120.77, partially offset by incremental revenues provided by the 500-room
expansion at Orlando Marriott, which was placed in service in June 2000, and the
inclusion of three hotels in total hotel sales as a result of the consolidation
of Rockledge and Fernwood as of March 24, 2001.
Comparable REVPAR for the second quarter of 2001 decreased by 6.1% to $121.81
compared to the same quarter in 2000 due to the recent slowdown in the economy.
The decrease is mainly attributable to a decrease in occupancy of 6.1 percentage
points during the quarter. As a result of decreased hotel sales, our hotel
managers have implemented cost cutting measures and revenue enhancement programs
at the property level in order to stabilize house profit. These measures include
increasing labor efficiency particularly at the managerial level and in the food
and beverage areas at the hotels, reducing discretionary expenses in rooms, food
and beverage, and repairs and maintenance and reducing energy consumption. As a
result, operating profit margins were down only .9 and 1.5 percentage points for
the quarter and year-to-date, respectively, in spite of the significant REVPAR
decline, reflecting a significant improvement from the first quarter.
Rental income decreased $155 million, or 83%, to $31 million for the second
quarter of 2001 versus the first quarter of 2000, reflecting the purchase of 116
of the Crestline lease entities by our wholly owned TRS effective January 1,
2001. As discussed in Note 2 to the condensed consolidated financial statements,
percentage rental revenues from third-party lessees of $15 million and $291
million for the twenty-four weeks ended June 15, 2001 and June 16, 2000,
respectively, were deferred on the balance sheet as deferred rent. For the
second quarter of 2001 and 2000, $8 million and $168 million of rental income
was deferred. Percentage rent will be recognized as income only as specified
hotel sales thresholds are achieved.
Depreciation and Amortization. Depreciation and amortization increased $27
million or 36% for the second quarter of 2001 versus the second quarter of 2000
and increased $30 million, or 20% year-to-date, primarily reflecting an increase
in depreciable assets. The increase in depreciation expense reflects the
consolidation of three hotels and other equipment as a result of the purchase of
the voting interest in Rockledge and Fernwood as discussed in Note 6. The
transaction caused an increase in depreciable assets of $206 million.
Additionally, a $13 million impairment charge was recorded in depreciation
expense during the second quarter due to the reclassification of certain fixed
assets of the Company from held for use to held for sale. It is also the result
of $379 million in capital expenditures in 2000 and $144 million in capital
expenditures in the first and second quarter of 2001 including the completion of
the 500-room addition to the Orlando World Center Marriott.
Hotel Operating Costs and Expenses. As discussed above, 2001 hotel revenues and
operating costs are not comparable with 2000. During 2000, Crestline, as the
lessee, paid specified direct property-level
-21-
HOST MARRIOTT, L.P.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
costs including management fees, which reduced the net rent payment to us under
the terms of the leases. During 2001, these costs are borne by us and are
included in our condensed consolidated results of operations.
Corporate Expenses. Corporate expenses decreased $1 million for the second
quarter of 2001 and $3 million year-to-date from prior year levels, due
primarily to cost control efforts.
Minority Interest Expense. Minority interest expense remained stable at $5
million in the second quarter of 2001 and 2000 and increased 20% to $12 million
year-to-date, primarily due to increased distributions to minority partners in
the partnerships that we consolidate.
Interest Expense. Interest expense increased 8% to $112 million in the second
quarter of 2001 and increased 7% to $222 million year-to-date, primarily due to
the issuance in October of 2000 of $250 million of 9 1/4% Series F Senior Notes,
which was primarily used to fund the purchase of the Crestline lessee Entities
and for general corporate purposes.
Extraordinary Gain. During the first quarter of 2000, we extinguished
approximately $22 million of the convertible debt obligation to Host REIT
through the purchase of 435,000 shares of Host REIT's Convertible Preferred
Securities on the open market. We recorded an extraordinary gain of
approximately $5 million on this transaction, net of income tax expense of $1
million, based on the discount at which we purchased the Convertible Preferred
Securities. During the second quarter of 2000, we recorded an extraordinary loss
of approximately $2 million representing the write off of deferred financing
costs and certain fees paid to our lender in connection with the renegotiation
of the bank credit facility.
Net Income (Loss). Our net income was $55 million for the second quarter of 2001
compared to a net loss of $68 million for the second quarter of 2000. Year to
date, our net income was $95 million as of June 15, 2001 compared to a net loss
of $137 million at June 16, 2000, primarily reflecting the acquisition of the
Crestline lease entities effective January 1, 2001, thereby eliminating amounts
paid to Crestline as lessee for 116 of our properties and the effect of the
deferral of contingent rent, which was approximately $168 million and $291
million for the second quarter and year-to-date 2000 with respect to the 116
hotels.
Net Income (Loss) Available to Common Unitholders. The net income available to
common unitholders was $46 million for the second quarter of 2001, an increase
of $119 million over the second quarter of 2000. The net income available to
common unitholders increased $228 million to $81 million year-to-date. These
increases reflect the previously discussed $123 million and $232 million
increases in our net income, respectively. The difference was slightly offset by
a $4 million increase in distributions on preferred limited partner units, due
to the sale of $600 million preferred limited partner units during second
quarter.
2001 (Historical) Compared to 2000 (Pro Forma)
Because of the significant changes to our corporate structure as a result of our
acquisition of the Crestline Lessee Entities effective January 1, 2001,
management believes that a discussion of our 2001 historical results of
operations compared to our 2000 pro forma results of operations is meaningful
and relevant to an investor's understanding of our present and future
operations. The unaudited pro forma results of operations for the twelve weeks
and twenty-four weeks ended June 16, 2000 set forth below are based on the
unaudited condensed consolidated statements of operations for the twelve weeks
and twenty-four
-22-
HOST MARRIOTT, L.P.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
weeks ended June 16, 2000 and are only adjusted to reflect the acquisition of
the Crestline lessee entities as if the transaction occurred at the beginning of
2000. The following pro forma results do not include adjustments for any
transactions other than the Crestline lease repurchase and are not presented in
accordance with Article 11 of SEC Regulation S-X.
As a result of the Crestline acquisition, effective January 1, 2001, we lease
116 (124 subsequent to quarter end) of our full-service hotels to our TRS. Our
2001 consolidated operations primarily represent property-level revenues and
expenses rather than rental income from Crestline. In addition, the net income
applicable to the TRS is subject to federal and state income taxes. The pro
forma adjustments to reflect the acquisition of the Crestline lessee entities
are as follows:
. record hotel-level revenues and expenses and reduce historical rental
income with respect to the 116 properties (The effect of the
additional eight leases acquired subsequent to quarter end would not
result in a material change to these amounts.);
. reduce historical interest income for amounts related to the working
capital note with Crestline;
. reduce historical equity in earnings of affiliates for interest
earned at our non-controlled subsidiary on the related FF&E loans
with Crestline;
. record interest expense related to the additional borrowings from the
9 1/4% Series F senior notes to fund the $207 million cash payment;
. record the minority interest effect related to the outside ownership
in the operating partnership; and
. record the tax provision attributable to the income of the TRS at an
effective tax rate of 39.5%.
The unaudited pro forma financial information does not purport to represent what
our results of operations or financial condition would actually have been if the
transaction had in fact occurred at the beginning of 2000, or to project our
results of operations or financial condition for any future period. The
unaudited pro forma financial information is based upon available information
and upon assumptions and estimates that we believe are reasonable under the
circumstances. The following unaudited pro forma financial information should be
read in conjunction with our audited financial statements contained in our
annual report on Form 10-K for the year ended December 31, 2000.
-23-
HOST MARRIOTT, L.P.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
UNAUDITED STATEMENTS OF OPERATIONS
For the Twelve Weeks Ended June 15, 2001 (Historical) and June 16, 2000
(Pro Forma) (in millions, except per share amounts)
Historical Pro Forma
June 15, 2001 June 16, 2000
------------- -------------
(unaudited)
REVENUES
Hotel sales
Rooms........................................................................... $ 589 $ 605
Food and beverage............................................................... 295 308
Other........................................................................... 73 73
------------- -------------
Total hotel sales.......................................................... 957 986
Rental income...................................................................... 31 30
------------- -------------
Total revenues............................................................. 988 1,016
------------- -------------
OPERATING COSTS AND EXPENSES
Hotel operating expenses
Rooms........................................................................... 135 138
Food and beverage............................................................... 208 218
Hotel departmental costs and deductions...................................... 232 229
Management fees and other....................................................... 54 62
Other property-level expenses................................................... 67 63
Depreciation and amortization................................................... 102 75
------------- -------------
Total hotel operating costs and expenses................................... 798 785
Corporate expenses................................................................. 9 10
Lease repurchase expenses.......................................................... 5 --
Other.............................................................................. 6 6
------------- -------------
OPERATING PROFIT..................................................................... 170 215
Minority interest expense.......................................................... (5) (5)
Interest income.................................................................... 12 7
Interest expense................................................................... (112) (109)
Net gains on property transactions................................................. -- 2
Equity in earnings of affiliates................................................... 2 3
------------- -------------
INCOME BEFORE INCOME TAXES......................................................... 67 113
Provision for income taxes......................................................... (12) (10)
------------- -------------
INCOME BEFORE EXTRAORDINARY ITEMS.................................................. 55 103
------------- -------------
Less:
Distributions on preferred limited partner interest................................ (9) (5)
INCOME BEFORE EXTRAORDINARY ITEMS AVAILABLE TO
COMMON UNITHOLDERS.............................................................. $ 46 $ 98
============= =============
Basic income before extraordinary items per unit................................... $ .16 $ .35
============= =============
-24-
UNAUDITED STATEMENTS OF OPERATIONS
For the Twenty-four Weeks Ended June 15, 2001 (Historical) and June 16, 2000
(Pro Forma) (in millions, except per share amounts)
Historical Pro Forma
June 15, 2001 June 16, 2000
------------- -------------
(unaudited)
REVENUES
Hotel sales
Rooms........................................................................... $ 1,110 $ 1,117
Food and beverage............................................................... 548 558
Other........................................................................... 137 137
------------- -------------
Total hotel sales.......................................................... 1,795 1,812
Rental income...................................................................... 62 63
------------- -------------
Total revenues............................................................. 1,857 1,875
------------- -------------
OPERATING COSTS AND EXPENSES
Hotel operating expenses
Rooms........................................................................... 256 259
Food and beverage............................................................... 399 401
Hotel departmental costs and deductions...................................... 440 429
Management fees and other....................................................... 106 113
Other property-level expenses................................................... 128 122
Depreciation and amortization................................................... 179 149
------------- -------------
Total hotel operating costs and expenses................................... 1,508 1,473
Corporate expenses................................................................. 17 20
Lease repurchase expense........................................................... 5 --
Other.............................................................................. 8 12
------------- -------------
OPERATING PROFIT..................................................................... 319 370
Minority interest expense.......................................................... (12) (10)
Interest income.................................................................... 20 15
Interest expense................................................................... (222) (218)
Net gains on property transactions................................................. 1 3
Equity in earnings affiliates...................................................... 4 3
------------- -------------
INCOME BEFORE INCOME TAXES......................................................... 110 163
Provision for income taxes......................................................... (15) (15)
------------- -------------
INCOME BEFORE EXTRAORDINARY ITEMS.................................................. 95 148
------------- -------------
Less:
Distributions on preferred limited partner interest................................ (14) (10)
INCOME BEFORE EXTRAORDINARY ITEMS AVAILABLE TO $ 81 $ 138
============= =============
Basic income before extraordinary items per unit................................... $ .28 $ .49
============= =============
-25-
HOST MARRIOTT, L.P.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Revenues. Revenues decreased $28 million, or 3%, to $988 million for the second
quarter of 2001 from $1,016 million for the second quarter of 2000. Year-to-date
revenues decreased $18 million, or 1% to $1,857 million. Hotel sales, which
include room sales, food and beverage sales, and other ancillary sales such as
telephone sales, decreased $29 million, or 3%, to $957 million for the second
quarter of 2001 and $17 million, or 1%, to $1,795 million year-to-date,
reflecting primarily a decrease in REVPAR for our comparable properties of 6.1%
to 121.81. This decrease in REVPAR was partially offset by the incremental
revenues provided by the Tampa Waterside Marriott, which opened in February of
2000, the 500-room expansion at the Orlando World Center Marriott, which was
placed in service in June 2000, and the operations of the St. Louis Marriott
Pavilion Downtown, JW Marriott Hotel, Mexico City, and the Mexico City Airport
Marriott Hotel which were consolidated as of March 24, 2001.
Hotel Operating Costs and Expenses. Hotel operating costs and expenses
principally consist of property-level operating costs, management fees, real and
personal property taxes, ground, building and equipment rent, insurance,
depreciation, and certain other costs. Hotel operating costs and expenses
increased $13 million, or 2% to $798 million for the second quarter of 2001
compared to second quarter 2000 and year-to-date 2001 costs increased $35
million, or 2% to $1,508 million from the same period in 2000, primarily due to
a $27 million and $30 million increase in depreciation expense for second
quarter and year-to-date 2001. The increase in depreciation expense was
partially offset by a decrease in property-level costs and management fees and
other of $14 million for the second quarter of 2001 in part reflecting
cost-cutting measures implemented at the property level by our managers during
the second quarter. Rooms, food and beverage, and hotel departmental costs and
deductions were 60% and 59% of hotel sales for the second quarters of 2001 and
2000, respectively, and 61% and 60% for the second quarter year-to-date for 2001
and 2000, respectively, reflecting the decrease in hotel sales and the
corresponding decrease in property-level expenses in the second quarter.
Operating Profit. As a result of the changes in revenues and operating costs and
expenses discussed above, our operating profit decreased $45 million, or 21%, to
$170 million in the second quarter of 2001. Year-to-date 2001, the operating
profit decreased $51 million, or 14% to $319 million compared to 2000. Operating
profit was approximately 17% and 21% of total revenues for the second quarters
of 2001 and 2000, respectively, and 17% and 20% for the second quarter
year-to-date for 2001 and 2000, respectively.
Minority Interest. Minority interest expense increased $2 million to $12 million
year-to-date for 2001 primarily due to the increase in distributions to minority
partners in the partnerships that we consolidate. Minority interest remained
unchanged quarter-over-quarter at $5 million.
Income Tax Provision. In addition to state and foreign taxes applicable to us,
the TRS is subject to federal and state income taxes. The income tax provision
increased $2 million to $12 million for the second quarter of 2001, due to
increased income earned by the TRS during the second quarter of 2001. The income
tax provision was $15 million for both 2001 and 2000, year-to-date.
Income Before Extraordinary Items Available to Common Unitholders. Income Before
Extraordinary Items Available to Common Unitholders for the second quarter 2001
was $46 million compared to $98 million for 2000. Basic income before
extraordinary items per unit was $.16 and $.35 for the second quarters of 2001
and 2000, respectively. Income before extraordinary item available to common
Unitholders year-to-date 2001 was $81 million compared to $138 million
year-to-date 2000. Basic income before extraordinary items per unit was $.28 and
$.49 year- to-date 2001 and 2000, respectively.
-26-
HOST MARRIOTT, L.P.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
FFO and EBITDA
--------------
We consider Comparative Funds From Operations ("Comparative FFO"), which
consists of Funds From Operations, as defined by the National Association of
Real Estate Investment Trusts, adjusted for significant non-recurring items
detailed in the chart below, and our consolidated earnings before interest
expense, income taxes, depreciation, amortization and other non-cash items
(including contingent rent) ("EBITDA") to be indicative measures of our
operating performance due to the significance of our long-lived assets.
Comparative FFO and EBITDA are also useful in measuring our ability to service
debt, fund capital expenditures and expand our business. Furthermore, management
believes that Comparative FFO and EBITDA are meaningful disclosures that will
help shareholders and the investment community to better understand our
financial performance, including comparing our performance to other real estate
investment trusts. However, Comparative FFO and EBITDA as presented may not be
comparable to amounts calculated by other companies. This information should not
be considered as an alternative to net income, operating profit, cash from
operations, or any other operating or liquidity performance measure prescribed
by accounting principles generally accepted in the United States. Cash
expenditures for various long-term assets, interest expense (for EBITDA purposes
only) and income taxes have been, and will be incurred which are not reflected
in the EBITDA and Comparative FFO presentations.
Comparative FFO available to common unitholders decreased $4 million, or 2%, to
$168 million in the second quarter of 2001 compared to the first quarter of
2000. Year-to-date, comparative FFO available to common unitholders increased $3
million, or 1% over 2000. The following is a reconciliation of the income (loss)
before extraordinary items to Comparative FFO (in millions):
Twelve Weeks Ended Twenty-four Weeks Ended
------------------------------- -------------------------------
June 15, 2001 June 16, 2000 June 15, 2001 June 16, 2000
------------- ------------- ------------- -------------
Funds from Operations
Income (loss) before extraordinary item.................... $ 55 $ (66) $ 95 $ (140)
Depreciation and amortization.............................. 100 74 176 146
Partnership adjustments.................................... 10 2 18 5
Other real estate activities............................... 1 (1) 1 (1)
----------- ----------- ----------- -----------
Funds from operations of Host LP.............................. 166 9 290 10
Effect on funds from operations of SAB 101................. 8 168 15 291
Loss on repurchase of leases............................... 5 -- 5 --
Taxes on lease repurchase.................................. (2) -- (2) --
----------- ----------- ----------- -----------
Comparative funds from operations of Host LP.................. 177 177 308 301
Distributions on preferred units........................... (9) (5) (14) (10)
----------- ----------- ----------- -----------
Comparative funds from operations of Host LP
available to common unitholders............................ $ 168 $ 172 $ 294 $ 291
=========== =========== =========== ===========
EBITDA increased $22 million, or 8%, to $304 million in the second quarter of
2001, and increased $29 million, or 6%, to $542 million, year-to-date over the
comparable periods in 2000. Hotel EBITDA was $291 million and $120 million for
the second quarters of 2001 and 2000, which does not include deferred rental
income of $8 million and $168 million, respectively, and $526 million and $233
million year-to-date, which does not include deferred rental income of $15
million and $291 million, respectively. As previously discussed, 2001 Hotel
EBITDA primarily reflects the revenues and expenses generated by the hotels,
whereas 2000 Hotel EBITDA primarily reflects rental income from lessees.
The following schedule presents our EBITDA as well as a reconciliation of EBITDA
to the income (loss) before extraordinary items (in millions):
-27-
HOST MARRIOTT, L.P.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Twelve Weeks Ended Twenty-four Weeks Ended
------------------------------- -------------------------------
June 15, 2001 June 16, 2000 June 15, 2001 June 16, 2000
------------- ------------- ------------- -------------
EBITDA
Hotels.................................................. $ 291 $ 120 $ 526 $ 233
Office buildings and other investments.................. 9 2 9 3
Interest income......................................... 12 8 20 17
Corporate and other expenses............................ (16) (16) (28) (31)
Effect on revenue of SAB 101............................ 8 168 15 291
----------- ----------- ----------- -----------
EBITDA of Host LP.......................................... $ 304 $ 282 $ 542 $ 513
=========== =========== =========== ===========
Twelve Weeks Ended Twenty-four Weeks Ended
------------------------------- -------------------------------
June 15, 2001 June 16, 2000 June 15, 2001 June 16, 2000
------------- ------------- ------------- -------------
EBITDA of Host LP.......................................... $ 304 $ 282 $ 542 $ 513
Effect on revenue of SAB 101............................... (8) (168) (15) (291)
Interest expense........................................... (112) (104) (222) (208)
Income taxes............................................... (12) (2) (15) (3)
Depreciation and amortization.............................. (102) (75) (179) (149)
Minority interest expense.................................. (5) (5) (12) (10)
Lease repurchase expense................................... (5) -- (5) --
Other non-cash charges, net................................ (5) 6 1 8
----------- ----------- ----------- -----------
Income (loss) before extraordinary item................. $ 55 $ (66) $ 95 $ (140)
=========== =========== =========== ===========
Our interest coverage, defined as EBITDA divided by cash interest expense, was
2.7 times for both the 2001 and 2000 twenty-four week periods, respectively, and
2.4 times for full year 2000. The ratio of earnings to fixed charges was 1.5 to
1.0 in the second quarter of 2001 versus a deficiency of earnings to fixed
charges of $123 million for the second quarter of 2000, which was primarily due
to the deferral of contingent rental revenue of $291 million. We reported a
ratio of earnings to fixed charges of 1.2 to 1.0 for the full year 2000.
Cash Flows and Financial Condition
We reported a decrease in cash and cash equivalents of $96 million during the
twenty-four weeks ended June 15, 2001 compared to a decrease of $122 million
during the twenty-four weeks ended June 16, 2000. Cash from operations was $79
million through the second quarter of 2001 and $248 million through the second
quarter of 2000. The $169 million decrease in cash from operations primarily
relates to the cash used to acquire the Crestline Lessee Entities. Cash flow
from operations would have been $283 million, or an increase of 14% over 2000.
Cash used in investing activities was $136 million and $222 million for the
second quarter of 2001 and 2000, respectively. Cash used in investing activities
for the second quarter includes capital expenditures and other investments of
$144 million and $185 million for 2001 and 2000, respectively, mostly related to
renewal and replacements on existing properties and new development projects.
Property and equipment balances include $115 million and $135 million for
construction in progress as of June 15, 2001 and December 31, 2000,
respectively. The balance as of June 15, 2001 primarily relates to the
development of the Ritz-Carlton, Naples Golf Resort and various other expansion
and development projects. On April 1, 2001, the 50,000 square foot world-class
spa at The Ritz-Carlton, Naples was placed in service at an approximate
development cost of $23 million.
Cash used in financing activities was $39 million through the second quarter of
2001 and $148 million through the second quarter of 2000. 2001 Cash from
financing activities through the second quarter of
-28-
HOST MARRIOTT, L.P.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERAIONS AND FINANCIAL CONDITION
2001 includes $121 million of debt issuances and $144 million from the issuance
of preferred limited partner units. Cash was used in financing primarily for
$159 million in limited partner distributions and the repayment and prepayment
of $139 million of debt. During the first quarter of 2001, the Company borrowed
$115 million under the revolver portion of the Bank Credit Facility to partially
fund the acquisition of the Crestline Lessee Entities as well as for general
corporate purposes, which was repaid in the second quarter of 2001. During the
third quarter, we borrowed an additional $60 million to purchase minority
interests in various hotels from Wyndham. As of June 25, 2001, $150 million and
$60 million are outstanding under the term and revolving loan portions of the
Bank Credit Facility, respectively, and the available capacity under the
revolver is $565 million.
On June 18, 2001, the Board of Directors of Host Marriott declared cash
distributions of $26 per unit of limited partnership interest and $.625 per
cumulative redeemable preferred limited partner unit, which were paid on July
13, 2001 to shareholders of record on June 30, 2001.
On March 27, 2001, Host Marriott sold approximately 6.0 million shares of 10%
Class C preferred stock ("Class C Preferred Stock") with a $0.01 par value for
net proceeds of $144 million and we issued an equivalent security, the Class C
Preferred Units to Host Marriott. Holders of the Class C Preferred Stock are
entitled to receive cumulative cash dividends at a rate of 10% per annum of the
$25 per share liquidation preference. Dividends are payable quarterly in arrears
commencing April 15, 2001, on which date a pro rata dividend of $0.03 per share
was distributed. A corresponding distribution on the Class C Preferred Units is
also payable quarterly in arrears commencing on the same date. Beginning March
27, 2006, Host Marriott has the option to redeem the Class C Preferred Stock for
$25.00 per share, plus accrued and unpaid dividends to the date of redemption.
Effective January 1, 2001, each of Rockledge Hotel Properties, Inc. and Fernwood
Hotel Assets, Inc. (the "Non-Controlled Subsidiaries") elected to be a TRS and
in April 2001, the Operating Partnership acquired the voting interests in the
Non-Controlled Subsidiaries held by the Host Marriott Statutory
Employee/Charitable Trust for approximately $2 million, which is also permitted
as a result of the REIT Modernization Act. Subsequent to the acquisition, on a
consolidated basis our results of operations will reflect the revenues and
expenses generated by the two taxable corporations, and our consolidated balance
sheets include the various assets, consisting of three additional full- service
properties, one located in St. Louis, Missouri, and two located in Mexico City,
Mexico, as well as certain joint venture interests, and related liabilities held
by the two taxable corporations, which were approximately $356 million of assets
and $262 million of liabilities, including $54 million of third party debt ($26
million of which matures in 2001), respectively, as of March 23, 2001.
On February 7, 2001, May 7, 2001 and May 29, 2001, Blackstone converted 12.5
million, 10.0 million and 18.2 million OP Units, respectively, to common shares
of Host REIT and immediately sold them to an underwriter for sale on the open
market. As a result of the transactions, Blackstone now owns approximately 1% of
the outstanding OP Units of the Operating Partnership and Host REIT increased
its ownership in the Operating Partnership to 92%. Neither Host REIT nor the
Operating Partnership received proceeds as a result of the transactions.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Our borrowings under the bank credit facility as well as the mortgage on The
Ritz-Carlton, Amelia Island are sensitive to changes in interest rates. The
interest rates on these debt obligations, which were $238 million and $239
million, respectively, at June 15, 2001 and December 31, 2000 are based on
various
-29-
HOST MARRIOTT, L.P.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERAIONS AND FINANCIAL CONDITION
LIBOR terms plus 200 basis points. The weighted average interest rate for these
financial instruments are 6.7% for the twenty-four weeks ended June 15, 2001 and
8.9% for the year ended December 31, 2000.
-30-
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The Company is involved in routine litigation and administrative proceedings
arising in the ordinary course of business, some of which are expected to be
covered by liability insurance and which collectively are not expected to have a
material adverse effect on the business, financial condition or results of
operations of the Company.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 6. Reports on Form 8-K
b. Reports on Form 8-K
. May 8, 2001 -- The Company, Host REIT, and various entities affiliated
with The Blackstone Group entered into an Underwriting Agreement dated
as of May 2, 2001 with Salomon Smith Barney, Inc. Host REIT agreed to
issue to the Blackstone Entities 10,000,000 shares of its common stock
upon redemption of units of limited partnership interest in Host LP
and The Blackstone Group agreed to sell to Smith Barney, Inc. the
10,000,000 shares of Host REIT stock for delivery on May 8, 2001.
. June 4, 2001 -- The Company, Host REIT, and various entities
affiliated with The Blackstone Group entered into an Underwriting
Agreement dated as of May 2, 2001 with Salomon Smith Barney, Inc. Host
REIT agreed to issue to the Blackstone Entities 18,200,000 shares of
its common stock upon redemption of units of limited partnership
interest in Host LP and The Blackstone Group agreed to sell to Smith
Barney, Inc. the 18,200,000 shares of Host REIT stock for delivery on
June 4, 2001.
-31-
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 thereunto duly authorized.
HOST MARRIOTT, L.P.
BY: HOST MARRIOTT CORPORATION
Its General Partner
July 27, 2001 /s/ Donald D. Olinger
------------- ---------------------
Date Donald D. Olinger
Senior Vice President and
Corporate Controller
(Chief Accounting Officer)
-32-