EX-99.5 9 d384807dex995.htm EXHIBIT 99.5 Exhibit 99.5

EXHIBIT 99.5

Report of Independent Registered Public Accounting Firm

The Partners

Host Hotels & Resorts, L.P.:

We have audited the accompanying consolidated balance sheets of Host Hotels & Resorts, L.P. and subsidiaries as of December 31, 2011 and 2010, and the related consolidated statements of operations, comprehensive income (loss), capital, and cash flows for each of the years in the three-year period ended December 31, 2011. In connection with our audits of the consolidated financial statements, we also have audited the financial statement schedule III included as Exhibit 99.7. These consolidated financial statements and financial statement schedule are the responsibility of the Partnership’s management. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Host Hotels & Resorts, L.P. and subsidiaries as of December 31, 2011 and 2010, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2011, in conformity with U.S. generally accepted accounting principles. Also in our opinion, the related financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

 

/s/ KPMG LLP

McLean, Virginia

February 22, 2012, except as to

Notes 6, 10, 17, and 21 which are as of July 24, 2012

 

1

HOST HOTELS & RESORTS, L.P. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

December 31, 2011 and 2010

(in millions)

 

     2011     2010  

ASSETS

     

Property and equipment, net

    $ 11,383      $ 10,514   

Due from managers

      37        45   

Investments in affiliates

      197        148   

Deferred financing costs, net

      55        44   

Furniture, fixtures and equipment replacement fund

      166        152   

Other

      368        353   

Restricted cash

      36        41   

Cash and cash equivalents

      826        1,113   
  

 

 

    

 

 

  

Total assets

    $ 13,068      $ 12,410   
  

 

 

    

 

 

  

LIABILITIES, LIMITED PARTNERSHIP INTEREST OF THIRD PARTIES AND CAPITAL

     

Debt

     

Senior notes, including $902 million and $1,156 million, respectively, net of discount, of Exchangeable Senior Debentures

    $ 4,543      $ 4,249   

Credit facility

      117        58   

Mortgage debt

      1,006        1,025   

Other

      87        145   
  

 

 

    

 

 

  

Total debt

      5,753        5,477   

Accounts payable and accrued expenses

      175        161   

Other

      269        250   
  

 

 

    

 

 

  

Total liabilities

      6,197        5,888   
  

 

 

    

 

 

  

Limited partnership interest of third parties.

      158        191   

Host Hotels & Resorts, L.P. capital:

     

General partner

      1        1   

Limited partner

      6,677        6,276   

Accumulated other comprehensive income (loss)

      (1 )      25   
  

 

 

    

 

 

  

Total Host Hotels & Resorts, L.P. capital

      6,677        6,302   

Non-controlling interests—consolidated partnerships

      36        29   
  

 

 

    

 

 

  

Total capital

      6,713        6,331   
  

 

 

    

 

 

  

Total liabilities, limited partnership interest of third parties and capital

    $ 13,068      $ 12,410   
  

 

 

    

 

 

  

See Notes to Consolidated Financial Statements.

 

2

HOST HOTELS & RESORTS, L.P. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

Years Ended December 31, 2011, 2010 and 2009

(in millions, except per common unit amounts)

 

     2011     2010     2009  

REVENUES

       

Rooms

    $ 2,989      $ 2,633      $ 2,458   

Food and beverage

      1,412        1,278        1,221   

Other

      293        274        308   
  

 

 

    

 

 

    

 

 

  

Owned hotel revenues

      4,694        4,185        3,987   

Other revenues

      253        199        107   
  

 

 

    

 

 

    

 

 

  

Total revenues

      4,947        4,384        4,094   
  

 

 

    

 

 

    

 

 

  

EXPENSES

       

Rooms

      821        724        672   

Food and beverage

      1,050        954        923   

Other departmental and support expenses

      1,247        1,138        1,086   

Management fees

      188        170        157   

Other property-level expenses

      566        485        383   

Depreciation and amortization

      641        585        607   

Corporate and other expenses

      111        108        116   

Gain on insurance settlement

      (2 )      (3 )      —     
  

 

 

    

 

 

    

 

 

  

Total operating costs and expenses

      4,622        4,161        3,944   
  

 

 

    

 

 

    

 

 

  

OPERATING PROFIT

      325        223        150   

Interest income

      20        8        7   

Interest expense

      (371 )      (384 )      (379 ) 

Net gains on property transactions and other

      7        1        14   

Gain (loss) on foreign currency transactions and derivatives

      3        (6 )      5   

Equity in earnings (losses) of affiliates

      4        (1 )      (32 ) 
  

 

 

    

 

 

    

 

 

  

LOSS BEFORE INCOME TAXES

      (12 )      (159 )      (235 ) 

Benefit for income taxes

      1        31        39   
  

 

 

    

 

 

    

 

 

  

LOSS FROM CONTINUING OPERATIONS

      (11 )      (128 )      (196 ) 

Loss from discontinued operations, net of tax.

      (5 )      (4 )      (62 ) 
  

 

 

    

 

 

    

 

 

  

NET LOSS

      (16 )      (132 )      (258 ) 

Less: Net loss attributable to non-controlling interests

      1        —          1   
  

 

 

    

 

 

    

 

 

  

NET LOSS ATTRIBUTABLE TO HOST HOTELS & RESORTS, L.P.

      (15 )      (132 )      (257 ) 

Less: Distributions on preferred units

      —          (4 )      (9 ) 

Issuance costs of redeemed preferred units

      —          (4 )      —     
  

 

 

    

 

 

    

 

 

  

NET LOSS AVAILABLE TO COMMON UNITHOLDERS

    $ (15 )    $ (140 )    $ (266 ) 
  

 

 

    

 

 

    

 

 

  

Basic loss per common unit:

       

Continuing operations

    $ (.01 )    $ (.21 )    $ (.34 ) 

Discontinued operations

      (.01 )      —          (.10 ) 
  

 

 

    

 

 

    

 

 

  

Basic loss per common unit

    $ (.02 )    $ (.21 )    $ (.44 ) 
  

 

 

    

 

 

    

 

 

  

Diluted loss per common unit:

       

Continuing operations

    $ (.01 )    $ (.21 )    $ (.35 ) 

Discontinued operations

      (.01 )      —          (.10 ) 
  

 

 

    

 

 

    

 

 

  

Diluted loss per common unit

    $ (.02 )    $ (.21 )    $ (.45 ) 
  

 

 

    

 

 

    

 

 

  

See Notes to Consolidated Financial Statements.

 

3

HOST HOTELS & RESORTS, L.P. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

Years Ended December 31, 2011, 2010 and 2009

(in millions)

 

     2011     2010     2009  

NET LOSS

    $ (16 )    $ (132 )    $ (258 ) 

OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX:

       

Unrealized loss on HMS Host common stock

      —          —          (4 ) 

Foreign currency translation and other comprehensive income (loss) of unconsolidated affiliates

      (27 )      8        15   

Change in fair value of derivative instruments

      1        5        (4 ) 
  

 

 

    

 

 

    

 

 

  

OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX

      (26 )      13        7   
  

 

 

    

 

 

    

 

 

  

COMPREHENSIVE LOSS

      (42 )      (119 )      (251 ) 
  

 

 

    

 

 

    

 

 

  

Less: Comprehensive loss attributable to non- controlling interests

      1        —          1   
  

 

 

    

 

 

    

 

 

  

COMPREHENSIVE LOSS ATTRIBUTABLE TO HOST HOTELS & RESORTS, L.P.

    $ (41 )    $ (119 )    $ (250 ) 
  

 

 

    

 

 

    

 

 

  

See Notes to Consolidated Financial Statements.

 

4

HOST HOTELS & RESORTS, L.P. AND SUBISIDARIES

CONSOLIDATED STATEMENTS OF CAPITAL

Years Ended December 31, 2011, 2010 and 2009

(in millions)

 

                                     Accumulated     Non-controlling     Limited  
                 Preferred                   Other     Interests of     Partnership  
OP Units Outstanding           Limited      General      Limited     Comprehensive     Consolidated     Interests of  

Preferred

    Common           Partner      Partner      Partner     Income (Loss)     Partnerships     Third Parties  
4.0      525.3      

Balance, December 31, 2008

    $ 97       $ 1       $ 5,485      $ 5      $ 24      $ 158   
—        —        

Net loss

      —           —           (252 )      —          (1 )      (5 ) 
—        —        

Unrealized loss on HMS Host common stock

      —           —           —          (4 )      —          —     
—        —        

Other changes in ownership

      —           —           (19 )      —          —          19   
—        —        

Foreign currency translation and other comprehensive income of unconsolidated affiliates

      —           —           —          15        —          —     
—        —        

Change in fair value of derivative instruments

      —           —           —          (4 )      —          —     
—        103.6      

Common OP unit issuances

      —           —           767        —          —          —     
—        .4      

Units issued to Host Inc. for the comprehensive stock and employee stock purchase plans

      —           —           6        —          —          —     
—        —        

Distributions on common OP units

      —           —           (16 )      —          —          —     
—        —        

Distributions on preferred OP units

      —           —           (9 )      —          —          —     
—        —        

Issuance of 2009 Exchangeable Senior Debentures

      —           —           82        —          —          —     
—        3.4      

Redemptions of limited partnership interests of third parties

      —           —           33        —          —          (33 ) 
—        —        

Contributions from non- controlling interests of consolidated partnerships

      —           —           —          —          1        —     
—        —        

Distributions to non-controlling interests of consolidated partnerships

      —           —           —          —          (2 )      —     

 

   

 

 

        

 

 

     

 

 

     

 

 

    

 

 

    

 

 

    

 

 

  
4.0      632.7      

Balance, December 31, 2009

    $ 97       $ 1       $ 6,077      $ 12      $ 22      $ 139   

 

   

 

 

        

 

 

     

 

 

     

 

 

    

 

 

    

 

 

    

 

 

  

See Notes to Consolidated Financial Statements.

 

5

HOST HOTELS & RESORTS, L.P. AND SUBISIDARIES

CONSOLIDATED STATEMENTS OF CAPITAL (continued)

Years Ended December 31, 2011, 2010 and 2009

(in millions)

 

                                      Accumulated     Non-controlling     Limited  
                   Preferred                  Other     Interests of     Partnership  
OP Units Outstanding           Limited     General      Limited     Comprehensive     Consolidated     Interests of  
Preferred      Common           Partner     Partner      Partner     Income (Loss)     Partnerships     Third Parties  
  4.0         632.7      

Balance, December 31, 2009

    $ 97      $ 1       $ 6,077      $ 12      $ 22      $ 139   
  —           —        

Net loss

      —          —           (130 )      —          —          (2 ) 
  —           —        

Other changes in ownership

      —          —           (69 )      —          —          69   
  —           —        

Foreign currency translation and other comprehensive income of unconsolidated affiliates

      —          —           —          8        —          —     
  —           —        

Change in fair value of derivative instruments

      —          —           —          5        —          —     
  —           26.4      

Common OP unit issuances

      —          —           407        —          —          —     
  —           1.1      

Units issued to Host Inc. for the comprehensive stock and employee stock purchase plans

      —          —           10        —          —          —     
  —           —        

Distribution on common OP unit

      —          —           (26 )      —          —          —     
  —           —        

Distribution on preferred OP unit

      —          —           (4 )      —          —          —     
  (4.0)         —        

Redemption of preferred units

      (97 )      —           (4 )      —          —          —     
  —           1.2      

Redemptions of limited partnership interests of third parties

      —          —           15        —          —          (15 ) 
  —           —        

Contributions from non- controlling interests of consolidated partnerships

      —          —           —          —          11        —     
  —           —        

Distributions to non-controlling interests of consolidated partnerships

      —          —           —          —          (4 )      —     

 

 

     

 

 

        

 

 

    

 

 

     

 

 

    

 

 

    

 

 

    

 

 

  
  —           661.4      

Balance, December 31, 2010

    $ —        $ 1       $ 6,276      $ 25      $ 29      $ 191   

 

 

     

 

 

        

 

 

    

 

 

     

 

 

    

 

 

    

 

 

    

 

 

  
  —           —        

Net loss

      —          —           (15 )      —          (1 )      —     
  —           —        

Other changes in ownership

      —          —           33        —          —          (33 ) 
  —           —        

Foreign currency translation and other comprehensive loss of unconsolidated affiliates

      —          —           —          (27 )      —          —     
  —           —        

Change in fair value of

derivative instruments

      —          —           —          1        —          —     
  —           27.3      

Common OP unit issuances

      —          —           460        —          —          6   
  —           1.3      

Units issued to Host Inc. for the comprehensive stock and employee stock purchase plans

      —          —           17        —          —          —     
  —           —        

Distribution on common OP unit

      —          —           (99 )      —          —          —     
  —           0.3      

Redemptions of limited partnership interests of third parties

      —          —           5        —          —          (5 ) 
  —           —        

Contributions from non- controlling interests of consolidated partnerships

      —          —           —          —          12        —     
  —           —        

Distributions to non-controlling interests

      —          —           —          —          (4 )      (1 ) 

 

 

     

 

 

        

 

 

    

 

 

     

 

 

    

 

 

    

 

 

    

 

 

  
  —           690.3      

Balance, December 31, 2011

    $ —        $ 1       $ 6,677      $ (1 )    $ 36      $ 158   

 

 

     

 

 

        

 

 

    

 

 

     

 

 

    

 

 

    

 

 

    

 

 

  

See Notes to Consolidated Financial Statements.

 

6

HOST HOTELS & RESORTS, L.P. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

Years Ended December 31, 2011, 2010 and 2009

(in millions)

 

     2011     2010     2009  

OPERATING ACTIVITIES

       

Net loss

    $ (16 )    $ (132 )    $ (258 ) 

Adjustments to reconcile to cash provided by operations:

       

Discontinued operations:

       

(Gain) loss on dispositions

      —          2        (26 ) 

Depreciation

      14        8        96   

Depreciation and amortization

      641        585        607   

Amortization of deferred financing costs

      11        12        14   

Amortization of debt premiums/discounts, net

      19        31        31   

Deferred income taxes

      (11 )      (36 )      (38 ) 

Net gains on property transactions and other

      (7 )      (1 )      (14 ) 

(Gain) loss on foreign currency transactions and derivatives

      (3 )      6        (5 ) 

Non-cash loss (gain) on extinguishment of debt

      4        1        (5 ) 

Equity in (earnings) losses of affiliates

      (4 )      1        32   

Distributions from equity investments

      —          2        1   

Change in due from managers

      —          (9 )      34   

Change in cash restricted for operating activities

      —          (25 )      —     

Changes in other assets

      (9 )      44        (12 ) 

Changes in other liabilities

      22        31        95   
  

 

 

    

 

 

    

 

 

  

Cash provided by operating activities

      661        520        552   
  

 

 

    

 

 

    

 

 

  

INVESTING ACTIVITIES

       

Proceeds from sales of assets, net

      6        12        199   

Acquisitions

      (1,047 )      (342 )      —     

Deposits for acquisitions

      —          (38 )      —     

Proceeds from transfer of Le Méridien Piccadilly to the Euro JV Fund II

      40        —          —     

Proceeds from sale of interest in CBM Joint Venture LLC

      —          —          13   

Deferred sale proceeds received from HPT

      —          17        —     

Investment in affiliates

      (49 )      (1 )      (7 ) 

Return of capital from investments in affiliates

      1        —          39   

Purchase of mortgage note on a portfolio of hotels

      —          (53 )      —     

Capital expenditures:

       

Renewals and replacements

      (327 )      (195 )      (164 ) 

Redevelopment and other investments

      (215 )      (114 )      (176 ) 

Change in furniture, fixtures & equipment (FF&E) replacement fund

      4        (17 )      (6 ) 

Change in FF&E replacement funds designated as restricted cash

      —          22        (14 ) 

Property insurance proceeds

      11        3        —     
  

 

 

    

 

 

    

 

 

  

Cash used in investing activities

      (1,576 )      (706 )      (116 ) 
  

 

 

    

 

 

    

 

 

  

FINANCING ACTIVITIES

       

Financing costs

      (23 )      (10 )      (20 ) 

Issuances of debt

      955        500        906   

Draws on credit facility

      153        56        —     

Repayment on credit facility

      (90 )      —          (410 ) 

Repurchase/redemption of senior notes, including exchangeable debentures

      (404 )      (821 )      (139 ) 

Mortgage debt prepayments and scheduled maturities

      (210 )      (364 )      (342 ) 

Scheduled principal repayments

      (5 )      (13 )      (14 ) 

Common OP unit issuance

      323        406        767   

Redemption of preferred OP units

      —          (101 )      —     

Distributions on common OP units

      (71 )      (20 )      (43 ) 

Distributions on preferred OP units

      —          (6 )      (9 ) 

Distributions to non-controlling interests

      (4 )      (4 )      (2 ) 

Contributions from non-controlling interests

      1        11        —     

Change in cash restricted for financing activities

      3        23        4   
  

 

 

    

 

 

    

 

 

  

Cash provided by (used in) financing activities

      628        (343 )      698   
  

 

 

    

 

 

    

 

 

  

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

      (287 )      (529 )      1,134   

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR

      1,113        1,642        508   
  

 

 

    

 

 

    

 

 

  

CASH AND CASH EQUIVALENTS, END OF YEAR

    $ 826      $ 1,113      $ 1,642   
  

 

 

    

 

 

    

 

 

  

See Notes to Consolidated Financial Statements.

 

7

HOST HOTELS & RESORTS, L.P. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

Years Ended December 31, 2011, 2010 and 2009

(in millions)

Supplemental schedule of noncash investing and financing activities:

During 2011, 2010 and 2009, non-controlling partners converted common operating partnership units (“OP units”) valued at $5 million, $15 million and $18 million, respectively, in exchange for 0.3 million, 1.2 million and 3.4 million shares, respectively, of Host Inc. common stock.

In June 2011, holders of approximately $134 million of the 3.25% Exchangeable Debentures elected to exchange their debentures for approximately 8.8 million shares of Host Inc. common stock.

On June 28, 2011, we transferred the Le Méridien Piccadilly to the Euro JV Fund II at a price of £64 million ($102 million), including the assumption of the associated £32 million ($52 million) mortgage. We also transferred the capital lease asset and corresponding liability associated with the building, each valued at £38 million ($61 million), to the Euro JV Fund II. We retained a 33.4% interest in the property through our general and limited partner interests in the Euro JV Fund II and received cash proceeds on the transfer of £25 million ($40 million). We acquired a leasehold interest in the property in July 2010, at which time we assumed the mortgage loan and recorded the capital lease obligation.

On April 29, 2011, we acquired a 75% controlling interest in the Hilton Melbourne South Wharf. In connection with the acquisition, we assumed A$80 million ($86 million) of mortgage debt and recorded such mortgage debt at its fair value at the acquisition date.

On March 17, 2011, we acquired the Manchester Grand Hyatt San Diego, and certain related rights. In connection with the acquisition, Host Hotels & Resorts, L.P. issued approximately 0.3 million OP units valued at approximately $6 million.

On September 2, 2010, we acquired a 90% controlling interest in the W New York, Union Square hotel. In connection with the acquisition, we assumed a $115 million mortgage debt with a fair value of $119 million, and other liabilities of $8.5 million.

See Notes to Consolidated Financial Statements.

 

8