-----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, AGszNX5yWDWqmRsFM2khjDyxtC3sbOAY2n4auhRi0onoeWwT+8TdKU+H4Rofe2rb rEvKBlcjAkjfCAp8djmAAQ== 0000950153-97-001311.txt : 19971219 0000950153-97-001311.hdr.sgml : 19971219 ACCESSION NUMBER: 0000950153-97-001311 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970210 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19971218 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: SEC FILE NUMBER: 001-06828 FILM NUMBER: 97740340 BUSINESS ADDRESS: STREET 1: 2231 E CAMELBACK RD STREET 2: STE 410 CITY: PHOENIX STATE: AZ ZIP: 80516 BUSINESS PHONE: 6028523900 MAIL ADDRESS: STREET 1: 2231 E CAMELBACK RD STREET 2: STE 410 CITY: PHOENIX STATE: AZ ZIP: 85016 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: SEC FILE NUMBER: 001-07959 FILM NUMBER: 97740341 BUSINESS ADDRESS: STREET 1: 2231 E CAMELBACK RD, 4TH FL STREET 2: SUITE 400 CITY: PHOENIX STATE: AZ ZIP: 85016 BUSINESS PHONE: 6028523900 MAIL ADDRESS: STREET 1: 2231 E CAMELBACK RD. 4TH FL STREET 2: SUITE 4O0 CITY: PHOENOX STATE: AZ ZIP: 85016 FORMER COMPANY: FORMER CONFORMED NAME: HOTEL INVESTORS CORP DATE OF NAME CHANGE: 19920703 8-K/A 1 FORM 8-K/A FROM FEBRUARY 10, 1997 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): February 10, 1997 Commission File Number: 1-6828 STARWOOD LODGING TRUST (Exact name of registrant as specified in its charter) Maryland (State or other jurisdiction of incorporation or organization) 52-0901263 (I.R.S. employer identification no.) 2231 East Camelback Road., Suite 410 Phoenix, Arizona 85016 (Address of principal executive offices, including zip code) (602) 852-3900 (Registrant's telephone number, including area code) Commission File Number: 1-7959 STARWOOD LODGING CORPORATION (Exact name of registrant as specified in its charter) Maryland (State or other jurisdiction of incorporation or organization) 52-1193298 (I.R.S. employer identification no.) 2231 East Camelback Road, Suite 400 Phoenix, Arizona 85016 (Address of principal executive offices, including zip code) (602) 852-3900 (Registrant's telephone number, including area code) ================================================================================ 2 ================================================================================ ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS. On February 10, 1997, Starwood Lodging Trust (the "Trust") and Starwood Lodging Corporation (the "Corporation" and, together with the Trust, "Starwood Lodging"), whose shares are paired and trade together as a unit (NYSE:HOT) agreed to consummate the acquisition of (i) HEI Hotels, L.L.C. a subsidiary of Westport Holdings, L.L.C. for a purchase price of $15.0 million ("HEI"), and (ii) a portfolio of ten upscale hotels owned by HEI and PRISA II, an institutional real estate investment fund managed by Prudential Real Estate Investors ("PREI"), for a purchase price of $312 million. The aggregate consideration of the acquisitions consist of limited partnership interests in Starwood Lodging partnerships exchangeable for 6.5 million paired shares of the Trust and the Corporation, as well as $112 million of cash from existing lines of credit and debt assumption. The transactions are accounted for as a "purchase" for accounting and financial reporting purposes in accordance with APB No. 16. The pro forma financial statements in this Form 8-K include the historical Starwood Lodging Trust and Starwood Lodging Corporation results for the period October 1, 1995 through September 30, 1996 and historical results for the period January 1, 1996 through January 2, 1997 of HEI and the HEI owned Hotels, as defined below. The portfolio consists of the 460-room Sheraton Hotel in Long Beach, California, the 446-room Omni Waterside Hotel in Norfolk, Virginia, the 310-room BWI Airport Marriott in Baltimore, Maryland, the 274-room Crown Plaza Edison, in Edison, New Jersey, the 272-room Courtyard by Marriott Crystal City in Arlington, Virginia, the 296-room Charleston Hilton in Charleston , South Carolina, the 265-room Park Ridge Hotel in King of Prussia, Pennsylvania, the 245-room Sonoma County Hilton in Santa Rosa, California, the 239-room Novi Hilton in Novi, Michigan, and the 233-suite Embassy Suites Hotel in Atlanta, Georgia (collectively, the "HEI Owned Hotels"). The eight additional HEI-managed hotels are the 418-room Sheraton Gateway Houston Airport in Houston, Texas, the 309-room Ontario Airport Hilton in Ontario, California, the 264-room Grand Junction Hotel in Grand Junction, Colorado, the 242-room Danbury Hilton & Towers in Danbury, Connecticut, the 208-room Residence Inn by Marriott in Princeton, New Jersey, the 211-room Long Island Sheraton Hotel in Smithtown, New York, the 193-room Wilmington Hilton Hotel in Wilmington, Delaware, and the 160-room Ramada Hotel Bethesda, in Bethesda, Maryland (collectively, the "HEI Managed Hotels" and, together with the Owned Hotels and HEI, the "HEI Portfolio"). The HEI Portfolio acquisition is scheduled to be completed by February 18, but is subject to the satisfaction of certain conditions. No assurance can be given that the pending acquisition will be completed. This Current Report on Form 8-K contains statements which constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements include all statements that are not strictly historical including statements regarding the intent, belief or current expectations of Starwood Lodging, its Trustees, Directors or its officers with respect to the consummation of, the acquisition described in this Report. Investors are cautioned that any such forward-looking statements involve risks and uncertainties, and that actual results may differ materially from those in the forward-looking statements as a result of various factors, including, without limitation, real estate conditions, execution of hotel development programs, the purchase or development of a brand, completion of pending acquisitions including the completion of customary due diligence and closing conditions, changes in local or national economic conditions and other risks and uncertainties relating to real estate investments and the financing thereof, as more specifically described in the Starwood 3 Lodging Current Report on Form 8-K dated May 16, 1996, and other filings with the Securities and Exchange Commission. ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS. (a) Financial Statements of Businesses to be Acquired. See Index to Financial Statements (page F -1). (b) Pro Forma Financial Information. See Index to Financial Statements (page F -1). EXHIBITS. 23.1 Independent accountants consent 23.2 Independent accountants consent 4 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:____________________________ By:___________________________________ Ronald C. Brown Alan M. Schnaid Senior Vice President and Vice President and Corporate Controller Chief Financial Officer Principal Accounting Officer Date: December __, 1997 5 INDEX TO FINANCIAL STATEMENTS STARWOOD LODGING TRUST AND STARWOOD LODGING CORPORATION -- PRO FORMA Combined and Separate Pro Forma Balance Sheets at September 30, 1996.................................... F-2 Notes to the Pro Forma Balance Sheets................................................................... F-5 Combined and Separate Pro Forma Statements of Operations for the twelve months ended September 30, 1996................................................................................................ F-8 Notes to Pro Forma Statements of Operations ............................................................ F-11 PRU-HEI HOTEL GROUP Report of Independent Accountants....................................................................... F-14 Combined Balance Sheet as of January 2, 1997............................................................ F-15 Combined Statement of Operations for the Fifty-Three Week Period Ended January 2, 1997.................. F-16 Combined Statement of Changes in Owners' Capital........................................................ F-17 Combined Statement of Cash Flows for the Fifty-Three Week Period Ended January 2, 1997.................. F-18 Notes to Combined Financial Statements.................................................................. F-19 WESTPORT HOLDINGS, L.L.C. Report of Independent Public Accountants................................................................ F-26 Consolidated Balance Sheet as of January 2, 1997........................................................ F-27 Consolidated Statement of Operations For the Year Ended January 2, 1997................................. F-28 Consolidated Statement of Changes in Members' Capital................................................... F-29 Consolidated Statement of Cash Flows For the Year Ended January 2, 1997................................. F-30 Notes to Consolidated Financial Statements.............................................................. F-31
F-1 6 STARWOOD LODGING TRUST AND STARWOOD LODGING CORPORATION UNAUDITED COMBINED PRO FORMA BALANCE SHEET SEPTEMBER 30, 1996
Historical Pro Forma Starwood Starwood Lodging HEI Pro Forma Lodging Combined Portfolio Adjustments Combined --------------- --------------- --------------- --------------- (A) ASSETS Hotel assets held for sale - net $ 32,921,000 $ 32,921,000 Hotel assets - net 968,781,000 312,000,000 (B) -- 1,280,781,000 --------------- --------------- --------------- --------------- 1,001,702,000 312,000,000 -- 1,313,702,000 Mortgage notes receivable, net 72,446,000 -- 72,446,000 Investments in joint ventures 48,934,000 48,934,000 --------------- --------------- --------------- --------------- Total real estate investments 1,123,082,000 312,000,000 -- 1,435,082,000 Cash and cash equivalents 31,298,000 31,298,000 Accounts and interest receivable 40,724,000 40,724,000 Notes receivable, net 2,916,000 2,916,000 Inventories, prepaid expenses and other assets 16,292,000 15,000,000 (C) 31,292,000 --------------- --------------- --------------- --------------- $ 1,214,312,000 $ 327,000,000 $ -- $ 1,541,312,000 =============== =============== =============== =============== LIABILITIES AND SHAREHOLDERS' EQUITY LIABILITIES Collateralized notes payable and revolving line of credit $ 423,709,000 $ 112,024,000 (D) 535,733,000 Mortgage and other notes payable 1,582,000 1,582,000 Accounts payable and other liabilities 43,223,000 43,223,000 Dividends and distributions payable 15,990,000 15,990,000 --------------- --------------- --------------- --------------- 484,504,000 112,024,000 -- 596,528,000 --------------- --------------- --------------- --------------- Commitments and contingencies MINORITY INTEREST 134,022,000 214,976,000 (F) (84,458,000) (H) 264,540,000 (E) --------------- --------------- --------------- --------------- SHAREHOLDERS' EQUITY Trust shares of beneficial interest, $0.01 par value; authorized 100,000,000 shares; outstanding 26,636,000 shares 266,000 266,000 Corporation common stock, $0.01 par value; authorized 100,000,000 shares; outstanding 26,636,000 shares 266,000 84,458,000 (H) 266,000 Additional paid-in capital 863,487,000 947,945,000 Accumulated deficit (268,233,000) (268,233,000) --------------- --------------- --------------- --------------- 595,786,000 84,458,000 680,244,000 --------------- --------------- --------------- --------------- $ 1,214,312,000 $ 327,000,000 $ -- $ 1,541,312,000 =============== =============== =============== ===============
F-2 7 STARWOOD LODGING TRUST UNAUDITED SEPARATE PRO FORMA BALANCE SHEET SEPTEMBER 30, 1996
Historical Pro Forma Starwood Starwood Lodging HEI Pro Forma Lodging Trust Portfolio Adjustments Trust --------------- --------------- --------------- --------------- (A) ASSETS Hotel assets held for sale - net $ 29,381,000 $ 29,381,000 Hotel assets - net 858,088,000 312,000,000 (B) 1,170,088,000 --------------- --------------- --------------- --------------- 887,469,000 312,000,000 -- 1,199,469,000 Mortgage notes receivable, net 72,446,000 72,446,000 Mortgage notes receivable - Corporation 87,884,000 87,884,000 Investments in joint ventures 47,482,000 47,482,000 --------------- --------------- --------------- --------------- Total real estate investments 1,095,281,000 312,000,000 -- 1,407,281,000 Cash and cash equivalents 12,852,000 12,852,000 Rent and interest receivable 9,203,000 9,203,000 Notes receivable - Corporation 2,239,000 4,251,000 (G) -- 6,490,000 Notes receivable - net 11,162,000 11,162,000 Prepaid expenses and other assets 9,117,000 -- 9,117,000 --------------- --------------- --------------- --------------- $ 1,139,854,000 $ 316,251,000 $ -- $ 1,456,105,000 =============== =============== =============== =============== LIABILITIES AND SHAREHOLDERS' EQUITY LIABILITIES Collateralized notes payable and revolving line of credit $ 423,709,000 $ 112,024,000 (D) 535,733,000 Mortgage and other notes payable -- -- Accounts payable and other liabilities 7,125,000 7,125,000 Dividends and distributions payable 15,990,000 15,990,000 --------------- --------------- --------------- --------------- 446,824,000 112,024,000 -- 558,848,000 --------------- --------------- --------------- --------------- Commitments and contingencies MINORITY INTEREST 127,268,000 204,227,000 (F) (77,253,000)(H) 254,242,000 (E) --------------- --------------- --------------- --------------- SHAREHOLDERS' EQUITY Trust shares of beneficial interest, $0.01 par value; authorized 100,000,000 shares; outstanding 26,636,000 shares 266,000 266,000 Additional paid-in capital 762,610,000 77,253,000 (H) 839,863,000 Accumulated deficit (197,114,000) (197,114,000) --------------- --------------- --------------- --------------- 565,762,000 77,253,000 643,015,000 --------------- --------------- --------------- --------------- $ 1,139,854,000 $ 316,251,000 $ -- $ 1,456,105,000 =============== =============== =============== ===============
F-3 8 STARWOOD LODGING CORPORATION UNAUDITED SEPARATE PRO FORMA BALANCE SHEET SEPTEMBER 30, 1996
Historical Pro Forma Starwood Starwood Lodging HEI Pro Forma Lodging Corporation Portfolio Adjustments Corporation ------------- ------------- ------------- ------------- (A) ASSETS Hotel assets held for sale - net $ 3,540,000 $ 3,540,000 Hotel assets - net 110,693,000 -- 110,693,000 ------------- ------------- ------------- ------------- 114,233,000 -- -- 114,233,000 Investments in joint ventures 1,452,000 1,452,000 ------------- ------------- ------------- ------------- Total real estate investments 115,685,000 -- -- 115,685,000 Cash and cash equivalents 18,446,000 18,446,000 Accounts and interest receivable 31,521,000 31,521,000 Notes receivable, net 677,000 677,000 Inventories, prepaid expenses and other assets 7,175,000 15,000,000 (C) 22,175,000 ------------- ------------- ------------- ------------- $ 173,504,000 $ 15,000,000 $ -- $ 188,504,000 ============= ============= ============= ============= LIABILITIES AND SHAREHOLDERS' EQUITY LIABILITIES Mortgage and other notes payable $ 1,582,000 1,582,000 Mortgage notes payable - Trust 87,884,000 4,251,000(G) 92,135,000 Notes payable - Trust 11,162,000 -- 11,162,000 Accounts payable and other liabilities 36,098,000 36,098,000 ------------- ------------- ------------- ------------- 136,726,000 4,251,000 -- 140,977,000 ------------- ------------- ------------- ------------- Commitments and contingencies MINORITY INTEREST 6,754,000 10,749,000(F) (7,205,000(H) 10,298,000 (E) ------------- ------------- ------------- ------------- SHAREHOLDERS' EQUITY Corporation common stock, $0.01 par value; authorized 100,000,000 shares; outstanding 26,636,000 shares 266,000 266,000 Additional paid-in capital 100,877,000 7,205,000(H) 108,082,000 Accumulated deficit (71,119,000) (71,119,000) ------------- ------------- ------------- ------------- 30,024,000 7,205,000 37,229,000 ------------- ------------- ------------- ------------- $ 173,504,000 $ 15,000,000 $ -- $ 188,504,000 ============= ============= ============= =============
F-4 9 STARWOOD LODGING TRUST AND STARWOOD LODGING CORPORATION NOTES TO THE UNAUDITED COMBINED AND SEPARATE PRO FORMA BALANCE SHEETS AT SEPTEMBER 30, 1996 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 "Company" 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 PROPERTIES (B) On February 10, 1997 the Company agreed to consummate the acquisition of ten hotel properties containing 3,040 upscale hotel rooms (the "HEI Owned Hotels") from HEI and PREI. The HEI Owned Hotels include:
NAME CITY STATE TOTAL ROOMS - ---- ---- ----- ----------- Sheraton Hotel Long Beach CA 460 Omni Waterside Hotel Norfolk VA 446 BWI Airport Marriott Baltimore MD 310 Crown Plaza Edison Edison NJ 274 Courtyard by Marriott Crystal City Arlington VA 272 Charleston Hilton Charleston SC 296 Park Ridge Hotel King of Prussia PA 265 Sonoma County Hilton Santa Rosa CA 245 Novi Hilton Novi MI 239 Embassy Suites Hotel Atlanta GA 233
F-5 10 NOTE 3. ACQUIRED MANAGEMENT COMPANY (C) On February 10, 1997 the Company agreed to consummate the acquisition of HEI and its 18 management contracts. The 18 management contracts relate to the ten HEI Owned Hotels, and eight hotels managed by HEI consisting of 2,005 rooms ( the "HEI Managed Hotels"). The HEI Managed Hotels contracts have expiration dates ranging from 2001 to 2016. The Company intends to allocate $15 million of the total purchase price to the management company. In addition to the HEI Owned Hotels, the HEI Managed Hotels consist of:
NAME CITY STATE TOTAL ROOMS - ---- ---- ----- ----------- Sheraton Gateway Houston Airport Houston TX 418 Ontario Airport Hilton Ontario CA 309 Grand Junction Hilton Grand Junction CO 264 Danbury Hilton & Towers Danbury CT 242 Residence Inn by Marriott Princeton NJ 208 Long Island Sheraton Hotel Smithtown NY 211 Wilmington Hilton Hotel Wilmington DE 193 Ramada Hotel Bethesda Bethesda MD 160
(D) Represents the $112 million cash and assumed debt portion of the consideration for the HEI Owned Hotels and HEI (together the "HEI Portfolio"). (E) Represents minority interest of 28% after issuance of the 6,507,500 Paired Units (exchangeable into Paired Shares) (F) Represents the issuance of 6,507,500 Paired Units (exchangeable into Paired Shares) as part of the consideration for the HEI Portfolio. At the time of the agreement in principle, the Paired Share had a market value of $32.83 (as adjusted for the three-for-two stock split on January 27, 1997). (G) Reflects the amount owed to the Trust from the Corporation for the purchase of the management contracts. (H) Pro forma adjustments reflect the adjustment necessary to attain the minority interest of 28% indicated in Note E. F-6 11 STARWOOD LODGING TRUST AND STARWOOD LODGING CORPORATION PRO FORMA COMBINED AND SEPARATE STATEMENTS OF OPERATIONS FOR THE TWELVE MONTHS ENDED SEPTEMBER 30, 1996 (UNAUDITED) The following Unaudited Combined and Separate Pro Forma Statement of Operations for the twelve months ended September 30, 1996 gives effect to the HEI Portfolio as of the beginning of the period. 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. Historical Starwood Lodging Trust and Starwood Lodging Corporation results are for the period October 1, 1995 through September 30, 1996 and historical HEI results are for the period January 1, 1996 through January 2, 1997. Historical Starwood Lodging Trust and Starwood Lodging Corporation results include the results of the properties acquired in 1995 (the Terrace Garden and Lenox Inn in Atlanta, Georgia - acquired on October 31, and the Holiday Inn in Beltsville, Maryland - acquired on November 30) and the properties acquired in 1996 (the Westin in Washington, D.C. - acquired on January 4, a 58.2% interest in the Boston Park Plaza in Boston, Massachusetts - acquired on January 24, the Doubletree Guest Suites DFW Airport in Irving, Texas, the Doubletree Guest Suites in Ft. Lauderdale, Florida and the Westin Hotel in Tampa, Florida - all three acquired on April 26, the Midland Hotel in Chicago, Illinois - acquired on March 27, the Clarion Hotel in San Francisco, California - acquired on April 25, the Doubletree Guest Suites in Philadelphia, Pennsylvania - acquired on June 1, the Days Inn in Philadelphia, Pennsylvania - acquired on June 28, the Teachers Portfolio consisting of the Ritz Carlton in Kansas City, Missouri, the Ritz Carlton in Philadelphia, Pennsylvania, the Westin Hotel in Waltham, Massachusetts, the Westin LAX in Los Angeles, California, the Westin Horton Plaza in San Diego, California, the Westin Hotel Concourse in Atlanta, Georgia, the Doubletree Grand at Mall of America in Bloomington, Minnesota and the Wyndham Hotel in Ft. Lauderdale, Florida - acquired on August 12, the HOD Portfolio consisting of the Hotel Park Tucson in Tucson, Arizona, the Embassy Suites in Palm Desert, California, the Marque in Atlanta, Georgia, the Arlington Park Hilton in Arlington Heights, Illinois, the Sheraton Needham in Needham, Massachusetts, the Sheraton Minneapolis Metrodome in Minneapolis, Minnesota, the Embassy Suites in St. Louis, Missouri, the Radisson Marque in Winston-Salem, North Carolina and the Allentown Hilton in Allentown, Pennsylvania - acquired on August 16, the Princeton Marriott in Princeton, New Jersey acquired on August 29, and the Doral Court and Doral Tuscany both in New York, New York - acquired on September 19) from their respective dates of acquisition. F-7 12 STARWOOD LODGING TRUST AND STARWOOD LODGING CORPORATION UNAUDITED COMBINED PRO FORMA STATEMENT OF OPERATIONS FOR THE TWELVE MONTHS ENDED SEPTEMBER 30, 1996
For The Year Ended December 31, 1996 Historical ------------------------------------------- Starwood Historical Pro Forma Lodging HEI Owned Adjustments HEI Historical Combined Hotels Owned Hotels HEI ------------ ----------- --------------- ---------- (A) (B) (R) REVENUE Hotel ................................................... $242,378,000 $93,751,000(B) $13,557,000(I) $ -- Gaming .................................................. 25,890,000 Interest from mortgage and other notes .................. 10,505,000 Income from joint ventures and rents from leased hotel properties .................... 3,728,000 (286,000)(D) Management fees and other income ........................ 3,193,000 154,000(C) 5,711,000 (E) Loss on sales of hotel assets ........................... (1,384,000) ------------ ----------- ----------- ---------- 284,310,000 93,905,000 13,557,000 5,425,000 ------------ ----------- ----------- ---------- EXPENSES Hotel operations ........................................ 168,372,000 70,239,000(B) 9,419,000(I) -- Gaming operations ....................................... 23,707,000 Interest ................................................ 15,628,000 Depreciation and amortization ........................... 32,660,000 Administrative and operating ............................ 11,885,000 4,258,000 (F) ------------ ----------- ----------- ---------- 252,252,000 70,239,000 9,419,000 4,258,000 ------------ ----------- ----------- ---------- Income (loss) before minority interest in Partnerships .. 32,058,000 $23,666,000 $ 4,138,000 $1,167,000 =========== =========== ========== Minority interest in Partnerships ....................... 9,173,000(O) ------------ Net income .............................................. $ 22,885,000 ============ Net income per share (Q) ................................ $ 0.94 ============ Weighted average shares outstanding ..................... 24,277,000 ============ Pro Forma Starwood Pro Forma Lodging Adjustments-HEI Combined --------------- ------------ REVENUE Hotel ................................................... $ $349,686,000 Gaming .................................................. 25,890,000 Interest from mortgage and other notes .................. 10,505,000 Income from joint ventures and rents from leased hotel properties .................... 286,000 (D) 3,728,000 Management fees and other income ........................ (2,813,000)(J) 6,245,000 Loss on sales of hotel assets ........................... (1,384,000) ------------ ------------ (2,527,000) 394,670,000 ------------ ------------ EXPENSES Hotel operations ........................................ (2,813,000)(B)(J) 245,217,000 Gaming operations ....................................... 23,707,000 Interest ................................................ 8,178,000 (K) 23,806,000 Depreciation and amortization ........................... 25,870,000 (L)(M) 58,530,000 Administrative and operating ............................ (1,207,000)(N) 14,936,000 ----------- ------------ 30,028,000 366,196,000 ----------- ------------ Income (loss) before minority interest in Partnerships .. $(32,555,000) 28,474,000 Minority interest in Partnerships ....................... =========== 11,093,000 (O)(P) ------------ Net income .............................................. 17,381,000 ============ Net income per share (Q) ................................ $ 0.72 ============ Weighted average shares outstanding ..................... 24,277,000 ============
F-8 13 STARWOOD LODGING TRUST UNAUDITED SEPARATE PRO FORMA STATEMENT OF OPERATIONS FOR THE TWELVE MONTHS ENDED SEPTEMBER 30, 1996
For The Year Ended December 31, 1996 ----------------------------------------------------------- Historical Pro Forma Pro Forma Starwood Historical Adjustments Starwood Lodging HEI Owned HEI Owned Historical Pro Forma Lodging Trust Hotels Hotels HEI Adjustments-HEI Trust ------------- ------------- ------------- ------------- ------------ ------------ (A) (B) (R) REVENUE Rents from Corporation ............ $55,464,000 $28,940,000(G) $ 84,404,000 Interest from Corporation ......... 8,090,000 478,000(H) 8,568,000 Interest from mortgage and other notes ..................... 10,525,000 10,525,000 Income from joint ventures and rents from leased hotel properties......................... 2,360,000 2,360,000 Other ............................. 1,991,000 1,991,000 Loss on sale ...................... (1,384,000) (1,384,000) ------------- ------------- ------------- ------------- ------------ ------------ 77,046,000 29,418,000 106,464,000 ------------- ------------- ------------- ------------- ------------ ------------ EXPENSES Interest .......................... 15,355,000 8,178,000(K) 23,533,000 Depreciation and amortization ..... 21,339,000 25,120,000(L) 46,459,000 Administrative and operating ...... 4,147,000 4,147,000 ------------- ------------- ------------- ------------- ------------ ------------ 40,841,000 33,298,000 74,139,000 ------------- ------------- ------------- ------------- ------------ ------------ Income before minority interest in Partnerships..................... 36,205,000 $ -- $ -- $ -- $ (3,880,000) 32,325,000 ============= ============= ============= ============= Minority interest in Partnerships ...................... 9,837,000(O) 12,593,000(O)(P) ------------- ------------- Net income ........................ $ 26,368,000 $ 19,732,000 ============= ============= Net income per share (Q) .......... $ 1.09 $ 0.81 ============= ============= Weighted average shares outstanding...................... 24,277,000 24,277,000 ============= =============
F-9 14 STARWOOD LODGING CORPORATION UNAUDITED SEPARATE PRO FORMA STATEMENT OF OPERATIONS FOR THE TWELVE MONTHS ENDED SEPTEMBER 30, 1996
For The Year Ended December 31, 1996 ------------------------------------------------------------------------- Historical Pro Forma Starwood Historical Adjustments Lodging HEI Owned HEI Owned Historical Pro Forma Corporation Hotels Hotels HEI Adjustments-HEI ------------- ------------- --------------- ------------- ---------------- (A) (B) (R) REVENUE Hotel .............................. $ 242,378,000 $ 93,751,000 (B) $13,557,000(I) Gaming ............................. 25,890,000 Income from joint venture .......... 1,368,000 (286,000)(D) 286,000 (D) Interest from notes receivable ..... 81,000 Management fees and other income ... 1,101,000 154,000 (C) 5,711,000 (E) (2,813,000)(J) ------------- ------------- ----------- ------------- ------------- 270,818,000 93,905,000 13,557,000 5,425,000 (2,527,000) ------------- ------------- ----------- ------------- ------------- EXPENSES Hotel operations ................... 168,372,000 70,239,000 (B) 9,419,000(I) (2,813,000)(B)(J) Gaming operations .................. 23,707,000 Rent - Trust ....................... 55,464,000 28,940,000 (G) Interest - Trust ................... 8,090,000 478,000 (H) Interest ........................... 273,000 Depreciation and amortization ...... 11,321,000 750,000 (M) Administrative and operating ....... 7,738,000 4,258,000 (F) (1,207,000)(N) ------------- ------------- ------------ ------------- ------------- 274,965,000 70,239,000 9,419,000 4,258,000 26,148,000 ------------- ------------- ------------ ------------- ------------- Income (loss) before minority interest in Partnerships (O)(P) .. (4,147,000) $ 23,666,000 $ 4,138,000 $ 1,167,000 $ (28,675,000) ============= =========== ============= ============= Minority interest in Partnerships .. (664,000)(O) ------------- Net income (loss) .................. $ (3,483,000) ============= Net income (loss) per share (Q) .... $ (0.14) ============= Weighted average shares outstanding 24,277,000 ========== Pro Forma Starwood Lodging Corporation ------------- REVENUE Hotel ................................................ $ 349,686,000 Gaming ............................................... 25,890,000 Income from joint venture ............................ 1,368,000 Interest from notes receivable ....................... 81,000 Management fees and other income ..................... 4,153,000 ------------- 381,178,000 ------------- EXPENSES Hotel operations ..................................... 245,217,000 Gaming operations .................................... 23,707,000 Rent - Trust ......................................... 84,404,000 Interest - Trust ..................................... 8,568,000 Interest ............................................. 273,000 Depreciation and amortization ........................ 12,071,000 Administrative and operating ......................... 10,789,000 ------------- 385,029,000 ------------- Income (loss) before minority interest in Partnerships (3,851,000) Minority interest in Partnerships .................... (1,500,000)(O)(P) ------------- Net income (loss) .................................... (2,351,000) ============= Net income (loss) per share (Q) ...................... $ (0.10) ============= Weighted average shares outstanding .................. 24,277,000 ==========
F-10 15 STARWOOD LODGING TRUST AND STARWOOD LODGING CORPORATION NOTES TO THE UNAUDITED COMBINED AND SEPARATE PRO FORMA STATEMENT OF OPERATIONS FOR THE TWELVE MONTHS ENDED SEPTEMBER 30, 1996 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 "Company" 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 Company. Operations for properties sold or pending sale are not considered material to the pro forma presentation. (B) Reflects the historical statements of operations in the HEI Owned Hotels. Listed below are the effects each acquired hotel had on the Combined Pro Forma Statement of Operations for the twelve months ended September 30, 1996 (in thousands):
HOTEL REVENUES EXPENSES EBITDA - --------------------------------------- ---------- ---------- -------- Sheraton Hotel 15,604 12,822 2,782 Omni Waterside Hotel 12,583 8,614 3,969 BWI Airport Marriott 14,993 10,524 4,469 Crown Plaza Edison 8,653 7,109 1,544 Courtyard by Marriott Crystal City 1,019 777 242 Charleston Hilton 8,022 6,500 1,522 Park Ridge Hotel 11,925 8,747 3,178 Sonoma County Hilton 1,101 955 146 Novi Hilton 11,126 8,081 3,045 Embassy Suites Hotel 8,725 6,110 2,615 ---------- ---------- -------- TOTALS 93,751 70,239 23,512 ========== ========== ========
F-11 16 Additional information related to the HEI Owned Hotels is as follows:
For the Year Ended December 31, ------------------------------- ADR ($) Occupancy % REVPAR ($) -------------------------- -------------------------- --------------------------- Hotel 1996 1995 1994 1996 1995 1994 1996 1995 1994 - ----- ---- ---- ---- ---- ---- ---- ---- ---- ---- Sheraton Hotel 85.61 80.84 76.37 63.0 62.8 62.3 53.91 50.77 47.58 Omni Waterside Hotel 81.93 76.59 73.40 63.5 62.1 62.6 52.02 47.58 45.95 BWI Airport Marriott 101.59 96.53 88.72 77.1 74.7 75.9 78.35 72.10 67.34 Crown Plaza Edison 77.87 75.47 67.63 69.9 62.6 67.0 54.46 47.27 45.31 Courtyard by Marriott Crystal City 102.00 98.55 96.08 68.6 68.5 69.3 69.97 67.47 66.61 Charleston Hilton 78.89 75.76 69.62 59.6 74.8 79.6 47.02 56.67 55.42 Park Ridge Hotel 94.68 93.21 89.23 70.0 64.3 60.3 66.31 59.95 53.80 Sonoma County Hilton 73.96 72.36 68.49 71.8 68.9 63.7 53.07 49.86 43.63 Novi Hilton 88.98 79.73 74.93 70.3 72.6 71.6 62.56 57.90 53.65 Embassy Suites Hotel 110.74 95.30 92.98 70.0 72.0 73.1 77.50 68.60 67.98
(C) Reflects historical interest earned on cash accounts at the HEI Owned Hotels. (D) Reflects loss allocated to HEI from affiliated partnerships. (E) Reflects management fees earned by HEI on the HEI Owned Hotels and the HEI Managed Hotels. (F) Reflects administrative and operating expenses of HEI for the year ended December 31, 1996. (G) Reflects pro forma adjustment for rents on the HEI owned hotels. 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. (H) Reflects interest on the unsecured note payable from the Corporation to the Trust for the purchase, by the Corporation, of HEI and HEI's management contracts. Interest on unsecured note is calculated based on Prime + 3%. (I) Reflects pro forma adjustments for the Courtyard by Marriott Crystal City and the Sonoma County Hilton which were acquired by HEI during the fourth quarter of 1996 as follows:
HOTEL REVENUES EXPENSES EBITDA ----- -------- -------- ------ Courtyard by Marriot Crystal City... 7,527 4,096 3,431 Sonoma County Hilton................ 6,030 5,323 707 ------ ------ ------ 13,557 9,419 4,138 ====== ====== ======
(J) Reflects management fees earned by HEI on the HEI Owned Hotels. F-12 17 (K) Reflects the addition of interest expense at 7.3% on the $112 million pro forma debt assuming draw down to acquire the properties as of October 1, 1995. (L) Reflects depreciation expense on the HEI Owned Hotels using the straight-line method over estimated useful lives of twenty years for buildings and improvements and three years for furniture, fixtures and equipment. (M) Reflects amortization of the management contracts underlying the HEI Managed Hotels using the straight-line method over the estimated useful lives of twenty years. (N) Pro forma administrative and operating expenses reflect decreases in operating expenses resulting from a decrease in costs as follows: Reduction in legal and accounting fees...................... 30,000 Reduction in nonrecurring salaries and bonuses.............. 1,076,000 Reduction in dead deal expenses............................. 80,000 Reduction in interest expense............................... 21,000 ---------- TOTAL $1,207,000 ==========
(O) Reflects Starwood Capital's and other partners' minority interests in the income of the Partnerships. (P) Reflects minority interest in the income of the partnerships on the partnership units issued in the HEI Portfolio. (Q) 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 3-for-2 stock split effective January 27, 1997. (R) Reflects the historical statements of operations of Westport Holdings, L.L.C. which manages the HEI Owned Hotels. F-13 18 REPORT OF INDEPENDENT ACCOUNTANTS To the Partners and Members of the Pru-HEI Hotel Group In our opinion, the accompanying combined balance sheet and the related combined statements of operations, of owners' capital and of cash flows present fairly, in all material respects, the financial position of Pru-HEI Hotel Group (not a legal entity, see Note 1) at January 2, 1997 and the results of its operations and its cash flows for the fifty-three week period ended January 2, 1997, in conformity with generally accepted accounting principles. These financial statements are the responsibility of Pru-HEI Hotel Group's management; our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit of these statements in accordance with generally accepted auditing standards which 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, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for the opinion expressed above. Price Waterhouse LLP New York, New York February 10, 1997 F-14 19 PRU-HEI HOTEL GROUP COMBINED BALANCE SHEET - --------------------------------------------------------------------------------
JANUARY 2, 1997 ASSETS Hotel property and equipment, at cost Land $ 22,239,282 Building and improvements 147,348,076 Furniture, fixtures and equipment 26,924,333 ------------- 196,511,691 Less - Accumulated depreciation (17,127,279) ------------- NET INVESTMENT IN HOTEL PROPERTY AND EQUIPMENT 179,384,412 ------------- Cash and cash equivalents 5,791,198 Restricted cash 4,559,584 Accounts receivable, net of allowance for doubtful accounts of $92,292 3,953,894 Inventories 2,162,590 Prepaid expenses, deferred charges and other assets 1,694,264 ------------- TOTAL ASSETS $ 197,545,942 ============= LIABILITIES AND OWNERS' CAPITAL Mortgage loans payable $ 25,194,470 Accounts payable and accrued expenses 8,888,271 ------------- TOTAL LIABILITIES 34,082,741 ------------- Commitments and contingent liabilities Owners' capital 163,463,201 ------------- TOTAL LIABILITIES AND OWNERS' CAPITAL $ 197,545,942 =============
The accompanying notes are an integral part of these combined financial statements. F-15 20 PRU-HEI HOTEL GROUP COMBINED STATEMENT OF OPERATIONS - --------------------------------------------------------------------------------
FOR THE FIFTY-THREE WEEK PERIOD ENDED JANUARY 2, 1997 Revenues Room $ 57,746,092 Food and beverage 31,462,366 Other 4,542,560 ------------ TOTAL REVENUES 93,751,018 ------------ Cost of sales - distributed operating expenses Room 14,113,819 Food and beverage 23,028,139 Other 2,248,169 ------------ TOTAL COST OF SALES - DISTRIBUTED OPERATING EXPENSES 39,390,127 ------------ Undistributed operating expenses General and administrative 8,183,151 Advertising and promotions 5,374,322 Utilities 4,075,210 Repairs and maintenance 4,323,475 ------------ TOTAL UNDISTRIBUTED OPERATING EXPENSES 21,956,158 ------------ Other expenses (income) HEI management fees 2,812,669 Franchise fees 2,508,228 Real estate taxes and insurance 3,571,600 General and administrative 640,160 Depreciation 7,350,826 Amortization 129,432 Interest expense 2,061,754 Interest income (154,451) ------------ TOTAL OTHER EXPENSES (INCOME) 18,920,218 ------------ NET INCOME $ 13,484,515 ============
The accompanying notes are an integral part of these combined financial statements. F-16 21 PRU-HEI HOTEL GROUP COMBINED STATEMENT OF CHANGES IN OWNERS' CAPITAL - --------------------------------------------------------------------------------
PRISA II HEI TOTAL Balance, as of December 28, 1995 $ 124,114,368 $ (2,689,141) $ 121,425,227 Contributions from owners 45,101,912 643,088 45,745,000 Net income 11,635,301 1,849,214 13,484,515 Distributions to owners (13,977,777) (3,213,764) (17,191,541) ------------- ------------- ------------- Balance, as of January 2, 1997 $ 166,873,804 $ (3,410,603) $ 163,463,201 ============= ============= =============
The accompanying notes are an integral part of these combined financial statements. F-17 22 PRU-HEI HOTEL GROUP COMBINED STATEMENT OF CASH FLOWS - --------------------------------------------------------------------------------
FOR THE FIFTY-THREE WEEK PERIOD ENDED JANUARY 2, 1997 Cash flows from operating activities Net income $ 13,484,515 ------------ Adjustments to reconcile net income to net cash provided by operating activities Depreciation 7,350,826 Amortization 129,432 Changes in Accounts receivable 974,809 Inventories (46,851) Prepaid expenses, deferred charges and other assets (320,337) Accounts payable and accrued liabilities 102,046 ------------ TOTAL ADJUSTMENTS 8,189,925 ------------ NET CASH PROVIDED BY OPERATING ACTIVITIES 21,674,440 ------------ Cash flows from investing activities Purchase of hotels (44,636,501) Additions and improvements to hotel property and equipment and other (5,346,046) Increase in restricted cash 613,049 ------------ NET CASH USED IN INVESTING ACTIVITIES (49,369,498) Cash flows from financing activities Contributions from partners 45,745,000 Distributions to partners (17,353,428) Principal payments on mortgage loans payable (164,916) ------------ NET CASH PROVIDED BY FINANCING ACTIVITIES 28,226,656 ------------ Net increase in cash and cash equivalents 531,598 ------------ Cash and cash equivalents at December 28, 1995 5,259,600 ------------ Cash and cash equivalents at January 2, 1997 $ 5,791,198 ============ Supplemented disclosure of Cash paid during the fiscal year for interest $ 2,009,615 ============
The accompanying notes are an integral part of these combined financial statements. F-18 23 PRU-HEI HOTEL GROUP NOTES TO COMBINED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 1. ORGANIZATION AND BASIS OF PRESENTATION ORGANIZATION The Pru-HEI Hotel Group (not a legal entity) is engaged in the acquisition, ownership and operation of ten hotels (the "Hotels") located in the United States. The Hotels are held in five limited partnerships, four limited liability corporations and one joint venture which are each owned by affiliates of HEI Hotels LLC ("HEI") and The Prudential Insurance Company of America for the benefit of the Prudential Property Investment Separate Account II ("PRISA II"). Hereafter, PRISA II and HEI are referred to collectively as the "Owners". The Hotels are managed by HEI (Note 7). On January 15, 1997, Starwood Lodging Trust and Starwood Lodging Corporation (collectively "Starwood") entered into a contract to purchase the Hotels, and the HEI hotel management company (the "Transaction") for an aggregate purchase price of $327 million comprised of limited partnership interests in Starwood partnerships exchangeable for equity shares as well as $112 million of cash and debt assumption. BASIS OF PRESENTATION The accompanying financial statements have been presented on a combined basis because the Hotels are under common ownership and management. The partnership, limited liability corporation and joint venture agreements specify required capital contributions of the Owners and the method of allocation of profits, losses, distributions and return of capital to the partners. Pursuant to the terms of certain of the partnership agreements or articles of incorporation, PRISA II annually earns a preferred rate of return. Such returns vary by entity and generally range between 9.50 and 10.50 percent of PRISA II's undistributed initial capital contribution, as defined. During the fifty three week period ended January 2, 1997, PRISA II earned aggregate preferred returns totalling $9,783,750. The following table sets forth additional information pertaining to the partnerships, joint venture and limited liability corporations including the name and location of the Hotels, the number of rooms and the ownership interests of PRISA II and HEI after consideration of PRISA II's preferred return. F-19 24 PRU-HEI HOTEL GROUP NOTES TO COMBINED FINANCIAL STATEMENTS - --------------------------------------------------------------------------------
NAME OF ENTITY/HOTEL GENERAL PARTNER INTERESTS LIMITED PARTNER INTERESTS NAME/LOCATION/NUMBER OF ROOMS PRISA II HEI PRISA II HEI -------- --- -------- --- Partnerships: Novi Hotel Associates Limited Partnership 1% 5% 39% 55% Novi Hilton Novi, Michigan: 239 rooms Virginia Hotel Associates Limited Partnership 1% 5% 39% 55% Omni Waterside Hotel Norfolk, Virginia: 446 rooms Edison Hotel Associates Limited Partnership 1% 5% 39% 55% Crown Plaza Edison Edison, New Jersey: 274 rooms BW Hotel Realty Limited Partnership 1% 5% 39% 55% BWI Airport Marriot Baltimore, Maryland: 310 rooms Park Ridge Hotel Associates, Limited Partnership -- 20% 80% -- Park Ridge Hotel Valley Forge, Pennsylvania: 265 rooms
OWNERSHIP INTERESTS Joint Venture: PRISA II HEI -------- --- Prudential - HEI Joint Venture 86.4% 13.6% Embassy Suite Hotel Atlanta, Georgia: 233 rooms
MEMBER INTERESTS Limited Liability Corporation: PRISA II HEI -------- --- Long Beach Hotel Associates, L.L.C. 80.0% 20.0% Sheraton Hotel Long Beach, California: 460 rooms Charleston Hotel Associates, L.L.C. 80.0% 20.0% Charleston Hilton Charleston, South Carolina: 296 rooms Crystal City Hotel Associates, L.L.C. 80.0% 20.0% Courtyard by Marriot Crystal City Arlington, Virginia: 272 rooms Santa Rosa Hotel Associates, L.L.C. 80.0% 20.0% Sonoma County Hilton Santa Rosa, California: 245 rooms
The Pru-HEI Hotel's fiscal year for reporting results of operations, cash flows and changes in owners' interests is the 52 or 53 week period ending on the Thursday closest to December 31. Fiscal 1996 was a fifty-three week period ending on January 2, 1997. Courtyard by Marriot Crystal City and Sonoma County Hilton (the "Acquired Hotels") were purchased from unrelated sellers on October 31, 1996 and October 24, 1996, respectively, for aggregate acquisition costs of approximately $29 million and $16 million, respectively. The Acquired Hotels were purchased with cash contributed by the Owners. The combined financial statements only include the financial statements of the Acquired Hotels for the portion of the fiscal year that the hotels were owned by the Owners. Certain other hotels jointly owned by PRISA II and HEI have been excluded from these financial statements as they are excluded from the Transaction. F-20 25 PRU-HEI HOTEL GROUP NOTES TO COMBINED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CASH AND CASH EQUIVALENTS All highly liquid investments with an original maturity of three months or less when purchased are considered to be cash equivalents. RESTRICTED CASH Restricted cash represents cash restricted pursuant to the terms of the management agreements and held in escrow for the purpose of renovating and refurbishing the property and purchases of property and equipment (Note 7). INVENTORIES Inventories, consisting primarily of room linen, china, glass, silverware and food and beverage, are stated at the lower of cost or market on a first-in first-out basis. HOTEL PROPERTY AND EQUIPMENT Hotel property and equipment are stated and cost and are depreciated on a straight-line basis over the estimated useful lives of the related assets, generally five to 39 years. The costs of repairs and minor renewals that do not significantly extend the life of the building and improvements are normally expensed as incurred. The costs of major renovation projects are capitalized and depreciated over the related period of benefit. The net investment in hotel property and equipment does not exceed the fair value of the Hotels less estimated cost of sales. DEFERRED CHARGES Deferred charges consist primarily of franchise fees, organization costs and loan origination costs. Deferred charges are being amortized over the term of the franchise agreements, five years, and the terms of the loan agreements, respectively. INCOME TAXES No provision for income taxes is necessary in the accompanying financial statements as the entities included in Pru-HEI Hotel Group are not subject to federal and state income taxes and the tax effects of their activities flow through to the Owners. REVENUE RECOGNITION Revenues are recognized when earned. An allowance for potential credit losses is provided against the portion of accounts receivable that is estimated to be uncollectible. INTEREST EXPENSE Interest is computed in accordance with the effective interest method. F-21 26 PRU-HEI HOTEL GROUP NOTES TO COMBINED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates. 3. RESTRICTED CASH Restricted cash includes amounts held in the property improvement fund (Note 7). 4. MORTGAGE LOANS PAYABLE The Novi Hotel Associates Limited Partnership ("Novi") is liable under a mortgage note in the original principal amount of $8,200,000. The mortgage note requires monthly payment of principal and interest. The interest rate was 8 percent until July 1, 1996, 8.5 percent until July 1, 1997 and thereafter 4 percent above an index rate based on U.S. Government Securities, until the loan matures on July 1, 2002. The Virginia Hotel Associates Limited Partnership ("Virginia") is liable under a mortgage note in the original principal amount of $8,325,000. The mortgage note requires monthly payments of interest based on scheduled increases in the interest rate, which range from 7.4 to 11 percent, until the loan matures on April 8, 2002 (8.5 percent at January 2, 1997). For financial reporting purposes interest expense approximates an interest rate of 8.96 percent, which is the weighted-average interest rate over the term of the mortgage note. After May 1, 1997, scheduled principal payments are required through maturity on April 8, 2002. The Edison Hotel Associates Limited Partnership ("Edison") is liable under a mortgage note in the original principal amount of $8,925,000. The mortgage bears interest at 7 percent and matures on March 10, 1999. The mortgage note requires monthly payments of interest only until April 1996 and monthly payments of principal and interest thereafter. Required annual principal payments on the mortgage loans payable at January 2, 1997 are as follows: Year AMOUNT 1997 $ 257,173 1998 325,549 1999 8,749,582 2000 207,372 2001 215,419 Thereafter 15,439,375 --------------- $ 25,194,470 =============== F-22 27 PRU-HEI HOTEL GROUP NOTES TO COMBINED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- In connection with the Transaction, management expects the mortgage loans will be repaid in full at their then carrying value. The real estate and the related property improvement fund (see Note 7) of the aforementioned partnerships have been pledged as collateral for the related mortgage notes. 5. ACCOUNTS PAYABLE AND ACCRUED EXPENSES Accounts payable and accrued expenses is comprised of the following: Accounts payable - trade $ 2,051,484 Accrued wages and benefits 2,291,941 Unearned customer deposits 703,923 Sales taxes payable 533,167 Other accrued liabilities 3,307,756 ------------ TOTAL ACCOUNTS PAYABLE AND ACCRUED EXPENSES $ 8,888,271 ============ 6. DISCLOSURE OF FAIR VALUE OF FINANCIAL INSTRUMENTS Cash equivalents, receivables, accounts payable and accrued expenses are carried at amounts which reasonably approximate their fair values. Mortgage loans payable are carried amounts which approximate their fair values based upon current interest rates for debt with similar terms and remaining maturity. 7. COMMITMENTS AND CONTINGENT LIABILITIES HOTEL MANAGEMENT The hotels are managed by HEI Hotels, LLC pursuant to the terms of operating agreements between them and the Owners. The management agreements renew annually unless terminated in a manner specified by the agreement. In accordance with the terms of the management agreement, HEI receives base management fees equal to 3% of gross revenues, as defined. Included in accounts payable and accrued expenses are management fees of approximately $202,000 payable to HEI. In conjunction with the management agreements, HEI provides group medical benefits for all employees of the hotels that it manages (including certain hotels not included in the Pru-HEI Hotel Group). The medical benefits are self-insured up to a certain determined amount for each occurrence and in aggregate. Costs in excess of these amounts are covered by an umbrella insurance policy. Each hotel is charged an amount equal to its actual costs up to the self-insured amount and a portion of the insurance premiums based on the number of employees at the hotel as a percentage of all employees covered. During the year, the PruHEI Hotel Group incurred an aggregate amount of approximately $2,017,000 for this coverage of which approximately $528,000 is included in accounts payable and accrued expenses. All employees of the Hotels who meet certain minimum age and period of service requirements are eligible to participate in a Section 401(k) plan (the "Plan") as defined by F-23 28 PRU-HEI HOTEL GROUP NOTES TO COMBINED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- the Internal Revenue Code. The Plan allows eligible employees to defer amounts ranging from 2 to 15 percent of their annual compensation. The amounts contributed by employees are immediately vested and non-forfeitable. The Hotels will match amounts contributed by employees on a dollar for dollar basis up to 2 percent of their salary and 25 cents per dollar for amounts from 3 to 6 percent on an annual basis. The Hotels contributed an aggregate of $187,787 during the year. FRANCHISE FEES Franchise fees represent the annual expense for franchise royalties calculated as a percentage of gross room revenues under the terms of separate hotel franchise agreements with several hotel chain franchises. Franchise fee percentages range from 2 to 6 percent and in certain instances are based on increasing scales over time. The Pru-HEI Hotel Group paid an aggregate amount of $2,508,000 in franchise fees for the fiscal year ended January 2, 1997. Additionally, the PruHEI Hotel Group paid aggregate amount of $1,021,000 representing franchisors fees for additional services including marketing and central reservations. These additional fees are included as advertising and promotions in the accompanying combined statement of operations. PROPERTY IMPROVEMENT FUND The aforementioned mortgage notes and management agreements require the contribution of amounts ranging from 3 to 5 percent of gross revenues to a property improvement fund. The funds are held in escrow to be used solely for renovation and refurbishment of the property and the purchase of property and equipment. The required contribution in fiscal 1996 aggregated approximately $3.5 million. 8. ADDITIONAL INFORMATION - ACQUIRED HOTELS COURTYARD BY MARRIOT CRYSTAL CITY The following schedule summarizes the revenues and certain expenses of the Courtyard by Marriot Crystal City for the period from January 1, 1996 through October 31, 1996, the date of acquisition by Pru-HEI Hotels. The schedule excludes certain expenses not comparable to the period subsequent to their acquisition by the Pru-HEI Hotel Group. Expenses excluded consist of valuation adjustments to the building and improvements, interest expense on certain debt incurred by the previous owners and amortization of expenses not directly related to the operations of the property. F-24 29 PRU-HEI HOTEL GROUP NOTES TO COMBINED FINANCIAL STATEMENTS - --------------------------------------------------------------------------------
REVENUES Room $6,233,247 Food and beverage 902,947 Other 391,380 ---------- 7,527,574 ---------- CERTAIN EXPENSES Operating costs and expenses 2,039,264 General and administrative 556,066 Advertising and promotion 308,095 Utilities 268,121 Repairs and maintenance 273,936 Related party management fees 113,150 Franchise fees 309,927 Property taxes and insurance 252,719 Other expenses 88,112 ---------- 4,209,398 ---------- REVENUE IN EXCESS OF CERTAIN EXPENSES $3,318,184 ==========
During the period from January 1, 1996 through October 31, 1996, the property incurred $181,080 of capital additions and recorded $805,632 of depreciation charges. SONOMA COUNTY HILTON The schedule of revenue and certain expenses for the Sonoma County Hilton for the period from January 1, 1996 through October 24, 1996, the date of acquisition by Pru-HEI Hotel Group, were not made available for audit by the previous owner and have thus been excluded from these combined financial statements. F-25 30 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Boards of Directors of Westport Holdings, L.L.C.: We have audited the accompanying consolidated balance sheet of Westport Holdings, L.L.C., as of January 2, 1997, and the related consolidated statements of operations, changes in members' capital and cash flows for the year 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 audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform an 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 audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Westport Holdings, L.L.C., as of January 2, 1997, and the consolidated results of their operations and their cash flows for the year then ended, in conformity with generally accepted accounting principles. Coopers and Lybrand L.L.P. New York, NY February 6, 1997. F-26 31 WESTPORT HOLDINGS, L.L.C. CONSOLIDATED BALANCE SHEET January 2, 1997 ASSETS: Current assets: Cash and cash equivalents $1,095,572 Accounts receivable 798,696 Prepaid expenses and other 216,062 ---------- Total current assets 2,110,330 ---------- Property and equipment: Furniture, fixtures, and equipment 432,655 Leasehold improvements 410,537 ---------- 843,192 Less, Accumulated depreciation (225,147) ---------- Net investment in property and equipment 618,045 ---------- Restricted cash (Note 3) 117,680 Investments in affiliates (Note 4) 1,477,098 Other assets 156,303 ---------- Total assets $4,479,456 ---------- LIABILITIES AND MEMBERS' CAPITAL: Current liabilities: Accounts payable $ 808,886 Note payable to bank (Notes 5 and 6) 437,500 Deferred compensation (Notes 3 and 6) 1,146,170 ---------- Total current liabilities 2,392,556 Commitments (Note 3) Members' capital 2,086,900 ---------- Total liabilities and members' capital $4,479,456 ==========
The accompanying notes are an integral part of the financial statements F-27 32 WESTPORT HOLDINGS, L.L.C. CONSOLIDATED STATEMENT OF OPERATIONS For the year ended January 2, 1997 Revenues (Note 3): Hotel management fees $ 4,477,997 Asset management fees 350,908 Other fees 882,020 ----------- Total revenues 5,710,925 ----------- Expenses: Payroll 2,413,240 General and administrative 765,764 Depreciation and amortization 45,557 ----------- Total expenses 3,224,561 ----------- Operating income 2,486,364 Deferred compensation (Note 3) (1,076,170) Interest expense, net of interest income of $18,318 (3,551) Equity in loss from investment in affiliates (Note 4) (286,077) ----------- Net income $ 1,120,566 ===========
The accompanying notes are an integral part of the financial statements F-28 33 WESTPORT HOLDINGS, L.L.C. CONSOLIDATED STATEMENT OF CHANGES IN MEMBERS' CAPITAL
WESTPORT WESTPORT HOSPITALITY, MANAGEMENT, INC. L.L.C. SAVIOR L.P. TOTAL ------------ ----------- ----------- ---------- Balance, December 29, 1995 $ 51,769 $ 570,032 $414,533 $1,036,334 Special distribution to member -- (70,000) -- (70,000) Net income 64,890 714,584 341,092 1,120,566 -------- ---------- -------- ---------- Balance, January 2, 1997 $116,659 $1,214,616 $755,625 $2,086,900 ======== ========== ======== ==========
The accompanying notes are an integral part of the financial statements F-29 34 WESTPORT HOLDINGS, L.L.C. CONSOLIDATED STATEMENT OF CASH FLOWS For the year ended January 2, 1997 Cash flows from operating activities: Net income $ 1,120,566 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 45,557 Equity in loss from investment in affiliates 286,077 Deferred compensation 1,076,170 Changes in operating assets and liabilities: Accounts receivable (468,252) Prepaid expenses and other assets (281,710) Accounts payable and accrued liabilities 464,191 ----------- Net cash provided by operating activities 2,242,599 ----------- Cash flows used in investing activities: Purchase of property and equipment (627,630) Investment in affiliates (1,157,853) Restricted cash (117,680) ----------- Net cash used in investing activities (1,903,163) ----------- Cash flows provided by financing activities: Distribution to member (70,000) Proceeds from note payable 500,000 Principal payments of note payable (62,500) ----------- Net cash provided by financing activities 367,500 ----------- Net increase in cash and cash equivalents 706,936 Cash and cash equivalents, beginning of year 388,636 ----------- Cash and cash equivalents, end of year $ 1,095,572 ===========
The accompanying notes are an integral part of the financial statements F-30 35 WESTPORT HOLDINGS, L.L.C. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. ORGANIZATION: Westport Holdings, L.L.C., is a Delaware limited liability company formed on September 8, 1995. The consolidated financial statements include the accounts of Westport Holdings, L.L.C., and its majority-owned subsidiary, HEI Hotels, L.L.C. (the "Management Company"), collectively referred to as the "Company". The minority interest in the Management Company is immaterial and is owned by members of the Company. All intercompany transactions have been eliminated. The Management Company is a Delaware Limited Liability company formed on May 19, 1995 to manage and provide various other services to hotel properties as an agent for the owners of the properties. As of January 2, 1997, the Management Company has agreements to manage eighteen hotel properties located in thirteen states. The Company also has investments through six affiliates in six hotels which are described in Note 4. All profits and losses and distributions are allocated to the members in accordance with their percentage ownership interests, except for certain specified special distributions to one of the members. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: CASH AND CASH EQUIVALENTS: All highly liquid investments with original maturities of three months or less when purchased are considered to be cash and cash equivalents. The Company maintains cash balances primarily in one bank. As the cash balances held are greater than the FDIC insured amount, the Company assumes a certain amount of credit risk. PROPERTY AND EQUIPMENT: Property and equipment is stated at cost and is being depreciated using the straight-line method over the following estimated useful lives.
YEARS ------------- Leasehold improvements Term of Lease Furniture, fixtures, and equipment 5 to 7
Maintenance and repairs are charged to operations as incurred; major renewals and betterments are capitalized. Upon the sale or disposition of property and equipment, the asset and related accumulated depreciation are removed from the accounts, and any gain or loss is included in operations. CONTINUED F-31 36 WESTPORT HOLDINGS, L.L.C. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED DEFERRED CHARGES: Deferred charges consist of organizational costs and costs related to potential hotel acquisitions. The hotel acquisition costs are reimbursed from hotel properties when they are purchased or are expensed when a decision is made not to purchase the hotel. The organizational costs are amortized on a straight-line basis over 60 months. INCOME TAXES: The financial statements contain no provision for Federal or state income taxes since the entities are limited liability companies. All Federal and state income tax liabilities and/or benefits are passed through to the individual members in accordance with the Internal Revenue Code. INVESTMENT IN AFFILIATES: Investments in affiliates are accounted for under the equity method. FISCAL YEAR: The Companies' fiscal year comprises 52 and 53 weeks, ending on the Thursday closest to December 31. The 1996 fiscal year ended on January 2, 1997. LONG-LIVED ASSETS: Effective December 29, 1995, the Company adopted Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment of Long-Lived assets and for Long-Lived Assets to Be Disposed Of." Pursuant to SFAS 121, the Company assesses the recoverability of its long-lived assets based upon projections of undiscounted cash flows over the life of such assets. In the event that such cash flows are insufficient, the assets are adjusted to their net realizable value. The application of FAS 121 did not have a material effect on the financial statements of the Company. USE OF ESTIMATES: The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. CONTINUED F-32 37 WESTPORT HOLDINGS, L.L.C. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED 3. COMMITMENTS: MANAGEMENT FEES: The Management Company has agreements to manage the following hotels.
MANAGEMENT BASE AGREEMENT MANAGEMENT OWNERSHIP HOTEL EXPIRATION DATE FEE INTEREST(c) ------------------------------ ---------------- ---------- ----------- Norfolk Omni December 1997(a) 3.00% 60% Princeton Residence Inn March 2001 3.00% 1% Wilmington Hilton December 1997(a) 2.50% -- Danbury Hilton February 2009 4.00% 1% Atlanta Embassy Suites January 2009 3.00% 13.6% Novi Hilton December 1997(a) 3.00% 60% Edison Crown Plaza December 1997(a) 3.00% 60% BWI Airport Marriott December 1997(a) 3.00% 60% Bethesda Ramada Inn June 1999 3.00% -- Sheraton Long Island (b) 2.50% -- The Park Ridge at Valley Forge August 2015 3.00% 20% Long Beach Sheraton October 2015 3.00% 20% Charleston-Hilton December 2015 3.00% 20% Grand Juncton Hilton December 2001 2.25% -- Sheraton Crown Houston September 2016 3.00% 20% Sonoma County Hilton October 2016 3.00% 20% Crystal City Courtyard November 2016 3.00% 20% Ontario Hilton November 2016 3.00% 20%
(a) Agreements automatically renew yearly unless termination actions, as defined, are taken. (b) Sheraton Long Island agreement is in effect until 60-days' written notice of termination is given. (c) This column represents the contractual ownership interest that the Company and certain affiliated entities have in the respective hotel. These affiliated entities have certain owners that also have ownership in the Company. The base management fee is calculated based on the hotels' gross revenues, as defined. The Management Company is also eligible to receive incentive management fees from certain hotels. During 1997, the Management Company received incentive management fees of approximately $453,000 related to four of the above hotels. The Management Company also receives asset management fees related to five hotels (including three nonmanaged hotels), and accounting and advertising fees related to eighteen of the hotels. Accounts receivable as of January 2, 1997 includes $779,554 from affiliates. CONTINUED F-33 38 WESTPORT HOLDINGS, L.L.C. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED FUTURE LEASE OBLIGATIONS: The Company leases office space under an agreement expiring in 2005. The lease requires a letter of credit in the amount of $117,680 which is collateralized by a cash deposit of the same amount. The minimum future rent payments are as follows:
YEAR ---------- 1997 $ 235,360 1998 235,360 1999 235,360 2000 235,310 2001 235,310 Thereafter 741,384 ---------- $1,918,084 ==========
Rent expense for fiscal 1996 was $186,307. MEDICAL PLAN: The Management Company provides group medical benefits for all of its employees and for all employees of the hotels that it manages. The medical benefits are self-insured up to a determined amount for each occurrence and in aggregate. Costs in excess of these amounts are covered by an umbrella insurance policy. The Management Company and the hotels that participate are charged an amount equal to their actual costs up to the self-insured amount and a portion of the insurance premiums based on the number of employees as a percentage of all employees covered. During fiscal 1996, the Management Company incurred approximately $44,000, net of employee contributions for this coverage. RETIREMENT PLAN: Substantially all the personnel employed by the Management Company are eligible and participate in a 401(k) defined contribution plan. The Management Company was required to make contributions of approximately $42,000 for fiscal 1996. DEFERRED COMPENSATION: The Management Company currently has a deferred compensation program for one of its key executives. The compensation payable within the program is based on a percentage of the increase in the value of certain hotel properties (currently managed by the Management Company) over each of the respective property's initial cost basis. This benefit will vest to the executive over a three-year period beginning May 18, 1995. Compensation expense under this program amounted to $1,076,170 for fiscal 1996. The balance sheet of the Company includes a liability of $1,146,170 related to this program as of January 2, 1997. CONTINUED F-34 39 WESTPORT HOLDINGS, L.L.C. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED Effective December 29, 1995, the Company instituted an additional deferred compensation plan for the benefit of its current president. This program will provide for various levels of deferred bonus compensation based on the Company's growth, profitability and other factors. There is no liability with respect to this plan as of January 2, 1997. 4. INVESTMENTS IN AFFILIATES: During fiscal 1996, the Company invested approximately $1,158,000 for a 90 percent interest in four affiliated partnerships. In the prior year, the Company invested approximately $605,000 for a 90 percent interest in two other affiliated partnerships. Each of the affiliated partnerships then invested the proceeds for a 20 percent ownership interest in six entities that each own a hotel (the "Hotels") managed by the Management Company. The affiliated partnerships receive distributions and are allocated income and loss from the Hotels based on certain priorities and preferred return calculations, as defined in the respective Hotels' ownership agreements. During fiscal 1996, the Company was allocated a loss of $286,077, after preferred distributions to another partner, and did not receive any distributions. Combined unaudited summarized balance sheet information for the six Hotels are as follows:
JANUARY 2, 1997 --------------- (IN 000s) Assets: Hotel Property, net $128,952 Other 17,213 -------- $146,165 ======== Liabilities $ 5,541 Equity 140,624 -------- $146,165 ========
Combined unaudited summarized income statement information for the six Hotels for fiscal 1996 are as follows:
1996 --------- (IN 000s) Revenues $29,577 Expenses 27,180 ------- Net income $ 2,397 =======
CONTINUED F-35 40 WESTPORT HOLDINGS, L.L.C. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED 5. TERM PROMISSORY NOTE: On May 20, 1996, the Management Company entered into a term promissory note (the "Note") in the original principal amount of $500,000. The Company has guaranteed the repayment of the Note. The Note requires monthly principal payments of $10,416 ($124,492 annually) plus interest at a rate of 8.58% per annum. The Note matures on June 1, 2000, when all unpaid principal is due. The Note requires that the Company maintain a ratio of liabilities to tangible net worth, as defined, of 1.5 to 1.0, tangible net worth, as defined, of $650,000 until December 31, 1996, when the amount increases to $1,000,000, and certain other ratios, as defined. 6. SUBSEQUENT EVENT (UNAUDITED): On January 15, 1997, Starwood Lodging Trust and Starwood Lodging Corporation (collectively "Starwood") entered into a contract to purchase certain of the hotels owned by affiliates of the Company, the Management Company and the principal assets of Westport Holdings, L.L.C. (the "Transaction"). Pursuant to the Transaction, the owners of the affiliates and the Company will receive the equivalent of approximately 6,547,500 Paired Units (as adjusted for the three-for-two stock split on January 27, 1997) of Starwood and certain limited partnership interests in Starwood Partnerships which are convertible into Paired Shares in Starwood and approximately $112 million in cash and debt assumption. The Transaction is expected to close in February 1997. In the event that the transaction closes, management of the Company expects to pay the deferred compensation and note payable; accordingly, such liabilities have been reclassified as current liabilities in the accompanying balance sheet. F-36 EX-23.1 2 CONSENT OF COOPERS & LYBRAND 1 Exhibit 23.1 CONSENT OF INDEPENDENT ACCOUNTANTS We consent to the incorporation by reference in the registration statements of Starwood Lodging Trust and Starwood Lodging Corporation on Forms S-3 (File Nos. 333-13411 and 333-13325) and on Form S-8 (File No. 333-02721) of our report dated February 6, 1997, on our audit of the consolidated financial statements of Westport Holdings, L.L.C. as of January 2, 1997, and for the year then ended, which report is included in the Current Report on Form 8-K dated February 13, 1997. Coopers & Lybrand L.L.P. New York, NY December 16, 1997 EX-23.2 3 CONSENT OF PRICE WATERHOUSE LLP 1 Exhibit 23.2 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Registration Statements on Forms S-3 (Nos. 333-13325 and 333-13411) of Starwood Lodging Trust and Starwood Lodging Corporation of our report dated February 10, 1997 relating to the combined financial statements of Pru-HEI Hotel Group, which appears in the Current Report on Form 8-K/A of Starwood Lodging Trust and Starwood Lodging Corporation dated February 10, 1997. /s/ Price Waterhouse LLP Price Waterhouse LLP New York, New York December 16, 1997 -----END PRIVACY-ENHANCED MESSAGE-----