-----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, KD0qmlm7z9RhGjC3VNKRQJZ35Ccqk+Un3rQiY5dY7zUE3l1I+2T/tPyX/futPG5l qPJ2ZHD4n8DZ7t2BTGBIxQ== 0000950148-96-000198.txt : 19960213 0000950148-96-000198.hdr.sgml : 19960213 ACCESSION NUMBER: 0000950148-96-000198 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19960124 ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19960212 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: 8-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 001-06828 FILM NUMBER: 96515912 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: 8-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 001-07959 FILM NUMBER: 96515913 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 8-K/A 1 AMENDMENT TO CURRENT REPORT ON FORM 8-K 1 ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K/A CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of earliest event reported): January 24, 1996 Commission File Number: 1-6828 Commission File Number: 1-7959 STARWOOD LODGING STARWOOD LODGING TRUST 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) (Former name or former address, (Former name or former address, if changed since last report) if changed since last report)
================================================================================ The undersigned Registrants hereby amend the following items, the Financial Statements, Pro Forma Financial Information and Exhibits of their Form 8-K dated February 5, 1996 as set forth in the pages attached hereto: ================================================================================ 2 Item 7 of the Joint Current Report on Form 8-KA dated February 5, 1996 filed by Starwood Lodging Trust and Starwood Lodging Corporation is hereby amended to read in its entirety as follows: ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS. (a) Financial Statements of Businesses Acquired. See Index to Financial Statements (page F-1). (b) Pro Forma Financial Information. See Index to Financial Statements (page F-1). 3 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, thereto duly authorized. STARWOOD LODGING TRUST STARWOOD LODGING CORPORATION By: /s/ RONALD C. BROWN By: /s/ KEVIN E. MALLORY ---------------------------- ------------------------------------ Ronald C. Brown Kevin E. Mallory Vice President and Executive Vice President Chief Financial Officer Date: February 12, 1996 4 INDEX TO FINANCIAL STATEMENTS STARWOOD LODGING TRUST AND STARWOOD LODGING CORPORATION -- PRO FORMA Combined and Separate Balance Sheets at September 30, 1995........................................ F-2 Notes to the Pro Forma Balance Sheets............................................................. F-5 Combined and Separate Statements of Operations for the nine months ended September 30, 1995 and the year ended December 31, 1994 ........................................................... F-8 Notes to Pro Forma Statements of Operations ...................................................... F-14 THE BOSTON PARK PLAZA HOTEL LIMITED PARTNERSHIP Reports of Independent Public Accountants ........................................................ F-18 Balance Sheets as of October 31, 1994 ............................................................ F-19 Statements of Income ............................................................................. F-20 Statements of Partners' Deficit .................................................................. F-21 Statements of Cash Flows ......................................................................... F-22 Notes to Financial Statements .................................................................... F-23 THE BOSTON PARK PLAZA HOTEL OPERATING COMPANY, INC. Reports of Independent Public Accountants......................................................... F-32 Balance Sheets as of October 31, 1994............................................................. F-33 Statements of Operations and Retained Earnings.................................................... F-34 Statements of Cash Flows.......................................................................... F-35 Notes to Financial Statements..................................................................... F-36
F-1 5 STARWOOD LODGING TRUST AND STARWOOD LODGING CORPORATION UNAUDITED COMBINED PRO FORMA BALANCE SHEETS SEPTEMBER 30, 1995
Historical Starwood Boston Park Starwood Lodging Plaza Hotel Pro Forma Lodging Combined and Complex Adjustments Combined ------------ ----------- ----------- ------------ (A) (B) ASSETS Hotel assets held for sale - net................... $ 8,328,000 $ $ $ 8,328,000 Hotel assets - net................................. 281,231,000 281,231,000 ------------- ----------- ---------- ------------- 289,559,000 289,559,000 Mortgage notes receivable, net..................... 78,454,000 78,454,000 Investments in joint ventures...................... 620,000 41,600,000 2,880,000 45,100,000 ------------- ----------- ---------- ------------- Total real estate investments.................. 368,633,000 41,600,000 2,880,000 413,113,000 Cash and cash equivalents.......................... 18,135,000 18,135,000 Accounts and interest receivable................... 6,911,000 6,911,000 Notes receivable, net.............................. 1,816,000 1,816,000 Inventories, prepaid expenses and other assets..... 11,660,000 11,660,000 ------------- ----------- ---------- ------------- $ 407,155,000 $41,600,000 $2,880,000 $ 451,635,000 ============= =========== ========== ============= LIABILITIES AND SHAREHOLDERS' EQUITY LIABILITIES Secured notes payable and revolving line of credit $ 64,600,000 41,600,000 $ 106,200,000 Mortgage and other notes payable................... 4,370,000 4,370,000 Accounts payable and other liabilities............. 17,325,000 17,325,000 ------------- ----------- ---------- ------------- 86,295,000 41,600,000 $ 127,895,000 ------------- ----------- ---------- ------------- Commitments and contingencies MINORITY INTEREST............................... 96,544,000 867,000 97,411,000 ------------- ----------- ---------- ------------- SHAREHOLDERS' EQUITY Trust shares of beneficial interest, $0.01 par value; authorized 100,000,000 shares; outstanding 13,810,000 shares................................ 138,000 138,000 Corporation common stock, $0.01 par value; authorized 100,000,000 shares; outstanding 13,810,000 shares.................... 138,000 138,000 Additional paid-in capital......................... 434,134,000 434,134,000 Accumulated deficit................................ (210,094,000) 2,013,000 (208,081,000) ------------- ----------- ---------- ------------- 224,316,000 2,013,000 226,329,000 ------------- ----------- ---------- ------------- $ 407,155,000 $41,600,000 $2,880,000 $ 451,635,000 ============= =========== ========== =============
F-2 6 STARWOOD LODGING TRUST UNAUDITED COMBINED PRO FORMA BALANCE SHEETS SEPTEMBER 30, 1995
Historical Pro Forma Starwood Boston Park Starwood Lodging Plaza Hotel Pro Forma Lodging Trust and Complex Adjustments Trust ------------- ----------- ----------- ------------- (A) (B) ASSETS Hotel assets held for sale - net..................... $ 8,094,000 $ $ $ 8,094,000 Hotel assets - net................................... 192,076,000 192,076,000 ------------- ----------- ----------- ------------- 200,170,000 200,170,000 Mortgage notes receivable, net....................... 78,454,000 78,454,000 Investments in joint ventures........................ 603,000 41,600,000 (628,000) (C) 41,575,000 ------------- ----------- ----------- ------------- Total real estate investments.................... 279,227,000 41,600,000 (628,000) 320,199,000 Cash and cash equivalents............................ 7,450,000 7,450,000 Rent and interest receivable......................... 853,000 853,000 Notes receivable - Corporation....................... 77,589,000 5,350,000 (C) 82,939,000 Notes receivable, net................................ 1,236,000 1,236,000 Prepaid expenses and other assets.................... 3,757,000 3,757,000 ------------- ----------- ----------- ------------- $ 370,112,000 $41,600,000 $ 4,722,000 $ 416,434,000 ============= =========== =========== ============= LIABILITIES AND SHAREHOLDERS' EQUITY LIABILITIES Secured notes payable and revolving line of credit... $ 64,600,000 $41,600,000 $ $ 106,200,000 Mortgage and other notes payable..................... 100,000 100,000 Accounts payable and other liabilities............... 2,499,000 2,499,000 ------------- ----------- ----------- ------------- 67,199,000 41,600,000 108,799,000 ------------- ----------- ----------- ------------- Commitments and contingencies MINORITY INTEREST.................................... 91,144,000 1,421,000 92,565,000 ------------- ----------- ----------- ------------- SHAREHOLDERS' EQUITY Trust shares of beneficial interest, $0.01 par value; authorized 100,000,000 shares; outstanding 13,810,000 shares.................................. 138,000 138,000 Additional paid-in capital........................... 354,682,000 354,682,000 Accumulated deficit.................................. (143,051,000) 3,301,000 (139,750,000) ------------- ----------- ----------- ------------- 211,769,000 3,301,000 215,070,000 ------------- ----------- ----------- ------------- $ 370,112,000 $41,600,000 $ 4,722,000 $ 416,434,000 ============= =========== =========== =============
F-3 7 STARWOOD LODGING CORPORATION UNAUDITED COMBINED PRO FORMA BALANCE SHEETS SEPTEMBER 30, 1995
Historical Pro Forma Starwood Boston Park Starwood Lodging Plaza Hotel Pro Forma Lodging Corporation and Complex Adjustments Corporation ------------- ----------- ----------- ------------- (A) (B) ASSETS Hotel assets held for sale - net..................... $ 234,000 $ $ $ 234,000 Hotel assets - net................................... 89,155,000 89,155,000 ------------ ----------- ---------- ------------ 89,389,000 89,389,000 Investments in joint ventures........................ 17,000 3,508,000 (C) 3,525,000 ------------ ----------- ---------- ------------ Total real estate investments.................... 89,406,000 3,508,000 92,914,000 Cash and cash equivalents............................ 10,685,000 10,685,000 Accounts and interest receivable..................... 6,058,000 6,058,000 Notes receivable, net................................ 580,000 580,000 Inventories, prepaid expenses and other assets....... 7,903,000 7,903,000 ------------ ----------- ---------- ------------ $114,632,000 $ $3,508,000 $118,140,000 ============ =========== ========== ============ LIABILITIES AND SHAREHOLDERS' EQUITY LIABILITIES Secured notes payable and revolving line of credit... $ 4,270,000 $ $ $ 4,270,000 Notes payable - Trust................................ 77,589,000 5,350,000 (C) 82,939,000 Accounts payable and other liabilities............... 14,826,000 14,826,000 ------------ ----------- ---------- ------------ 96,685,000 5,350,000 102,035,000 ------------ ----------- ---------- ------------ Commitments and contingencies MINORITY INTEREST.................................... 5,400,000 (554,000) 4,846,000 ------------ ----------- ---------- ------------ SHAREHOLDERS' EQUITY Corporation common stock, $0.01 par value; authorized 100,000,000 shares; outstanding 13,810,000 shares...................... 138,000 138,000 Additional paid-in capital........................... 79,452,000 79,452,000 Accumulated deficit.................................. (67,043,000) (1,288,000) (68,331,000) ------------ ----------- ---------- ------------ 12,547,000 (1,288,000) 11,259,000 ------------ ----------- ---------- ------------ $114,632,000 $ $3,508,000 $118,140,000 ============ =========== ========== ============
F-4 8 STARWOOD LODGING TRUST AND STARWOOD LODGING CORPORATION NOTES TO THE UNAUDITED COMBINED AND SEPARATE PRO FORMA BALANCE SHEETS AT SEPTEMBER 30, 1995 NOTE 1. BASIS OF PRESENTATION (A) The Trust and the Corporation 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 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. NOTE 2. ACQUIRED PROPERTY (B) On January 24, 1996, SaunStar Land Co., LLC ("Land Co."), a Delaware limited liability company, in which SLT Realty Limited Partnership (SLT") has a 58.2% interest and in which The Donald Saunders Family Limited Liability Company ("DSF"), a Massachusetts limited liability company, has a 41.8% interest, acquired (i) the Boston Park Plaza Hotel and Towers (the "Hotel") which contains 977 guest rooms, approximately 45,500 square feet of meeting and function space and approximately 24,000 square feet of net rentable retail space, (ii) the Statler Office Building (the "Office Building") which contains approximately 250,000 square feet of gross rentable area which is adjacent to and shares utilities and other facilities with the Hotel and (iii) the Armory of the First Corps of Cadets, which contains approximately 52,000 square feet of gross useable area and is near the Hotel and the Office Building (collectively, the "Property"). Land Co. acquired these properties from the Boston Park Plaza Limited Partnership in which certain affiliates of DSF had an aggregate 43.75% interest. The Property is subject to a first mortgage held by a third-party lender, the outstanding principal balance of which is approximately $25 million and which matures on May 1, 1996. In connection with this transaction, SLT invested approximately $41.4 million plus closing cost and its share of closing adjustments. Immediately after acquiring the property, Land Co. distributed all fixtures, furnishings and equipment to its members in proportion to their interest. SLT then sold its interest in the personal property to SLC Operating Limited Partnership ("SLC") for approximately $5.4 million for a note in such amount. SLC and DSF then contributed their interest in such personal property to SaunStar Operating Co., LLC ("Operating Co."), a limited liability company, in which SLC has a 58.2 % interest and DSF has a 41.8% interest. F-5 9 Land Co. has leased the Property to Operating Co. Operating Co. has engaged SLC to manage the hotel portion of the Property and Saunders Real Estate Corporation, an affiliate of DSF, to manage the office and retail portion of the Property. Each management agreement has a term of 10 years and, subject to the mutual consent of the parties, is extendible for two additional terms of 10 years each. NOTE 4. PRO FORMA ADJUSTMENTS (C) Immediately after receiving its interest in the property, the Trust sold its interest in the personal property to the Corporation for approximately $5,350,000 for a note in such amount. F-6 10 STARWOOD LODGING TRUST AND STARWOOD LODGING CORPORATION PRO FORMA COMBINED AND SEPARATE STATEMENTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 AND THE YEAR ENDED DECEMBER 31, 1994 (UNAUDITED) Effective January 1, 1995, Starwood Lodging Trust (the "Trust") and Starwood Lodging Corporation (the "Corporation" and collectively, "the Companies") consummated the previously announced reorganization (the "Reorganization") with Starwood Capital Group, L.P. and its affiliates (collectively "Starwood Capital"). 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. On September 20, 1995, the Companies acquired the Doral Inn in New York, New York for $43.3 million. On January 24, 1996, the Companies formed a partnership with Saunders Real Estate Corporation ("Saunders") to acquire the Boston Park Plaza Hotel Complex. The Companies contributed $41.6 million to the partnership. Due to the impact of the Offering and the acquisitions of properties acquired, the historical results of operations and earnings per share are not indicative of future results of operations and earnings per share. The following Unaudited Combined and Separate Pro Forma Statements of Operations for the nine months ended September 30, 1995 and for the year ended December 31, 1994 give effect to the Reorganization, the Offering and the acquisitions previously discussed as of the beginning of the periods presented and exclude the results from properties sold in 1994. 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. F-7 11 STARWOOD LODGING TRUST AND STARWOOD LODGING CORPORATION UNAUDITED COMBINED PRO FORMA STATEMENTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995
Historical Pro Forma Starwood Boston Park Starwood Lodging Acquired Plaza Hotel Pro Forma Lodging Combined Properties Complex Adjustments Combined ------------ ------------ ----------- ----------- ---------- (A) (C) (D) REVENUE Hotel .................................... $ 81,951,000 $28,166,000 $ $ $110,117,000 Gaming ................................... 20,375,000 20,375,000 Interest from mortgage and other notes ... 8,004,000 8,004,000 Income from joint ventures and rents from leased hotel properties...... 608,000 760,000 2,120,000 (E) 3,488,000 Other income.............................. 1,334,000 1,334,000 Gain (loss) on sales of hotel assets ..... (125,000) (125,000) ------------ ----------- -------- ------------ ------------ 112,147,000 28,166,000 760,000 2,120,000 143,193,000 ------------ ----------- -------- ------------ ------------ EXPENSES Hotel operations ......................... 56,232,000 21,647,000 (1,248,000) (F) 76,631,000 Gaming operations ........................ 18,351,000 18,351,000 Interest ................................. 11,198,000 3,219,000 (11,647,000) (G) 5,345,000 2,575,000 (G) Depreciation and amortization............. 10,182,000 6,657,000 16,839,000 Administrative and operating ............. 3,836,000 10,000 (F) 3,846,000 ------------ ----------- -------- ------------ ------------ 99,799,000 31,523,000 (10,310,000) 121,012,000 ------------ ----------- -------- ------------ ------------ Income (loss) before minority interest ... 12,348,000 $(3,357,000) $760,000 $ 12,430,000 22,181,000 =========== ======== ============ Minority interest in Partnerships (H) .... 5,398,000 6,674,000 ------------ ------------ Net income (loss) ........................ $ 6,950,000 $ 15,507,000 ============ ============ Net income (loss) per paired share (I) ... $ 1.17 $ 1.12 ============ ============
See accompanying notes to the pro forma statements of operations. F-8 12 STARWOOD LODGING TRUST UNAUDITED COMBINED PRO FORMA STATEMENTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995
Historical Pro Forma Starwood Boston Park Starwood Lodging Acquired Plaza Hotel Pro Forma Lodging Trust Properties Complex Adjustments Trust ----------- ----------- ----------- ----------- ----------- (A) (C) (D) REVENUE Rents from Corporation ................... $18,287,000 $ $ $ 4,566,000 (J) $22,853,000 Interest from Corporation ................ 2,629,000 3,813,000 (K) 6,442,000 Interest from mortgage and other notes ... 7,915,000 7,915,000 Income from joint ventures and rents from leased hotel properties ..... 608,000 4,722,000 (E) 5,330,000 Other income.............................. 461,000 461,000 Gain (loss) on sales of hotel assets ..... (125,000) (125,000) ----------- ----------- ----------- ----------- ----------- 29,775,000 13,101,000 42,876,000 ----------- ----------- ----------- ----------- ----------- EXPENSES Interest - other ......................... 10,534,000 (7,846,000) (G) 5,263,000 2,575,000 (G) Depreciation and amortization............. 6,260,000 1,483,000 7,743,000 Administrative and operating ............. 1,178,000 1,178,000 ----------- ----------- ----------- ----------- ----------- 17,972,000 1,483,000 (5,271,000) 14,184,000 ----------- ----------- ----------- ----------- ----------- Income (loss) before minority interest ... 11,803,000 $(1,483,000) $ $18,372,000 28,692,000 =========== =========== =========== Minority interest in Partnerships (H) .... 4,957,000 8,633,000 ----------- ----------- Net income (loss) ........................ $ 6,846,000 $20,059,000 =========== =========== Net income (loss) per paired share (I) ... $ 1.15 $ 1.45 =========== ===========
See accompanying notes to the pro forma statements of operations. F-9 13 STARWOOD LODGING CORPORATION UNAUDITED COMBINED PRO FORMA STATEMENTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995
Historical Pro Forma Starwood Boston Park Starwood Lodging Acquired Plaza Hotel Pro Forma Lodging Corporation Properties Complex Adjustments Corporation ----------- ---------- ------- ----------- ----------- (A) (C) (D) REVENUE Hotel ...................................... $ 81,951,000 $28,166,000 $ $ $110,117,000 Gaming ..................................... 20,375,000 20,375,000 Income (loss) from joint venture............ 760,000 (2,602,000) (E) (1,842,000) Interest from mortgage and other notes ..... 89,000 89,000 Other income................................ 873,000 873,000 ------------ ----------- -------- ----------- ------------ 103,288,000 28,166,000 760,000 2,602,000 129,612,000 ------------ ----------- -------- ----------- ------------ EXPENSES Hotel operations ........................... 56,232,000 21,647,000 (1,248,000) (F) 76,631,000 Gaming operations .......................... 18,351,000 18,351,000 Rent - Trust ............................... 18,287,000 4,566,000 (J) 22,853,000 Interest - Trust ........................... 2,629,000 3,813,000 (K) 6,442,000 Interest - other ........................... 664,000 3,219,000 (3,801,000) (G) 82,000 Depreciation and amortization............... 3,922,000 5,174,000 9,096,000 Administrative and operating ............... 2,658,000 10,000 (F) 2,668,000 ------------ ----------- -------- ----------- ------------ 102,743,000 30,040,000 3,340,000 136,123,000 ------------ ----------- -------- ----------- ------------ Income (loss) before minority interest ..... 545,000 $(1,874,000) $760,000 $(5,942,000) (6,511,000) =========== ======== =========== Minority interest in Partnerships (H) ...... 441,000 (1,959,000) ------------ ------------ Net income (loss) .......................... $ 104,000 $ (4,552,000) ============ ============ Net income (loss) per paired share (I)..... $ 0.02 $ (0.33) ============ ============
See accompanying notes to the pro forma statements of operations. F-10 14 STARWOOD LODGING TRUST AND STARWOOD LODGING CORPORATION UNAUDITED COMBINED PRO FORMA STATEMENTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1994
Historical Pro Forma Starwood Boston Park Starwood Lodging Starwood Acquired Plaza Hotel Pro Forma Lodging Combined Capital Properties Complex Adjustments Combined -------- ------- ---------- ------- ----------- -------- (A) (B) (C) (D) REVENUE Hotel .................................. $ 82,668,000 $16,467,000 $46,091,000 $ $ $145,226,000 Gaming ................................. 27,981,000 27,981,000 Interest from mortgage and other notes .......................... 1,554,000 8,496,000 10,050,000 Income from joint ventures and rents from leased hotel properties ... 927,000 331,000 3,459,000 (E) 4,717,000 Other income............................ 411,000 411,000 Gain (loss) on sales of hotel assets ... 456,000 456,000 ------------ ----------- ----------- -------- ------------ ------------ 113,997,000 24,963,000 46,091,000 331,000 3,459,000 188,841,000 ------------ ----------- ----------- -------- ------------ ------------ EXPENSES Hotel operations ....................... 60,829,000 12,751,000 34,554,000 (3,359,000) (F) 104,775,000 Gaming operations ...................... 24,454,000 24,454,000 Interest ............................... 17,606,000 3,834,000 7,354,000 (25,691,000) (G) 7,063,000 3,960,000 (G) Depreciation and amortization........... 8,161,000 2,496,000 10,509,000 1,220,000 (L) 22,386,000 Administrative and operating ........... 4,203,000 286,000 (F) 4,489,000 Shareholder litigation expense ......... 2,648,000 2,648,000 Provision for losses ................... 759,000 759,000 ------------ ----------- ----------- -------- ------------ ------------ 118,660,000 19,081,000 52,417,000 (23,584,000) 166,574,000 ------------ ----------- ----------- -------- ------------ ------------ Income before minority interest ........ (4,663,000) $ 5,882,000 $(6,326,000) $331,000 $ 27,043,000 22,267,000 =========== =========== ======== ============ Minority interest in Partnerships (H) ..................... 6,700,000 ------------ ------------ Net income (loss) ...................... $ (4,663,000) $ 15,567,000 ============ ============ Net income per paired share (I) ........ $ (2.31) $ 1.13 ============ ============
See accompanying notes to the pro forma statements of operations. F-11 15 STARWOOD LODGING TRUST UNAUDITED COMBINED PRO FORMA STATEMENTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1994
Historical Pro Forma Starwood Boston Park Starwood Lodging Starwood Acquired Plaza Hotel Pro Forma Lodging Trust Capital Properties Complex Adjustments Trust ----- ------- ---------- ------- ----------- ----- (A) (B) (C) (D) REVENUE Rents from Corporation ................. $16,906,000 $ $ $ 8,589,000 (J) $25,495,000 Interest from Corporation .............. 1,730,000 6,424,000 (K) 8,154,000 Interest from mortgage and other notes ......................... 1,512,000 8,496,000 10,008,000 Income from joint ventures and rents from leased hotel properties ... 927,000 7,481,000 (E) 8,408,000 Other income............................ 164,000 164,000 Gain (loss) on sales of hotel assets ... 432,000 432,000 ----------- ---------- ----------- ----------- ----------- ----------- 21,671,000 8,496,000 22,494,000 52,661,000 ----------- ---------- ----------- ----------- ----------- ----------- EXPENSES Interest - other ....................... 16,265,000 3,834,000 875,000 (17,958,000)(G) 6,976,000 3,960,000 (G) Depreciation and amortization........... 5,205,000 1,270,000 2,791,000 610,000 (L) 9,876,000 Administrative and operating ........... 1,583,000 1,583,000 Shareholder litigation expense ......... 1,324,000 1,324,000 Provision for losses ................... 759,000 759,000 ----------- ---------- ----------- ----------- ----------- ----------- 25,136,000 5,104,000 3,666,000 (13,388,000) 20,518,000 ------------ ----------- ------------ ----------- ------------ ---------------- Income before minority interest ........ (3,465,000) $3,392,000 $(3,666,000) $35,882,000 32,143,000 ========== =========== =========== =========== Minority interest in Partnerships (H) ..................... 9,672,000 ----------- ----------- Net income (loss) ...................... $(3,465,000) $22,471,000 =========== =========== Net income per paired share (I) ........ $ (1.71) $ 1.63 =========== ===========
See accompanying notes to the pro forma statements of operations. F-12 16 STARWOOD LODGING CORPORATION UNAUDITED COMBINED PRO FORMA STATEMENTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1994
Historical Pro Forma Starwood Boston Park Starwood Lodging Starwood Acquired Plaza Hotel Pro Forma Lodging Corporation Capital Properties Complex Adjustments Corporation ----------- ------- ---------- ------- ----------- ----------- (A) (B) (C) (D) REVENUE Hotel .................................... $ 82,668,000 $16,467,000 $46,091,000 $ $ $145,226,000 Gaming ................................... 27,981,000 27,981,000 Income (loss) from joint venture.......... 331,000 (4,022,000) (E) (3,691,000) Interest from mortgage and other notes ... 42,000 42,000 Other income.............................. 247,000 247,000 Gain (loss) on sales of hotel assets ..... 24,000 24,000 ------------ ----------- ----------- -------- ----------- ------------ 110,962,000 16,467,000 46,091,000 331,000 (4,022,000) 169,829,000 ------------ ----------- ----------- -------- ----------- ------------ EXPENSES Hotel operations ......................... 60,829,000 12,751,000 34,554,000 (3,359,000) (F) 104,775,000 Gaming operations ........................ 24,454,000 24,454,000 Rent - Trust ............................. 16,906,000 8,589,000 (J) 25,495,000 Interest - Trust ......................... 1,730,000 6,424,000 (K) 8,154,000 Interest - other ......................... 1,341,000 6,479,000 (7,733,000) (G) 87,000 Depreciation and amortization............. 2,956,000 1,226,000 7,718,000 610,000 (L) 12,510,000 Administrative and operating ............. 2,620,000 286,000 (F) 2,906,000 Shareholder litigation expense ........... 1,324,000 1,324,000 ------------ ----------- ----------- -------- ----------- ------------ 112,160,000 13,977,000 48,751,000 4,817,000 179,705,000 ------------ ----------- ----------- -------- ----------- ------------ Income before minority interest .......... (1,198,000) $ 2,490,000 $(2,660,000) $331,000 $(8,839,000) (9,876,000) =========== =========== ======== =========== Minority interest in Partnerships (H) ....................... (2,972,000) ------------ ------------ Net income (loss) ........................ $ (1,198,000) $ (6,904,000) ============ ============ Net income per paired share (I) .......... $ (0.59) $ (0.50) ============ ============
See accompanying notes to the pro forma statements of operations. F-13 17 STARWOOD LODGING TRUST AND STARWOOD LODGING CORPORATION NOTES TO THE UNAUDITED COMBINED AND SEPARATE PRO FORMA STATEMENT OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 AND THE YEAR ENDED DECEMBER 31, 1994 NOTE 1. BASIS OF PRESENTATION The Trust and the Corporation 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 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. NOTE 2. PRO FORMA ADJUSTMENTS (A) Reflects the historical statements of operations of the Companies. Operations for properties sold or pending sale are not considered material to the pro forma presentation. (B) Reflects the pro forma statements of operations (reflecting Starwood Capital's cost basis) of the assets and liabilities contributed by Starwood Capital in the Reorganization. For additional information regarding the Reorganization, please see Item 7 (Financial Statements, Pro Forma Financial Information and Exhibits) of the Companies' Form 8-K as amended dated January 31, 1995, which is incorporated herein by reference. (C) Reflects the pro forma statements of operations (reflecting the Companies' cost basis) of the Doral Inn and the properties acquired in connection with the Offering. For additional information, please see pages F-1 through F-140 (Financial Statements and Financial Statement Schedules) of the Companies' Form S-2 as amended dated June 29, 1995 and Item 7 (Financial Statements, Pro Forma Financial Information and Exhibits) of the Companies' Form 8-K as amended dated September 20, 1995, which is incorporated herein by reference. (D) Reflects the pro forma statements of operations of the Boston Park Plaza Hotel Complex. See description of the acquisition in note 2 to the Unaudited Combined and Separate Pro Forma Balance Sheets. Additional information related to the property is as follows:
For the Twelve Months Ending ---------------------------- 1994 1993 1992 ---- ---- ---- Average occupancy rate ............ 75% 71% 71% Average room rate ................. $97.60 $90.40 $88.42 Revenue per available room ........ $73.20 $64.18 $62.78
F-14 18 (E) Pro Forma income from joint ventures and rents from leased hotel properties reflect the Companies' proportionate share of (i) increases from management fees earned, (ii) decreases in administrative and operating expenses resulting primarily from reduction in personnel and other administrative costs, (iii) differences in depreciation and (iv) intercompany rents as follows:
Twelve Months Ended December 31, 1994 ------------------------------------- Trust Corporation Combined ----- ----------- -------- Additional management fees earned .......................... -- 833,000 833,000 Decrease in personnel and other administrative costs ...... -- 2,586,000 2,586,000 Difference in depreciation ....... (573,000) 613,000 40,000 Intercompany rents ............... 8,054,000 (8,054,000) --------- --------- --------- 7,481,000 (4,022,000) 3,459,000 ========= ========= =========
Nine Months Ended September 30, 1996 ------------------------------------ Trust Corporation Combined ----- ----------- -------- Additional Mgmt Fees ........... -- 572,000 572,000 Earned Decrease in personnel and other administrative costs .......... -- 1,704,000 1,704,000 Difference in depreciation ..... (430,000) 274,000 (156,000) Intercompany rents ............. 5,152,000 (5,152,000) --------- --------- --------- 4,722,000 (2,602,000) 2,120,000 ========= ========== =========
(F) The Corporation intends to operate all of the Companies' hotels and terminate existing third party management contracts for all properties at the earliest practicable date. Accordingly, certain costs directly attributable to existing third party management contracts included in the pro forma statements of operations have been eliminated. Such cost savings are reflected in the pro forma statements of operations as if such contracts had been canceled as of the beginning of the periods presented. Listed below are the hotels on which third party management contracts have been or are anticipated to be terminated and the related management and other fees incurred in each period. F-15 19
Fees Paid (1) ---------------------- 12 Months 9 Months Ended Ended 12/31/94 9/30/95 Status --------- -------- ------ Hotel Holiday Inn - Albany, GA ........ $ 160,000 $ 9,000 Terminated Best Western - Columbus, OH ..... 156,000 33,000 Cancelable in 1995 Best Western - Savannah, GA ..... 109,000 21,000 Cancelable in 1995 Radisson - Gainesville, FL ...... 149,000 19,000 Cancelable in 1996 Park Central - Dallas, TX ....... 342,000 34,000 Terminated Capital Hill - Washington, DC ... 143,000 43,000 Cancelable in 1995 French Quarter - Lexington, KY .. 432,000 21,000 Terminated Doubletree - Rancho Bernardo, CA 237,000 67,000 Terminated Colony Square - Atlanta, GA ..... 624,000 139,000 Terminated Omni - Chapel Hill, NC .......... 92,000 23,000 Terminated Embassy Suites - Tempe, AZ ...... 284,000 406,000 Terminated Doral Inn - New York, NY ........ 631,000 433,000 Cancelable in 1995 ---------- ---------- 3,359,000 1,248,000 ========== ==========
- ------------------ (1) Fees include base and incentive management fees as well as accounting fee chargebacks and other corporate costs. Pro Forma administrative and operating expenses reflect (i) increases in operating expenses resulting principally from additional corporate office personnel and (ii) decreases in operating expenses resulting form a decrease in director's and officers' liability insurance. Such cost adjustments are reflected in the pro forma statements of operations as follows:
Administrative and Operating Expenses ------------------ 12 Months 9 Months Ended Ended 12/31/94 9/30/95 -------- ------- Additional personnel costs and corporate travel........... $ 486,000 $ 97,000 Decrease in directors' and officers' liability insurance.. (200,000) (87,000) --------- -------- $ 286,000 $ 10,000 ========= ========
(G) Reflects the elimination of historical and pro forma interest expense related to the debt repaid from the proceeds of the Offering and the addition of interest expense on pro forma amounts outstanding. (H) Reflects Starwood Capital's minority interest in the income of the Partnerships. F-16 20 (I) Net income (loss) per paired share has been computed using the weighted average number of paired shares and equivalent paired shares outstanding. All paired share information has been adjusted to reflect a one-for-six reverse split effective June 12, 1995. (J) Reflects pro forma adjustment for rents on the following hotels contributed by Starwood Capital in the Reorganization and hotels and land acquired by the Companies in 1995. The hotel leases between the Trust and the Corporation provide for annual base or minimum rents plus contingent or percentage rents based on the gross revenue of the properties and are accounted for as operating leases.
Hotel Date Contributed/Acquired - ------------------------------------- ------------------------- Capitol Hill - Washington, DC........ January 1, 1995 French Quarter - Lexington, KY....... January 1, 1995 Doubletree - Rancho Bernardo, CA..... January 1, 1995 Harvey - Wichita, KS................. January 1, 1995 Omni - Chapel Hill, NC............... April 6, 1995 Colony Square - Atlanta, GA.......... July 24, 1995 Embassy Suites - Tempe, AZ........... July 27, 1995 Doral Inn - New York, NY............. September 20, 1995
(K) Reflects interest on the notes payable from the Corporation to the Trust at 9.5% for the note secured by the leasehold interest in the Doral property, prime plus 3% for notes secured by the Milwaukee property and prime plus 2% for unsecured notes. (L) Reflects the amortization of organization costs related to the formation of the Partnerships over a five-year period. F-17 21 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Partners of The Boston Park Plaza Hotel Limited Partnership: We have audited the accompanying balance sheets of The Boston Park Plaza Hotel Limited Partnership (a Massachusetts limited partnership) (the Partnership) as of October 31, 1993 and 1994, and the related statements of income, partners' deficit and cash flows for the years then ended. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. 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 financial statements referred to above present fairly, in all material respects, the financial position of The Boston Park Plaza Hotel Limited Partnership as of October 31, 1993 and 1994, and the results of its operations and its cash flows for the years then ended in conformity with generally accepted accounting principles. As more fully described in Note 6 to the financial statements, one of the Partnership's two general partners, Donald L. Saunders, has asserted on behalf of the Partnership that the Boston Park Plaza Hotel Operating Company, Inc. (the Operating Company) is in default of its lease with the Partnership as it relates to the payment of rent and other claims. The Partnership has thus notified the Operating Company that it is in default under its lease with the Partnership and has brought legal action against the Operating Company. The other general partner, Roger A. Saunders, has denied these claims and has asserted counterclaims against Donald L. Saunders, related to the operations of the Partnership. Both parties have agreed to use a Special Master appointed by the court to determine all such claims. At this time, the ultimate resolution of these items is uncertain as is the recovery, if any, from the Operating Company of any amounts referenced in the claims. The accompanying financial statements do not include any adjustments that might result from the ultimate resolution of these matters. In addition, the Partnership has disputed certain charges from the Operating Company as of October 31, 1994. These charges have been offset by the Operating Company against the amounts it owes to the Partnership. The resulting difference in the receivable recorded by the Partnership and the payable recorded by the Operating Company is $2,031,260 as of October 31, 1994. At this time, the ultimate resolution of these items is uncertain, as is the recovery, if any, from the Operating Company of any amounts referenced in the claims. The accompanying financial statements do not include any adjustments that might result from the ultimate resolution of these matters. ARTHUR ANDERSEN LLP Boston, Massachusetts August 10, 1995 F-18 22 THE BOSTON PARK PLAZA HOTEL LIMITED PARTNERSHIP BALANCE SHEETS
OCTOBER 31, SEPTEMBER 30, ASSETS 1993 1994 1995 (UNAUDITED) CURRENT ASSETS: Cash and cash equivalents (Note 3) $ 512,293 $ 100,804 $ 71,571 Accounts receivable- Trade, less allowance for doubtful accounts of $274,000 in 1993, $256,000 in 1994 and $136,000 in 1995 (Note 8) The Boston Park Plaza Hotel Operating 288,534 266,031 190,053 Company, Inc., an affiliate (Notes 6 and 7) Other 1,286,917 2,759,689 3,048,959 Loan receivable from co-general partners and certain limited 42,682 182,652 124,816 partners Prepaid expenses -- -- 744,851 256,326 66,279 87,891 ----------- ----------- ----------- Total current assets 2,386,752 3,375,455 4,268,141 ----------- ----------- ----------- PROPERTY AND EQUIPMENT (Notes 1 and 2): Land Buildings and improvements 794,826 794,826 794,826 Furniture and equipment 16,053,443 16,207,081 15,649,282 13,734,714 13,831,265 14,425,070 ----------- ----------- ----------- 30,582,983 30,833,172 30,869,178 Less--Accumulated depreciation and amortization 20,031,296 21,080,376 21,804,450 ----------- ----------- ----------- Property and equipment, net 10,551,687 9,752,796 9,064,728 ----------- ----------- ----------- OTHER ASSETS: Deferred lease commissions (Note 2) Other (Note 2) 295,544 311,812 254,484 198,703 202,362 34,267 ----------- ----------- ----------- 494,247 514,174 288,751 ----------- ----------- ----------- Total assets $13,432,686 $13,642,425 $13,621,620 =========== =========== ===========
OCTOBER 31, SEPTEMBER 30, LIABILITIES AND PARTNERS' DEFICIT 1993 1994 1995 (UNAUDITED) CURRENT LIABILITIES: Current maturities of long-term debt and capital lease obligations (Notes 4 and 6) $ 199,036 $ 226,893 $ 25,251,832 Accounts payable 272,341 477,828 763,306 Accrued expenses 568,257 245,780 221,508 Tenant security deposits and rent paid in advance 353,013 410,025 372,658 Amounts payable to co-general partners -- 163,587 163,587 Notes payable to general partner -- -- 149,549 ------------ ------------ ------------ Total current liabilities 1,392,647 1,524,113 26,922,440 ------------ ------------ ------------ LONG-TERM DEBT, NET OF CURRENT MATURITIES (Note 4) 25,284,956 25,144,114 -- CAPITAL LEASE OBLIGATION, NET OF CURRENT MATURITIES (Note 6) 433,224 335,599 247,203 ------------ ------------ ------------ Total liabilities 27,110,827 27,003,826 27,169,643 ------------ ------------ ------------ PARTNERS' DEFICIT (13,678,141) (13,361,401) (13,548,023) ------------ ------------ ------------ Total liabilities and partners' deficit $ 13,432,686 $ 13,642,425 $ 13,621,620 ============ ============ ============
The accompanying notes are an integral part of these financial statements. F-19 23 W THE BOSTON PARK PLAZA HOTEL LIMITED PARTNERSHIP STATEMENTS OF INCOME
ELEVEN MONTHS ENDED YEAR ENDED OCTOBER 31, SEPTEMBER 30, 1993 1994 1994 1995 (UNAUDITED) REVENUE: Rentals- Partnership tenants (Note 6(a)) $ 1,013,323 $ 1,076,099 $ 882,021 $ 874,719 Statler Division (Note 6(b)) 4,285,459 4,044,180 3,677,971 4,274,046 The Boston Park Plaza Hotel Operating Company, Inc., an affiliate (Notes 6 and 7) 5,108,577 5,856,882 5,368,808 5,502,805 Armory Drill Hall/Plaza Castle (Note 6(e)) 240,000 256,738 235,901 230,163 ----------- ----------- ----------- ----------- Total revenue 10,647,359 11,233,899 10,164,701 10,881,733 ----------- ----------- ----------- ----------- OPERATING EXPENSES: Property operation, insurance, maintenance and utility costs 2,450,259 2,598,338 2,317,647 2,468,599 General and administrative expenses 2,417,139 3,945,234 3,572,997 3,763,113 Property taxes 1,502,006 1,524,870 1,382,983 1,428,687 Depreciation and amortization 1,324,705 1,131,896 1,018,060 786,215 ----------- ----------- ----------- ----------- 7,694,109 9,200,338 8,291,687 8,446,614 ----------- ----------- ----------- ----------- Operating income 2,953,250 2,033,561 1,873,014 2,435,119 OTHER INCOME (EXPENSE): Interest expense (2,296,720) (2,133,897) (1,953,884) (2,203,941) Interest income 111,247 49,393 49,127 2,592 Miscellaneous 363,377 425,096 376,870 79,608 ----------- ----------- ----------- ----------- Net income $ 1,131,154 $ 374,153 $ 345,127 $ 313,378 =========== =========== =========== ===========
The accompanying notes are an integral part of these financial statements. F-20 24 THE BOSTON PARK PLAZA HOTEL LIMITED PARTNERSHIP STATEMENTS OF PARTNERS' DEFICIT
GENERAL LIMITED PARTNERS PARTNERS TOTAL BALANCE, OCTOBER 31, 1992 $(18,912,865) $ 4,142,284 $(14,770,581) Allocation of net income for the year ended October 31, 1993 (Note 1) 22,623 1,108,531 1,131,154 Distributions (38,714) -- (38,714) ------------ ----------- ------------ BALANCE, OCTOBER 31, 1993 (18,928,956) 5,250,815 (13,678,141) Allocation of net income for the year ended October 31, 1994 (Note 1) 7,483 366,670 374,153 Distributions (57,413) -- (57,413) ------------ ----------- ------------ BALANCE, OCTOBER 31, 1994 (18,978,886) 5,617,485 (13,361,401) Allocation of net income for the eleven-month period ended September 30, 1995 (unaudited) 6,268 307,110 313,378 Distributions (unaudited) (10,000) (490,000) (500,000) ------------ ----------- ------------ BALANCE, SEPTEMBER 30, 1995 (UNAUDITED) $(18,982,618) $ 5,434,595 $(13,548,023) ============ =========== ============
The accompanying notes are an integral part of these financial statements. F-21 25 THE BOSTON PARK PLAZA HOTEL LIMITED PARTNERSHIP STATEMENTS OF CASH FLOWS
ELEVEN MONTHS ENDED YEAR ENDED OCTOBER 31, SEPTEMBER 30, 1993 1994 1994 1995 (UNAUDITED) CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 1,131,154 $ 374,153 $ 345,127 $ 313,378 Adjustments to reconcile net income to net cash provided by operating activities- Depreciation and amortization 1,324,705 1,131,896 1,018,060 786,215 Changes in current assets and liabilities- Allowance for accounts receivable 131,000 (18,000) 85,000 (120,000) Accounts receivable 43,082 (1,572,239) (1,398,613) (35,456) Loan receivable from co-general partners and certain limited partners -- -- -- (744,851) Prepaid expenses 187,171 190,047 159,118 (21,612) Accounts payable (181,743) 205,487 226,535 285,478 Accrued expenses 336,381 (322,477) (457,747) (24,272) Tenant security deposits and rent paid in advance (81,459) 57,012 42,710 (37,367) Amounts payable to co-general partners -- 163,587 -- -- ----------- ----------- ----------- ---------- Net cash provided by operating activities 2,890,291 209,466 20,190 401,513 ----------- ----------- ----------- ---------- CASH FLOWS FROM INVESTING ACTIVITIES: Additions to property and equipment (1,928,360) (250,189) (266,198) (36,006) (Additions to) deductions from deferred lease commissions and other (121,068) (102,743) (28,135) 163,282 ----------- ----------- ----------- ---------- Net cash provided by (used in) investing activities (2,049,428) (352,932) (294,333) 127,276 ----------- ----------- ----------- ---------- CASH FLOWS FROM FINANCING ACTIVITIES: Principal borrowings -- -- -- 149,549 Principal payments of long-term debt (119,174) (140,842) (130,008) (119,175) Distributions to partners (38,714) (57,413) -- (500,000) Payments of notes payable to partner (585,930) -- -- -- Principal payments under capital lease obligation (69,679) (69,768) (62,168) (88,396) ----------- ----------- ----------- ---------- Net cash used in financing activities (813,497) (268,023) (192,176) (558,022) ----------- ----------- ----------- ---------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 27,366 (411,489) (466,319) (29,233) CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 484,927 512,293 512,293 100,804 ---------- CASH AND CASH EQUIVALENTS, END OF PERIOD $ 512,293 $ 100,804 $ 45,974 $ 71,571 ----------- ----------- ----------- ---------- SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the period for interest $ 2,119,888 $ 2,310,728 $ 1,905,977 $2,115,715 =========== =========== =========== ==========
The accompanying notes are an integral part of these financial statements. F-22 26 THE BOSTON PARK PLAZA HOTEL LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS OCTOBER 31, 1994 (1) ORGANIZATIONAL STRUCTURE AND TAX STATUS The Boston Park Plaza Hotel Limited Partnership (the Limited Partnership or the Partnership), a Massachusetts limited partnership organized on January 28, 1977, is the beneficial owner and operator of a building which consists of approximately 1,000,000 square feet of total space on 14 floors. Approximately 700,000 square feet of the Partnership's space is operated as the Boston Park Plaza Hotel and Towers (the Hotel), containing 966 rooms. The remaining space is operated as the Statler Building Division (the Division) and consists of leasable office and retail space and common areas such as boiler and engine rooms and the underlying land. The Partnership also directly owns the Armory of the 1st Corps of Cadets (also known as the Armory Head House and the Armory Drill Hall/Plaza Castle), which contains approximately 21,000 square feet of office space on eight floors of the Head House Section and approximately 20,000 square feet of exhibition hall space on the single street level adjoining the Armory Head House. The Hotel and the Armory Drill Hall/Plaza Castle are operated on a tenancy-at-will basis through an affiliate (see Notes 6 and 7). Legal title to the real estate (except for the entire Armory building referred to above) is held in the name of The Boston Park Plaza Hotel Trust, a nominee trust (the Trust). The two general partners of the Partnership are also the same two trustees of the Trust. The beneficiary of the Trust is the Limited Partnership. The Partnership Agreement provides that the net profits and net losses of the Partnership, before deduction of depreciation expense, are to be allocated to the general partners and the limited partner in the respective amounts of 2% and 98%. The Partnership will expire on January 28, 1997, or earlier, if agreed to by the two general partners or as provided in the Partnership Agreement. For income tax purposes, Partnership returns are filed, and accordingly, all taxable income or loss and available tax credits are reported pro rata by the partners on their respective individual and trust tax returns. (2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Property and Equipment Property and equipment are reported at cost. Depreciation for financial statement purposes is computed primarily using the accelerated method acceptable for tax purposes in the year the asset is placed into service. Buildings and building improvements are depreciated primarily using the straight-line method over the useful lives of 15 to 39 years. Leased assets are depreciated over the lease term (five years) on a straight-line basis. F-23 27 THE BOSTON PARK PLAZA HOTEL LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS OCTOBER 31, 1994 (2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Intangible Assets Deferred lease commissions are amortized using the straight-line method and charged against income over the respective terms of the related leases. Accounting for Leases (A) RENTALS UNDER LEASES The Partnership, as lessor, classifies its leases with its tenants as operating leases (see Note 6). Rent is reported as income over the lease term in a systematic manner, usually the straight-line method, and the leased property is depreciated like other productive assets. (B) OBLIGATIONS UNDER OPERATING AND CAPITAL LEASES Leases that transfer most of the benefits and risks of ownership of an asset are classified as capital leases, wherein the leased property is accounted for as an asset by the Partnership and the payment obligations are accounted for as a liability. Other leases that do not transfer any benefits or risks of ownership of an asset are classified as operating leases by the Partnership, and payments are charged to rental expense. (3) CASH AND CASH EQUIVALENTS Cash and cash equivalents consist of the following:
1993 1994 Cash- On hand $ 1,275 $ 1,275 Demand deposits 300,961 69,844 Cash equivalents- Money market accounts 210,057 29,685 -------- -------- Total cash and cash equivalents, at cost which approximates market $512,293 $100,804 ======== ========
F-24 28 THE BOSTON PARK PLAZA HOTEL LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS OCTOBER 31, 1994 (4) LONG-TERM DEBT On May 6, 1986, the Partnership issued a $26 million mortgage note payable (the Note) to Barclays American Business Credit, Inc. (Barclays) for purposes of refinancing the then-existing mortgage notes payable and for other Partnership purposes. The original term of the Note was seven years, with an option for the Partnership to extend for an additional three years at the request of the Partnership. Principal payments commenced on May 1, 1989 in monthly installments of $10,834. In fiscal 1993, the Partnership exercised its option to extend the note repayment until May 1, 1996. Principal payments of $10,834 will continue through May 1, 1996, with the remaining balance due for payment at that time. Current interest requirements on the Note are based on a contract rate, as defined, which offers the Partnership a choice of three interest options based on the interest rates of different financial instruments. The contract rate for the period from November 1993 through October 1994 was 8.08%. The effective interest rate was 8.08% and 8.44% for the years ended October 31, 1993 and 1994, respectively. The Note stipulates that when the contract rate exceeds 12%, the Partnership may elect to defer payment of the amount of interest expense in excess of 12% to a cumulative maximum of $2,600,000. Furthermore, when the interest rate is below 12%, the Partnership is required to make payments at the same rate, with the difference applied against any deferred interest. There was accumulated deferred interest of $173,620 as of October 31, 1991, which was repaid based on interest payments at the contract rate in fiscal 1992. There was no deferred interest added to the note in 1993 or 1994. Interest is payable monthly in arrears. The Note is secured by a majority of the Partnership's assets, exclusive of the assets of the Armory. The Partnership can prepay the Note subject to certain restrictions based upon the interest rate selected. The Note is subject to certain covenants, including compliance with certain financial ratios and reporting requirements; the Partnership is in compliance with all such covenants at October 31, 1994, with the exception of a reporting requirement that was subsequently extended to September 30, 1995. The following is a summary of the principal payments required for the Note in each of the years following October 31, 1994:
Years Ending October 31, 1995 $ 130,008 1996 25,144,114 ----------- $25,274,122 ===========
F-25 29 THE BOSTON PARK PLAZA HOTEL LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS OCTOBER 31, 1994 (5) EMPLOYEE BENEFIT PLAN The Partnership participates in a 401(k) plan (the Plan), established in 1988 by an affiliate. Participants may elect annually to contribute up to 15% of their compensation to the Plan, up to a defined maximum. The Partnership will make a matching contribution equal to 50% of the employees' contributions, not to exceed 2.5% of the employees' compensation. Additionally, discretionary contributions can be made each year by the Partnership. There is a vesting of certain contributions made by the Partnership on behalf of the participants from 0% (less than one year of service) to 100% (six years of service). For the years ended October 31, 1993 and 1994, the Partnership made matching contributions of $12,261 and $7,339, respectively, to the Plan on behalf of the Partnership's employees. No discretionary contributions were made for the years ended October 31, 1994 or 1993. (6) RENTALS UNDER LEASES (a) Partnership Tenants The retail spaces in the entire property, including the Hotel, are leased, operated and managed by the Statler Division of the Limited Partnership. (b) Statler Division The Partnership leases space to approximately 200 commercial office and retail tenants for periods generally ranging from one to ten years. Under the terms of many of the lease contracts, the Partnership receives annual rentals, payable monthly, computed on the basis of a contract rent as stated in each lease which, in certain leases, is adjusted annually for increases in the consumer price index, plus additional rent based upon changes in real estate taxes and operating costs compared to certain base years. The rent charged to certain retail tenants is also calculated on a percentage-of-sales basis. Percentage rent payments are generally paid one month in arrears, following the sales reporting from these same retail tenants' contracts referred to above. F-26 30 THE BOSTON PARK PLAZA HOTEL LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS OCTOBER 31, 1994 (6) RENTALS UNDER LEASES (Continued) (b) Statler Division (Continued) The following is a schedule of minimum future rental income from operating leases of the Partnership tenants and the Statler division as of October 31, 1994:
MINIMUM FUTURE RENTALS Years Ending October 31, 1995 $ 2,928,398 1996 2,285,311 1997 1,844,369 1998 1,440,600 1999 1,115,140 2000 and thereafter 3,023,720 ----------- Total minimum future rentals $12,637,538* ===========
* This amount does not include rentals that may be received in excess of stipulated minimums for escalation billings related to real estate taxes and operating costs. Percentage sales rents in excess of stipulated minimums were $847,000 and $850,000 for the years ended October 31, 1993 and 1994, respectively. (c) Hotel The Partnership leases approximately 700,000 square feet of the building's total space to the Boston Park Plaza Hotel Operating Company, Inc. (the Operating Company), an affiliated entity, for the purpose of operating the Hotel. The two general partners of the Partnership are also the sole stockholders of the Operating Company. The lease between the Partnership and the Operating Company is a one-year lease. For the eleven-month period ended September 30, 1994, the rent was calculated based on 95% of the Operating Company's net profit (as defined in the lease). As discussed in the following paragraph, this determination is currently a matter of dispute between the two general partners. F-27 31 THE BOSTON PARK PLAZA HOTEL LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS OCTOBER 31, 1994 (6) RENTALS UNDER LEASES (Continued) (c) Hotel (Continued) There is presently certain litigation that arose out of disputes between the Partnership's two general partners. One of the Partnership's general partners, Donald L. Saunders, has asserted on behalf of the Partnership that the Operating Company is in default on its lease with the Partnership as it relates to the payment of rent, other expenses under this provision of the lease and other claims. The claim alleges that amounts due to the Partnership from the Operating Company for 1994 and prior for unpaid rent and other claims amounts to approximately $39,469,937 as of October 31, 1994. The financial statements of the Operating Company show a net worth as of October 31, 1994 of approximately $3.3 million without consideration for these amounts. The Partnership has notified the Operating Company that it is in default under its lease with the Partnership and has brought legal action against the Operating Company. The other general partner, Roger A. Saunders, has denied these claims and has asserted counterclaims against Donald L. Saunders related to the operations of the Partnership. Both parties have agreed to use a Special Master appointed by the court to determine these claims. At this time, the ultimate resolution of these items is uncertain, as is the recovery, if any, of the claims due from the Operating Company. The accompanying financial statements do not include any adjustments that might result from the ultimate resolution of these matters. In addition, the Partnership has disputed certain charges from the Operating Company as of October 31, 1994. These charges have been offset by the Operating Company against the amounts it owes to the Partnership. The resulting difference in the receivable recorded by the Partnership and the payable recorded by the Operating Company is $2,031,260 as of October 31, 1994. At this time, the ultimate resolution of these items is uncertain, as is the recovery, if any, of the claims due from the Operating Company. The accompanying financial statements do not include any adjustments that might result from the ultimate resolution of these matters. F-28 32 THE BOSTON PARK PLAZA HOTEL LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS OCTOBER 31, 1994 (6) RENTALS UNDER LEASES (Continued) (d) Capital Leases The Partnership leases certain equipment under capital lease agreements. Future minimum payments under these leases as of October 31, 1994 are as follows:
AMOUNT Years Ending October 31, 1995 $140,223 1996 140,223 1997 139,776 1998 112,381 -------- 532,603 Less--Amounts representing interest 100,119 -------- Present value of minimum lease payments 432,484 Less--Amounts included in current liabilities 96,885 -------- $335,599 ========
(e) Armory Drill Hall/Plaza Castle Rental income from the Operating Company for the use of the Armory Drill Hall/Plaza Castle was recorded to be $250,000 and $240,000 for the years ended October 31, 1993 and 1994, respectively. These amounts were accounted for through the intercompany account, as no cash payments were made. The rental terms are in dispute and included as part of the litigation discussed in Note 6(c). The claim alleges that the net rental payments from the Operating Company shall be a minimum of $250,000 in cash, not by intercompany transactions, plus out-of-pocket expenses, and the Operating Company shall assume the cost of all operating expenses, including real estate taxes. The counter claim denies these assertions. F-29 33 THE BOSTON PARK PLAZA HOTEL LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS OCTOBER 31, 1994 (7) RELATED PARTY TRANSACTIONS The following is a summary of the major transactions with related parties for the years ending October 31, 1993 and 1994: (a) Amounts Payable to Co-general Partners Amounts payable to co-general partners represent amounts owed for expenses paid by partners and/or affiliates on behalf of the Partnership. (b) Boston Park Plaza Hotel Operating Company, Inc. Amounts due to and from the Operating Company represent intercompany activity resulting from the payment of certain invoices, cash transfers and rental arrangements. Donald L. Saunders alleges that the payments have not been made in accordance with agreements between the two general partners. (c) Utility Expenses Total utility costs for the property for the years ended October 31, 1993 and 1994 were approximately $2,337,000 and $2,265,000, respectively, of which the respective amounts of approximately $391,000 and $374,000 were charged to the Partnership. These amounts are also in dispute and are included as part of the litigation discussed in Note 6(c). The claim alleges that all utility expenses historically and prospectively are to be borne by the Operating Company. The counter claim denies these allegations. (d) Partners' Compensation/Management Fees For the years ended October 31, 1994 and 1993, no management fees were paid by the Parntership to Donald L. Saunders. The litigation discussed in Note 6(c) alleges that payments were improperly made to Roger A. Saunders and his sons and to their other entities for amounts yet to be determined, as is the effect, if any, on the Partnership's financial statements. The Operating Company paid $153,413 directly to these other entities in fiscal 1994 and, in addition, paid $1,227,891 to unrelated third parties for amounts incurred by the related entities on behalf of the Operating Company. These amounts are included in the disputed charges discussed in Note 6(c), and no adjustment has been made to the accompanying financial statements to reflect the potential outcome of this uncertainty. F-30 34 THE BOSTON PARK PLAZA HOTEL LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS OCTOBER 31, 1994 (7) RELATED PARTY TRANSACTIONS (Continued) (e) Notes Payable to a General Partner During 1990 and 1989, Mr. Donald L. Saunders, one of the two general partners, loaned approximately $682,000 and $615,000, respectively, totaling $1,297,000, to the Partnership, of which $585,930 remained outstanding as of October 31, 1992. The remaining balance of the notes was paid off in August 1993. Interest expense related to these notes, incurred by the Partnership, was $51,970 for the year ended October 31, 1993. Principal and interest payments were made directly to a bank loan account held by this general partner. (8) MATTERS RELATED TO UNAUDITED PERIODS (UNAUDITED) In November 1995, Starwood Lodging Trust and Donald L. Saunders, one of the two general partners, entered into an agreement to purchase the other Partnership interests and The Boston Park Plaza Hotel. The transaction is expected to be completed in 1996. As more fully discussed in Note 6, the Partnership has continued to dispute certain charges from the Operating Company. The difference in the receivable recorded by the Partnership and the payable recorded by the Operating Company is $3,937,190 as of September 30, 1995. The principal components of this difference are the treatment of certain fixed asset purchases ($2,302,075) and certain operating and management charges. The Partnership has not recorded any depreciation expense on these fixed assets as the amounts are in dispute. The Partnership has also recorded as a receivable certain amounts paid to one of the general partners and certain limited partners in the amount of $638,114 as of September 30, 1995. The ultimate resolution of these items is uncertain as is the recovery of these amounts pending the determination of these claims by the Special Master. The accompanying financial statements do not include any adjustments that might result from the ultimate resolution of these matters. F-31 35 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Board of Directors and Stockholders of The Boston Park Plaza Hotel Operating Company, Inc.: We have audited the accompanying balance sheets of The Boston Park Plaza Hotel Operating Company, Inc. (the Company), as of October 31, 1994 and 1993, and the related statements of operations and retained earnings and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. 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 financial statements referred to above present fairly, in all material respects, the financial position of The Boston Park Plaza Hotel Operating Company, Inc. as of October 31, 1994 and 1993, and the results of its operations and its cash flows for the years then ended, in conformity with generally accepted accounting principles. As further discussed in Note 2 to the financial statements, one of the general partners of The Boston Park Plaza Hotel Limited Partnership (the Partnership), Donald L. Saunders, an affiliate, has filed claims purportedly on behalf of the Partnership against the Company relating to amounts allegedly due under the lease between the parties and other disputes. The Partnership has notified the Company claiming that the Company is in default under its lease with the Partnership and has brought legal action against the Company. The other general partner, Roger A. Saunders, has denied these claims and has asserted counterclaims against Donald L. Saunders, related to the operations of the Partnership. In addition, the Partnership has disputed certain charges related to capital improvements and other items from the Company for the years ended October 31, 1994. Payment for such items has been offset by the Company against the amount it owes the Partnership. The resulting difference in the receivable recorded by the Partnership and the payable recorded by the Company is $2,031,260 as of October 31, 1994. At this time, the ultimate resolution of these items is uncertain as is the liability of the Company to the Partnership, if any, as a result of the claims discussed in the preceding paragraph. The accompanying financial statements do not include any adjustments that might result from the ultimate resolution of these matters. ARTHUR ANDERSEN LLP Boston, Massachusetts August 17, 1995 F-32 36 THE BOSTON PARK PLAZA HOTEL OPERATING COMPANY, INC. BALANCE SHEETS
ASSETS OCTOBER 31, SEPTEMBER 30, 1993 1994 1995 (UNAUDITED) CURRENT ASSETS: Cash and cash equivalents $2,101,498 $1,517,893 $1,809,145 Accounts receivable, less allowance for doubtful accounts of $120,745 in 1994 and $63,509 in 1993 (Note 5) 3,816,806 4,417,041 2,921,923 Due from The Boston Park Plaza Hotel Limited Partnership (Notes 2 and 5) - - 888,231 Other receivables (Note 5) 210,592 227,560 119,025 Inventories 219,828 243,354 166,231 Prepaid expenses 163,772 196,178 144,482 Refundable income taxes - 27,900 -- Net deferred tax asset (Note 3) 195,000 324,500 249,908 ---------- ---------- ---------- Total current assets 6,707,496 6,954,426 6,298,945 ---------- ---------- ---------- OTHER ASSETS 62,500 62,500 -- ---------- ---------- ---------- Total assets $6,769,996 $7,016,926 $6,298,945 ========== ========== ==========
LIABILITIES AND STOCKHOLDERS' OCTOBER 31, SEPTEMBER 30, EQUITY 1993 1994 1995 (UNAUDITED) CURRENT LIABILITIES: Accounts payable $ 268,885 $ 338,784 $ 922,714 Due to The Boston Park Plaza Hotel Limited Partnership (Notes 2 and 5) 1,228,397 728,428 -- Advance deposits 101,485 194,172 271,332 Accrued payroll 441,281 517,567 619,689 Other accrued liabilities (Notes 4 and 5)- Accrued vacation 448,196 460,434 486,187 Accrued insurance 340,787 502,778 402,264 Accrued legal 2,941 210,480 -- Other 845,038 777,641 405,577 ---------- ---------- ---------- Total current liabilities 3,677,010 3,730,284 3,107,763 ---------- ---------- ---------- COMMITMENTS AND CONTINGENCIES (Notes 2, 4 and 6) STOCKHOLDERS' EQUITY: Common stock, no par value- Authorized--12,500 shares Issued and outstanding--100 shares 500 500 500 Retained earnings 3,092,486 3,286,142 3,190,682 ---------- ---------- ---------- Total stockholders' equity 3,092,986 3,286,642 3,191,182 ---------- ---------- ---------- Total liabilities and stockholders' equity $6,769,996 $7,016,926 $6,298,945 ========== ========== ==========
The accompanying notes are an integral part of these financial statements. F-33 37 THE BOSTON PARK PLAZA HOTEL OPERATING COMPANY, INC. STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
ELEVEN MONTHS ENDED YEARS ENDED OCTOBER 31, SEPTEMBER 30, 1993 1994 1994 1995 (UNAUDITED) REVENUES: Rooms $22,535,871 $25,777,520 $22,349,704 $23,076,954 Food and beverage 8,699,519 8,933,391 7,930,197 8,431,785 Telephone 962,985 1,001,752 877,298 944,447 Other 1,318,301 1,292,783 1,118,876 1,258,932 ----------- ----------- ----------- ----------- Total revenues 33,516,676 37,005,446 32,276,075 33,712,118 ----------- ----------- ----------- ----------- DEPARTMENTAL EXPENSES: Rooms 7,376,968 7,958,302 7,077,293 7,672,130 Food and beverage 8,018,902 8,687,828 7,811,107 7,871,665 Telephone 531,553 566,319 503,010 571,756 Other 762,960 875,339 786,854 832,941 ----------- ----------- ----------- ----------- Total departmental expenses 16,690,383 18,087,788 16,178,264 16,948,492 ----------- ----------- ----------- ----------- OPERATING EXPENSES: Administrative and general 3,773,799 3,935,351 4,044,320 4,190,436 Marketing and promotion 2,272,579 2,168,781 1,933,743 2,113,927 Property operation and maintenance 3,127,634 3,649,189 3,265,577 3,222,613 Energy costs 1,965,796 2,044,285 1,883,971 1,881,639 ----------- ----------- ----------- ----------- Total undistributed operating expenses 11,139,808 11,797,606 11,127,611 11,408,615 ----------- ----------- ----------- ----------- Gross operating profit 5,686,485 7,120,052 4,970,200 5,355,011 CAPITAL EXPENSES: Fixed charges 271,304 263,579 240,530 251,875 Rent (Note 2) 5,108,578 5,856,882 4,496,498 4,847,979 Other 37,732 691,332 -- -- Corporate excise tax 8,033 8,520 7,810 7,817 ----------- ----------- ----------- ----------- Income before provision for income taxes 260,838 299,739 225,362 247,340 PROVISION FOR INCOME TAXES (Note 3) 136,379 106,083 97,243 220,774 ----------- ----------- ----------- ----------- Net income 124,459 193,656 128,119 26,566 RETAINED EARNINGS, BEGINNING OF YEAR 2,968,027 3,092,486 3,092,486 3,286,142 DIVIDENDS -- -- -- 122,026 ----------- ----------- ----------- ----------- RETAINED EARNINGS, END OF YEAR $ 3,092,486 $ 3,286,142 $ 3,220,605 $ 3,190,682 =========== =========== =========== ===========
The accompanying notes are an integral part of these financial statements. F-34 38 THE BOSTON PARK PLAZA HOTEL OPERATING COMPANY, INC. STATEMENTS OF CASH FLOWS
YEARS ENDED OCTOBER 31, ELEVEN MONTHS ENDED SEPTEMBER 30, 1993 1994 1994 1995 (UNAUDITED) CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 124,459 $ 193,656 $ 128,119 $ 26,566 Adjustments to reconcile net income to net cash provided by (used in) operating activities- (Increase) decrease in accounts receivable (326,695) (600,235) (67,969) 1,495,118 (Increase) decrease in other receivables 235,766 (16,968) 85,376 108,535 (Increase) decrease in inventories 12,791 (23,526) (13,182) 77,123 (Increase) decrease in prepaid expenses 200,020 (32,406) (39,965) 51,696 Increase in refundable income taxes -- (27,900) (27,900) -- Increase in deferred tax asset (195,000) (129,500) (112,447) 102,492 Decrease in other assets -- -- -- 62,500 Increase (decrease) in accounts payable (48,765) 69,899 93,264 583,930 Increase (decrease) in advance deposits (68,088) 92,687 182,076 77,160 Increase in accrued payroll 180,299 76,286 (50,249) 102,122 Increase (decrease) in other accrued liabilities 429,636 314,371 169,068 (657,305) ---------- ---------- ----------- ----------- Net cash provided by (used in) operating activities 544,423 (83,636) 346,191 2,029,937 ---------- ---------- ----------- ----------- CASH FLOWS FROM INVESTING/FINANCING ACTIVITIES: Increase (decrease) in due to the Boston Park Plaza Hotel Limited Partnership 229,851 (499,969) (1,171,731) (1,616,659) Dividends -- (122,026) ---------- ---------- ----------- ----------- Net cash provided by (used in) investing/financing activities 229,851 (499,969) (1,171,731) (1,738,685) ---------- ---------- ----------- ----------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 774,274 (583,605) (825,540) 291,252 CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 1,327,224 2,101,498 2,101,498 1,517,893 ---------- ---------- ----------- ----------- CASH AND CASH EQUIVALENTS, END OF YEAR $2,101,498 $1,517,893 $ 1,275,958 $ 1,809,145 ========== ========== =========== =========== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the year for- Income taxes $ 240,700 $ 369,100 $ 309,100 $ 115,000 ========== ========== =========== ===========
The accompanying notes are an integral part of these financial statements. F-35 39 THE BOSTON PARK PLAZA HOTEL OPERATING COMPANY, INC. NOTES TO FINANCIAL STATEMENTS OCTOBER 31, 1994 (1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (a) Inventories and Operating Stock Inventories, principally food and beverage, are carried at the lower of cost (first-in, first-out) or market. Acquisitions of operating stock, consisting of linen, china, glassware and silver, are expensed when acquired. (b) Property, Equipment and Depreciation All of the property and equipment of the Boston Park Plaza Hotel Operating Company, Inc. (the Company) are maintained and owned by The Boston Park Plaza Hotel Limited Partnership (the Partnership), and accordingly, such assets, along with the related depreciation, are not presented in the accompanying financial statements. (c) Income Taxes Income taxes are provided based on the liability method of accounting pursuant to Statement of Financial Accounting Standards (SFAS) No. 109, Accounting for Income Taxes, which was adopted for the year ended October 31, 1993. The adoption of SFAS No. 109 did not have a material impact. Deferred income taxes are provided for temporary differences resulting from income and expenses that are reported for tax purposes in different years than for financial reporting purposes. These temporary differences relate primarily to workmen's compensation insurance, the reserve for bad debts and accrued expenses, which are not currently deductible for tax purposes. (d) Cash and Cash Equivalents For the purposes of the statements of cash flows, the Company considers all highly liquid investments, purchased with a maturity of three months or less, to be cash equivalents. (d) Reclassification Certain 1993 amounts have been reclassified to conform to the 1994 presentation. F-36 40 (2) OPERATING LEASE AND RELATED LITIGATION The Company leases the property, including personal property, known as The Boston Park Plaza Hotel (the Hotel), from the Partnership, an affiliate. The Company's stockholders are the general partners of the Partnership. The initial term of the lease was for the period from January 28, 1977 to December 31, 1977. In accordance with the terms of the lease agreement, the lease has been automatically extended from year to year. The rent has been calculated as the greater of (i) 95% of the lessee's net profit, as defined, from the operation of the Hotel or (ii) 70% of the lessor's debt service on its mortgage and real estate taxes related to the Hotel, as defined. For the years ended October 31, 1994 and 1993, rent was based on 95% of the lessee's net profit, as defined, and amounted to $5,966,087 and $5,856,882, respectively. As discussed in the following paragraph, the exact interpretation of this calculation and other matters are in dispute. There is presently certain litigation that arose out of disputes between the Partnership's general partners. One of the Partnership's general partners, Donald L. Saunders, has filed substantial claims purportedly on behalf of the Partnership against the Company relating to amounts allegedly due under the lease and other disputes. The Partnership has rendered invoices to the Company for additional rent for the current and prior years in the approximate amount of $39,500,000. The Partnership has notified the Company claiming that it is in default under its lease with the Partnership and has brought legal action against the Company. This rent claim is based on Donald L. Saunders' recalculation in 1995 of the rent allegedly due back to 1984. The other general partner, Roger A. Saunders, has denied these claims and has asserted counterclaims against Donald L. Saunders related to the operations of the Partnership. In addition, the Partnership has disputed certain charges related to capital improvements and other items from the Company for the years ended October 31, 1994. These charges have been offset by the Company against the amount it owes the Partnership. The resulting difference in the receivable recorded by the Partnership and the payable recorded by the Company is $2,031,260 as of October 31, 1994. At this time, the ultimate resolution of these items is uncertain as is the liability of the Company, if any, as a result of the claims. In the opinion of Hotel management, based on the advice of its legal counsel, the Partnership's claims are without merit, and the ultimate resolution of these matters will not have a material adverse effect on the financial condition and results of operations of the Company. The accompanying financial statements do not include any adjustments that might result from the ultimate resolution of these uncertainties. F-37 41 (3) INCOME TAXES The provision for income taxes consists of the following:
1994 1993 Current- Federal $ 173,670 $ 170,700 State 61,913 48,167 Deferred tax benefit (129,500) (82,488) --------- --------- $ 106,083 $ 136,379 ========= =========
The net deferred tax asset consists of the following:
1994 1993 Deferred tax assets $ 377,400 $258,400 Deferred tax liabilities (52,900) (63,400) -------- -------- Net deferred tax asset $ 324,500 $195,000 ======== ========
(4) EMPLOYEE BENEFIT PLANS The Company's union employees are covered by a defined contribution, multiemployer union pension plan. Contributions to the plan are made in accordance with a negotiated labor contract. Amounts charged to operations for contributions to the plan amounted to $47,961 in 1994 and $129,220 in 1993. Under the collective bargaining agreement between the Company and the Union, bonus compensation is provided to certain union employees based on the attainment of a specified level of occupancy for a calendar year among the nine hotels that are participants in the agreement. For the years ended October 31, 1994 and 1993, the Company has accrued a liability based on a preliminary estimate of occupancy totaling $146,600 and $159,880, respectively. The Company participates in the Saunders Hotels Group Thrift Savings Plan, a Section 401(k) plan, for its nonunion employees. The Company contributes $.50 for each $1.00 contributed by its participating employees to this plan, up to the first 6% of employees' compensation, subject to eligibility requirements. Employees become vested in the Company's contributions, based on length of employment, over a period of seven years. The Company's contributions under this plan amounted to $81,728 in 1994 and $70,706 in 1993. F-38 42 (5) RELATED PARTY TRANSACTIONS Amounts due to the Partnership represent activity resulting from the payment of certain invoices, cash transfers, capitalizable purchases and net of the rent charge for the Hotel premises. In addition, the Company rents, on a month-to-month basis, the exhibition hall area of the Plaza Castle from the Partnership for a monthly charge of $20,000 plus utility costs, and less a credit equal to the amount of revenue received by the Partnership for that space. The rent charged to expense under this arrangement was $117,213 in 1994 and $117,932 in 1993. As discussed in Note 2, the amount owed by the Company to the Partnership is in dispute. For the years ended October 31, 1994 and 1993, utility charges were allocated to the Partnership by the Company for office and retail space occupied by tenants in the Statler Office Building. Such charges amounted to $403,011 and $381,405 in 1994 and 1993, respectively. Included in trade and other receivables at October 31, 1994 and 1993 are receivables due from affiliates of $60,167 and $103,521, respectively. For the years ended October 31, 1994 and 1993, respectively, the Company included in other income $119,252 and $116,804, respectively, which was collected from related parties for security services. (6) OTHER COMMITMENTS AND CONTINGENCIES As of October 31, 1994, the Company has an outstanding purchase commitment for computer equipment and software to be utilized in hotel operations. The Company expects to obtain lease financing for a term of seven years, in amounts not to exceed $350,000 at a proposed interest rate of 9.63% per annum. As of October 31, 1994, the Company is contingently liable under irrevocable letters of credit totaling $229,596 issued to an insurance carrier as part of its paid-loss retroinsurance program. (7) MATTERS RELATED TO UNAUDITED PERIODS (UNAUDITED) In November 1995, Starwood Lodging Trust and Mr. Donald L. Saunders, one of the stockholders, entered into an agreement to purchase the other stockholders' interests and the other partnership interests in The Boston Park Plaza Hotel Limited Partnership. The transaction is expected to be completed in 1996. F-39 43 (7) MATTERS RELATED TO UNAUDITED PERIODS (UNAUDITED) (Continued) As more fully discussed in Note 2, the Partnership has continued to dispute certain charges from the Operating Company. The difference in the receivable recorded by the Partnership and the payable recorded by the Operating Company is $3,937,190 as of September 30, 1995. The principal components of this difference are the treatment of certain fixed asset purchases ($2,302,075) and certain operating and management charges. The ultimate resolution of these items is uncertain pending the determination of these claims by the Special Master. The accompanying financial statements do not include any adjustments that might result from the ultimate resolution of these matters. F-40 -----END PRIVACY-ENHANCED MESSAGE-----