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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[x] JOINT ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from _____ to _____
Commission File Number: 1-6828 Commission File Number: 1-7959
STARWOOD LODGING STARWOOD LODGING
TRUST CORPORATION
(Exact name of registrant as specified in its (Exact name of registrant as specified in its
charter) charter)
Maryland Maryland
(State or other jurisdiction (State or other jurisdiction
of incorporation or organization) of incorporation or organization)
52-0901263 52-1193298
(I.R.S. employer identification no.) (I.R.S. employer identification no.)
11835 W. Olympic Blvd., Suite 695 11835 W. Olympic Blvd., Suite 675
Los Angeles, California 90064 Los Angeles, California 90064
(Address of principal executive (Address of principal executive
offices, including zip code) offices, including zip code)
(310) 575-3900 (310) 575-3900
(Registrant's telephone number, (Registrant's telephone number,
including area code) including area code)
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Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
------------------- -------------------
Shares of Beneficial Interest, $0.01 par value,
of Starwood Lodging Trust ("Trust Shares")
paired with New York Stock Exchange
Shares of Common Stock, $0.01 par value,
of Starwood Lodging Corporation ("Corporation
Shares")
1986 Warrants to purchase Trust Shares
paired with American Stock Exchange
1986 Warrants to purchase Corporation Shares
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the Registrants (1) have 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 (or for such shorter period that the
Registrants were required to file such reports), and (2) have been subject to
such filing requirements for the past 90 days. Yes X No .
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of each Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K [ ].
As of February 23, 1996, the aggregate market value of the Registrants'
voting stock held by non-affiliates(1) was $462,822,000.
As of February 23, 1996, the Registrants had outstanding 13,822,617 Trust
Shares and 13,822,617 Corporation Shares.
__________________________________
1 For purposes of this Joint Annual Report only, includes
all voting shares other than those held by the Registrants'
Trustees or Directors and executive officers.
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TABLE OF CONTENTS
Item
Number
in Form
10-K PART I Page
---- ----
1. Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
4. Submission of Matters to a Vote of Security Holders . . . . . . . . . . 26
PART II
5. Market for Registrants' Common Equity and Related
Stockholder Matters . . . . . . . . . . . . . . . . . . . . . . . . . . 28
6. Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . 30
7. Management's Discussion and Analysis of Financial Condition
and Results of Operations. . . . . . . . . . . . . . . . . . . . . . . 31
8. Financial Statements and Supplementary Data . . . . . . . . . . . . . . 39
9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure . . . . . . . . . . . . . . . . . . 39
PART III
10. Trustees, Directors and Executive Officers of the Registrants . . . . . 39
11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . 43
12. Security Ownership of Certain Beneficial Owners and Management . . . .
48
13. Certain Relationships and Related Transactions . . . . . . . . . . . . 50
PART IV
14. Exhibits, Financial Statements, Financial Statement Schedules
and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . 54
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PART I
ITEM 1. BUSINESS.
Starwood Lodging Trust, formerly Hotel Investors Trust (the
"Trust"), was organized in 1969 as a Maryland real estate investment trust, and
has invested in fee, ground leasehold and mortgage loan interests in hotel
properties located throughout the United States.
In order for the Trust to qualify for favorable tax status as
a real estate investment trust ("REIT") under the Internal Revenue Code of 1986
(the "Code"), the Trust leases its properties to third party operators. In
1980, Starwood Lodging Corporation, formerly Hotel Investors Corporation (the
"Corporation" and, together with the Trust, "Starwood Lodging"), was organized
as a Maryland corporation and has leased hotel properties from the Trust since
that date.
Unless the context otherwise requires, all references herein
to "Starwood Lodging" refer to the Trust and the Corporation, and all
references to the "Trust" and to the "Corporation" include the Trust and the
Corporation, respectively, and those entities respectively owned or controlled
by the Trust or the Corporation, including the Realty Partnership (defined
below) and the Operating Partnership (defined below).
Since 1980, the shares of beneficial interest of the Trust
("Trust Shares") and the shares of common stock of the Corporation
("Corporation Shares") have been "paired" on a one-for-one basis and may only
be held or transferred in units consisting of one Trust Share and one
Corporation Share ("Paired Shares"). The Code has prohibited the "pairing" of
shares between a REIT and a management company since 1983. This rule does not
apply to the Trust because its Paired Share structure has existed since 1980.
At December 31, 1995, Starwood Lodging owned equity interests
in 36 hotel properties, including two hotel/casinos, and owned mortgage
interests in another 13 hotel properties. At such date, of the 36 hotels in
which Starwood Lodging owned an equity interest (including the two
hotel/casinos), four hotels were being managed by third-party operators and
three hotels were leased to a third-party operator. For information as to such
interests and properties, see Item 2 of this Joint Annual Report.
ACQUISITION STRATEGY
Starwood Lodging intends to continue to expand and diversify
its hotel portfolio through the acquisition of primarily midscale and upscale
hotels in major metropolitan areas. Starwood Lodging believes that hotels
primarily in these segments can be purchased at prices below replacement cost
and offer better potential for cash flow growth than hotels in other market
segments. Starwood Lodging generally seeks investments in hotels where
management believes that such hotels' profits can be increased by the
introduction of more professional and efficient management techniques or the
injection of
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capital for maintenance and renovations. Properties are targeted throughout
the United States, but Starwood Lodging generally focuses on markets located
near other properties owned and operated by Starwood Lodging, markets with
significant barriers to entry or markets with stable demand generators such as
universities, government agencies or large companies.
Consistent with this strategy, Starwood Lodging acquired
equity and mortgage interests in the following hotels during 1995:
Approximate
Date of Purchase
Hotel Location Purchase Price (000s) Rooms
----- -------- -------- ------------ -----
Omni Chapel Hill, NC 4/6/95 $ 10,500 168
Sheraton Colony Square Atlanta, GA 7/18/95 34,000 462
Embassy Suites Tempe, AZ 7/27/95 19,300 224
Doral Inn New York, NY 9/20/95 43,000 652
Grand Hotel (1) Washington, DC 9/28/95 19,500 263
Terrace Garden Atlanta, GA 10/31/95 27,900 364
Lenox Inn Atlanta, GA 10/31/95 9,000 180
Holiday Inn Beltsville, MD 11/30/95 11,500 206
-------- -----
$174,700 2,519
======== =====
(1) Represents a mortgage interest. The equity interest was purchased on
January 4, 1996 for approximately $13.5 million. This hotel is now
known as the Westin Washington.
In addition, during the first month of 1996, Starwood Lodging
completed the acquisition of the Grand Hotel in Washington D.C. for an
additional $13.5 million and for approximately $41.6 million, acquired a 58.2%
interest in a joint venture that acquired the 960-room Boston Park Plaza and
related real estate assets in Boston, Massachusetts.
Starwood Lodging is evaluating numerous other hotel
properties for acquisition, and as of the date of this Joint Annual Report has
entered into agreements to purchase and has made offers on eight properties in
the aggregate amount of approximately $170 million, all but one of which are
subject to the satisfaction of a number of conditions prior to closing.
Starwood Lodging has fully performed under such other agreement to purchase;
however, the closing remains subject to certain limited conditions on the part
of the other parties. Starwood Lodging intends to finance the acquisition of
these or other hotel properties through cash flow from operations, through
borrowings under credit facilities and, when market conditions warrant,
through the issuance of debt or equity securities.
The Trust and the Corporation intend that the Operating
Partnership lease and operate hotels owned or acquired by the Realty
Partnership thereby retaining for shareholders the economic benefits otherwise
retained by third party operators. During 1995, the
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Operating Partnership assumed management of 13 hotels and in January of 1996
assumed management of the Grand Hotel in Washington, D.C. (now a Westin hotel)
and the Boston Park Plaza. In addition, in early 1996, the Operating
Partnership expects to terminate two of the third-party management agreements
currently in place for three hotels which are currently majority owned by the
Realty Partnership and operated on behalf of the Operating Partnership by
third-party management companies. Upon such termination, the Operating
Partnership intends to assume the management of these hotels.
THE REORGANIZATION
On January 31, 1995 (the "Closing Date"), the Trust and the
Corporation consummated a reorganization (the "Reorganization") with Starwood
Capital Group, L.P. ("Starwood Capital") and certain affiliates of Starwood
Capital (the "Starwood Partners") effective January 1, 1995.
The Reorganization involved a number of related transactions
that occurred simultaneously on the Closing Date. Such transactions included
(i) the contribution by the Trust to SLT Realty Limited Partnership (the
"Realty Partnership"), a newly formed Delaware limited partnership, of
substantially all of the properties and assets of the Trust, subject to
substantially all of the liabilities of the Trust (including the senior debt
(the "Senior Debt") of the Trust), in exchange for an approximate 28.3%
interest as a general partner in the Realty Partnership, (ii) the contribution
by the Starwood Partners to the Realty Partnership of approximately $12.6
million in cash and certain hotel properties and first mortgage notes, in
exchange for limited partnership units representing the remaining approximate
71.7% interest in the Realty Partnership, (iii) the contribution by the
Corporation and its subsidiaries to SLC Operating Limited Partnership (the
"Operating Partnership" and together with the Realty Partnership, the
"Partnerships"), a newly formed Delaware limited partnership, of substantially
all of their properties and operating assets (except for their gaming assets,
which are to be contributed upon approval by Nevada gaming authorities),
subject to substantially all of their liabilities, in exchange for an
approximate 28.3% interest as a general partner in the Operating Partnership,
and (iv) the contribution by the Starwood Partners to the Operating Partnership
of approximately $1.4 million in cash and fixtures, furnishings and equipment
of the hotel properties, in exchange for limited partnership units representing
the remaining approximate 71.7% interest in the Operating Partnership. On
March 24, 1995, a Starwood Partner exchanged $12 million of Senior Debt for
additional limited partnership units of the Realty Partnership and the
Operating Partnership resulting in the Starwood Partners owning approximately
74.6% of each of the Partnerships.
The following equity interests and mortgage notes were
contributed to the Realty Partnership by the Starwood Partners in the
Reorganization:
Equity Interests contributed as part of the Reorganization:
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Hotel Location Rooms
----- -------- -----
Doubletree Hotel Rancho Bernardo, California 209
Capitol Hill Suites Washington, D.C. 152
Harvey Wichita Wichita, Kansas 259
French Quarter Suites Lexington, Kentucky 155
Mortgage notes contributed as part of the Reorganization:
Hotel Outstanding Principal
Securing Balance on
Note January 1, 1995
-------- ---------------------
Harvey Hotel Addison (1) . . . . . . $10,403,000
Harvey Hotel Bristol (1) . . . . . . 16,645,000
Harvey Hotel DFW (1) . . . . . . . . 25,892,000
Atlantic City Quality Inn (2) . . . . 11,411,000
Secaucus, New Jersey Ramada (2) . . . 12,458,000
-----------
$76,809,000
- ------------------ ===========
(1) Represent first mortgage notes bearing interest at 8% payable quarterly
in arrears. The mortgage notes have a 15-year amortization period and a
balloon payment at maturity. The mortgage notes mature on December 31,
2002 and are cross-collateralized.
(2) The mortgage notes bear interest at various rates and are payable
monthly in arrears, except that for the months of November 1994 through
April 1995, debt service for the Atlantic City Quality Inn was to accrue
and be paid from excess cash flow. Commencing May 1, 1995 fixed
payments of debt service were required to be resumed. The mortgages
mature between 1996 and 2010.
As part of the Reorganization, the Realty Partnership assumed certain mortgage
notes payable, all of which were refinanced during 1995 with the proceeds of
the Prior Credit Agreement (defined below) or the Facilities (defined below).
The terms of the assumed mortgage notes are summarized as follows:
A $39,013,000 note issued in connection with the acquisition of the
Harvey mortgage notes receivable under the terms of a Loan Agreement
with a third party dated October 15, 1993. The note was nonrecourse,
was to mature on January 31, 2003 and bore interest on a monthly basis
at variable rates based on the London Interbank Offer Rate ("LIBOR")
plus 3%.
A $2,122,000 construction loan funded in 1994 and used to renovate the
Harvey Wichita Hotel. The note bore interest at 7.5%. Principal and
interest was payable monthly and the note was to mature in the year
2000.
In addition, as part of the Reorganization, the Realty Partnership assumed
other mortgage notes payable in the aggregate principal amount of $17,750,000,
which notes were refinanced with the proceeds of the Loan (defined below)
pursuant to the Prior Credit Agreement.
THE OFFERING
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On July 6, 1995, Starwood Lodging completed a public offering
(the "Offering") of 11,787,500 Paired Shares at a price of $23.00 per Paired
Share. Net proceeds of the Offering of approximately $245.7 million in
aggregate were contributed by the Trust and the Corporation to the Realty
Partnership and the Operating Partnership, respectively, thereby increasing the
general partnership interest of the Trust and the Corporation to approximately
69.9% of the Realty Partnership and the Operating Partnership, respectively,
with the Starwood Partners' limited partnership interests representing the
remaining approximate 30.1% interest in each of the Partnerships. Proceeds
from the Offering were used to repay amounts outstanding under the Prior Credit
Agreement. Shortly prior to the Offering, the Trust and the Corporation
effected a one-for-six reverse stock split of the Paired Shares in which each
six Paired Shares held on the record date for the reverse split were converted
into one Paired Share.
STRUCTURE
As of the date of this Joint Annual Report, the structure of
Starwood Lodging is as follows:
Holders of Paired Shares
Starwood Lodging Starwood Lodging
Trust Shares are Corporation
Owns 69.9% of SLT ------------------ Owns 69.9% of SLC
Realty Limited Paired Operating Limited
Partnership Partnership
SLT Realty SLT Operating
Limited Partnership Limited Partnership
Starwood Partners
Own 30.1% of each of SLT Realty
Limited Partnership and SLC Operating
Limited Partnership
The limited partnership units of the Realty Partnership and the
Operating Partnership held by the Starwood Partners are (subject to the
ownership limit provisions of the Trust and the Corporation) exchangeable by
the Starwood Partners, for, at the option of the Trust and the Corporation,
either cash, Paired Shares of Starwood Lodging representing up to approximately
30.1% of the Paired Shares after such exchange, or a combination of
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cash and such Paired Shares. The ownership limit provisions of Starwood
Lodging are designed to preserve the status of the Trust as a REIT for tax
purposes by providing that in general no shareholder may own, directly or
indirectly, more than 8% of the outstanding Paired Shares.
Since the Reorganization, the Trust has conducted substantially
all of its business and operations through the Realty Partnership. As of
December 31, 1995, the Realty Partnership held fee interests, ground leaseholds
and mortgage loan interests in 49 hotel properties containing over 10,500 rooms
located in 21 states throughout the United States and the District of Columbia.
The Trust controls the Realty Partnership as the sole general partner of the
Realty Partnership.
Since the Reorganization, the Corporation (together with its
wholly-owned subsidiaries) has conducted substantially all of its business and
operations (other than its gaming operations) through the Operating
Partnership. As of December 31, 1995, the Operating Partnership leased from
the Realty Partnership all but four of the 35 hotel properties owned in fee or
held pursuant to long-term leases by the Realty Partnership. In addition, the
Operating Partnership owns a 51% general partnership interest in a joint
venture that owns the Milwaukee Marriott hotel.
GAMING APPROVALS
Upon receipt of Nevada gaming regulatory approvals, the
Corporation will control the Operating Partnership as its managing general
partner. Prior to the receipt of such approvals, the Operating Partnership is
being managed by a management committee, the members of which are identical to
the members of the Board of Directors of the Corporation that will hold office
upon receipt of Nevada gaming regulatory approvals (see Item 10 of this Joint
Annual Report) and the gaming operations (which consist of two hotel/casinos
located in Las Vegas, Nevada) are being operated through Hotel Investors
Corporation of Nevada ("HICN") a wholly-owned subsidiary of the Corporation.
Upon receipt of such approvals (or such time as such approvals are no longer
required), HICN will become a wholly-owned subsidiary of the Operating
Partnership. Nevada gaming regulatory approvals are expected to be received by
the end of 1997.
CREDIT FACILITIES
On July 25, 1995, the Realty Partnership and the Trust, entered
into a Mortgage Loan Funding Facility Agreement (together with subsequent
amendments the "Repo Facility") with Lehman Commercial Paper Inc. ("Lehman
Commercial Paper"). Pursuant to the Repo Facility, Lehman Commercial Paper has
agreed to advance up to $71 million to the Realty Partnership for a period of
18 months ending January 25, 1997. Advances under the Repo Facility bear
interest at a rate based on one month LIBOR plus 150 basis points for the
period ending July 25, 1996 and one month LIBOR plus 175 basis points
thereafter and are secured by certain mortgage notes receivable and other
collateral of the Realty Partnership.
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On October 25, 1995, the Realty Partnership and the Trust
entered into a line of credit agreement (together with subsequent amendments,
the "Acquisition Facility") with Lehman Brothers Holdings, Inc ("Lehman
Holdings") pursuant to which Lehman Holdings agreed to make advances to the
Realty Partnership of up to $135 million for a period expiring on October 1,
1998. The Acquisition Facility superseded and replaced the Prior Credit
Agreement.
Advances under the Acquisition Facility bear interest at a rate
based upon one, two or three-month LIBOR plus 162.5 basis points and are
secured by liens on 29 of the hotel equity interests of the Realty Partnership
and may be secured by other properties, all on a cross-collateralized basis. A
$60 million portion of the Acquisition Facility is being syndicated. Up to $58
million of the obligations under the Acquisition Facility has been guaranteed
by the Operating Partnership, in consideration for the cancellation by the
Realty Partnership of intercompany indebtedness in 1994. Such guaranty is
secured by first priority liens on all of the assets of the Operating
Partnership relating to the hotels owned or leased by the Realty Partnership
which are subject to liens under the Acquisition Facility.
The Repo Facility and the Acquisition Facility (together, the
"Facilities") contain a number of covenants including (i) a requirement that
the Realty Partnership maintain a net worth equal to at least $215 million plus
75% of the net proceeds of equity offerings by the Trust; (ii) a restriction on
the ability of the Realty Partnership and the Trust to incur combined
indebtedness in excess of 55% of the net book value of their combined assets;
and (iii) maintenance of certain loan to value and debt service coverage
ratios. The Facilities also provide a right of the Trust and the Corporation,
subject to certain limitations, to pay distributions to their shareholders.
See Item 5 - Distributions of this Joint Annual Report.
In addition, on January 17, 1996, the Realty Partnership entered
into $100 million in notional amount Treasury Lock Transactions with Merrill
Lynch and Chemical Bank. The transactions have the effect of fixing the base
interest rate at 5.7 percent for up to $100 million of debt, with an assumed
term of seven years from October 15, 1996, issued by the Realty Partnership on
or before October 15, 1996. The actual rate of interest is expected to be the
base rate plus an amount determined at the time of issuance based on several
factors including, without limitation, any credit enhancements provided by
Starwood Lodging, the terms and conditions of the specific transaction, and
then existing market conditions.
PRIOR DEBT REFINANCING
On March 24, 1995, the Realty Partnership and the Trust entered
into an Amended and Restated Credit Agreement (the "Prior Credit Agreement")
pursuant to which the Realty Partnership borrowed $131.75 million (the "Loan")
primarily to refinance all outstanding Senior Debt and approximately $27
million of first mortgage debt. The Loan was to mature on April 1, 1997 and
bore interest at a rate based on LIBOR plus 300 basis points. All amounts
outstanding under the Prior Credit Agreement were repaid with a portion of the
proceeds of the Offering and the Prior Credit Agreement was superseded and
replaced by the Acquisition Facility.
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TAX STATUS OF THE TRUST
The Trust intends to elect to be taxed as a REIT, commencing
with its taxable year ended December 31, 1995. The Trust expects to make this
election for the year ended December 31, 1995 when it files its tax return for
such period, which is due no later than September 15, 1996. The Trust was
taxed as a REIT beginning in 1969 through and including its taxable year ended
December 31, 1990. During 1994, the Trust discovered that it may not have
qualified as a REIT in 1991 through 1994 due to its failure to comply with
certain procedural requirements of the Code. The Trust requested and received
a letter from the Internal Revenue Service providing that the Trust's election
to be taxed as a REIT terminated beginning with the Trust's taxable year ended
December 31, 1991 and permitting the Trust to re-elect to be taxed as a REIT
commencing with its taxable year ended December 31, 1995. Because the Trust
had net losses for tax purposes for its 1991 through 1994 taxable years, the
Trust does not owe any federal income tax for such years.
OTHER INFORMATION
Seasonality and Competition. The hotel industry is seasonal
in nature. Generally, hotel revenues are greater in the second and third
quarters than in the first and fourth quarters due to generally decreased
travel during the winter months.
The hotel industry is highly competitive. The properties of
the Trust and the Corporation compete with other hotel properties in their
geographic markets. Many of the competitors of the Trust and the Corporation
may have substantially greater marketing and financial resources than Starwood
Lodging.
The Trust and the Corporation may compete for acquisition
opportunities with entities which have substantially greater financial
resources than the Trust and the Corporation. These entities may generally be
able to accept more risk than the Trust and the Corporation can prudently
manage. Competition may generally reduce the number of suitable investment
opportunities and increase the bargaining power of property owners seeking to
sell. Further, management of the Trust believes that it will face competition
for acquisition opportunities from entities organized for purposes
substantially similar to the objectives of the Trust.
Environmental Matters. Neither the Trust, the Corporation,
the Realty Partnership nor the Operating Partnership has been identified by the
U.S. Environmental Protection Agency or any similar state agency as a
responsible or potentially responsible party for, nor have they been the
subject of any governmental proceeding with respect to, any hazardous waste
contamination. If the Trust, the Corporation, the Realty Partnership or the
Operating Partnership were to be identified as a responsible party, they would
in most circumstances be strictly liable, jointly and severally with other
responsible parties, for environmental investigation and clean-up costs
incurred by the government and, to a more limited extent, by private persons.
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In connection with the Acquisition Facility, preliminary or
"Phase I" environmental site assessments were prepared with respect to 29 of
the Trust's fee interest and ground leasehold properties. The results of the
Phase I assessments and subsequent "Phase II" assessments performed at six of
the properties led to an assessment by the Trust and its outside consultants
that the Trust's overall potential for environmental impairment was low.
A release of petroleum from an underground storage tank at the
Bay Valley Hotel and Resort was reported to the appropriate state agency in
1992. After the tank and surrounding soils were removed, additional soils and
groundwater testing was performed, which revealed environmental contamination
in a localized area. Environmental testing has been performed to identify the
vertical and horizontal extent of the contamination released from the tank.
The consultant initially proposed to remedy the contamination through
installation of a groundwater pump and treatment system to capture and treat
impacted groundwater and excavation of about 390 cubic yards of impacted soil.
Recent amendments to the relevant state environmental clean-up laws reduced the
extent of the clean-up required at the site and the Trust is now only required
to monitor the site. Any further remediation costs that are incurred will be
borne by the Realty Partnership.
With respect to the remaining majority owned fee-interest
properties, a 1991 Phase I environmental assessment and a tank leak test
conducted at the Bourbon Street Hotel in early 1992 and a Phase I environmental
assessment prepared for the Milwaukee Marriott in 1991 revealed no material
impairments. The last six properties acquired by Starwood Lodging (the Doral
Inn in New York, New York, the Terrace Garden Inn and Lenox Inn in Atlanta,
Georgia, the Holiday Inn in Beltsville, Maryland, the Grand Hotel in
Washington, D.C., and the Boston Park Plaza in Boston, Massachusetts) had Phase
I environmental assessments prepared in 1995 which evidenced no material
impairments.
Based upon the environmental reports described above, the
Trust believes that a substantial number of its hotels incorporate potentially
asbestos-containing materials. Under applicable current Federal, state and
local laws, asbestos need not be removed from or encapsulated in a hotel unless
and until the hotel is renovated or remodeled. The Trust has asbestos
operation and maintenance plans for each property testing positive for
asbestos.
Based upon the above-described environmental reports and
testing and facts known to the managements of the Trust and the Corporation,
future remediation costs are not expected to have a material adverse effect on
the results of operations, financial position or cash flows of the Trust or the
Corporation and compliance with environmental laws has not had and is not
expected to have a material effect on the capital expenditures, earnings or
competitive position of the Trust or the Corporation.
Regulation and Licensing. The ownership and operation of the
casino gaming facilities of the Corporation in Nevada are subject to extensive
licensing and regulatory control by the Nevada Gaming Commission, the Nevada
Sate Gaming Control Board and the Clark County Liquor and Gaming Licensing
Board. See Item 2, "Regulation and Licensing" of this Joint Annual Report.
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Employees. As of December 31, 1995, the Trust had four
employees and the Corporation had approximately 3,800 employees.
The Trust's executive offices are located at 11835 West
Olympic Boulevard, Suite 695, Los Angeles, California 90064 (telephone (310)
575-3900) and the Corporation's executive offices are located at 11835 West
Olympic Boulevard, Suite 675, Los Angeles, California 90064 (telephone (310)
575-3900).
Financial information with respect to the two segments of the
hospitality industry (hotels and gaming) in which the Corporation operates is
included in Note 16 of the Notes to Financial Statements included in Item 8 of
this Joint Annual Report.
ITEM 2. PROPERTIES.
At December 31, 1995, the Trust owned and the Corporation
operated and managed, a portfolio of hotel assets, including fee, ground
leasehold and first mortgage interests. At such date, all but four of the
Trust's fee and ground leasehold hotels were leased to the Corporation or its
subsidiaries pursuant to leases between the Trust and the Corporation (the
"Intercompany Leases").
As described in Item 1 of this Joint Annual Report, upon the
closing of the Reorganization, substantially all of the properties and assets
of the Trust were contributed to the Realty Partnership and substantially all
of the properties and assets of the Corporation and its subsidiaries (except
for their gaming assets, which are to be contributed upon approval by Nevada
gaming authorities) were contributed to the Operating Partnership.
Accordingly, since the Reorganization, the Trust has conducted
substantially all of its business and operations through the Realty Partnership
and the Corporation has conducted substantially all of its business and
operations (other than its gaming operations) through the Operating
Partnership. As of the date of this Joint Annual Report, the Trust had an
approximate 69.9% interest in the Realty Partnership and the Corporation had an
approximate 69.9% interest in the Operating Partnership.
THE TRUST AND THE REALTY PARTNERSHIP
Equity Investments. As of December 31, 1995, the Trust had
equity investments in 35 properties (including two hotel/casinos) containing a
total of over 7,100 guest rooms. As of that date, the Trust owned fee
interests in 30 hotels (including two hotel/casinos), held three hotels
pursuant to ground leases, owned one hotel partially in fee and partially
pursuant to a ground lease, and also had a 5% equity interest in, and was the
general partner of, a limited partnership that owns the Omaha Marriott Hotel
which contains 303 guestrooms. See Note 11 to the Financial Statements
included in Item 8 of this Joint Annual Report. Of the 35 hotels in which the
Trust had an equity interest at December 31, 1995, 23 operate under one of the
following nationally recognized names: Sheraton(R),
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Marriott(R), Doubletree(R), Omni(R), Radisson(R), Embassy Suites(R), Holiday
Inn(R), Residence Inn(R), Days Inn(R), Best Western(R) and Vagabond Inn(R).
Each of the Intercompany Leases provides for the lessee's
payment of annual minimum rent in a specified amount plus additional rent based
on a percentage of the gross revenues (or items thereof) of the leased
property. The Intercompany Leases have an average remaining term of four
years. The Intercompany Leases are "triple-net" - i.e., the lessee is
generally responsible for paying all operating expenses of the hotel property,
including maintenance and repair costs, insurance premiums and real estate and
personal property taxes, and for making all rental and other payments required
pursuant to any underlying ground leases. As lessee, the Operating Partnership
retains all of the profits, net of rents and other expenses, and bears all risk
of losses, generated by the hotel property's operations.
In addition to the Intercompany Leases, the three Vagabond
Inns are leased to a third party and such leases expire in 2001, 2007 and 2008,
respectively. The lease expiring in 2001 contains options to extend the term
of the lease for two additional five year periods. Each of these leases
provides for the payment of percentage rent equal to 26% of room revenues
against specified minimum rents. The leases are "triple net."
The following table sets forth the 1995, 1994, and 1993
average occupancy, room rates, revenue per available room ("REVPAR") and
certain other information concerning the hotels owned by the Trust as of
December 31, 1995:
11
15
Years Ended December 31,
Year Constructed/ ------------------------
Property Year Acquired (1) Property Description 1995 1994 1993
-------- ----------------- -------------------- ---- ---- ----
Average Occupancy
-----------------
Rate
----
ARIZONA
Embassy Suites
Phoenix, Arizona 1981/1983 227 suites, restaurant, 80% 76% 72%
lounge and meeting
facilities
Embassy Suites 1984/1995 224 suites, restaurant, 80% 83% 82%
Tempe, Arizona lounge and meeting
facilities
Plaza Hotel 1971/1983 149 guest rooms, restaurant, 77% 77% 74%
Tucson, Arizona (2) lounge and meeting
facilities
CALIFORNIA
Doubletree Hotel 1988/1995 209 guest rooms, restaurant, 68% 66% 61%
Rancho Bernardo, California lounge and meeting facilities
Vagabond Inn 1974/1974 102 guest rooms and 33% 39% 44%
Rosemead, California (3) restaurant
Vagabond Inn 1975/1975 108 guest rooms and 52% 63% 59%
Sacramento, California (3) restaurant
Vagabond Inn 1973/1973 101 guest rooms and 52% 69% 58%
Woodland Hills, California (3) restaurant
DISTRICT OF COLUMBIA
Years Ended December 31,
Year Constructed/ -------------------------
Property Year Acquired (1) Property Description 1995 1994 1993
-------- ----------------- -------------------- ---- ---- ----
Average Room
-------------
Rate
----
ARIZONA
Embassy Suites
Phoenix, Arizona 1981/1983 227 suites, restaurant, $85.14 $80.23 $74.04
lounge and meeting
facilities
Embassy Suites 1984/1995 224 suites, restaurant, $95.75 $83.37 $76.24
Tempe, Arizona lounge and meeting
facilities
Plaza Hotel 1971/1983 149 guest rooms, restaurant, $48.34 $46.12 $45.05
Tucson, Arizona (2) lounge and meeting
facilities
CALIFORNIA
Doubletree Hotel 1988/1995 209 guest rooms, restaurant, $71.02 $65.68 $63.62
Rancho Bernardo, California lounge and meeting facilities
Vagabond Inn 1974/1974 102 guest rooms and $38.09 $37.47 $38.14
Rosemead, California (3) restaurant
Vagabond Inn 1975/1975 108 guest rooms and $59.57 $55.89 $52.17
Sacramento, California (3) restaurant
Vagabond Inn 1973/1973 101 guest rooms and $48.04 $46.72 $43.68
Woodland Hills, California (3) restaurant
DISTRICT OF COLUMBIA
Years Ended December 31,
Year Constructed/ -------------------------
Property Year Acquired (1) Property Description 1995 1994 1993
-------- ----------------- -------------------- ---- ---- ----
Revenue per
-----------
Available Room
--------------
ARIZONA
Embassy Suites
Phoenix, Arizona 1981/1983 227 suites, restaurant, $68.34 $60.63 $53.20
lounge and meeting
facilities
Embassy Suites 1984/1995 224 suites, restaurant, $76.78 $68.99 $62.29
Tempe, Arizona lounge and meeting
facilities
Plaza Hotel 1971/1983 149 guest rooms, restaurant, $37.37 $35.58 $33.54
Tucson, Arizona (2) lounge and meeting
facilities
CALIFORNIA
Doubletree Hotel 1988/1995 209 guest rooms, restaurant, $48.52 $43.09 $38.68
Rancho Bernardo, California lounge and meeting facilities
Vagabond Inn 1974/1974 102 guest rooms and $12.49 $14.53 $16.68
Rosemead, California (3) restaurant
Vagabond Inn 1975/1975 108 guest rooms and $31.04 $34.93 $30.49
Sacramento, California (3) restaurant
Vagabond Inn 1973/1973 101 guest rooms and $24.79 $32.26 $25.44
Woodland Hills, California (3) restaurant
DISTRICT OF COLUMBIA
12
16
Capitol Hill Suites 1955/1995 152 guest rooms 69% 64% 63%
Washington, D.C.
FLORIDA
Radisson Hotel 1974/1986 195 guest rooms, restaurant, 58% 59% 62%
Gainesville, Florida lounge and meeting
facilities
GEORGIA
Holiday Inn 1989/1989 151 guest rooms, restaurant, 77% 79% 74%
Albany, Georgia lounge and meeting
facilities
Lenox Inn 1965/1995 180 guest rooms, restaurant 77% 77% 75%
Atlanta, Georgia and meeting facilities
Sheraton Colony Square 1973/1995 462 guest rooms, restaurant, 72% 72% 67%
Atlanta, Georgia lounge and meeting facilities
Terrace Garden Inn 1975/1995 368 guest rooms, restaurant, 64% 65% 63%
Atlanta, Georgia lounge and meeting
facilities.
Best Western Riverfront Inn 1971/1986 142 guest rooms, restaurant, 64% 57% 55%
Savannah, Georgia lounge and meeting facilities
KANSAS
Harvey Wichita 1974/1995 259 guest rooms, restaurant, 64% 58% 59%
Wichita, Kansas lounge and meeting facilities
Capitol Hill Suites 1955/1995 152 guest rooms $95.09 $91.93 $89.60
Washington, D.C.
FLORIDA
Radisson Hotel 1974/1986 195 guest rooms, restaurant, $60.43 $59.89 $56.63
Gainesville, Florida lounge and meeting
facilities
GEORGIA
Holiday Inn 1989/1989 151 guest rooms, restaurant, $59.08 $56.06 $56.96
Albany, Georgia lounge and meeting
facilities
Lenox Inn 1965/1995 180 guest rooms, restaurant $69.23 $63.57 $60.10
Atlanta, Georgia and meeting facilities
Sheraton Colony Square 1973/1995 462 guest rooms, restaurant, $89.59 $86.57 $81.47
Atlanta, Georgia lounge and meeting facilities
Terrace Garden Inn 1975/1995 368 guest rooms, restaurant, $93.27 $88.39 $82.62
Atlanta, Georgia lounge and meeting
facilities.
Best Western Riverfront Inn 1971/1986 142 guest rooms, restaurant, $46.75 $47.27 $46.21
Savannah, Georgia lounge and meeting facilities
KANSAS
Harvey Wichita 1974/1995 259 guest rooms, restaurant, $62.52 $50.62 $43.92
Wichita, Kansas lounge and meeting facilities
Capitol Hill Suites 1955/1995 152 guest rooms $65.82 $58.93 $56.72
Washington, D.C.
FLORIDA
Radisson Hotel 1974/1986 195 guest rooms, restaurant, $35.07 $35.57 $35.21
Gainesville, Florida lounge and meeting
facilities
GEORGIA
Holiday Inn 1989/1989 151 guest rooms, restaurant, $45.59 $44.23 $41.92
Albany, Georgia lounge and meeting
facilities
Lenox Inn 1965/1995 180 guest rooms, restaurant $53.43 $49.15 $45.10
Atlanta, Georgia and meeting facilities
Sheraton Colony Square 1973/1995 462 guest rooms, restaurant, $64.84 $62.64 $54.91
Atlanta, Georgia lounge and meeting facilities
Terrace Garden Inn 1975/1995 368 guest rooms, restaurant, $58.88 $57.73 $51.98
Atlanta, Georgia lounge and meeting
facilities.
Best Western Riverfront Inn 1971/1986 142 guest rooms, restaurant, $29.78 $26.92 $25.23
Savannah, Georgia lounge and meeting facilities
KANSAS
Harvey Wichita 1974/1995 259 guest rooms, restaurant, $39.85 $29.21 $25.74
Wichita, Kansas lounge and meeting facilities
13
17
Years Ended December 31,
Year Constructed/ ------------------------
Property Year Acquired (1) Property Description 1995 1994 1993
-------- ----------------- -------------------- ---- ---- ----
Average Occupancy
-----------------
Rate
----
KENTUCKY
French Quarter Suites 1989/1995 155 guest rooms, restaurant, 75%
Lexington, Kentucky (4) lounge, meeting facilities,
retail and office space
MARYLAND
Calverton Holiday Inn 1987/1995 206 guest rooms, restaurant, 61% 58% 58%
Beltsville, Maryland lounge and meeting facilities
MICHIGAN
Bay Valley Hotel & Resort 1973/1984 151 guest rooms, restaurant, 63% 64% 52%
Bay City, Michigan lounge and meeting
facilities; 18-hole golf
course and tennis club
NEBRASKA
Omaha Marriott Hotel 1982/1982 303 guest rooms, restaurant, 80% 76% 76%
Omaha, Nebraska (5) lounge and meeting facilities
NEVADA
Bourbon Street 1975/1988 150 guest rooms, restaurant, 88% 90% 92%
Las Vegas, Nevada lounge and casino
Years Ended December 31,
Year Constructed/ -------------------------
Property Year Acquired (1) Property Description 1995 1994 1993
-------- ----------------- -------------------- ---- ---- ----
Average Room
-------------
Rate
----
KENTUCKY
French Quarter Suites 1989/1995 155 guest rooms, restaurant, $82.93
Lexington, Kentucky (4) lounge, meeting facilities,
retail and office space
MARYLAND
Calverton Holiday Inn 1987/1995 206 guest rooms, restaurant, $67.46 $63.37 $56.92
Beltsville, Maryland lounge and meeting facilities
MICHIGAN
Bay Valley Hotel & Resort 1973/1984 151 guest rooms, restaurant, $62.02 $62.22 $66.39
Bay City, Michigan lounge and meeting
facilities; 18-hole golf
course and tennis club
NEBRASKA
Omaha Marriott Hotel 1982/1982 303 guest rooms, restaurant, $94.40 $87.21 $82.56
Omaha, Nebraska (5) lounge and meeting facilities
NEVADA
Bourbon Street 1975/1988 150 guest rooms, restaurant, $33.21 $32.89 $31.63
Las Vegas, Nevada lounge and casino
Years Ended December 31,
Year Constructed -------------------------
Property Year Acquired (1) Property Description 1995 1994 1993
-------- ----------------- -------------------- ---- ---- ----
Revenue per
-----------
Available Room
--------------
KENTUCKY
French Quarter Suites 1989/1995 155 guest rooms, restaurant, $61.84 $58.57 $58.37
Lexington, Kentucky (4) lounge, meeting facilities,
retail and office space
MARYLAND
Calverton Holiday Inn 1987/1995 206 guest rooms, restaurant, $41.37 $36.43 $32.94
Beltsville, Maryland lounge and meeting facilities
MICHIGAN
Bay Valley Hotel & Resort 1973/1984 151 guest rooms, restaurant, $39.13 $39.53 $34.62
Bay City, Michigan lounge and meeting
facilities; 18-hole golf
course and tennis club
NEBRASKA
Omaha Marriott Hotel 1982/1982 303 guest rooms, restaurant, $75.52 $66.42 $62.75
Omaha, Nebraska (5) lounge and meeting facilities
NEVADA
Bourbon Street 1975/1988 150 guest rooms, restaurant, $29.09 $29.62 $29.16
Las Vegas, Nevada lounge and casino
14
18
Years Ended December 31,
Year Constructed/ ------------------------
Property Year Acquired (1) Property Description 1995 1994 1993
-------- ----------------- -------------------- ---- ---- ----
Average Occupancy
-----------------
Rate
----
King 8 Hotel and Gambling Hall 1974/1988 300 guest rooms, restaurant, 81% 82% 82%
Las Vegas, Nevada lounge and casino
Years Ended December 31,
Year Constructed/ -------------------------
Property Year Acquired (1) Property Description 1995 1994 1993
-------- ----------------- -------------------- ---- ---- ----
Average Room
-------------
Rate
----
King 8 Hotel and Gambling Hall 1974/1988 300 guest rooms, restaurant, $31.88 $32.80 $29.46
Las Vegas, Nevada lounge and casino
Years Ended December 31,
Year Constructed/ -------------------------
Property Year Acquired (1) Property Description 1995 1994 1993
-------- ----------------- -------------------- ---- ---- ----
Revenue per
-----------
Available Room
--------------
King 8 Hotel and Gambling Hall 1974/1988 300 guest rooms, restaurant, $25.77 $26.76 $24.15
Las Vegas, Nevada lounge and casino
15
19
Years Ended December 31,
Year Constructed/ ------------------------
Property Year Acquired (1) Property Description 1995 1994 1993
-------- ----------------- -------------------- ---- ---- ----
Average Occupancy
-----------------
Rate
----
NEW MEXICO
Best Western Airport Inn 1980/1984 120 guest rooms and leased 83% 86% 80%
Albuquerque, New Mexico (6) restaurant adjacent to
property
Best Western Mesilla Valley Inn 1974/1982 166 guest rooms, restaurant, 75% 71% 71%
Las Cruces, New Mexico lounge and meeting facilities
NEW YORK
Doral Inn 1927/1995 652 guest rooms, two 75% 81% 77%
New York, New York restaurants, lounge, ball
room and meeting facilities
NORTH CAROLINA
Omni Chapel Hill 1981/1995 172 guest rooms, restaurant, 71% 65% 56%
Chapel Hill, North Carolina lounge and meeting facility.
OHIO
Best Western North 1974/1992 180 guest rooms, restaurant, 65% 70% 66%
Columbus, Ohio lounge and meeting facilities
and sports club
OREGON
Years Ended December 31,
Year Constructed/ ------------------------
Property Year Acquired (1) Property Description 1995 1994 1993
-------- ----------------- -------------------- ---- ---- ----
Average Room
-------------
Rate
----
NEW MEXICO
Best Western Airport Inn 1980/1984 120 guest rooms and leased $56.70 $54.45 $52.38
Albuquerque, New Mexico (6) restaurant adjacent to
property
Best Western Mesilla Valley Inn 1974/1982 166 guest rooms, restaurant, $44.94 $42.74 $41.67
Las Cruces, New Mexico lounge and meeting facilities
NEW YORK
Doral Inn 1927/1995 652 guest rooms, two $96.34 $88.31 $87.71
New York, New York restaurants, lounge, ball
room and meeting facilities
NORTH CAROLINA
Omni Chapel Hill 1981/1995 172 guest rooms, restaurant, $84.33 $74.54 $67.35
Chapel Hill, North Carolina lounge and meeting facility.
OHIO
Best Western North 1974/1992 180 guest rooms, restaurant, $44.37 $42.34 $42.12
Columbus, Ohio lounge and meeting facilities
and sports club
OREGON
Years Ended December 31,
Year Constructed/ -------------------------
Property Year Acquired (1) Property Description 1995 1994 1993
-------- ----------------- -------------------- ---- ---- ----
Revenue per
-----------
Available Room
--------------
NEW MEXICO
Best Western Airport Inn 1980/1984 120 guest rooms and leased $47.02 $47.02 $41.98
Albuquerque, New Mexico (6) restaurant adjacent to
property
Best Western Mesilla Valley Inn 1974/1982 166 guest rooms, restaurant, $33.73 $30.42 $29.44
Las Cruces, New Mexico lounge and meeting facilities
NEW YORK
Doral Inn 1927/1995 652 guest rooms, two $70.15 $72.07 $67.50
New York, New York restaurants, lounge, ball
room and meeting facilities
NORTH CAROLINA
Omni Chapel Hill 1981/1995 172 guest rooms, restaurant, $59.87 $48.28 $37.99
Chapel Hill, North Carolina lounge and meeting facility.
OHIO
Best Western North 1974/1992 180 guest rooms, restaurant, $29.02 $29.76 $27.88
Columbus, Ohio lounge and meeting facilities
and sports club
OREGON
16
20
Years Ended December 31,
Year Constructed/ ------------------------
Property Year Acquired (1) Property Description 1995 1994 1993
-------- ----------------- -------------------- ---- ---- ----
Average Occupancy
-----------------
Rate
----
Days Inn City Center 1962/1984 173 guest rooms, restaurant, 78% 71% 63%
Portland, Oregon lounge and meeting facilities
Riverside Inn 1964/1984 137 guest rooms, restaurant, 78% 78% 79%
Portland, Oregon lounge and meeting facilities
TEXAS
Park Central Hotel 1972/1972 445 guest rooms, restaurant, 36% 42% 62%
Dallas, Texas lounge and meeting facilities
Best Western Airport Inn 1974/1985 175 guest rooms and leased 79% 80% 70%
El Paso, Texas restaurant adjacent to
property
VIRGINIA
Residence Inn 1984/1984 96 suites with full kitchens 85% 83% 78%
Tysons Corner, Virginia and fireplaces
WASHINGTON
Days Inn Town Center 1957/1984 90 guest rooms, restaurant and 81% 79% 75%
Seattle, Washington (7) lounge
Years Ended December 31,
Year Constructed/ -------------------------
Property Year Acquired (1) Property Description 1995 1994 1993
-------- ----------------- -------------------- ---- ---- ----
Average Room
-------------
Rate
----
Days Inn City Center 1962/1984 173 guest rooms, restaurant, $60.71 $53.12 $57.50
Portland, Oregon lounge and meeting facilities
Riverside Inn 1964/1984 137 guest rooms, restaurant, $71.35 $64.69 $63.96
Portland, Oregon lounge and meeting facilities
TEXAS
Park Central Hotel 1972/1972 445 guest rooms, restaurant, $55.03 $59.97 $62.34
Dallas, Texas lounge and meeting facilities
Best Western Airport Inn 1974/1985 175 guest rooms and leased $36.12 $34.76 $35.56
El Paso, Texas restaurant adjacent to
property
VIRGINIA
Residence Inn 1984/1984 96 suites with full kitchens $103.87 $99.68 $103.07
Tysons Corner, Virginia and fireplaces
WASHINGTON
Days Inn Town Center 1957/1984 90 guest rooms, restaurant and $62.73 $60.99 $60.85
Seattle, Washington (7) lounge
Years Ended December 31,
Year Constructed/ -------------------------
Property Year Acquired (1) Property Description 1995 1994 1993
-------- ----------------- -------------------- ---- ---- ----
Revenue per
-----------
Available Room
--------------
Days Inn City Center 1962/1984 173 guest rooms, restaurant, $47.25 $37.51 $36.32
Portland, Oregon lounge and meeting facilities
Riverside Inn 1964/1984 137 guest rooms, restaurant, $55.30 $50.49 $50.21
Portland, Oregon lounge and meeting facilities
TEXAS
Park Central Hotel 1972/1972 445 guest rooms, restaurant, $19.82 $25.37 $38.89
Dallas, Texas lounge and meeting facilities
Best Western Airport Inn 1974/1985 175 guest rooms and leased $28.68 $27.96 $25.01
El Paso, Texas restaurant adjacent to
property
VIRGINIA
Residence Inn 1984/1984 96 suites with full kitchens $88.25 $82.70 $80.55
Tysons Corner, Virginia and fireplaces
WASHINGTON
Days Inn Town Center 1957/1984 90 guest rooms, restaurant and $51.08 $48.40 $45.81
Seattle, Washington (7) lounge
17
21
Years Ended December 31,
Year Constructed/ ------------------------
Property Year Acquired (1) Property Description 1995 1994 1993
-------- ----------------- -------------------- ---- ---- ----
Average Occupancy
-----------------
Rate
----
Meany Tower Hotel 1932/1984 155 guest rooms, restaurant, 73% 71% 62%
Seattle, Washington lounge and meeting facilities,
including ballroom
Sixth Avenue Inn 1959/1984 166 guest rooms, restaurant, 79% 75% 62%
Seattle, Washington (8) lounge and meeting facilities
West Coast Tyee 1961/1987 155 guest rooms, restaurant, 58% 57% 62%
Tumwater, Washington lounge and meeting facilities
- -------------------------------------------------------------------------------
Years Ended December 31,
Year Constructed/ ------------------------
Property Year Acquired (1) Property Description 1995 1994 1993
-------- ----------------- -------------------- ---- ---- ----
Average Room
-------------
Rate
----
Meany Tower Hotel 1932/1984 155 guest rooms, restaurant, $72.83 $70.47 $76.29
Seattle, Washington lounge and meeting facilities,
including ballroom
Sixth Avenue Inn 1959/1984 166 guest rooms, restaurant, $74.42 $70.04 $72.37
Seattle, Washington (8) lounge and meeting facilities
West Coast Tyee 1961/1987 155 guest rooms, restaurant, $61.64 $60.63 $56.28
Tumwater, Washington lounge and meeting facilities
- -------------------------------------------------------------------------------
Years Ended December 31,
Year Constructed/ -------------------------
Property Year Acquired (1) Property Description 1995 1994 1993
-------- ----------------- -------------------- ---- ---- ----
Revenue per
-----------
Available Room
--------------
Meany Tower Hotel 1932/1984 155 guest rooms, restaurant, $53.07 $50.14 $46.92
Seattle, Washington lounge and meeting facilities,
including ballroom
Sixth Avenue Inn 1959/1984 166 guest rooms, restaurant, $58.53 $52.57 $44.67
Seattle, Washington (8) lounge and meeting facilities
West Coast Tyee 1961/1987 155 guest rooms, restaurant, $35.97 $34.78 $34.78
Tumwater, Washington lounge and meeting facilities
18
22
(1) "Year constructed" represents the calendar year in which construction
of the property was completed; "Year acquired" represents the calendar
year in which the Trust (or a predecessor) made its initial investment
in the property.
(2) Property is held subject to ground leases expiring in (assuming that
renewal options are exercised) 2019.
(3) Property is leased to Imperial Hotels Corporation.
(4) ADR and occupancy for 1993 and 1994 are not available.
(5) The Trust is the general partner of, and owns a 5% equity interest in,
the limited partnership which owns the property.
(6) Property is held subject to a ground lease expiring in 2029.
(7) Property is subject to a ground lease expiring in October 2007, which
is terminable by the ground lessor after September 1, 1999 upon six
months' notice under certain circumstances.
(8) Property is subject to a ground lease expiring in September 2008,
which is terminable by the ground lessor after September 1, 1999 upon
six months' notice under certain circumstances.
Mortgage and Other Notes Receivables. At December 31, 1995,
in addition to the three promissory notes related to the Milwaukee Marriott
referred to below, the Trust held eighteen promissory notes either contributed
by the Starwood Partners as part of the Reorganization or executed by
third-party purchasers of its hotels, all of which are secured by mortgages
(including deeds of trust) on thirteen hotels in the aggregate. Eleven of the
notes ($104.1 million in aggregate principal amount at December 31, 1995) are
secured by first mortgages; five notes ($1.6 million in aggregate principal
amount as of December 31, 1995) are secured by second mortgages; one note
($1.3 million in principal amount as of December 31, 1995) is secured by a
third mortgage; and one note ($173,000 in principal amount as of December 31,
1995) is secured by a fourth mortgage. Ten of the notes have fixed interest
rates that currently range from 7.0% to 10.0% per annum and five of the notes
have variable interest rates that range from 7.16% to 9.75% per annum at
December 31, 1995. The remaining three notes require principal payments only.
Two of the notes also provide for contingent interest based on a percentage of
the gross revenues of the properties securing such notes. The maturity dates
of the notes range from 1996 to 2017.
For additional information with respect to certain of the third-party
promissory notes and the three promissory notes held by the Trust and issued by
a partnership affiliated with the Corporation in connection with the Milwaukee
Marriott Hotel, see Notes 8 and 9 of Notes to Financial Statements included in
Item 8 of this Joint Annual Report.
In December 1987, in connection with the Corporation's acquisition of
the leasehold interest in two Atlanta, Georgia area hotels owned by the Trust
(which have been subsequently sold) from an affiliated partnership, John F.
Rothman, former president and chief executive officer of the Trust and general
partner of the partnership, assumed certain obligations of such partnership,
which obligations are evidenced by an unsecured promissory note to the Trust in
the principal amount of $800,000. Interest on the outstanding principal amount
of this note accrues interest at an annual rate of 10% and is payable annually;
the entire principal amount of the note is due in December 1999.
19
23
All of the notes described above were contributed by the Trust or the
Starwood Partners to the Realty Partnership in connection with the
Reorganization.
THE CORPORATION AND THE OPERATING PARTNERSHIP
At December 31, 1995, 28 of the 31 hotel properties leased by
the Trust to the Corporation were operated directly by the Corporation, and the
remaining three were managed by three independent hotel companies. The
Operating Partnership, the general partner of the partnership that owns the
Milwaukee Marriott, also operates the Milwaukee Marriott.
The following table sets forth the 1995, 1994 and 1993 average
occupancy and room rates, REVPAR, and certain other information concerning the
hotel in which the Operating Partnership is the general partner, Milwaukee
Marriott Hotel, as of December 31, 1995.
Year Constructed/
Year
Property Acquired Property Description
-------- ---------------- --------------------
Milwaukee Marriott 1972/1990 393 guest rooms, restaurant, lounge and
Milwaukee, WI meeting facilities.
Years Ended December 31,
------------------------------------------------------------------------------------------
1995 1994 1993 1995 1994 1993 1995 1994 1993
---- ---- ---- ---- ---- ---- ---- ---- ----
Average Occupancy Rate Average Room Revenue per Available
---------------------- ------------ ----------------------
Rate Room
---- ----
71% 70% 55% $72.19 $67.91 $71.99 $51.44 $47.42 $39.24
Management Agreements. Each management agreement with a third
party provides that the management company has the exclusive right to direct
the operations of the hotel subject to that agreement. The management company
is responsible for maintaining and making all necessary repairs to the managed
hotel, hiring, training and supervising all hotel employees, and performing all
hotel bookkeeping and other administrative duties.
Each management company is required to submit to the Operating
Partnership for its approval an annual budget that includes proposed capital
expenditures, and the management company makes only those capital expenditures
that are approved by the
20
24
Operating Partnership. The Realty Partnership is required to make available to
each management company sufficient working capital to permit that company to
operate the managed property.
For their services in managing the hotels, each third party
management company receives a management fee equal to a specified percentage
(generally 2% - 2-1/2%) of the gross revenues of the managed hotel, plus
additional incentive fees based upon the hotel's operating profits. Two of the
management agreements expire in 1998 and one expires in 1999. Of the remaining
four third-party management agreements currently in place, two are expected to
be terminated in early 1996 and management of the underlying properties assumed
by the Operating Partnership.
Franchise Agreements. All but twelve of the hotel properties
in which Starwood Lodging had an equity interest at December 31, 1995 are
operated pursuant to franchise or license agreements ("Franchise Agreements").
The Franchise Agreements generally require the payment of a monthly royalty fee
based on gross sales and various other marketing fees associated with certain
marketing or advertising and centralized reservation service funds, usually
based on gross sales. Such fees may vary among individual hotels within a
franchise system based on the type of marks, restaurants or other aspects of
the franchise system used.
The Franchise Agreements generally contain specific standards
for, and restrictions and limitations on, the operation and maintenance of the
hotels which are established by the franchisors to maintain uniformity in the
system created by each such franchisor. Such standards generally regulate the
appearance of the hotel, quality and type of goods and services offered,
signage, and protection of marks. Compliance with such standards could require
significant expenditures for capital improvements.
Ongoing training costs, requirements to purchase only from
approved suppliers, financial reporting requirements, insurance requirements
and various covenants not to compete imposed upon the franchisee are other<