-----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, SN5gPiN7khiGl1Evt6yeZ5HVhDrUHkzk3LpqM/C4MuQc2Q06XuskegBmJJPBHD47 GdwpoQtdXuDlfzk03Hsm9A== 0000950148-96-000313.txt : 19960305 0000950148-96-000313.hdr.sgml : 19960305 ACCESSION NUMBER: 0000950148-96-000313 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19950920 ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19960304 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: 96530476 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: 96530477 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 FORM 8-K/A 1 ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K/A1 CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of earliest event reported): September 20, 1995 Commission File Number: 1-6828 Commission File Number: 1-7959 STARWOOD LODGING STARWOOD LODGING CORPORATION TRUST (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) 52-1193298 52-0901263 (I.R.S. employer identification no.) (I.R.S. employer identification no.) 11845 W. Olympic Blvd., Suite 560 11845 W. Olympic Blvd., Suite 550 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)
================================================================================ 2 The undersigned Registrants hereby amend the following items, the financial statements, Pro Forma Financial Information and Exhibits of their Form 8-K/A dated September 20, 1995 as set forth in the pages attached hereto: ============================================================================== Item 7 of the Joint Current Report on Form 8-KA dated September 20, 1995 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/ Kenneth J. Biehl ____________________________ ___________________________________ Ronald C. Brown Kenneth J. Biehl Vice President and Vice President and Principal Chief Financial Officer Financial and Accounting Officer
Date: December 1, 1995 4 INDEX TO FINANCIAL STATEMENTS 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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-2 Notes to Pro Forma Statements of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . F-9 DORAL INN Reports of Independent Auditors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-12 Balance Sheet as of December 31, 1994 and 1993 . . . . . . . . . . . . . . . . . . . . . . . . . . F-13 Statements of Operations for the years ended December 31, 1994, 1993 and 1992 . . . . . . . . . . . F-14 Statements of Division Account for the years ended December 31, 1994, 1993 and 1992 . . . . . . . . F-16 Statements of Cash Flows for the years ended December 31, 1994, 1993 and 1992 . . . . . . . . . . . F-17 Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-19
F-1 5 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") 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. 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 related acquisitions of the Sheraton Colony Square in Atlanta, Georgia, the Embassy Suites in Tempe, Arizona, and the Omni Europa in Chapel Hill, North Carolina; and the acquisition of the Doral Inn in New York, New York as of the beginning of the period 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-2 6 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 Starwood Lodging Acquired Pro Forma Lodging Combined Properties Doral Inn Adjustments Combined ------------ ------------ ----------- ----------- ----------- (A) (C) (D) REVENUE Hotel . . . . . . . . . . . . . . . . $81,951,000 $14,854,000 $13,312,000 $110,117,000 Gaming . . . . . . . . . . . . . . . . 20,375,000 20,375,000 Interest from mortgage and other notes 8,004,000 8,004,000 Rents from leased hotel properties . . 608,000 608,000 Other income . . . . . . . . . . . . . 1,334,000 1,334,000 Gain (loss) on sales of hotel assets . (125,000) (125,000) ----------- ----------- ----------- ------------ ------------ 112,147,000 14,854,000 13,312,000 140,313,000 ----------- ----------- ----------- ------------ ------------ EXPENSES Hotel operations . . . . . . . . . . . 56,232,000 10,285,000 11,362,000 (1,248,000) (E) 76,631,000 Gaming operations . . . . . . . . . . 18,351,000 18,351,000 Interest . . . . . . . . . . . . . . . 11,198,000 3,219,000 (13,909,000) (F) 3,083,000 2,575,000 (F) Depreciation and amortization . . . . . 10,182,000 3,465,000 3,192,000 16,839,000 Administrative and operating . . . . . 3,836,000 10,000 (E) 3,846,000 ----------- ----------- ----------- ------------ ------------ 99,799,000 13,750,000 17,773,000 (12,572,000) 118,750,000 ----------- ----------- ----------- ------------ ------------ Income (loss) before minority interest 12,348,000 $1,104,000 $(4,461,000) $12,572,000 21,563,000 Minority interest in Partnerships (H) 5,398,000 =========== =========== ============ 6,488,000 ----------- ------------ Income from continuing operations . . . $6,950,000 $15,075,000 =========== ============ Income from continuing operations per paired share (I) . . . . . . . . $1.17 $1.09 =========== ============
See accompanying notes to the pro forma statements of operations. F-3 7 STARWOOD LODGING TRUST UNAUDITED COMBINED PRO FORMA STATEMENTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995
Historical Starwood Pro Forma Lodging Acquired Starwood Trust Properties Doral Inn Pro Forma Lodging (A) (C) (D) Adjustments Trust ----------- ---------- ---------- ----------- ----------- REVENUE Rents from Corporation . . . . . . . . $18,287,000 $ $ $4,566,000 (J) $22,853,000 Interest from Corporation . . . . . . 2,629,000 3,412,000 (K) 6,041,000 Interest from mortgage and other notes 7,915,000 7,915,000 Rents from leased hotel properties . . 608,000 608,000 Other income . . . . . . . . . . . . . 461,000 461,000 Gain (loss) on sales of hotel assets . (125,000) (125,000) ----------- ---------- ---------- ---------- ----------- 29,775,000 7,978,000 37,753,000 ----------- ---------- ---------- ---------- ----------- EXPENSES Interest - other . . . . . . . . . . . 10,534,000 (10,108,000)(F) 3,001,000 2,575,000 (F) 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 (7,533,000) 11,922,000 ----------- ---------- ---------- ---------- ----------- Income (loss) before minority interest 11,803,000 $1,483,000 $ 15,511,000 25,831,000 ========== ========== ========== Minority interest in Partnerships (H) 4,957,000 7,772,000 ----------- ----------- Income from continuing operations . . . $6,846,000 $18,059,000 =========== =========== Income from continuing operations per paired share (I) . . . . . . . . $1.15 $1.31 =========== ===========
See accompanying notes to the pro forma statements of operations. F-4 8 STARWOOD LODGING CORPORATION UNAUDITED COMBINED PRO FORMA STATEMENTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995
Historical Pro Forma Starwood Starwood Lodging Acquired Pro Forma Lodging Corporation Properties Doral Inn Adjustments Corporation ----------- ----------- ----------- ----------- ------------ (A) (C) (D) REVENUE Hotel . . . . . . . . . . . . . . . . $81,951,000 $14,854,000 $13,312,000 $ $110,117,000 Gaming . . . . . . . . . . . . . . . . 20,375,000 20,375,000 Interest from mortgage and other notes 89,000 89,000 Other income . . . . . . . . . . . . . 873,000 873,000 ------------ ----------- ----------- ----------- ------------ 103,288,000 14,854,000 13,312,000 131,454,000 ------------ ----------- ----------- ----------- ------------ EXPENSES Hotel operations . . . . . . . . . . . 56,232,000 10,285,000 11,362,000 (1,248,000) (E) 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 3,412,000 (K) 6,041,000 Interest - other . . . . . . . . . . . 664,000 3,219,000 (3,801,000) (F) 82,000 Depreciation and amortization . . . . . 3,922,000 1,982,000 3,192,000 9,096,000 Administrative and operating . . . . . 2,658,000 10,000 (E) 2,668,000 ------------ ----------- ----------- ----------- ------------ 102,743,000 12,267,000 17,773,000 2,939,000 135,722,000 ------------ ----------- ----------- ----------- ------------ Income (loss) before minority interest 545,000 $2,587,000 $(4,461,000) $(2,939,000) (4,268,000) =========== =========== =========== Minority interest in Partnerships (H) 441,000 (1,284,000) ------------ ----------- Net income (loss) . . . . . . . . . . $104,000 $(2,984,000) ============ =========== Net income (loss) per paired share . . $0.02 $(0.22) ============ ===========
See accompanying notes to the pro forma statements of operations. F-5 9 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 Starwood Lodging Starwood Acquired Pro Forma Lodging Combined Capital Properties Doral Inn Adjustments Combined ---------- ----------- ---------- ---------- ----------- ---------- (A) (B) (C) (D) REVENUE Hotel . . . . . . . . . . . . . $82,668,000 $16,467,000 $26,632,00 $19,459,000 $ $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 Rents from leased hotel properties and income from joint ventures 927,000 927,000 Other income . . . . . . . . . . 411,000 411,000 Gain (loss) on sales of hotel assets . . . . . . . . . . . . . 456,000 456,000 ----------- ----------- ---------- ----------- ------------ ------------ 113,997,000 24,963,000 26,632,00 19,459,000 185,051,000 ----------- ----------- ---------- ----------- ------------ ------------ EXPENSES Hotel operations . . . . . . . . 60,829,000 12,751,000 19,503,00 15,051,000 (3,359,000) (E) 104,775,000 Gaming operations . . . . . . . 24,454,000 24,454,000 Interest . . . . . . . . . . . . 17,606,000 3,834,000 875,00 6,479,000 (28,707,000) (F) 4,047,000 3,960,000 (F) Depreciation and amortization . . 8,161,000 2,496,000 6,253,00 4,256,000 1,220,000 (G) 22,386,000 Administrative and operating . . 4,203,000 286,000 (E) 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 26,631,00 25,786,000 (26,600,000) 163,558,000 ----------- ----------- ---------- ----------- ------------ ------------ Income before minority interest (4,663,000) $ 5,882,000 $1,000 $(6,327,000) $26,600,000 21,493,000 Minority interest in =========== ========== =========== ============ Partnerships (H) . . . . . . . 6,467,000 ----------- ------------ Net income (loss) . . . . . . . $(4,663,000) $15,026,000 =========== ============ Net income per paired share (I) $(2.31) $1.09 =========== ============
See accompanying notes to the pro forma statements of operations. F-6 10 STARWOOD LODGING TRUST UNAUDITED COMBINED PRO FORMA STATEMENTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1994
Historical Pro Forma Starwood Starwood Lodging Starwood Acquired Pro Forma Lodging Trust Capital Properties Doral Inn 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 5,889,000 (K) 7,619,000 Interest from mortgage and other notes . . . . . . . . . 1,512,000 8,496,000 10,008,000 Rents from leased hotel properties and income from joint ventures 927,000 927,000 Other income . . . . . . . . . . 164,000 164,000 Gain (loss) on sales of hotel assets . . . . . . . . . . . . 432,000 432,000 ----------- ---------- ----------- ---------- ----------- ----------- 21,671,000 8,496,000 14,478,000 44,645,000 ----------- ---------- ----------- ---------- ----------- ----------- EXPENSES Interest - other . . . . . . . . 16,265,000 3,834,000 875,000 (20,974,000)(F) 3,960,000 3,960,000 (F) Depreciation and amortization . . 5,205,000 1,270,000 2,791,000 610,000 (G) 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 (16,404,000) 17,502,000 ----------- ---------- ----------- ---------- ----------- ----------- Income before minority interest (3,465,000) $3,392,000 $(3,666,000) $ $30,822,000 27,143,000 ========== =========== ========== =========== Minority interest in Partnerships (H) . . . . . . . 8,167,000 ----------- ----------- Net income (loss) . . . . . . . $(3,465,000) $18,976,000 =========== =========== Net income per paired share (I) $(1.71) $1.37 =========== ===========
See accompanying notes to the pro forma statements of operations. F-7 11 STARWOOD LODGING CORPORATION UNAUDITED COMBINED PRO FORMA STATEMENTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1994
Historical Pro Forma Starwood Starwood Lodging Starwood Acquired Pro Forma Lodging Corporation Capital Properties Doral Inn Adjustments Corporation ----------- ----------- ----------- ----------- ------------ ----------- (A) (B) (C) (D) REVENUE Hotel . . . . . . . . . . . . . $82,668,000 $16,467,000 $26,632,000 $19,459,000 $ $145,226,000 Gaming . . . . . . . . . . . . . 27,981,000 27,981,000 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 26,632,000 19,459,000 173,520,000 ----------- ----------- ----------- ----------- ------------ ----------- EXPENSES Hotel operations . . . . . . . . 60,829,000 12,751,000 19,503,000 15,051,000 (3,359,000)(E) 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 5,889,000 (K) 7,619,000 Interest - other . . . . . . . . 1,341,000 6,479,000 (7,733,000)(F) 87,000 Depreciation and amortization . . 2,956,000 1,226,000 3,462,000 4,256,000 610,000 (G) 12,510,000 Administrative and operating . . 2,620,000 286,000 (E) 2,906,000 Shareholder litigation expense . 1,324,000 1,324,000 ----------- ----------- ----------- ----------- ------------ ----------- 112,160,000 13,977,000 22,965,000 25,786,000 4,282,000 179,170,000 ----------- ----------- ----------- ----------- ------------ ----------- Income before minority interest (1,198,000) $2,490,000 $3,667,000 $(6,327,000) $(4,282,000) (5,650,000) =========== =========== =========== ============ Minority interest in Partnerships (H) . . . . . . . (1,700,000) ----------- ----------- Net income (loss) . . . . . . . $(1,198,000) $(3,950,000) =========== =========== Net income per paired share (I) $(0.59) $(0.29) =========== ===========
See accompanying notes to the pro forma statements of operations. F-8 12 STARWOOD LODGING TRUST AND STARWOOD LODGING CORPORATION NOTES TO THE UNAUDITED COMBINED AND SEPARATE PRO FORMA STATEMENTS 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 (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 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'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 Company's Form 8-K as amended dated January 31, 1995, which is incorporated herein by Reference. Listed below are the effects each contributed hotel had on the combined pro forma statement of operations:
For the Twelve Months Ended 12/31/94 --------------------------------------------------------- Doubletree Capitol Hill French Quarters Rancho Harvey Suites Suites Bernardo Wichita Total ------------ --------------- ----------- --------- ---------- Hotel Revenues . . . . . . . . . . . . . . . . $3,484,000 $5,247,000 $3,753,000 $3,983,000 $16,467,000 Hotel Expenses . . . . . . . . . . . . . . . . 2,228,000 3,789,000 2,795,000 3,939,000 12,751,000 Depreciation Expense . . . . . . . . . . . . . 556,000 858,000 481,000 601,000 2,496,000 ---------- ---------- ---------- ---------- ----------- Income (loss) before Minority Interest . . . . $ 700,000 $ 600,000 $ 477,000 $ (557,000) $ 1,220,000 ========== ========== ========== ========== ===========
(C) Reflects the pro forma statements of operations (reflecting the Companies' cost basis) of the properties acquired in connection with the Offering. For additional information regarding the Offering, please see pages F-1 through F-140 (Financial Statements and Financial Statement Schedules) of the Company's Form S-2 as amended dated June 29, 1995 which are incorporated herein by reference. Listed below are the effects each acquired hotel had on the combined pro forma statements of operations:
For the Nine Months Ended 9/30/95 ------------------------------------------------------------- Omni Sheraton Embassy Suites Chapel Hill Colony Square Tempe Total ------------ --------------- -------------- ---------- Hotel Revenues . . . . . . . . . . . . . . . . $1,265,000 $9,557,000 $4,032,000 $14,854,000 Hotel Expenses . . . . . . . . . . . . . . . . 887,000 7,127,000 2,271,000 10,285,000 Depreciation Expense . . . . . . . . . . . . . 163,000 2,073,000 1,229,000 3,465,000 ---------- ---------- ---------- ----------- Income (loss) before Minority Interest . . . . $ 215,000 $ 357,000 $ 532,000 $ 1,104,000 ========== ========== ========== ===========
For the Twelve Months Ended 12/31/94 ------------------------------------------------------------- Omni Sheraton Embassy Suites Chapel Hill Colony Square Tempe Total ------------ --------------- -------------- ----------- Hotel Revenues . . . . . . . . . . . . . . . . $4,407,000 $16,200,000 $6,025,000 $26,632,000 Hotel Expenses . . . . . . . . . . . . . . . . 3,024,000 12,656,000 3,823,000 19,503,000 Depreciation Expense . . . . . . . . . . . . . 884,000 3,363,000 2,006,000 6,253,000 ---------- ----------- ---------- ----------- Income (loss) before Minority Interest . . . . $ 499,000 $ 181,000 $ 196,000 $ 876,000 ========== =========== ========== ===========
(D) Reflects the pro forma statements of operations of the Doral Inn. On September 20, 1995, Realty purchased land for $3 million and mortgage notes receivable secured by the Doral Inn for $40.3 million. Realty also entered into a long-term lease agreement with SBK Delaware Realty Holdings, L.L.C. ("SBK"), the owners of the Doral Inn, to lease the land for $240,000 per year. Simultaneously, Operating entered into a long-term lease agreement with SBK to lease the land and the building for $240,000 per year, plus the debt service on the mortgage held by Realty. The agreement with Operating also allows for management fees to be paid by Operating to SBK. Realty has the option of acquiring the building for the value of the mortgage note plus $400,000 after ten years. It is management's intention to exercise that option. Accordingly, Operating has recorded the transaction as an accounting purchase. F-9 13 Additional information related to the property is as follows:
For the Twelve Months Ending ---------------------------- 1994 1993 1992 ------ ------ ------ Average occupancy rate 80% 76% 79% Average room rate $89.92 $89.12 $96.47 ------ ------ ------ Revenue per available room $71.94 $67.73 $76.21 ------ ------ ------
(E) 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.
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 ======== =======
F-10 14 (F) 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 calculated as follows:
Nine Months Ending 9/30/95 Twelve Months Ending 12/31/94 --------------------------------------- ----------------------------------------- Trust Corporation Combined Trust Corporation Combined ---------- ----------- ------------ ----------- ----------- ------------- Interest on GSI note $ 82,000 $ 82,000 $ 87,000 $ 87,000 Interest expense on amount outstanding under lines of credit (subsequent to offering) $ 383,000 383,000 $ 383,000 - 383,000 Interest expense relating to acquisition of the Doral Inn (1) 2,083,000 2,083,000 2,870,000 - 2,870,000 Interest expense relating to additional draw down on line (2) 535,000 535,000 707,000 - 707,000 ---------- --------- ---------- ---------- --------- ---------- Total Interest Expense - pro forma $3,001,000 $ 82,000 $3,083,000 $3,960,000 $ 87,000 $4,047,000 ========== ========= ========== ========== ========= ========== (1) Assumes draw down of $39.6 million on January 1, 1995 and 1994 to purchase the Doral Inn (2) Assumes draw down of $9.8 million on January 1, 1995 and 1994 to reflect actual draw down in 3rd quarter 1995
(G) Reflects the amortization of organization costs related to the formation of the Partnerships over a five-year period. (H) Reflects Starwood Capital's minority interest in the income of the Partnerships. (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 --------------------------------------- ------------------------- Capital 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. F-11 15 INDEPENDENT AUDITORS' REPORT To the Shareholders of Carol Management Corporation d/b/a Doral Inn We have audited the accompanying balance sheets of Doral Inn (the "Hotel"), a division of Carol Management Corporation ("CMC") (Note 8) as of December 31, 1994 and 1993, and the related statements of operations, division account and cash flows for each of the three years in the period ended December 31, 1994. 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 Doral Inn, a division of Carol Management Corporation as of December 31, 1994 and 1993, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1994, in conformity with generally accepted accounting principles. The accompanying financial statements have been prepared assuming that the Hotel will continue as a going concern. As discussed in Note 7 to the financial statements, the first mortgagee has instituted an action to foreclose on the Hotel property, and the Hotel has suffered recurring losses. These conditions raise substantial doubt about the Hotel's ability to continue as a going concern. Management's plans with regard to these matters are also described in Note 7. The financial statements do not include any adjustments that might result from the outcome of these uncertainties. DAVID BERNDON & CO. LLP New York, New York April 4, 1995 F-12 16 DORAL INN (A DIVISION OF CAROL MANAGEMENT CORPORATION (NOTE 8)) BALANCE SHEET
December 31, --------------------------------- 1994 1993 ----------- ----------- CURRENT ASSETS Cash and cash equivalents (Note 2) . . . . . . $ 949,577 $ Trade accounts receivable, less allowance for doubtful accounts of $150,000 at December 31, 1994, and $111,000 at December 31, 1993 . . . . . . . . . . . . . 1,832,452 1,828,267 Inventories . . . . . . . . . . . . . . . . . 80,036 45,860 Prepaid real estate taxes . . . . . . . . . . 809,657 814,354 Prepaid expenses and other receivables . . . . 292,656 128,703 Due from related parties (Note 3(c)) . . . . . 239,241 264,040 ----------- ----------- TOTAL CURRENT ASSETS 4,203,619 3,081,224 PROPERTY AND EQUIPMENT - AT COST, LESS ACCUMULATED DEPRECIATION (Notes 4 and 5) . . . . . . . . 9,935,740 10,057,198 ----------- ----------- $14,139,359 $13,138,422 =========== =========== LIABILITIES AND DIVISION ACCOUNT ----------------------------------------------- CURRENT LIABILITIES: Mortgage payable (Note 5) . . . . . . . . . . $47,722,700 $47,722,700 Bank overdraft . . . . . . . . . . . . . . . . 3,265 Accounts payable . . . . . . . . . . . . . . . 745,501 728,401 Accrued mortgage interest (Note 5) . . . . . . 6,002,474 2,137,136 Accrued expenses . . . . . . . . . . . . . . . 875,866 791,526 Due to related party (Note 3(c)) . . . . . . . 2,004,296 1,410,069 ----------- ----------- TOTAL CURRENT LIABILITIES 57,350,837 52,793,097 TENANTS' SECURITY DEPOSITS . . . . . . . . . . 63,078 66,681 ADVANCE DEPOSITS . . . . . . . . . . . . . . . 53,194 84,682 ----------- ----------- TOTAL LIABILITIES 57,467,109 52,944,460 COMMITMENTS AND CONTINGENCIES (Notes 3(b), 5, 6, 7 and 8) DIVISION ACCOUNT ((Exhibit C) . . . . . . . . (43,327,750) (39,806,038) ----------- ----------- $14,139,359 $13,138,422 =========== ===========
The accompanying notes to financial statements are an integral part of these statements. F-13 17 DORAL INN (A DIVISION OF CAROL MANAGEMENT CORPORATION (NOTE 8)) STATEMENTS OF OPERATIONS
Nine Months Ended September 30, Year Ended December 31, ----------------------------- ------------------------------------------------ 1995 1994 1994 1993 1992 ----------- ----------- ----------- ----------- ----------- (unaudited) REVENUES: Rooms . . . . . . . . . . . . $12,397,298 $12,146,196 $17,150,216 $16,064,257 $18,074,329 Telephone . . . . . . . . . . 787,980 763,776 1,053,427 971,965 1,250,175 Rental and other income . . . 833,963 943,655 1,255,576 1,276,650 1,263,038 ----------- ----------- ----------- ----------- ----------- TOTAL REVENUES 14,019,241 13,853,627 19,459,219 18,312,872 20,587,542 ----------- ----------- ----------- ----------- ----------- COST OF SALES AND OTHER OPERATING EXPENSES: Distributed operating expenses: Rooms . . . . . . . . . . . . 5,097,901 5,065,072 7,044,519 6,710,061 6,790,490 Telephone . . . . . . . . . . 472,566 410,174 570,364 530,741 631,975 ----------- ----------- ----------- ----------- ----------- Total distributed operating expenses 5,570,467 5,475,246 7,614,883 7,240,802 7,422,465 ----------- ----------- ----------- ----------- ----------- OPERATING DEPARTMENT INCOME 8,998,774 8,378,381 11,844,336 11,072,070 13,165,077 ----------- ----------- ----------- ----------- ----------- Undistributed operating expenses Administrative and general . . 1,780,889 1,290,568 2,018,609 1,852,705 2,007,933 Marketing . . . . . . . . . . 864,770 796,045 1,085,042 810,845 1,069,855 Property operations and maintenance . . . . . . . . 789,576 828,722 1,097,703 1,126,786 1,282,711 Energy costs . . . . . . . . . 569,868 501,074 604,215 653,482 570,768 ----------- ----------- ----------- ----------- ----------- Total undistributed operating expenses 4,005,108 3,416,409 4,805,569 4,443,818 4,931,267 ----------- ----------- ----------- ----------- -----------
(Continued) F-14 18 DORAL INN (A DIVISION OF CAROL MANAGEMENT CORPORATION (NOTE 8)) STATEMENTS OF OPERATIONS (Continued)
Nine Months Ended September 30, Year Ended December 31, ----------------------------- ------------------------------------------------- 1995 1994 1994 1993 1992 ----------- ----------- ----------- ----------- ------------ (unaudited) INCOME BEFORE MANAGEMENT FEE, FIXED CHARGES AND RECEIVER EXPENSES . . . . . . . . . . 4,443,671 4,961,972 7,038,767 6,628,252 8,233,810 MANAGEMENT FEE (Note 3(b)) . . . . . . . . 436,172 449,634 631,075 595,168 668,370 ----------- ----------- ----------- ---------- --------- INCOME BEFORE FIXED CHARGES AND RECEIVER EXPENSES . . . . . . . . . . 4,007,499 4,512,338 6,407,692 6,033,084 7,565,440 ----------- ----------- ----------- ---------- --------- FIXED CHARGES: Rent, taxes and insurance . . 1,441,894 1,425,751 1,900,267 1,921,910 1,783,763 Interest expense (Note 5) . . 4,859,529 4,827,372 6,478,937 5,077,019 4,830,015 Amortization of mortgage costs . . . . . . . . . . . 128,385 168,861 Depreciation . . . . . . . . . 691,300 799,510 1,066,014 1,201,436 1,429,301 ----------- ----------- ----------- ---------- --------- TOTAL FIXED CHARGES 6,992,723 7,052,033 9,445,218 8,328,750 8,211,940 ----------- ----------- ----------- ---------- --------- RECEIVER EXPENSES (Note 5(b)) . . . . . . . . 419,551 438,864 528,744 72,989 ----------- ----------- ----------- ---------- --------- NET (LOSS) $(3,404,775) $(2,979,159) $(3,566,270) $(2,368,655) $(646,500) =========== =========== =========== =========== =========
The accompanying notes to financial statements are an integral part of these statements. F-15 19 DORAL INN (A DIVISION OF CAROL MANAGEMENT CORPORATION (NOTE 8)) STATEMENTS OF DIVISION ACCOUNT
Year Ended December 31, --------------------------------------------------- 1994 1993 1992 ------------ ------------ ------------ DIVISION ACCOUNT - BEGINNING OF PERIOD . . . . . . . . . . . . $(39,806,038) $(36,188,109) $(34,224,095) Contributions (distributions) - Carol Management Corp . . . . . . . . . . . 44,558 (1,249,274) (1,317,514) Net (loss) (Exhibit B) . . . . . . . . . . . . (3,566,270) (2,368,655) (646,500) ------------ ------------ ------------ DIVISION ACCOUNT - END OF PERIOD . . . . . . . . . . . . . . . $(43,327,750) $(39,806,038) $(36,188,109) ============ ============ ============
The accompanying notes to financial statements are an integral part of these statements. F-16 20 DORAL INN (A DIVISION OF CAROL MANAGEMENT CORPORATION (NOTE 8)) STATEMENTS OF CASH FLOWS
Nine Months Ended September 30, Year Ended December 31, ----------------------------- --------------------------------------------- 1995 1994 1994 1993 1992 ------------- ------------ ----------- ------------ ----------- CASH FLOWS FROM OPERATING ACTIVITIES: Net (loss) . . . . . . . . . . . . . $(3,404,775) $(2,979,159) $(3,566,270) $(2,368,655) $ (646,500) Adjustments to reconcile net (loss) to net cash provided by operating activities: Depreciation and amortization . . . . 691,300 799,510 1,066,014 1,329,821 1,598,162 Provision for bad debts . . . . . . . 117,088 21,035 133,468 138,330 95,951 Changes in assets and liabilities: (Increase) decrease in: Accounts receivable . . . . . . . . (874,353) (88,035) (137,653) (202,263) 725,572 Inventories . . . . . . . . . . . . (3,857) (14,914) (34,176) 18,986 103,958 Prepaid real estate taxes . . . . . 403,008 420,239 4,697 (27,637) (64,832) Prepaid expenses and other receivables . . . . . . . . . . . (45,792) (155,828) (163,953) (3,898) 8,262 Increase (decrease) in: Accounts payable . . . . . . . . . . 318,939 (30,879) 17,100 269,705 (642,733) Accrued expenses . . . . . . . . . . 5,172,050 3,338,194 3,949,678 1,594,982 (279,019) Advance deposits . . . . . . . . . . (45,651) (31,488) 84,682 Tenants' security deposits . . . . . (3,603) (3,603) Due to related party . . . . . . . . 4,861 429,362 594,227 574,899 788,323 ---------- ---------- ----------- ----------- --------- NET CASH PROVIDED BY OPERATING ACTIVITIES . . . . . . . . 2,378,469 1,690,271 1,828,041 1,408,952 1,687,144 ---------- ---------- ----------- ----------- ---------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures . . . . . . . . (2,218,893) (508,223) (944,556) (53,639) (51,409) Due from related parties . . . . . . (3,912) 24,799 (19,474) 13,334 Cash not transferred from predecessors . . . . . . . . . . . (173,960) (11,012) ---------- ---------- ---------- ---------- ---------- NET CASH (USED IN) INVESTING ACTIVITIES . . . . . . . . (2,396,765) (519,235) (919,757) (73,113) (38,075) ---------- ---------- ---------- ---------- ---------
(Continued) F-17 21 DORAL INN (A DIVISION OF CAROL MANAGEMENT CORPORATION (NOTE 8)) STATEMENTS OF CASH FLOWS (Continued)
Nine Months Ended September 30, Year Ended December 31, --------------------------- ----------------------------------------------- 1995 1994 1994 1993 1992 ---------- ---------- ---------- ---------- ---------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds of bank overdraft . . . . . (3,265) (3,265) 3,265 Due to related party . . . . . . . . 6,702 (51,713) Contributions (distributions) - Carol Management Corp . . . . . (15,665) (71,442) 44,558 (1,249,274) (1,317,514) Decrease in long-term debt . . . . . (109,109) (149,629) Decrease in capital lease obligations . . . . . . . . . . . (25,916) (87,452) ---------- ---------- ---------- ---------- ---------- NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES . . . . . . . . . . . . . (15,665) (68,005) 41,293 (1,381,034) (1,606,308) ---------- ---------- ---------- ---------- ---------- NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS . . . . . . . . . . . . (33,961) 1,103,031 949,577 (45,195) 42,761 ---------- ---------- ---------- ---------- ---------- CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD . . . . . . . . 949,577 -- 45,195 2,434 ---------- ---------- ---------- ---------- ---------- CASH AND CASH EQUIVALENTS - END OF PERIOD . . . . . . . . . . . $ 915,616 $1,103,031 $ 949,577 $ $ 45,195 ========== ========== ========== ========== ========== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid for interest . . . . . . . $ 647,794 $1,641,825 $2,613,599 $3,329,487 $5,034,191 ========== ========== ========== ========== ==========
NOTE: In connection with the acquisition of the Hotel, the carrying value of the fixed assets was increased by approximately $31 million to reflect the new cost basis. The accompanying notes to financial statements are an integral part of these statements. F-18 22 DORAL INN (A DIVISION OF CAROL MANAGEMENT CORPORATION (NOTE 8)) NOTES TO FINANCIAL STATEMENTS NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (a) Organization The Doral Inn (the "Hotel") is an operating division of Carol Management Corporation ("CMC") and has no separate legal status or existence. The accompanying financial statements include all the assets and liabilities relating to the operations of the Hotel. (b) Inventories Inventories, consisting of linen and guest supplies, are stated at the lower cost (first-in, first-out) or market. (c) Property and Equipment Land, building and improvements and furniture, fixtures and equipment are stated at cost less accumulated depreciation. The building, aggregating $1,350,000 is stated based on January 1, 1969 appraisal for estate purposes, which, net of depreciation, did not differ significantly from estimated cost. The net book value at December 31, 1994 amounted to approximately $200,000. Building, building improvements, and furniture, fixtures and equipment are depreciated on the straight-line and declining- balance methods over estimated useful lives of the respective assets, as follows: Building 40 years Building improvements 5 to 20 years Furniture, fixtures and equipment 5 to 7 years
(d) Income Taxes For income tax purposes, the Hotel's operations are combined with those of other divisions of CMC. Any applicable tax expense or credits which may result from filing income tax returns will inure to CMC and have not been reflected in the accompanying financial statements. (e) Deferred Mortgage Costs F-19 23 Costs incurred in connection with obtaining a mortgage are amortized over the term of the mortgage. (f) Cash and Cash Equivalents The Hotel considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. NOTE 2 - CONCENTRATION OF CREDIT RISK At December 31, 1994, the Hotel had a significant concentration of cash and cash equivalents with one financial institution. NOTE 3 - RELATED PARTY TRANSACTIONS (a) The Hotel participates in transactions with other division or affiliates of CMC. Balances due to/from affiliates at December 31, 1994 and 1993 were noninterest bearing, are payable within one year and represent expenses paid by or on behalf of the Hotel. (b) In 1994, 1993 and 1992, Doral Hotels and Resorts Management Company ("DHRMC") (an affiliate) charged the Hotel a management fee, pursuant to a ten-year agreement dated June 1, 1988, of 3.25% of gross revenues. (c) Balances due to/from related parties are summarized as follows:
December 31, ----------------------------- 1994 1993 ---------- ---------- Due from: Tuscany Operating Company $ 69,358 $ 97,471 Doral Park Avenue Hotel 123,703 111,157 Other 46,180 55,412 ---------- ---------- Due from related parties $ 239,241 $ 264,040 ========== ========== Due to DHRMC $2,004,296 $1,410,069 ========== ==========
F-20 24 NOTE 4 - PROPERTY AND EQUIPMENT Property and equipment consists of the following:
December 31, ------------------------------ 1994 1993 ----------- ----------- Land $ 2,275,000 $ 2,275,000 Building and improvements 15,969,058 15,386,618 Furniture, fixtures and equipment 4,403,291 4,304,244 Construction-in-progress 287,765 24,696 ----------- ----------- 22,935,114 21,990,558 Less, accumulated depreciation 12,999,374 11,933,360 ----------- ----------- $ 9,935,740 $10,057,198 =========== ===========
NOTE 5 - MORTGAGES PAYABLE Mortgages payable are summarized as follows:
December 31, ------------------------------ 1994 1993 ----------- ----------- First mortgage - The Mutual Life Insurance Company (a) $29,722,700 $29,722,700 Second mortgage - Bankers Trust Company (b) 18,000,000 18,000,000 ----------- ----------- $47,722,700 $47,722,700 =========== ===========
(a) Pursuant to the mortgage terms, the mortgage matured on September 1, 1993 and bore interest at 12.5% per annum payable monthly. Monthly payments of $323,879 were required to be applied first to interest and the balance to reduction of principal. Unpaid interest at December 31, 1994 and 1993 amounted to $4,199,724 and $1,843,886, respectively. (b) Pursuant to the mortgage terms, the second mortgage notes matured on September 1, 1993. Interest-only payments were due monthly at a per annum rate either at the prime rate plus .375% (as defined), CD rate (as defined), or LIBO rate plus 1.65% (as defined), as selected by the borrower in accordance with the terms of the note. Unpaid interest at December 31, 1994 and 1993 amounted to $1,802,750 and $293,250, respectively. As additional security for these loans, CMC assigned its rights to the Hotel's leases, rents and other income. On November 22, 1993, the first mortgagee instituted an action to foreclose on its security interest in the property and to apply for the F-21 25 appointment of a receiver to operate the property as a result of the mortgagor's alleged default in the payment of principal, interest, late charges, and other charges which became due and payable on September 1, 1993. Subsequent to September 1, 1993, interest has accrued at the rate of 15% per annum. On November 24, 1993, the United States District Court, Southern District of New York, ordered the appointment of a receiver to operate the property. Currently, this foreclosure action is still pending while the property is being operated by the receiver. Pursuant to a court order, the Hotel is required to pay a monthly fee to the receiver which amounted to $40,000 per month through May 24, 1994 and $30,000 per month thereafter. The total fee for the years ended December 31, 1994 and 1993 amounted to approximately $407,000 and $49,000, respectively. In addition, the Hotel incurred approximately $122,000 and $24,000 other receiver related expenses for the years ended December 31, 1994 and 1993, respectively, and these above-mentioned amounts are included in the caption "Receiver Expenses" in the accompanying statements of operations. NOTE 6 - PENSION PLAN The Hotel makes contributions, along with many other employers, to union-sponsored multiemployer pension plans, based on the number of hours worked by employees covered under union contracts. The Multiemployer Pension Plan Amendments Act of 1989 imposes certain liabilities upon employers associated with multiemployer plans who withdraw from such a plan or upon termination of said plan. The Hotel has not received information form the plan's administrator to determine its share of unfunded vested benefits, if any. The Hotel has not undertaken to terminate, withdraw or partially withdraw from the plans. Contributions to the multiemployer plans during the years ended December 31, 1994, 1993 and 1992 amounted to $305,625, $298,545 and $213,770, respectively. NOTE 7 - GOING CONCERNS As discussed in Note 5, the first mortgage has instituted an action to foreclose on its security interest in the property and the second mortgage has also matured. In addition, the Hotel has suffered recurring losses and has had a working capital deficiency over the past few years. These conditions raise substantial doubt about the Hotel's ability to continue as a going concern, which is dependent upon the resolution of a satisfactory agreement with its lenders with regard to the debt mentioned above. Management's plans include the restructuring or refinancing of the mortgage agreements or selling the Hotel. The accompanying financial statements do not include any adjustments that might be necessary should management be unable to successfully accomplish these plans. F-22 26 NOTE 8 - SUBSEQUENT EVENT In February 1995, CMC transferred the Hotel to a newly created entity, SBK Realty Holdings LLC ("SBK"). In exchange CMC received a 99% interest in SBK and a related entity received a 1% interest. F-23 -----END PRIVACY-ENHANCED MESSAGE-----