EXHIBIT 99.1
FOR IMMEDIATE RELEASE
Host Marriott Corporation
Terence C. Golden, President & CEO
(301) 380-7774
Christopher J. Nassetta, Executive Vice President and COO
(301) 380-6138
Robert E. Parsons, Jr. Executive Vice President & CFO
(301) 380-7209
Investors: Media: The Blackstone Group:
Jim Francis, Assistant Treasurer Owen Blicksilver Stephen A. Schwarzman, President & CEO
(301) 380-1974 (212) 303-7603 (212) 836-9823
Geoffrey Wendt, Mgr. Investor Relations Doug Donsky Thomas J. Saylak, Senior Managing Director
(301) 380-5694 (212) 303-7608 (212) 836-9895
HOST MARRIOTT CORPORATION TO ADD
WORLD-CLASS LUXURY HOTEL PORTFOLIO FOR $1.775 BILLION;
THE BLACKSTONE GROUP TO CONTRIBUTE INTERESTS IN
13 U.S. HOTELS IN EXCHANGE FOR A SIGNIFICANT EQUITY STAKE IN HOST MARRIOTT;
REORGANIZATION AS REAL ESTATE INVESTMENT TRUST,
SPIN OFF OF SENIOR LIVING BUSINESS PLANNED
- -- Addition of Blackstone Hotel Portfolio Launches Multi-Branding Strategy
- -- Strategic Initiatives Expected to Add $0.26 Per Share to 1999 FFO
BETHESDA, MD, April 17, 1998 Host Marriott Corporation (NYSE: HMT) announced
today that it has reached a definitive agreement with various affiliates of The
Blackstone Group and Blackstone Real Estate Partners (collectively "Blackstone")
to acquire interests in 13 world-class luxury hotels in the U.S. and certain
other assets in a transaction valued at approximately $1.775 billion, including
the assumption of debt. Following the transaction, Blackstone will have the
largest ownership interest in Host Marriott on a fully diluted basis.
This strategic combination will solidify Host Marriott's reputation as the
nation's leading owner of luxury hotels and launches a new multi-branding
strategy for the Company.
In addition, Host Marriott announced that its Board of Directors has
authorized the Company to reorganize its business operations to qualify as a
real estate investment trust (REIT), effective as of January 1, 1999, and to
spin off its senior living communities business (the "Senior Living Communities
Company") through a taxable stock dividend to its shareholders.
"Today is an historic moment in our Company's history," said Terence C.
Golden, President and Chief Executive Officer of Host Marriott. "As a result of
these strategic initiatives, the Company has dramatically increased its growth
potential, further solidified its position as the leading owner of luxury
hotels, significantly strengthened its financial position, and increased its
overall competitiveness by lowering its cost of capital. Host Marriott
continues to foster its reputation as the nation's preeminent `blue chip' hotel
ownership company."
THE BLACKSTONE HOTEL PORTFOLIO
Host Marriott expects to pay approximately $835 million in cash and assumed
debt and to issue approximately 47 million Operating Partnership units of the
new operating partnership (the "Operating
Partnership") to be formed as part of the REIT conversion at $20 per Operating
Partnership unit (subject to adjustments to reflect any partial interests). Each
Operating Partnership unit will be exchangeable for one share of Host Marriott
common stock (or its cash equivalent). Upon completion of the acquisition,
Blackstone will own approximately 19% of the primary shares outstanding of Host
Marriott common stock on a fully converted basis. John Schreiber, co-chairman of
the Blackstone Real Estate Partners' Investment Committee, will join the Board
of Directors of Host Marriott in the next 60 days.
The Blackstone portfolio is one of the premier collections of hotel real
estate properties. It includes two Ritz-Carltons, three Four Seasons, one Grand
Hyatt, three Hyatt Regencies and four Swissotel properties. The Blackstone
transaction is expected to close simultaneously with the reorganization of Host
Marriott as a REIT. At that time, Blackstone's hotels and other assets will be
contributed into the Operating Partnership. The hotels will continue to be
managed under existing management contracts.
"The Blackstone portfolio is one of the highest quality collections of
properties in the world. These hotels are located in major urban and
convention/resort markets with significant barriers to new competition. Given
the quality of this portfolio and the lack of new competition, we anticipate
significant upside in the performance of these properties," said Christopher J.
Nassetta, Executive Vice President and Chief Operating Officer of Host Marriott.
"This transaction more than triples our acquisition target for 1998, and greatly
accelerates the implementation of our multi-brand strategy."
Stephen A. Schwarzman, President & CEO of The Blackstone Group, commented,
"We are big believers in the prospects for Host's multi-brand full-service hotel
strategy and see this transaction as a way of broadening and diversifying our
asset base with an experienced, savvy management team."
Located in eight states, the Blackstone hotels in which Host Marriott will
acquire a controlling interest include: The Ritz-Carlton, Amelia Island (449
rooms); The Ritz-Carlton, Boston (275 rooms); Hyatt Regency Burlingame at San
Francisco Airport (793 rooms); Hyatt Regency Cambridge, Boston (469 rooms);
Hyatt Regency Reston, Virginia (514 rooms); Grand Hyatt Atlanta (439 rooms);
Four Seasons Philadelphia (365 rooms); Four Seasons Atlanta (246 rooms); The
Drake (Swissotel) New York (494 rooms); Swissotel Chicago (630 rooms); Swissotel
Boston (498 rooms); and Swissotel Atlanta (348 rooms). Additionally, the
transaction includes: the first mortgage loan on the Four Seasons Beverly Hills
(285 Rooms) as well as a letter of intent to purchase the equity interest in the
property; two office buildings in Atlanta -- The offices at The Grand (97,879
sq. ft.) and the offices at the Swissotel (67,110 sq. ft.); and a 25% interest
in the Swissotel U.S. Management Company.
The purchase is expected to be accretive to funds from operations (FFO) and
to generate earnings before interest expense, taxes, depreciation, amortization
and other non-cash items (EBITDA) of approximately $183 million in 1999, the
first full year the assets will be owned by Host Marriott.
Host Marriott's acquisition of the Blackstone portfolio is subject to
certain conditions, including Host Marriott's conversion to a REIT by March 31,
1999.
Merrill Lynch acted as advisor on the transaction for the Company. Bear
Stearns & Company, Inc. advised Blackstone on the transaction.
REIT REORGANIZATION
After the REIT reorganization, which is subject to stockholder and final
Board of Directors approval, Host Marriott Corporation intends to operate as an
"UPREIT," with all of its assets and operations conducted through the newly
formed Operating Partnership of which Host Marriott will be the general partner.
Marriott International's role in managing Marriott hotels owned by Host Marriott
will be unchanged.
"The proposed REIT reorganization will maximize shareholder value, both
over the short- and long-term," said Mr. Golden. "After an extensive analysis
of alternatives, we concluded that the REIT structure would provide superior
results through changing economic conditions and all phases of the hotel cycle."
In connection with the reorganization, Host Marriott anticipates
repurchasing or exchanging its approximately $1.55 billion of outstanding debt
securities, adjusting the conversion ratio of its Quarterly Income Preferred
Securities ("QUIPS") to reflect the distribution of the Senior Living
Communities Company stock and cash to Host Marriott stockholders, and issuing
additional debt and equity securities.
"This step will further improve our financial flexibility and allow us to
continue to strengthen our balance sheet," added Robert E. Parsons, Jr.,
Executive Vice President and Chief Financial Officer of Host Marriott. "We will
be able to compete more effectively with other public lodging real estate
companies, which already are organized as REITs, and to improve investor
understanding of Host Marriott, thus making performance comparisons with our
peers more meaningful. With our initial dividend yield expected to be
approximately 4%, we believe our shareholder base will expand to include
investors attracted by yield and asset quality."
OPERATING PARTNERSHIP
Following the reorganization, Host Marriott will own Operating Partnership
units in the Operating Partnership equal to the number of outstanding shares of
Host Marriott common stock at the time of the conversion. The UPREIT structure
will not affect the ownership by stockholders of their existing Host Marriott
shares.
As part of the reorganization, limited partners in Host Marriott full-
service hotel partnerships and joint ventures are expected to be given an
opportunity to receive, on a tax-deferred basis, Operating Partnership units in
the new Operating Partnership in exchange for their current partnership
interests.
As a REIT, Host Marriott will continue its strategy of aggressively
acquiring and owning high quality lodging real estate with prospects for
significant long-term capital appreciation. The Company has added 68 hotels
with an aggregate investment value of $3.5 billion from the beginning of 1994
through the end of 1997. Management intends to continue growing the Company's
portfolio through acquisitions of Marriott hotels and of multi-branded full
service lodging properties, expansion of existing hotels and selected new
development where market conditions offer favorable economics.
"We believe this conversion will help us significantly in reaching our
growth targets," said Mr. Nassetta. "We will continue to acquire hotels in the
Marriott and Ritz-Carlton pipeline, properties where we can add value by
conversion to the Marriott brand, and select non-Marriott hotels, such as those
in the Blackstone portfolio, that meet our quality and performance standards."
SENIOR LIVING SPIN-OFF
Host Marriott will distribute shares in the Senior Living Communities
Company to Host Marriott stockholders at the time of the REIT reorganization.
Host Marriott also expects to make a cash distribution at that time. The
projected aggregate value of these distributions, which are expected to be
treated as taxable dividends to shareholders, is currently estimated between
$400 and $550 million. An additional taxable distribution may be required in
1999.
The Senior Living Communities Company is expected to own Host Marriott's
approximately $700 million portfolio of senior living properties. This
portfolio currently consists of 31 retirement communities, totaling 7,218 units
in 12 states. The communities will continue to be managed by Marriott
International. In addition, the Senior Living Communities Company will lease
substantially all of the hotels owned by the REIT and its affiliates.
The Senior Living Communities Company will operate independently of Host
Marriott, will be publicly listed, and will pursue its own growth opportunities.
In order to facilitate the transition, there may initially be some Board of
Directors overlap, which will be eliminated over time. In order to comply with
REIT rules, each company will limit ownership of its stock by single investors
and related parties and groups to less than 10%.
"Senior living is a high growth industry supported by favorable demographic
trends," said Mr. Golden. "The new company will be in an excellent position to
build on Host Marriott's current leadership position in the upper tier segment
of the senior living market. Initially 67% of Senior Living Communities Company
EBITDA will be generated by its senior living properties."
"The Senior Living Communities Company will grow through the acquisition of
new and existing communities, as well as new development," Mr. Golden continued.
"In addition, it will benefit from Marriott International's targeted expansion
of senior living properties, which is expected to nearly triple its number of
properties over the next five years, providing a valuable pipeline of upper tier
properties that fit the acquisition profile. The company will also pursue
expansion into other attractive real estate areas."
FINANCIAL OUTLOOK
Mr. Parsons said: "In reorganizing as a REIT, acquiring the Blackstone
portfolio and spinning off our senior living communities business, we currently
anticipate FFO per share in 1999, for the two companies combined, to be $0.26
above current consensus estimates of $2.15 per share."
The Company expects no layoffs as a result of the reorganization, and both
companies will maintain headquarters in Bethesda, Md.
BT Wolfensohn, Merrill Lynch and PaineWebber are serving as advisors on the
REIT reorganization and spin-off of the Senior Living Communities Company.
COMPANY BACKGROUNDS/ FORWARD LOOKING STATEMENTS
Host Marriott is a lodging real estate company which owns 100 upscale and
luxury full service hotels operated primarily under the Marriott and Ritz-
Carlton brand names. Additionally, the company owns 31 senior living
communities all of which are managed by Marriott International. The company
also serves as general partner and holds minority interests in various
unconsolidated partnerships which own 240 lodging properties, 20 of which are
full service hotels.
For further information on Host Marriott Corporation, please visit our
website at http://www.hostmarriott.com. For further information on the proposed
REIT conversion, Blackstone portfolio transaction and Senior Living Communities
spinoff, see Host Marriott's current report on Form 8-K filed with the
Securities and Exchange Commission.
The Blackstone Group is a private New York-based investment bank founded in
1985 by its current Chairman, Peter G. Peterson, and its current CEO and
President, Stephen A. Schwarzman. Blackstone's real estate activities are led
by Senior Managing Directors Thomas J. Saylak and John Z. Kukral, as well as
John G. Schreiber, who together with Mr. Schwarzman, co-chairs the Blackstone
Real Estate Partners' Investment Committee. Real Estate is one of five areas of
business focus at Blackstone. The others are Private Equity Investing in
corporate situations (where Blackstone Capital Partners III, with nearly $4
billion in equity capital, was the largest such fund raised in 1997); Mergers &
Acquisitions Advisory; Restructuring & Reorganization Advisory; and Liquid
Alternative Asset Management.
Certain matters discussed in this press release include forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995, including, without limitation, statements related to the proposed REIT
conversion, the terms, structure and timing thereof, and the expected effects of
the proposed REIT conversion and the Blackstone portfolio acquisition on FFO,
EBITDA, and business and operating strategies in the future. All forward-
looking statements involve known and unknown risks, uncertainties and other
factors, many of which are not in control of Host Marriott, that may cause
actual transactions, results, performance or achievements to be materially
different from any future transactions, results, performance or achievements
expressed or implied by the forward-looking statements. The transactions
described herein are subject to certain consents of shareholders, lenders, debt
holders and partners of Host Marriott and its affiliates and of other third
parties and various other conditions and contingencies, and future results,
performance and achievements will be affected by general economic, business and
financing conditions, competition and governmental actions. These and other
factors are described in more detail in Host Marriott's current report on Form
8-K relating to the proposed REIT conversion and in its other filings with the
Securities and Exchange Commission. While Host Marriott believes that the
expectations reflected in these forward-looking statements are based on
reasonable assumptions, it can give no assurance that its performance or other
expectations will be attained, that the transactions described herein will be
consummated or that the terms of the transactions or the timing or effects
thereof will not differ materially from those described herein.
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