-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, NWWwlBQJeV6by7h8uu4c7QHFQfBjDR/KGTdiGiVBLOfLE/FHEY4PLLctrRNEwimb Ov7xCZNYBweNFKSs3AfsXg== 0000950148-95-000807.txt : 19951119 0000950148-95-000807.hdr.sgml : 19951119 ACCESSION NUMBER: 0000950148-95-000807 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19950930 FILED AS OF DATE: 19951114 SROS: AMEX SROS: BSE SROS: CSX SROS: NYSE SROS: PSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: STARWOOD LODGING TRUST CENTRAL INDEX KEY: 0000048595 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 520901263 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-06828 FILM NUMBER: 95592996 BUSINESS ADDRESS: STREET 1: 11845 W OLYMPIC BLVD STREET 2: SUITE 550 CITY: LOS ANGELES STATE: CA ZIP: 90064 BUSINESS PHONE: 3105753900 MAIL ADDRESS: STREET 1: 11845 W OLYMPIC BLVD STREET 2: SUITE 550 CITY: LOS ANGELES STATE: CA ZIP: 90064 FORMER COMPANY: FORMER CONFORMED NAME: HOTEL INVESTORS TRUST /MD/ DATE OF NAME CHANGE: 19930506 FORMER COMPANY: FORMER CONFORMED NAME: HOTEL INVESTORS TRUST DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: HOTEL INVESTORS DATE OF NAME CHANGE: 19800720 FILER: COMPANY DATA: COMPANY CONFORMED NAME: STARWOOD LODGING CORP CENTRAL INDEX KEY: 0000316206 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE [6500] IRS NUMBER: 521193298 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-07959 FILM NUMBER: 95592997 BUSINESS ADDRESS: STREET 1: 11845 W OLYMPIC BLVD STREET 2: SUITE 560 CITY: LOS ANGELES STATE: CA ZIP: 90064 BUSINESS PHONE: 3105753900 MAIL ADDRESS: STREET 1: 11845 W OLYMPIC BLVD STREET 2: SUITE 560 CITY: LOS ANGELES STATE: CA ZIP: 90064 FORMER COMPANY: FORMER CONFORMED NAME: HOTEL INVESTORS CORP DATE OF NAME CHANGE: 19920703 10-Q 1 FORM 10-Q FOR THE QUARTERLY PERIOD ENDED 9/30/95 1 ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [X] Quarterly report pursuant to Section 13 or 15(d) of the Securities and Exchange Act of 1934 For the quarterly period ended September 30, 1995 ------------------------------ OR [ ] Transition report pursuant to Section 13 or 15(d) of the Securities and Exchange Act of 1934 For the transition period from to --------- --------- Commission File Number: 1-6828 Commission File Number: 1-7959 STARWOOD LODGING TRUST STARWOOD LODGING CORPORATION (Exact name of registrant as specified in its charter) (Exact name of registrant as specified in its 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.) 11845 W. Olympic Blvd., Suite 550 11845 W. Olympic Blvd., Suite 560 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)
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 the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. 13,809,658 Shares of Beneficial Interest, par value $0.01 per share, of Starwood Lodging Trust paired with 13,809,658 Shares of Common Stock, par value $0.01 per share, of Starwood Lodging Corporation, outstanding as of November 14, 1995. ================================================================================ 2 STARWOOD LODGING TRUST AND STARWOOD LODGING CORPORATION PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS The following financial statements of Starwood Lodging Trust (the "Trust") and Starwood Lodging Corporation (the "Corporation") are provided pursuant to the requirements of this item. INDEX TO FINANCIAL STATEMENTS Starwood Lodging Trust and Starwood Lodging Corporation: Unaudited Combined Pro Forma Statements of Operations - for the three months and nine months ended September 30, 1995 and 1994 Notes to Unaudited Combined Pro Forma Statements of Operations Starwood Lodging Trust and Starwood Lodging Corporation: Combined Balance Sheets - As of September 30, 1995 and December 31, 1994 Combined Statements of Operations - For the three and nine months ended September 30, 1995 and 1994 Combined Statements of Cash Flows - For the nine months ended September 30, 1995 and 1994 Starwood Lodging Trust: Balance Sheets - As of September 30, 1995 and December 31, 1994 Statements of Operations - For the three and nine months ended September 30, 1995 and 1994 Statements of Cash Flows - For the nine months ended September 30, 1995 and 1994 Starwood Lodging Corporation: Balance Sheets - As of September 30, 1995 and December 31, 1994 Statements of Operations - For the three and nine months ended September 30, 1995 and 1994 Statements of Cash Flows - For the nine months ended September 30, 1995 and 1994 Notes to Financial Statements - 2 - 3 STARWOOD LODGING TRUST AND STARWOOD LODGING CORPORATION UNAUDITED COMBINED PRO FORMA STATEMENTS OF OPERATIONS
Three Months Ended September 30, ----------------------------------- 1995 1994 ----------- ----------- REVENUE Hotel . . . . . . . . . . . . . . . . . . . . $33,227,000 $30,139,000 Gaming . . . . . . . . . . . . . . . . . . . . 6,559,000 6,781,000 Interest from mortgage and other notes . . . . 2,868,000 2,884,000 Rents from leased hotel properties and income from joint ventures . . . . . . . 221,000 242,000 Other income . . . . . . . . . . . . . . . . . 377,000 87,000 Gain (loss) on sales of hotel assets . . . . . (12,000) 78,000 ----------- ----------- 43,240,000 40,211,000 ----------- ----------- EXPENSES Hotel operations . . . . . . . . . . . . . . . 22,406,000 20,868,000 Gaming operations . . . . . . . . . . . . . . 6,018,000 6,237,000 Interest . . . . . . . . . . . . . . . . . . . 460,000 447,000 Depreciation and amortization . . . . . . . . . 4,557,000 4,378,000 Administrative and operating . . . . . . . . . 1,387,000 1,135,000 ----------- ----------- 34,828,000 33,065,000 ----------- ----------- Income before minority interest . . . . . . . 8,412,000 7,146,000 Minority interest in Partnerships . . . . . . 2,531,000 2,039,000 ----------- ----------- Net income . . . . . . . . . . . . . . . . . . $5,881,000 $5,107,000 =========== =========== Net income per paired share . . . . . . . . . $0.43 $0.37 =========== =========== Funds from operations . . . . . . . . . . . . $12,981,000 $11,446,000 =========== =========== Funds from operations per paired share . . . . $0.66 $0.58 =========== ===========
See accompanying notes to the pro forma statements of operations. - 3 - 4 STARWOOD LODGING TRUST AND STARWOOD LODGING CORPORATION UNAUDITED COMBINED PRO FORMA STATEMENTS OF OPERATIONS
Nine Months Ended September 30, ----------------------------------- 1995 1994 ----------- ----------- REVENUE Hotel . . . . . . . . . . . . . . . . . . . . $96,805,000 $87,947,000 Gaming . . . . . . . . . . . . . . . . . . . . 20,375,000 21,094,000 Interest from mortgage and other notes . . . . 8,004,000 7,696,000 Rents from leased hotel properties and income from joint ventures . . . . . . . 608,000 705,000 Other income . . . . . . . . . . . . . . . . . 1,334,000 395,000 Gain (loss) on sales of hotel assets . . . . . (125,000) 670,000 ----------- ----------- 127,001,000 118,507,000 ----------- ----------- EXPENSES Hotel operations . . . . . . . . . . . . . . . 65,702,000 61,829,000 Gaming operations . . . . . . . . . . . . . . 18,351,000 18,396,000 Interest . . . . . . . . . . . . . . . . . . . 999,000 986,000 Depreciation and amortization . . . . . . . . . 13,647,000 13,377,000 Administrative and operating . . . . . . . . . 3,847,000 3,208,000 ----------- ----------- 102,546,000 97,796,000 ----------- ----------- Income before minority interest . . . . . . . 24,455,000 20,711,000 Minority interest in Partnerships . . . . . . 7,358,000 6,232,000 ----------- ----------- Net income . . . . . . . . . . . . . . . . . . $17,097,000 $14,479,000 =========== =========== Net income per paired share . . . . . . . . . $1.24 $1.05 =========== =========== Funds from operations . . . . . . . . . . . . $37,813,000 $33,418,000 =========== =========== Funds from operations per paired share . . . . $1.91 $1.69 =========== ===========
See accompanying notes to the pro forma statements of operations. - 4 - 5 STARWOOD LODGING TRUST AND STARWOOD LODGING CORPORATION NOTES TO THE UNAUDITED COMBINED PRO FORMA STATEMENTS OF OPERATIONS FOR THE THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 1995 NOTE 1. BASIS OF PRESENTATION The Trust and the Corporation (collectively, "the Companies") have unilateral control of SLT Realty Limited Partnership ("Realty") and SLC Operating Limited Partnership ("Operating" and, together with Realty the "Partnerships"), respectively, and, therefore, the historical financial statements of Realty and Operating are consolidated with those of the Trust and the Corporation. Unless the context otherwise requires, all references herein to the "Companies" refer to the Trust and the Corporation, and all references to the "Trust" and to the "Corporation" include the Trust and the Corporation and those entities respectively owned or controlled by the Trust or the Corporation, including Realty and Operating. On July 6, 1995, the Trust and the Corporation completed a public offering (the "Offering") of 11,787,500 paired shares. Net proceeds from the Offering of approximately $252.1 million together with proceeds from a financing facility and cash on hand were used as follows: approximately $206.5 million was used to repay existing indebtedness, including $10 million which was used by Realty to purchase the first trust deed on Operating's Milwaukee hotel, and approximately $53.8 million was used for the acquisition of the 462-room Sheraton Colony Square in Atlanta, Georgia and the 224-room Embassy Suites in Tempe, Arizona. Due to the impact of the Offering and the acquisitions of properties acquired in connection with the Offering, the historical results of operations and earnings per share are not indicative of future results of operations and earnings per share. The Unaudited Combined Pro Forma Statements of Operations included as part of the financial statements for the three months and nine months ended September 30, 1995 and 1994 give effect to the reorganization with Starwood Capital Group, L.P. and its affiliates (collectively, "Starwood Capital") effective January 1, 1995 (the "Reorganization"), the Offering, and the acquisitions of the Sheraton Colony Square in Atlanta, Georgia, the Embassy Suites in Tempe, Arizona, and the Omni Europa in Chapel Hill, North Carolina as of the beginning of the period presented. Pro forma results include the results of the Doral Inn in New York, New York, from the date of acquisition (September 20, 1995) and exclude the results from properties sold in 1994. Additional pro forma information reflecting the inclusion of the Doral Inn from the beginning of each respective period is included in Note 5 to the historical financial statements. The pro forma information is based upon historical information and does not purport to present what actual results would have been had such transactions, in fact, occurred at the beginning of each period presented or to project results for any future period. - 5 - 6 NOTE 2. NET INCOME AND FUNDS FROM OPERATIONS PER PAIRED SHARE Net income per paired share has been computed using the pro forma weighted average number of paired shares and equivalent paired shares outstanding for the period presented -- 13,809,658 paired shares. For the purpose of computing funds from operations ("FFO") per paired share, all limited partnership units held by Starwood Capital are assumed to have been exchanged for paired shares. The resulting pro forma amount of paired shares outstanding at September 30, 1995 used in calculating FFO per paired share is 19,753,236. - 6 - 7 STARWOOD LODGING TRUST AND STARWOOD LODGING CORPORATION COMBINED BALANCE SHEETS (Unaudited)
September 30, December 31, 1995 1994 ------------- ------------- ASSETS Hotel assets held for sale - net . . . . . . . . . . . . $8,328,000 $8,585,000 Hotel assets - net . . . . . . . . . . . . . . . . . . . 281,231,000 142,600,000 ------------ ------------ 289,559,000 151,185,000 Mortgage notes receivable, net . . . . . . . . . . . . . 78,454,000 14,049,000 Investments . . . . . . . . . . . . . . . . . . . . . . 620,000 262,000 ------------ ------------ Total real estate investments . . . . . . . . . . 368,633,000 165,496,000 Cash and cash equivalents . . . . . . . . . . . . . . . 18,135,000 5,065,000 Accounts and interest receivable . . . . . . . . . . . . 6,911,000 4,040,000 Notes receivable, net . . . . . . . . . . . . . . . . . 1,816,000 1,627,000 Inventories, prepaid expenses and other assets . . . . . 11,660,000 7,727,000 ------------ ------------ $407,155,000 $183,955,000 ============ ============ LIABILITIES AND SHAREHOLDERS' EQUITY LIABILITIES Secured notes payable and revolving line of credit . . . $64,600,000 $113,896,000 Mortgage and other notes payable . . . . . . . . . . . . 4,370,000 46,586,000 Accounts payable and other liabilities . . . . . . . . . 17,325,000 14,765,000 ------------ ------------ 86,295,000 175,247,000 ------------ ------------ Commitments and contingencies MINORITY INTEREST . . . . . . . . . . . . . . . . . . . 96,544,000 ------------ ------------ SHAREHOLDERS' EQUITY Trust shares of beneficial interest, $0.01 par value; authorized 100,000,000 shares; outstanding 13,810,000 shares . . . . . . . . . . . . . . . . . . 138,000 12,133,000 Corporation common stock, $0.01 par value; authorized 100,000,000 shares; outstanding 13,810,000 shares . . . . . . . . . . . . 138,000 1,213,000 Additional paid-in capital . . . . . . . . . . . . . . . 434,134,000 210,251,000 Accumulated deficit . . . . . . . . . . . . . . . . . . (210,094,000) (214,889,000) ------------ ------------ 224,316,000 8,708,000 ------------ ------------ $407,155,000 $183,955,000 ============ ============
See accompanying notes to financial statements. - 7 - 8 STARWOOD LODGING TRUST AND STARWOOD LODGING CORPORATION COMBINED STATEMENTS OF OPERATIONS (Unaudited)
Three Months Ended September 30, -------------------------------- 1995 1994 ----------- ----------- REVENUE Hotel . . . . . . . . . . . . . . . . . . . . . . . . . $32,366,000 $21,964,000 Gaming . . . . . . . . . . . . . . . . . . . . . . . . . 6,559,000 6,781,000 Interest from mortgage and other notes . . . . . . . . . 2,868,000 514,000 Rents from leased hotel properties . . . . . . . . . . . 221,000 242,000 Other . . . . . . . . . . . . . . . . . . . . . . . . . 377,000 87,000 Gain (loss) on sale . . . . . . . . . . . . . . . . . . (12,000) 78,000 ----------- ----------- 42,379,000 29,666,000 ----------- ----------- EXPENSES Hotel operations . . . . . . . . . . . . . . . . . . . . 21,875,000 14,971,000 Gaming operations . . . . . . . . . . . . . . . . . . . 6,018,000 6,237,000 Interest . . . . . . . . . . . . . . . . . . . . . . . . 461,000 4,570,000 Depreciation and amortization . . . . . . . . . . . . . 3,997,000 2,061,000 Administrative and operating . . . . . . . . . . . . . . 1,386,000 1,135,000 Shareholder litigation expense . . . . . . . . . . . . . 2,648,000 Provision for losses . . . . . . . . . . . . . . . . . . 759,000 ----------- ----------- 33,737,000 32,381,000 ----------- ----------- Income (loss) before extraordinary item and minority 8,642,000 (2,715,000) interest . . . . . . . . . . . . . . . . . . . . . . . . Minority interest . . . . . . . . . . . . . . . . . . . 2,655,000 ----------- ----------- Income (loss) before extraordinary item . . . . . . . . 5,987,000 (2,715,000) Extraordinary item (net of $1,084,000 minority interest). (2,518,000) ----------- ----------- NET INCOME (LOSS) $3,469,000 $(2,715,000) =========== =========== EARNINGS PER PAIRED SHARE Income (loss) before extraordinary item . . . . . . . . $0.43 $(1.34) Extraordinary item . . . . . . . . . . . . . . . . . . . (0.18) ----------- ----------- NET INCOME (LOSS) PER PAIRED SHARE $0.25 $(1.34) ----------- ----------- Weighted average number of paired shares 13,810,000 2,022,000 =========== ===========
See accompanying notes to financial statements. - 8 - 9 STARWOOD LODGING TRUST AND STARWOOD LODGING CORPORATION COMBINED STATEMENTS OF OPERATIONS (Unaudited)
Nine Months Ended September 30, -------------------------------- 1995 1994 ----------- ----------- REVENUE Hotel . . . . . . . . . . . . . . . . . . . . . . . . . $81,951,000 $63,858,000 Gaming . . . . . . . . . . . . . . . . . . . . . . . . . 20,375,000 21,094,000 Interest from mortgage and other notes . . . . . . . . . 8,004,000 1,276,000 Rents from leased hotel properties . . . . . . . . . . . 608,000 705,000 Other . . . . . . . . . . . . . . . . . . . . . . . . . 1,334,000 395,000 Gain (loss) on sale . . . . . . . . . . . . . . . . . . (125,000) 670,000 ----------- ----------- 112,147,000 87,998,000 ----------- ----------- EXPENSES Hotel operations . . . . . . . . . . . . . . . . . . . . 56,232,000 46,095,000 Gaming operations . . . . . . . . . . . . . . . . . . . 18,351,000 18,396,000 Interest . . . . . . . . . . . . . . . . . . . . . . . . 11,198,000 13,028,000 Depreciation and amortization . . . . . . . . . . . . . 10,182,000 6,074,000 Administrative and operating . . . . . . . . . . . . . . 3,836,000 3,115,000 Shareholder litigation expense . . . . . . . . . . . . . 2,648,000 Provision for losses . . . . . . . . . . . . . . . . . . 759,000 ----------- ----------- 99,799,000 90,115,000 ----------- ----------- Income (loss) before extraordinary items and minority 12,348,000 (2,117,000) interest Minority interest . . . . . . . . . . . . . . . . . . . 5,398,000 ----------- ----------- Income (loss) before extraordinary items . . . . . . . . 6,950,000 (2,117,000) Extraordinary items (net of $163,000 minority interest) (2,155,000) ----------- ----------- NET INCOME (LOSS) $ 4,795,000 $(2,117,000) =========== =========== EARNINGS PER PAIRED SHARE Income (loss) before extraordinary items . . . . . . . . $ 1.17 $(1.05) Extraordinary items . . . . . . . . . . . . . . . . . . (0.36) ----------- ----------- NET INCOME PER PAIRED SHARE $0.81 $(1.05) =========== =========== Weighted average number of paired shares 5,951,000 2,022,000 =========== ===========
See accompanying notes to financial statements. - 9 - 10 STARWOOD LODGING TRUST AND STARWOOD LODGING CORPORATION COMBINED STATEMENTS OF CASH FLOWS (Unaudited)
Nine Months Ended September 30, ----------------------------------- 1995 1994 ------------ ------------ CASH FLOWS FROM OPERATING ACTIVITIES Net income (loss) . . . . . . . . . . . . . . . . . . . $4,795,000 $(2,117,000) Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Minority interest . . . . . . . . . . . . . . . . . . 5,398,000 Extraordinary items . . . . . . . . . . . . . . . . . 2,155,000 Depreciation and amortization . . . . . . . . . . . . 10,182,000 6,074,000 Accretion of discount . . . . . . . . . . . . . . . . (2,286,000) Deferred interest . . . . . . . . . . . . . . . . . . . 649,000 2,221,000 Gain (loss) on sale . . . . . . . . . . . . . . . . . 125,000 (670,000) Provision for losses . . . . . . . . . . . . . . . . . 759,000 Changes in operating assets and liabilities: Accounts receivable, inventories, prepaid expenses and other assets . . . . . . . . . . . . . . . . . . . . (9,374,000) (797,000) Accounts payable and other liabilities . . . . . . . . 5,681,000 1,900,000 ------------ ------------ Net cash provided by operating activities . . . . 17,325,000 7,370,000 ------------ ------------ CASH FLOWS FROM INVESTING ACTIVITIES Additions to hotel assets . . . . . . . . . . . . . . . (113,075,000) (2,062,000) Net proceeds from sales of assets . . . . . . . . . . . 4,528,000 Increase in mortgage notes receivable . . . . . . . . . (19,515,000) Principal received on notes receivable . . . . . . . . . 6,332,000 2,389,000 Reorganization costs . . . . . . . . . . . . . . . . . . (2,786,000) ------------ ------------ Net cash provided by (used in) investing activities (129,044,000) 4,855,000 ------------ ------------ CASH FLOWS FROM FINANCING ACTIVITIES Principal payments on mortgage and other notes payable . (106,130,000) (1,205,000) Payments on secured notes payable , net . . . . . . . . (38,299,000) (20,518,000) Borrowings under mortgage and other notes . . . . . . . 9,977,000 6,000,000 Increase in secured notes payable and revolving line of 4,500,000 credit . . . . . . . . . . . . . . . . . . . . . . . . . Limited partner capital contributions . . . . . . . . . 14,860,000 Purchase of warrants . . . . . . . . . . . . . . . . . . (1,300,000) Proceeds from offering . . . . . . . . . . . . . . . . . 245,681,000 Principal received on share purchase notes . . . . . . . 11,000 ------------ ------------ Net cash provided by (used in) financing activities 124,789,000 (11,212,000) ------------ ------------ INCREASE IN CASH AND CASH EQUIVALENTS . . . . . . . . . 13,070,000 1,013,000 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD . . . . . . . . . . . . . . . . 5,065,000 5,652,000 ------------ ------------ CASH AND CASH EQUIVALENTS AT END OF PERIOD . . . . . . . . . . . . . . . . . . . $18,135,000 $6,665,000 ============ ============
See accompanying notes to financial statements. - 10 - 11 STARWOOD LODGING TRUST BALANCE SHEETS (Unaudited)
September 30, December 31, 1995 1994 ------------- ------------ ASSETS Hotel assets held for sale - net . . . . . . . . . . . . $8,094,000 $8,281,000 Hotel assets - net . . . . . . . . . . . . . . . . . . . 192,076,000 108,428,000 ------------ ------------ 200,170,000 116,709,000 Mortgage notes receivable, net . . . . . . . . . . . . . 78,454,000 14,049,000 Investments . . . . . . . . . . . . . . . . . . . . . . 603,000 240,000 ------------ ------------ Total real estate investments . . . . . . . . . . 279,227,000 130,998,000 Cash and cash equivalents . . . . . . . . . . . . . . . 7,450,000 255,000 Rent and interest receivable . . . . . . . . . . . . . 853,000 698,000 Notes receivable - Corporation . . . . . . . . . . . . . 77,589,000 26,916,000 Notes receivable, net . . . . . . . . . . . . . . . . . 1,236,000 1,004,000 Prepaid expenses and other assets . . . . . . . . . . . 3,757,000 2,374,000 ------------ ------------ $370,112,000 $162,245,000 ============ ============ LIABILITIES AND SHAREHOLDERS' EQUITY LIABILITIES Secured notes payable and revolving line of credit . . . $64,600,000 $113,896,000 Mortgage and other notes payable . . . . . . . . . . . . 100,000 32,838,000 Accounts payable and other liabilities . . . . . . . . . 2,499,000 5,061,000 ------------ ------------ 67,199,000 151,795,000 ------------ ------------ Commitments and contingencies MINORITY INTEREST . . . . . . . . . . . . . . . . . . . 91,144,000 ------------ ------------ SHAREHOLDERS' EQUITY Trust shares of beneficial interest, $0.01 par value; authorized 100,000,000 shares; outstanding 13,810,000 shares . . . . . . . . . . . . . . . . . . 138,000 12,133,000 Additional paid-in capital . . . . . . . . . . . . . . . 354,682,000 146,059,000 Accumulated deficit . . . . . . . . . . . . . . . . . . (143,051,000) (147,742,000) ------------ ------------ 211,769,000 10,450,000 $370,112,000 $162,245,000 ============ ============
See accompanying notes to financial statements. - 11 - 12 STARWOOD LODGING TRUST STATEMENTS OF OPERATIONS (Unaudited)
Three Months Ended September 30, ------------------------------- 1995 1994 ---------- ---------- REVENUE Rents from Corporation . . . . . . . . . . . . . . . . . . $7,319,000 $4,441,000 Interest from Corporation . . . . . . . . . . . . . . . . 1,060,000 439,000 Interest from mortgage and other notes . . . . . . . . . . 2,802,000 505,000 Rents from other leased hotel properties . . . . . . . . . 221,000 242,000 Other . . . . . . . . . . . . . . . . . . . . . . . . . . 361,000 47,000 Gain (loss) on sale . . . . . . . . . . . . . . . . . . . (12,000) ---------- ----------- 11,751,000 5,737,000 ---------- ----------- EXPENSES Interest . . . . . . . . . . . . . . . . . . . . . . . . . 426,000 4,238,000 Depreciation and amortization . . . . . . . . . . . . . . 2,342,000 1,269,000 Administrative and operating . . . . . . . . . . . . . . . 405,000 460,000 Shareholder litigation expense . . . . . . . . . . . . . . 1,324,000 Provision for losses . . . . . . . . . . . . . . . . . . . 759,000 ---------- ----------- 3,173,000 8,050,000 ---------- ----------- Income (loss) before extraordinary item and minority interest . . . . . . . . . . . . . . . . . . . . . . . . . 8,578,000 (2,313,000) Minority interest . . . . . . . . . . . . . . . . . . . . 2,581,000 ---------- ----------- Income (loss) before extraordinary item . . . . . . . . . 5,997,000 (2,313,000) Extraordinary item (net of $1,084,000 minority interest). . (2,518,000) ---------- ----------- NET INCOME (LOSS) $3,479,000 $(2,313,000) ========== =========== EARNINGS PER PAIRED SHARE Income (loss) before extraordinary item . . . . . . . . . $0.43 $(1.14) Extraordinary item . . . . . . . . . . . . . . . . . . . . (0.18) ---------- ----------- NET INCOME LOSS PER SHARE $0.25 $(1.14) ========== ===========
See accompanying notes to financial statements. - 12 - 13 STARWOOD LODGING TRUST STATEMENTS OF OPERATIONS (Unaudited)
Nine Months Ended September 30, -------------------------------- 1995 1994 ----------- ----------- REVENUE Rents from Corporation . . . . . . . . . . . . . . . . . $18,287,000 $12,897,000 Interest from Corporation . . . . . . . . . . . . . . . 2,629,000 1,280,000 Interest from mortgage and other notes . . . . . . . . . 7,915,000 1,243,000 Rents from other leased hotel properties . . . . . . . . 608,000 705,000 Other . . . . . . . . . . . . . . . . . . . . . . . . . 461,000 166,000 Gain (loss) on sale . . . . . . . . . . . . . . . . . . (125,000) 642,000 ----------- ----------- 29,775,000 16,933,000 ----------- ----------- EXPENSES Interest . . . . . . . . . . . . . . . . . . . . . . . . 10,534,000 12,013,000 Depreciation and amortization . . . . . . . . . . . . . 6,260,000 3,834,000 Administrative and operating . . . . . . . . . . . . . . 1,178,000 1,182,000 Shareholder litigation expense . . . . . . . . . . . . . 1,324,000 Provision for losses . . . . . . . . . . . . . . . . . . 759,000 ----------- ----------- 17,972,000 19,112,000 ----------- ----------- Income (loss) before extraordinary items and minority interest . . . . . . . . . . . . . . . . . . . . . . . . 11,803,000 (2,179,000) Minority interest . . . . . . . . . . . . . . . . . . . . 4,957,000 ----------- ----------- Income (loss) before extraordinary items . . . . . . . . 6,846,000 (2,179,000) Extraordinary items (net of $163,000 minority interest) (2,155,000) ----------- ----------- NET INCOME (LOSS) $4,691,000 $(2,179,000) =========== =========== EARNINGS PER PAIRED SHARE Income (loss) before extraordinary items . . . . . . . . $1.15 $(1.08) Extraordinary items . . . . . . . . . . . . . . . . . . (0.36) ----------- ----------- NET INCOME (LOSS) PER SHARE $0.79 $(1.08) =========== ===========
See accompanying notes to financial statements. - 13 - 14 STARWOOD LODGING TRUST STATEMENTS OF CASH FLOWS (Unaudited)
Nine Months Ended September 30, ----------------------------------- 1995 1994 -------------- ------------- CASH FLOWS FROM OPERATING ACTIVITIES Net income (loss) . . . . . . . . . . . . . . . . . . . $4,691,000 $(2,179,000) Adjustments to reconcile net income to net cash provided by (used in) operating activities: Minority interest . . . . . . . . . . . . . . . . . . 4,957,000 Extraordinary items . . . . . . . . . . . . . . . . . 2,155,000 Depreciation and amortization . . . . . . . . . . . . 6,260,000 3,834,000 Accretion of discount . . . . . . . . . . . . . . . . (2,286,000) Deferred interest . . . . . . . . . . . . . . . . . . 649,000 2,221,000 Deferred interest - Corporation . . . . . . . . . . . (1,111,000) (1,280,000) Gain (loss) on sale . . . . . . . . . . . . . . . . . 125,000 (642,000) Provision for losses . . . . . . . . . . . . . . . . . 759,000 Changes in operating assets and liabilities: Accounts receivable, prepaid expenses and other assets (4,460,000) (136,000) Accounts payable and other liabilities . . . . . . . . 190,000 211,000 -------------- ------------- Net cash provided by operating activities . . . . 11,170,000 2,788,000 -------------- ------------- CASH FLOWS FROM INVESTING ACTIVITIES Additions to hotel assets . . . . . . . . . . . . . . . (59,014,000) (1,387,000) Net proceeds from sales of assets . . . . . . . . . . . 4,245,000 Increase in mortgage notes receivable . . . . . . . . . (17,729,000) Principal received on mortgage and other notes receivable 4,503,000 2,334,000 Reorganization costs . . . . . . . . . . . . . . . . . . (1,393,000) Net changes in notes receivable - Corporation . . . . . (49,562,000) 2,248,000 -------------- ------------- Net cash provided by (used in) investing activities (123,195,000) 7,440,000 -------------- ------------- CASH FLOWS FROM FINANCING ACTIVITIES Principal payments on mortgage and other notes payable . (96,589,000) (779,000) Payments on secured notes payable, net . . . . . . . . . (38,299,000) (20,518,000) Proceeds from offering . . . . . . . . . . . . . . . . . 233,398,000 Borrowings under mortgage and other notes . . . . . . . 9,977,000 6,000,000 Purchase of warrants . . . . . . . . . . . . . . . . . . (1,235,000) Increase in secured notes payable and revolving line of credit . . . . . . . . . . . . . . . 4,500,000 Limited partner capital contributions . . . . . . . . . 11,968,000 Principal received on share purchase notes . . . . . . 11,000 -------------- ------------- Net cash provided by (used in) financing activities 119,220,000 (10,786,000) -------------- ------------- INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS . . . . . . . . . . . . . . . . . . . 7,195,000 (558,000) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD . . . . . . . . . . . . . . . . 255,000 918,000 -------------- ------------- CASH AND CASH EQUIVALENTS AT END OF PERIOD . . . . . . . . . . . . . . . . . . . $7,450,000 $360,000 ============== =============
See accompanying notes to financial statements. - 14 - 15 STARWOOD LODGING CORPORATION BALANCE SHEETS (Unaudited)
September 30, December 31, 1995 1994 -------------- ------------- ASSETS Hotel assets held for sale - net . . . . . . . . . . . $234,000 $304,000 Hotel assets - net . . . . . . . . . . . . . . . . . . . 89,155,000 34,172,000 -------------- ------------- 89,389,000 34,476,000 Investments . . . . . . . . . . . . . . . . . . . . . . 17,000 22,000 -------------- ------------- Total real estate investments . . . . . . . . . . 89,406,000 34,498,000 Cash and cash equivalents . . . . . . . . . . . . . . . 10,685,000 4,810,000 Accounts receivable . . . . . . . . . . . . . . . . . . 6,058,000 3,342,000 Notes receivable . . . . . . . . . . . . . . . . . . . . 580,000 623,000 Inventories, prepaid expenses and other assets . . . . . 7,903,000 5,353,000 -------------- ------------- $114,632,000 $48,626,000 ============== ============= LIABILITIES AND SHAREHOLDERS' DEFICIT LIABILITIES Mortgage and other notes payable . . . . . . . . . . . . $4,270,000 $13,748,000 Notes payable - Trust . . . . . . . . . . . . . . . . . 77,589,000 26,916,000 Accounts payable and other liabilities . . . . . . . . . 14,826,000 9,704,000 -------------- ------------- 96,685,000 50,368,000 -------------- ------------- Commitments and contingencies MINORITY INTEREST . . . . . . . . . . . . . . . . . . . 5,400,000 -------------- ------------- SHAREHOLDERS' DEFICIT Corporation common stock, $0.01 par value; authorized 100,000,000 shares; outstanding 13,810,000 shares . . . . . . . . . . . . 138,000 1,213,000 Additional paid-in capital . . . . . . . . . . . . . . . 79,452,000 64,192,000 Accumulated deficit . . . . . . . . . . . . . . . . . . (67,043,000) (67,147,000) -------------- ------------- 12,547,000 (1,742,000) -------------- ------------- $114,632,000 $48,626,000 ============== =============
See accompanying notes to financial statements. - 15 - 16 STARWOOD LODGING CORPORATION STATEMENTS OF OPERATIONS (Unaudited)
Three Months Ended September 30, -------------------------------- 1995 1994 ----------- ----------- REVENUE Hotel . . . . . . . . . . . . . . . . . . . . . . . . . $32,366,000 $21,964,000 Gaming . . . . . . . . . . . . . . . . . . . . . . . . . 6,559,000 6,781,000 Interest from notes receivable . . . . . . . . . . . . . 66,000 9,000 Other income . . . . . . . . . . . . . . . . . . . . . . 16,000 40,000 Gain on sales of hotel assets . . . . . . . . . . . . . 15,000 ----------- ----------- 39,007,000 28,809,000 ----------- ----------- EXPENSES Hotel operations . . . . . . . . . . . . . . . . . . . . 21,875,000 14,971,000 Gaming operations . . . . . . . . . . . . . . . . . . . 6,018,000 6,237,000 Rent - Trust . . . . . . . . . . . . . . . . . . . . . . 7,319,000 4,441,000 Interest - Trust . . . . . . . . . . . . . . . . . . . . 1,060,000 439,000 Interest - other . . . . . . . . . . . . . . . . . . . . 35,000 332,000 Depreciation and amortization . . . . . . . . . . . . . 1,655,000 792,000 Administrative and operating . . . . . . . . . . . . . . 981,000 675,000 Shareholder litigation expense . . . . . . . . . . . . . 1,324,000 ----------- ----------- 38,943,000 29,211,000 ----------- ----------- Income (loss) before minority interest . . . . . . . . . 64,000 (402,000) Minority interest . . . . . . . . . . . . . . . . . . . (74,000) ----------- ----------- NET LOSS $(10,000) $(402,000) =========== =========== NET LOSS PER SHARE $(0.00) $(0.20) =========== ===========
See accompanying notes to financial statements. - 16 - 17 STARWOOD LODGING CORPORATION STATEMENTS OF OPERATIONS (Unaudited)
Nine Months Ended September 30, -------------------------------- 1995 1994 ----------- ----------- REVENUE Hotel . . . . . . . . . . . . . . . . . . . . . . . . . $81,951,000 $63,858,000 Gaming . . . . . . . . . . . . . . . . . . . . . . . . . 20,375,000 21,094,000 Interest from notes receivable . . . . . . . . . . . . . 89,000 33,000 Other income . . . . . . . . . . . . . . . . . . . . . . 873,000 229,000 Gain on sales of hotel assets . . . . . . . . . . . . . 28,000 ----------- ----------- 103,288,000 85,242,000 ----------- ----------- EXPENSES Hotel operations . . . . . . . . . . . . . . . . . . . . 56,232,000 46,095,000 Gaming operations . . . . . . . . . . . . . . . . . . . 18,351,000 18,396,000 Rent - Trust . . . . . . . . . . . . . . . . . . . . . . 18,287,000 12,897,000 Interest - Trust . . . . . . . . . . . . . . . . . . . . 2,629,000 1,280,000 Interest - other . . . . . . . . . . . . . . . . . . . . 664,000 1,015,000 Depreciation and amortization . . . . . . . . . . . . . 3,922,000 2,240,000 Administrative and operating . . . . . . . . . . . . . . 2,658,000 1,933,000 Shareholder litigation expense . . . . . . . . . . . . . 1,324,000 ----------- ----------- 102,743,000 85,180,000 ----------- ----------- Income before minority interest . . . . . . . . . . . . 545,000 62,000 Minority interest . . . . . . . . . . . . . . . . . . . 441,000 ----------- ----------- NET INCOME $104,000 $62,000 =========== =========== NET INCOME PER SHARE $0.02 $0.00 =========== ===========
See accompanying notes to financial statements. - 17 - 18 STARWOOD LODGING CORPORATION STATEMENTS OF CASH FLOWS (Unaudited)
Nine Months Ended September 30, -------------------------------- 1995 1994 --------- --------- CASH FLOWS FROM OPERATING ACTIVITIES Net income . . . . . . . . . . . . . . . . . . . . . . . $104,000 $62,000 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Minority interest . . . . . . . . . . . . . . . . . . 441,000 Depreciation and amortization . . . . . . . . . . . . 3,922,000 2,240,000 Deferred interest - Trust . . . . . . . . . . . . . . 1,111,000 1,280,000 Gain (loss) on sales of hotel assets . . . . . . . . . (28,000) Changes in operating assets and liabilities: Accounts receivable inventories, prepaid expenses and other assets . . . . . . . . . . . . . . . . . . . . (4,914,000) (661,000) Accounts payable and other liabilities . . . . . . . . 5,491,000 1,689,000 ---------- ---------- Net cash provided by operating activities . . . . 6,155,000 4,582,000 ---------- ---------- CASH FLOWS FROM INVESTING ACTIVITIES Additions to hotel assets . . . . . . . . . . . . . . . (54,061,000) (675,000) Net proceeds from sales of hotel assets . . . . . . . . 283,000 Principal received on notes receivable . . . . . . . . . 43,000 55,000 Reorganization costs . . . . . . . . . . . . . . . . . . (1,393,000) ----------- ---------- Net cash used in investing activities . . . . . . (55,411,000) (337,000) ----------- ---------- CASH FLOWS FROM FINANCING ACTIVITIES Net change in notes payable - Trust . . . . . . . . . . 49,562,000 (2,248,000) Principal payments on mortgage and other notes payable . (9,541,000) (426,000) Proceeds from offering . . . . . . . . . . . . . . . . . 12,283,000 Limited partner capital contributions . . . . . . . . . 2,892,000 Purchase of warrants . . . . . . . . . . . . . . . . . . (65,800) ----------- ---------- Net cash provided by (used in) financing activities . . . . . . . . . . . . . . 55,131,000 (2,674,000) ----------- ---------- INCREASE IN CASH AND CASH EQUIVALENTS . . . . . . . . . 5,875,000 1,571,000 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD . . . . . . . . . . . . . . . . 4,810,000 4,734,000 ----------- ---------- CASH AND CASH EQUIVALENTS AT END OF PERIOD . . . . . . . . . . . . . . . . . . . $10,685,000 $6,305,000 =========== ==========
See accompanying notes to financial statements. - 18 - 19 STARWOOD LODGING TRUST AND STARWOOD LODGING CORPORATION NOTES TO FINANCIAL STATEMENTS NOTE 1. INTERIM FINANCIAL STATEMENTS The accompanying unaudited financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q which mandate adherence to Rule 10-01 of Regulation S-X. Accordingly, these statements do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management of the Trust and the Corporation, all adjustments necessary for a fair presentation, consisting of normal recurring accruals, have been included. The financial statements presented herein have been prepared in accordance with the accounting policies described in the Registrants' Joint Annual Report on Form 10-K for the year ended December 31, 1994 and should be read in conjunction therewith. NOTE 2. BASIS OF PRESENTATION The Trust and the Corporation have unilateral control of Realty and Operating, respectively, and therefore, the historical financial statements of Realty and Operating are consolidated with those of the Trust and the Corporation, respectively. Paired share information has been adjusted to reflect a one-for-six reverse stock split effective June 19, 1995. NOTE 3. HOTEL ASSETS A summary of hotel assets at September 30, 1995 and December 31, 1994 is as follows (in thousands):
Trust Corporation -------------------------------- -------------------------------- September 30, December 31, September 30, December 31, 1995 1994 1995 1994 ------------- ------------ ------------- ------------ Land and leasehold interests in land $ 51,896 $ 41,184 $13,797 $13,796 Building and improvements . . . . 198,901 122,300 56,801 22,315 Furniture, fixtures and equipment 27,089 25,124 40,159 15,630 Accumulated depreciation and amortization . . . . . . . . . . (54,516) (48,699) (20,980) (16,877) Reserve for losses . . . . . . . . (23,200) (23,200) (388) (388) -------- -------- ------- ------- Hotel assets - net . . . . . . $200,170 $116,709 $89,389 $34,476 ======== ======== ======= =======
- 19 - 20 NOTE 4. EXTRAORDINARY ITEMS Under the terms of a Credit Agreement dated January 28, 1993 (the "Prior Credit Agreement") the Trust restructured its debt existing at such time. Management concluded that this debt restructuring represented a "troubled debt restructuring" as defined under generally accepted accounting principles, and accordingly, upon execution of the Prior Credit Agreement, accrued all known current or future identifiable debt restructuring costs as of December 31, 1992. Upon execution of an Amended and Restated Credit Agreement dated March 24, 1995 (the "New Credit Agreement"), the Realty Partnership recognized extraordinary income of $1,284,000 relating to the extinguishment of the debt under the terms of the Prior Credit Agreement, representing the remaining amount of the accrual at March 24, 1995. Additionally, in July 1995 subsequent to the Offering, Realty repaid existing indebtedness borrowed under the New Credit Agreement and recorded an extraordinary charge to net income of $3,602,000 relating to the extinguishment of such debt. NOTE 5. PRO FORMA FINANCIAL INFORMATION As required by Regulation S-X, the following unaudited pro forma separate and combined condensed financial information for the three and nine months ended September 30, 1995 and 1994 is presented as if the Reorganization, the Offering and certain property acquisitions, including the acquisition of the Doral Inn in New York, New York, had occurred at the beginning of each of the respective periods.
Three Months Ended September 30, 1995 --------------------------------------------------- Trust Corporation Combined ------------ ----------- -------------- Revenues $12,900,000 $44,568,000 $47,940,000 Net income (loss) $6,171,000 $(655,000) $5,516,000 Net income (loss) per share $0.45 $(0.05) $0.40
Nine months Ended September 30, 1995 ------------------------------------------------------ Trust Corporation Combined ------------ -------------- -------------- Revenues $37,753,000 $131,454,000 $140,313,000 Net income (loss) $18,059,000 $(2,984,000) $15,075,000 Net income (loss) per share $1.31 $(0.22) $1.09
Three Months Ended September 30, 1994 -------------------------------------------------- Trust Corporation Combined ------------ ------------ ------------ Revenues $12,200,000 $41,926,000 $45,153,000 Net income (loss) $6,359,000 $(1,834,000) $4,525,000 Net income (loss) per share $0.46 $(0.13) $0.33
- 20 - 21
Nine months Ended September 30, 1994 -------------------------------------------------- Trust Corporation Combined ----------- ------------- -------------- Revenues $35,274,000 $123,185,000 $132,361,000 Net income (loss) $17,203,000 $(4,404,000) $12,799,000 Net income (loss) per share $1.25 $(0.32) $0.93
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following Management's Discussion and Analysis should be read in conjunction with the Management's Discussion and Analysis included in the Companies' Joint Annual Reports on Form 10-K for the year ended December 31, 1994 and the Companies' Joint Quarterly Reports on Form 10-Q for the quarters ended March 31, 1995 and June 30, 1995. COMBINED PRO FORMA RESULTS OF OPERATIONS PRO FORMA FUNDS FROM OPERATIONS Management believes that FFO is one measure of financial performance of an equity REIT such as the Trust. On a pro forma basis, combined FFO (as defined by the National Association of Real Estate Investment Trusts) for the third quarter of 1995 grew by 14.0 percent to $13.0 million, or $.66 per paired share, on combined revenues of $43.2 million, compared to combined FFO of $11.4 million, or $.58 per paired share, on combined revenues of $40.2 million for the corresponding period in 1994. On a year-over-year basis, while occupancy rates remained relatively constant, average daily rate (ADR) for the Companies' owned and operated, nongaming hotels for the third quarter (including the Doral Inn for the last ten days of the third quarter in each year), increased 7.1 percent, from $66.23 to $70.90, and revenue per available room (REVPAR) for such hotels increased 6.5 percent, from $50.07 to $53.32. On a pro forma basis, for the first nine months of 1995, combined FFO rose by 13.2 percent to $37.8 million on combined revenues of $127.0 million compared to combined FFO of $33.4 million on combined revenues of $118.5 million for the comparable period in 1994. On a year-over-year basis, for the nine months ended September 30, 1995 ADR increased 6.8 percent, from $66.91 to $71.43 and REVPAR increased 7.8 percent, from $48.84 to $52.64 while occupancy rates increased slightly. The following table shows the calculation of pro forma combined FFO for the indicated periods: - 21 - 22
Three Months Ended Nine Months Ended September 30, September 30, ------------------- ------------------ 1995 1994 1995 1994 ---- ---- ---- ---- (in thousands) Income before minority interest . . . . . . . . . . $8,412 $7,146 $24,455 $20,711 Depreciation and amortization, net of amortization of financing costs . . . . . . . . 4,557 4,378 13,233 13,377 Loss on sales of hotel assets . . . . . . . . . . 12 (78) 125 (670) ------- ------- ------- ------- FUNDS FROM OPERATIONS $12,981 $11,446 $37,813 $33,418 ======= ======= ======= ======= FFO PER PAIRED SHARE $0.66 $0.58 $1.91 $1.69 ======= ======= ======= =======
FFO includes $430,000 of interest income recognized in excess of the actual cash received on mortgage notes receivable (as a result of the notes having been purchased at a discount) for the third quarter of 1995 and 1994 and $975,000 of such income for the nine months ended September 30, 1995 and 1994. INTERNAL GROWTH The overall 7.5 percent increase in revenues for the third quarter of 1995 was fueled by increases in ADR for the Companies' upscale, midscale and economy market hotels of 9.4 percent, 2.3 percent (5.9 percent excluding the Dallas, Texas property which lost the benefit of a Marriott franchise in 1994) and 11.4 percent, respectively. Likewise, ADR increases for the Companies' upscale, midscale and economy hotels for the nine months ended September 30, 1995 were 9.2, 1.9 (4.3 excluding Dallas) and 9.3 percent, respectively. Management believes that ADR increases, particularly in the upscale segment, reflect increases in demand which continue to outpace increases in supply. The increase in the economy segment (consisting of two hotels) primarily reflects management's decision to reposition and flag the formerly independent Portland, Oregon property in October of 1994. The following tables summarize average occupancy, ADR and REVPAR on a year-over-year basis for the Companies' owned and operated, nongaming hotels for the three and nine months ended September 30, 1995 and 1994.
Three Months Ended Nine Months Ended September 30, September 30, All Nongaming Hotels: 1995 1994 1995 1994 - -------------------- ---- ---- ---- ---- Occupancy rate . . . . . . . . . . . . . . 75.2% 75.6% 73.7% 73.0% ADR . . . . . . . . . . . . . . . . . . . . $70.90 $66.23 $71.43 $66.91 REVPAR . . . . . . . . . . . . . . . . . . $53.32 $50.07 $52.64 $48.84 REVPAR % change 6.5% 7.8%
- 22 - 23
Three Months Ended Nine Months Ended September 30, September 30, ------------------- ------------------- Upscale Hotels: 1995 1994 1995 1994 - -------------- ---- ---- ---- ---- Occupancy rate . . . . . . . . . . . . . . 77.6% 78.1% 77.7% 76.4% ADR . . . . . . . . . . . . . . . . . . . . $80.99 $74.05 $83.12 $76.14 REVPAR . . . . . . . . . . . . . . . . . . $62.85 $57.83 $64.58 $58.17 REVPAR % change 8.7% 11.0%
Three Months Ended Nine Months Ended September 30, September 30, ------------------- ------------------- Midscale Hotels (excluding Dallas - --------------------------------- Park Central): 1995 1994 1995 1994 - --------------- ---- ---- ---- ---- Occupancy rate . . . . . . . . . . . . . . 78.6% 80.2% 75.3% 73.7% ADR . . . . . . . . . . . . . . . . . . . . $58.96 $55.66 $56.56 $54.24 REVPAR . . . . . . . . . . . . . . . . . . $46.34 $44.64 $42.59 $39.97 REVPAR % change 3.8% 6.6%
Three Months Ended Nine Months Ended September 30, September 30, ------------------- ------------------- Economy Hotels: 1995 1994 1995 1994 - -------------- ---- ---- ---- ---- Occupancy rate . . . . . . . . . . . . . . 93.4% 90.1% 82.0% 74.9% ADR . . . . . . . . . . . . . . . . . . . . $66.99 $60.12 $61.40 $56.17 REVPAR . . . . . . . . . . . . . . . . . . $62.57 $54.17 $50.35 $42.07 REVPAR % change 15.5% 19.7%
Management believes that the increases in REVPAR resulted primarily from increases in demand due to more favorable economic conditions which have created increased business and leisure travel throughout the United States, while the supply of hotel rooms has not increased as rapidly. Revenue increases were greatest at properties located in the Northwest as well as the Harvey Hotel in Wichita, Kansas (under renovation in 1994) and the Omni Europa Hotel in Chapel Hill, North Carolina. Management believes that there are several important factors that have contributed to the improved profitability of hotel properties, including increased occupancy and average room rate and effective cost management. Because a substantial portion of the hotels' operating costs and expenses are generally fixed, the Companies derive substantial operating leverage from increases in revenue. Consequently, primarily as a result of the stronger growth in ADR than in occupancy, gross margins for the third quarter of 1995 rose to 32.6% from 29.8% in the corresponding quarter in 1994 and rose to 32.1% for the nine months ended September 30, 1995 from 29.7% in the corresponding period in 1994. Additionally, the improvements in gross margins were also due to (i) the termination of the third-party management agreements for hotels in Albany, Georgia (February 1995); Lexington, Kentucky (March 1995); Chapel Hill, North Carolina (April 1995); Dallas, Texas (July 1995); and San Diego, California (September 1995) and (ii) the increased operating margins following the renovations of the Harvey Wichita Hotel (October 1994) and the Milwaukee Marriott (January 1994). - 23 - 24 In March 1994 the franchise and management agreements with Marriott Corporation for the Dallas property were terminated. The property is now being managed by the Corporation as an independent hotel and has been renamed the Dallas Park Central Hotel. The Companies have commenced an approximately $9.0 million major renovation and conversion of the Park Central Hotel to a Radisson to be completed in the second quarter of 1996. Revenues at the Dallas property decreased by $20,000 and $1.3 million for the three and nine months ended September 30, 1995 compared to the corresponding periods in 1994. EXTERNAL GROWTH During the third quarter of 1995, the Companies acquired the 462-room Sheraton Colony Square Hotel in Atlanta, Georgia; the 224-room Embassy Suites in Tempe, Arizona; the 652-room Doral Inn in New York, New York; and a $19.5 million mortgage interest in the 263-room Grand Hotel in Washington, D.C.. In October 1995, the Companies acquired two additional hotels in Atlanta, Georgia: the 364-room, full-service Terrace Garden Inn for $27.9 million and the 180-room, limited-service Lenox Inn for $9.0 million. In total, the Companies' growth through acquisitions since the Offering has exceeded $150 million including the assumption of management of five of these hotels containing an aggregate of 1,882 rooms. Management believes that the results of operations from these acquisitions will have a positive effect on FFO. SELF MANAGEMENT As discussed above, Operating has assumed management of five hotels acquired since the Offering as well as five continuously owned properties consistent with its business objective to capture the economic benefits otherwise retained by a third-party operator. Of the remaining five third-party management agreements currently in place, all except for the Harvey Wichita Hotel, are expected to be terminated by the end of the first quarter of 1996. Management believes that the assumption of direct control over the operations of these hotels will allow the Companies to effectively use their experience to improve operations, implement renovations and expansions and align hotel chain affiliations to further increase FFO. RENOVATIONS AND REPOSITIONING HOTELS As previously discussed, the Companies have commenced an estimated $10.0 million major renovation and conversion of the Dallas property to a Radisson. Additionally, the Companies have commenced an estimated $6.0 million renovation of the Atlanta Sheraton Colony Square Hotel which is expected to be completed in the second quarter of 1996 and a $2.0 million renovation of the Portland Riverside Inn expected to be completed by the end of the first quarter of 1996. The Companies are currently negotiating the flagging of the French Quarter Suites Hotel in Lexington, Kentucky which is expected to benefit from a national franchise affiliation and reservation system. Management believes that the effect of these renovations and repositionings will have a positive impact on FFO. - 24 - 25 SEASONALITY AND DIVERSIFICATION Demand is affected by normally recurring seasonal patterns. Generally, the Companies' portfolio of hotels as a whole has performed better in the second and third quarters (with the third quarter performing slightly stronger than the second) due to decreased travel in the winter months. Because of the impact of the hotel acquisitions since the Offering, as reflected in the combined pro forma financial statements, the hotel portfolio performed slightly better in the second quarter than the third quarter for both 1994 and 1995. Future acquisitions may further affect the seasonality of the Companies' current portfolio. The Companies have continued to implement a business strategy of franchise and geographic diversification. During the third quarter of 1995, hotels were acquired with the Sheraton, Embassy Suites and Doral franchises, and locations included New York, Georgia and Arizona. The following tables summarize certain information for the Companies' owned and operated, nongaming hotels with respect to franchise affiliations and to the distribution of hotels throughout the United States. FRANCHISE AFFILIATIONS
Pro Forma Nine Months Ended Number of September 30, 1995 Percentage of Franchise Systems Rooms Gross Revenues Gross Revenues - ----------------- --------- ------------------ -------------- Sheraton 462 12,616 13.0% Embassy Suites 451 10,432 10.8% Best Western 786 9,593 9.9% Marriott 393 9,407 9.7% Days Inn 263 4,924 5.1% Harvey 259 4,262 4.4% Omni 168 3,945 4.1% Doubletree 209 3,303 3.4% West Coast 155 3,272 3.4% Radisson 195 3,168 3.3% Residence Inn 96 2,483 2.6% Holiday Inn 151 2,295 2.4% Doral 652 672 0.7% ----- ------ ----- Subtotal 4,240 70,372 72.7% Independent hotels 1,510 26,433 27.3% ----- ------ ----- Total 5,750 96,805 100.0% ===== ====== =====
- 25 - 26 GEOGRAPHIC DIVERSIFICATION
Nine Months Ended September 30,1995 Percentage No. of No. of Pro Forma of Gross State Hotels Rooms Gross Revenues Revenues - -------------- ------ ------ ----------------- ---------- Georgia 3 755 16,212 16.7% Arizona 3 600 12,838 13.3% Washington 4 566 11,846 12.2% Wisconsin 1 393 9,407 9.7% Oregon 2 310 5,913 6.1% Texas 2 620 5,140 5.3% New Mexico 2 289 4,330 4.5% Kansas 1 259 4,262 4.4% North Carolina 1 168 3,945 4.1% Michigan 1 151 4,017 4.1% Kentucky 1 155 3,899 4.0% California 1 209 3,303 3.4% Florida 1 195 3,168 3.3% Washington, DC 1 152 2,985 3.1% Virginia 1 96 2,483 2.6% Ohio 1 180 2,385 2.5% New York 1 652 672 0.7% -- ----- ------ ----- TOTALS: 27 5,750 96,805 100.0% == ===== ====== =====
OTHER INCOME AND ADMINISTRATIVE AND OPERATING EXPENSES Included in other income for the nine months ended September 30, 1995 is $800,000 received for the termination of management contracts in connection with the settlement of certain shareholder actions against former officers of the Companies. (See Item 1 of Part II.) Administrative and operating expenses for the third quarter of 1995 increased to $1,387,000 representing 3.2 percent of revenue, from $1,135,000 representing 2.8 percent of revenue in the third quarter of 1994. For the nine months ended September 30, 1995, administrative and operating expenses increased to $3,847,000, representing 3.0 percent of revenues, as compared to $3,208,000, representing 2.7 percent of revenues, in the corresponding period of 1994. The increases were primarily a result of increases in payroll costs due to additions to the corporate staffs commensurate with the Companies' growth, as well as the assumption of management of hotels previously provided by third-party operators. - 26 - 27 COMBINED LIQUIDITY AND CAPITAL RESOURCES The principal source of cash to be used to fund the Companies' operating expenses, interest expense, recurring capital expenditures and dividend payments by the Trust will be cash flow provided by operating activities. The Companies anticipate that their cash flow provided by operating activities will provide the necessary funds on a short and long term basis to meet their cash requirements including all distributions to shareholders by the Trust. The Trust commenced paying dividends in the fourth quarter of 1995 by declaring a dividend of $0.47 per share for the quarter ending September 30, 1995. The following table shows the calculation of combined pro forma cash available for distribution for the periods indicated.
Three Months Nine Months Ended Ended September 30, September 30, 1995 1995 ------------- ------------- FFO $12,981 $37,813 Noncash interest income . . . . . . . . . . . (230) (775) Pro forma estimated cash used in investing activities (1) . . . . . . . . (1,210) (3,469) ------- ------- Cash available for distribution . . . . . . . $11,541 $33,569 ======= ======= Dividend (2) . . . . . . . . . . . . . . . . . $9,284 $27,852 ======= ======= Payout ratio based on FFO . . . . . . . . . . 71.5% 73.7% ======= ======= Payout ratio based on cash available for distribution . . . . . . . . . . . . . . 80.1% 83.0% ======= ======= - -----------------------
(1) Represents reserves for estimated recurring capital expenditures, on a pro forma basis, primarily for furniture, fixtures and equipment and for building and improvements preservation other than major renovations. This amount was calculated based on 5% of pro forma room revenues for the three and nine month periods ended September 30, 1995. (2) The Trust declared a dividend of $0.47 per share in the third quarter of 1995. The pro forma dividend for the nine months ended September 30, 1995 assumes an annual dividend of $1.88 per share. Additionally, the Companies intend to finance the acquisition of additional hotel properties, hotel renovations and capital improvements and provide for general corporate purposes through two loan facilities with affiliates of Lehman Brothers, Inc. and, when market conditions warrant, to issue additional equity or debt securities. In October 1995, Realty modified its agreement with Lehman Commercial Paper Inc., to increase its 18-month financing facility to $71 million from $45 million, which facility is secured by certain mortgage loans owned by Realty (the "Financing"). Interest accrues at a rate equal to the one-month LIBOR plus 1.5% for the first 12 months, and the one-month LIBOR plus 1.75% thereafter. As of September 30, 1995, Realty had borrowed $44.6 million under the Financing. Additionally, the Companies have entered into an agreement with affiliates of Lehman Brothers, Inc. to provide a 3-year, $135 million secured revolving credit (the "Acquisition Facility"). Amounts drawn under the Acquisition Facility accrue interest at a rate equal to the one, two or three month LIBOR at the - 27 - 28 Companies' option plus 1.625%. The Acquisition Facility is secured by certain properties of the Companies and may be secured by other properties acquired by the Companies, all on a cross-collateralized basis. As of September 30, 1995, Realty had borrowed $20 million under the Acquisition Facility. Subsequent to September 30, 1995, the Companies borrowed an additional $38.9 million under the Acquisition Facility to purchase the Lenox Inn and Terrace Garden Inn. The Acquisition Facility may be retired in whole or in part from the proceeds of public or private issuances of equity or debt securities by the Companies and may be refinanced in whole or in part with fixed-rate financing. The final closing of the Acquisition Facility is subject to a variety of conditions, including the completion of certain due diligence matters and the syndication of $60 million of the facility amount. As previously discussed, the Companies have commenced an approximately $9.0 million major renovation and conversion of the Dallas Park Central Hotel to a Radisson, a $5.0 million renovation of the Atlanta Sheraton Colony Square Hotel and a $2.0 million renovation of the Portland Riverside Inn. Major and minor renovations of other hotels are also being contemplated. Management believes the renovations should result in increases in REVPAR and profitability. Sources of capital for major building renovations and expansions are expected to be: (i) excess funds from operations, (ii) additional debt financing, and (iii) additional equity raised in the public and private markets. Since the Reorganization, the Companies have acquired over $164 million in hotel assets. As part of their investment strategy, the Companies plan to acquire additional hotels. Future acquisitions are expected to be funded through use of the Acquisition Facility or other borrowings and the issuance of additional equity or debt securities. The Companies intend to incur additional indebtedness in a manner consistent with their policy of maintaining a Ratio of Debt-to-Total Market Capitalization of not more than 50%. Management of each of the Trust and of the Corporation believes that it will have access to capital resources sufficient to satisfy the cash requirements of each of the Trust and the Corporation and to expand and develop their business in accordance with their strategy for future growth. HISTORICAL RESULTS OF OPERATIONS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994 The following discussion and analysis of the historical results of operations for the three and nine months ended September 30, 1995 give effect to transactions on the actual date they were consummated: in the case of the Reorganization, as of January 1, 1995; in the case of the Offering, July 6, 1995 and in the case of acquisitions of hotel properties as of the date each was purchased. - 28 - 29 THE TRUST: Rents from the Corporation, which are based in part on hotel revenues, increased $2.9 million and $5.4 million for the three and nine months ended September 30, 1995, respectively, as compared to the corresponding periods of 1994. The increases were primarily the result of rents earned by Realty on four hotels contributed by Starwood Capital to Realty and Operating in January 1995 and on four additional hotels acquired during the nine months ended September 30, 1995. The four contributed hotels (the Doubletree Hotel located in Rancho Bernardo, California; the Capitol Hill Suites located in Washington, D.C.; the Harvey Wichita located in Wichita, Kansas; and the French Quarter Suites located in Lexington, Kentucky) and the four acquired hotels (the Omni Hotel in Chapel Hill, North Carolina acquired in April 1995 and the three hotels acquired in the third quarter as previously discussed) accounted for increased rents of $2.8 million and $5.3 million, respectively, for the three and nine months ended September 30, 1995. In addition, rents earned by the Trust from continuously owned properties leased by the Corporation increased $177,000 and $660,000, respectively. These increases were offset by a decrease in rents of $71,000 and $523,000, respectively, resulting from the sale of hotels in Austin, Texas (May 1994), Brunswick, Georgia and New Port Richey, Florida (August 1994), and Fayetteville, North Carolina and Jacksonville, Florida (November 1994). Interest from the Corporation increased by $621,000 and $1,349,000 for the three and nine months ended September 30, 1995, respectively, as compared to the corresponding periods of 1994. The increase in interest income was primarily a result of interest on the first mortgage of the Milwaukee Marriott Hotel (owned by a partnership of which Operating is the sole general partner) which was purchased by Realty in July 1995 and interest on unsecured notes from the Corporation having an average balance of $11.1 million and bearing interest at prime plus two percent for the nine month period ended September 30, 1995. A moratorium on the payment of interest on such unsecured notes was in effect throughout 1994. Interest from mortgage and other notes amounted to $2,602,000 and $7,915,000 for the three and nine months ended September 30, 1995, respectively, as compared to $505,000 and $1,243,000, respectively, for the corresponding periods in 1994. The increases primarily resulted from the contribution of notes receivable by Starwood Capital to Realty in the Reorganization. Interest expense decreased by $3.8 million and $1.5 million for the three and nine months ended September 30, 1995, respectively, as compared to the corresponding periods of 1994. The decreases were due to the repayment of approximately $206.5 million of existing indebtedness in connection with the Offering and to mortgage notes retired in the first quarter of 1995, which were secured by the Phoenix, Arizona and Bay City, Michigan properties offset by additional notes payable assumed by Realty in the Reorganization. Depreciation and amortization expense increased by $1.1 million and $2.4 million during the three and nine months ended September 30, 1995, respectively, as compared to the - 29 - 30 corresponding periods of 1994, principally due to the above mentioned property contributions and acquisitions and to the amortization of reorganization and financing costs offset by the above mentioned property sales. Minority interest represents the interest of Starwood Capital in Realty for the three and nine months ended September 30, 1995. THE CORPORATION: Hotel revenues increased by $10.4 million and $18.1 million for the three and nine months ended September 30, 1995, respectively, as compared to the corresponding periods of 1994. The addition of the four contributed properties and the four acquired properties as discussed above resulted in increases in hotel revenues of $11.1 million and $22.4 million, respectively, for three and nine month periods ended September 30, 1995. The Milwaukee, Wisconsin property, for which a $4.5 million renovation was completed in the first quarter of 1994, accounted for increases of $190,000 and $940,000, respectively, for the same periods. These increases were offset by the hotel sales discussed above resulting in decreased revenues of $1.5 million and $6.5 million, respectively, as well as $20,000 and $1.3 million, respectively, resulting from the termination of the Marriott franchise agreement at the Dallas, Texas property as discussed below. The remaining increases of $600,000 and $2.6 million for the three and nine months ended September 30, 1995, respectively, are attributable to other continuously owned properties. Hotel gross margin for the third quarter of 1995 was $10.5 million, or 32.4% of hotel revenues, as compared to $7.0 million, or 31.8% of hotel revenues, for the third quarter of 1994. Hotel gross margin for the nine months ended September 30, 1995 was $25.8 million, or 31.4% of hotel revenues, as compared to $17.8 million, or 27.8% of hotel revenues for the corresponding period of 1994. The increases in gross margin were primarily due to increases in REVPAR, the termination of the third-party management agreements, and the additional operating margin following the renovations previously discussed. Gaming revenues for the third quarter of 1995 as compared to the corresponding period of 1994 decreased by $222,000 or 3.3% to $6.5 million. Gaming revenues for the nine months ended September 30, 1995 decreased $719,000 or 3.4% compared to the corresponding period of 1994. Management believes that the lower revenues at the two gaming facilities are a result of decreased travel to the Las Vegas area and of public road construction activity adjacent to the Bourbon Street Hotel and Casino which reduced vehicular and pedestrian traffic. Gaming gross margin for the third quarter of 1995 was $541,000, or 8.2% of gaming revenues, as compared to $544,000, or 8.0% of gaming revenues, for the third quarter of 1994. Gaming gross margin for the nine months ended September 30, 1995 was $2.0 million, or 9.9% of gaming revenues, as compared to $2.7 million, or 12.8% of gaming revenues, for the corresponding period of 1994. Management believes that lower win percentages as well as - 30 - 31 decreased travel to the Las Vegas area resulted in the decrease in gross margin for the nine months ended September 30, 1995. Included in other income for the nine months ended September 30, 1995 is $800,000 received by the Corporation for the termination of management contracts in connection with the settlement of certain shareholder actions against former officers of the Companies. (See Item 1 of Part II.) Administrative and operating expenses increased by $306,000 and $725,000 respectively, for the three and nine months ended September 30, 1995, as compared to the corresponding periods of 1994. The increases were primarily a result of increases in payroll costs commensurate with the Companies' growth, as well as the assumption of management of hotels previously provided by third-party operators. Depreciation and amortization expense increased by $863,000 and $1.7 million, respectively, for the three and nine months ended September 30, 1995, as compared to the corresponding periods of 1994. The increases were primarily a result of the contributed and acquired hotels and amortization of reorganization costs as discussed above. Minority interest represents the interest of Starwood Capital in the Operating Partnership for the three and nine months ended September 30, 1995. For information with respect to rent and interest to the Trust during the three and nine months ended September 30, 1995 and 1994, see "Trust" immediately above. - 31 - 32 PART II OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS During the year ended December 31, 1994, the Trust and the Corporation reached settlement agreements with respect to two purported class action complaints and one complaint which was purportedly brought on behalf of the Trust and the Corporation (collectively, the "Shareholder Actions"). The Shareholder Actions were brought in 1991 and 1992 in each case in connection with the Trust's purchase of its two hotel/casinos and the Ramada Inn in Indian Wells, California. The two purported class actions were filed in the United States District Court for the Southern District of California in August 1991 and February 1992 against the Trust, the Corporation and certain current and former officers, Directors and Trustees. The complaint alleged fraud, violations of federal and California securities laws, the federal Racketeer Influenced and Corrupt Organizations Act and ERISA. The actions sought compensatory damages, rescission and/or treble and exemplary damages plus interest, costs and attorneys' fees and statutory damages under ERISA. The third action was filed in the Superior Court for the State of California for San Diego County in March 1992 against current and former officers, Directors and Trustees and alleged breach of fiduciary duty, gross negligence and corporate waste. The action sought compensatory damages, certain remuneration and costs. The plaintiffs and defendants in the Shareholder Actions entered into stipulations of settlement providing for the release of all claims that were or might have been made in the Shareholder Actions and provided for a $3,250,000 cash settlement fund which, after payment of fees and expenses of plaintiffs' counsel, will be distributed to the certified plaintiff classes. The Trust and the Corporation have paid $400,000 into the settlement fund, with the balance of the settlement being paid by the insurance company that issued the directors and officers policy applicable to the period to which the Shareholder Actions relate and by two former officers and Trustees of the Trust. The Trust and the Corporation have also agreed to pay the legal fees and other costs incurred prior to October 12, 1993 by the defendants in the Shareholder Actions. Holders of approximately 200,000 Paired Shares opted out of the settlement. The stipulation requires that the Trust's Board of Trustees and the Corporation's Board of Directors establish a joint transaction committee of independent Trustees and Directors to make recommendations to those Boards with respect to any transaction proposed in the future by management and having a fair market value of $20 million or more. In connection with the settlement of the Shareholder Actions, Messrs. Ronald Young and John Rothman and certain of their affiliated partnerships terminated the management agreements that existed between those partnerships and the Corporation's subsidiary, Western Host, Inc. (the "Management Contracts"), and Western Host has agreed not to dispute such action and has withdrawn as a general partner of two additional affiliated partnerships. In satisfaction of any - 32 - 33 damages that the Trust and the Corporation may incur as a result of the termination of the Management Contracts, Messrs. Rothman and Young provided to the Trust and the Corporation an irrevocable letter of credit having a one-year term in the amount of $800,000. In the second quarter of 1995, the proceeds of the letter of credit were distributed to the Operating Partnership. Upon receipt of the proceeds from the letter of credit, the parties to the Management Contracts, Messrs. Rothman and Young and the Trust and the Corporation released all of their respective claims related to the termination of the Management Contracts. Ross Agreement. In November 1994, Starwood Capital entered into an agreement (the "Ross Agreement") with Leonard Ross and his affiliates ("Ross"). Ross held approximately 9.8% of the outstanding Paired Shares prior to the Reorganization and had opted out of the settlement by the Companies of the Shareholder Actions. In addition to preserving his rights to institute an action against the Companies with respect to the matters covered by such settlement, Ross had threatened to assert other alleged causes of action against the Companies. The Ross Agreement was entered into in settlement of the threatened litigation by Ross and provides for an assignment to Starwood Capital of Ross' claims. Starwood Capital also received a proxy to vote Ross' Paired Shares and Starwood Capital has agreed to purchase those Paired Shares, at Ross' election, in a 60-day period beginning on December 15, 1995, at a price of $33.75 per Paired Share (plus 10 percent per annum from December 31, 1994 to the date of exercise less distributions paid on the shares). Starwood Capital may also elect to purchase such Paired Shares at the same time and on the same terms. In December 1994, Ross sold 33,167 of the Paired Shares, which remain subject to the Ross Agreement. Ross has agreed not to purchase or sell any Paired Shares during the period specified for the purchase of his Paired Shares and not to acquire more than 4.9% thereafter. The Companies agreed to indemnify and hold harmless Starwood Capital (and its subsidiaries, affiliates and successors) against liabilities, losses or damages and reasonable out-of-pocket expenses incurred (i) in connection with any action, suit or proceeding brought by a holder of Paired Shares against Starwood Capital relating to the Reorganization or (ii) under or in respect of the Ross Agreement (other than, in each case, to the extent such liabilities, losses, damages or expenses arose from a breach by Starwood Capital of any agreement entered into in connection with the Reorganization, or the Ross Agreement or a breach of any fiduciary duty by Starwood Capital); provided that the aggregate indemnification obligation of the Companies under the provisions described in clause (ii) is limited to $1,800,000. Item 2. Changes in Securities None. Item 3. Defaults Upon Senior Securities None. - 33 - 34 Item 4. Submission of Matters to a Vote of Security Holders None. Item 5. Other Information None. Item 6. Exhibits and Reports on Form 8-K (b) Reports on Form 8-K On October 9, 1995, the Trust and Corporation filed a Joint Current Report on Form 8-K to report the purchase of the Doral Inn in New York, New York. On October 31, 1995, the Trust and Corporation filed a Joint Current Report on Form 8-K to report a change in certifying accountants. - 34 - 35 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, each Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. STARWOOD LODGING TRUST STARWOOD LODGING CORPORATION Registrant Registrant /s/ RONALD C. BROWN /s/ KENNETH J. BIEHL - ------------------------------------------ ------------------------------ Ronald C. Brown Kenneth J. Biehl Vice President and Chief Financial Officer Vice President and Controller (Principal Financial Officer) (Principal Accounting Officer) Date: November 14, 1995 - 35 - EX-27.1 2 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE RELATED BALANCE SHEETS AND STATEMENTS OF OPERATIONS AND IS QUALIIED IN ITS ENTIRETY BY REFERENCE TO SUCH ON THE JOINT ANNUAL REPORT ON FORM 10K. 0000316206 STARWOOD LODGING CORPORATION 1 9-MOS DEC-31-1995 JUL-1-1995 SEP-30-1995 10,685,000 0 6,638,000 0 0 0 89,389,000 0 114,632,000 0 0 138,000 0 0 12,409,000 114,632,000 102,326,000 103,288,000 0 74,583,000 24,867,000 0 3,293,000 104,000 104,000 104,000 0 0 0 104,000 0.02 0
EX-27.2 3 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE RELATED BALANCE SHEETS AND STATEMENTS OF OPERATIONS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH ON THE JOINT ANNUAL REPORT ON FORM 10K. 0000048595 STARWOOD LODGING TRUST 1 U.S. DOLLARS 9-MOS DEC-31-1995 JUL-1-1995 SEP-30-1995 1 7,450,000 0 158,132,000 0 0 3,757,000 200,170,000 0 370,112,000 2,499,000 0 138,000 0 0 211,831,000 370,112,000 0 29,775,000 0 0 7,438,000 0 10,534,000 6,846,000 6,846,000 6,846,000 0 (2,155,000) 0 4,691,000 0.79 0
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