-----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, KyQ/KhF6t51vLPwD/jJ89+LZSuFUziVFj/ZCiyFaAsH3eDKkEPv/QfoC0Wcmz8z0 GstvLTruhNVW48Z+lZ2xKw== 0001024739-97-000705.txt : 19971111 0001024739-97-000705.hdr.sgml : 19971111 ACCESSION NUMBER: 0001024739-97-000705 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970912 FILED AS OF DATE: 19971110 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: ATLANTA MARRIOTT MARQUIS LTD PARTNERSHIP CENTRAL INDEX KEY: 0000770809 STANDARD INDUSTRIAL CLASSIFICATION: HOTELS & MOTELS [7011] IRS NUMBER: 521427553 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-14374 FILM NUMBER: 97711976 BUSINESS ADDRESS: STREET 1: 10400 FERNWOOD RD CITY: BETHESDA STATE: MD ZIP: 20817 BUSINESS PHONE: 3013807339 MAIL ADDRESS: STREET 1: 10400 FERNWOOD ROAD CITY: BETHESDA STATE: MD ZIP: 20817 10-Q 1 FORM 10-Q ================================================================================ Securities and Exchange Commission Washington, D.C. 20549 Form 10-Q /x/ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Quarter Ended September 12, 1997 OR / / Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Commission File Number: 0-14374 ATLANTA MARRIOTT MARQUIS LIMITED PARTNERSHIP ------------------------------------------------------ (Exact name of registrant as specified in its charter) Delaware 52-1427553 - --------------------------------------------- -------------------------------------------------- (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 10400 Fernwood Road Bethesda, Maryland 20817 - ----------------------------------------------------------------------------------------------------------- (Address of principal executive offices)
Registrant's telephone number, including area code: 301-380-2070 Securities registered pursuant to Section 12(b) of the Act: Not Applicable Securities registered pursuant to Section 12(g) of the Act: Units of Limited Partnership Interest (Title of Class) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days. Yes ___ No ___ (Not Applicable. The Partnership became subject to Section 13 reporting on November 10, 1997.) ================================================================================ TABLE OF CONTENTS
PAGE NO. -------- PART I - FINANCIAL INFORMATION Item 1. Financial Statements Condensed Consolidated Statement of Operations Twelve and Thirty-Six Weeks Ended September 12, 1997 and September 6, 1996.............................1 Condensed Consolidated Balance Sheet September 12, 1997 and December 31, 1996................................2 Condensed Consolidated Statement of Cash Flows Thirty-Six Weeks ended September 12, 1997 and September 6, 1996.........3 Notes to Condensed Consolidated Financial Statements......................4 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.....................................6 PART II - OTHER INFORMATION Item 1. Legal Proceedings.........................................................9 Item 6. Exhibits and Reports on Form 8-K..........................................9
PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS ATLANTA MARRIOTT MARQUIS LIMITED PARTNERSHIP CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (unaudited) (in thousands, except per unit amounts)
Twelve Weeks Ended Thirty-Six Weeks Ended ` ----------------------------- ----------------------------- September 12, September 6, September 12, September 6, 1997 1996 1997 1996 ------------- ------------- -------------- ------------- REVENUES............................... $ 6,613 $ 8,985 $ 26,786 $ 26,972 ------------- ------------- -------------- ------------- OPERATING COSTS AND EXPENSES Interest............................. 5,976 5,220 16,838 15,629 Depreciation ........................ 1,169 1,606 3,518 4,819 Base management fee.................. 536 618 1,847 1,854 Property taxes and other............. 653 1,087 1,981 2,438 Incentive management fee............. (551) 280 1,447 1,307 ------------- ------------- -------------- ------------- 7,783 8,811 25,631 26,047 ------------- ------------- -------------- ------------- NET (LOSS) INCOME ...................... $ (1,170) $ 174 $ 1,155 $ 925 ============= ============= ============== ============= ALLOCATION OF NET (LOSS) INCOME General Partner...................... $ (12) $ 2 $ 12 $ 9 Limited Partners..................... (1,158) 172 1,143 916 ------------- ------------- -------------- ------------- $ (1,170) $ 174 $ 1,155 $ 925 ============= ============= ============== ============ NET (LOSS) INCOME PER LIMITED PARTNER UNIT (530 Units) $ (2,185) $ 325 $ 2,157 $ 1,728 ============= ============= ============== ============
See Notes to Condensed Consolidated Financial Statements. 1 ATLANTA MARRIOTT MARQUIS LIMITED PARTNERSHIP CONDENSED CONSOLIDATED BALANCE SHEET (in thousands)
September 12, December 31, 1997 1996 ------------- ------------ (unaudited) ASSETS Property and equipment, net.............................................. $ 162,654 $ 162,111 Amounts held by Marriott International, Inc.............................. 3,207 3,490 Working capital and supplies held by Marriott International, Inc......... 2,900 2,900 Other assets............................................................. 6,100 7,406 Cash and cash equivalents................................................ 6,709 5,601 ----------- ----------- $ 181,570 $ 181,508 =========== =========== LIABILITIES AND PARTNERS' DEFICIT LIABILITIES Mortgage note payable.................................................... $ 199,019 $ 215,574 Due to Host Marriott Corporation under Original Debt Service Guarantee and Commitment....................................... 30,524 20,134 Due to Marriott International, Inc....................................... 4,478 3,030 Accounts payable and accrued expenses.................................... 3,933 309 ----------- ----------- Total Liabilities...................................................... 237,954 239,047 ----------- ----------- PARTNERS' DEFICIT General Partner.......................................................... (503) (514) Limited Partners......................................................... (55,881) (57,025) ----------- ----------- Total Partners' Deficit................................................ (56,384) (57,539) ----------- ----------- $ 181,570 $ 181,508 =========== ===========
See Notes to Condensed Consolidated Financial Statements. 2 ATLANTA MARRIOTT MARQUIS LIMITED PARTNERSHIP CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (unaudited) (in thousands)
Thirty-Six Weeks Ended ------------------------------ September 12, September 6, 1997 1996 -------------- ------------ OPERATING ACTIVITIES Net income .......................................................... $ 1,155 $ 925 Noncash items........................................................ 4,985 6,479 Changes in operating accounts........................................ 5,355 (491) -------------- ------------ Cash provided by operating activities.............................. 11,495 6,913 -------------- ------------ INVESTING ACTIVITIES Additions to property and equipment, net............................. (4,064) (3,306) Change in property improvement fund.................................. 877 187 -------------- ------------ Cash used in investing activities.................................. (3,187) (3,119) -------------- ------------ FINANCING ACTIVITIES Advances under Debt Service Guarantee and Commitment................. 10,390 Payment of Deferred Interest on Mortgage Note Payable................ (17,590) -- ------------ Cash distributions................................................... -- (819) -------------- ------------ Cash used in financing activities.................................... (7,200) (819) -------------- ------------ INCREASE IN CASH AND CASH EQUIVALENTS.................................. 1,108 2,975 CASH AND CASH EQUIVALENTS at beginning of period....................... 5,601 1,010 -------------- ------------ CASH AND CASH EQUIVALENTS at end of period............................. $ 6,709 $ 3,985 ============== ============ SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid for mortgage interest...................................... $ 28,470 $ 10,881 ============== ============
See Notes to Condensed Consolidated Financial Statements. 3 ATLANTA MARRIOTT MARQUIS LIMITED PARTNERSHIP NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) 1. The accompanying condensed consolidated financial statements have been prepared by the Atlanta Marriott Marquis Limited Partnership (the "Partnership") without audit. Certain information and footnote disclosures normally included in financial statements presented in accordance with generally accepted accounting principles have been condensed or omitted from the accompanying statements. The Partnership believes the disclosures made are adequate to make the information presented not misleading. However, the condensed consolidated financial statements should be read in conjunction with the Partnership's consolidated financial statements and notes thereto included in the Partnership's Form 10-K filed on November 10, 1997 for the fiscal year ended December 31, 1996. In the opinion of the Partnership, the accompanying condensed consolidated unaudited financial statements reflect all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position of the Partnership as of September 12, 1997 and the results of operations and cash flows for the twelve and thirty-six weeks ended September 12, 1997 and September 6, 1996. Interim results are not necessarily indicative of fiscal year performance because of seasonal and short-term variations. 2. The Partnership owns an 80% general partnership interest in Ivy Street Hotel Limited Partnership ("Ivy") which owns and operates the Atlanta Marriott Marquis Hotel (the "Hotel"). The financial statements and all significant intercompany transactions and balances have been eliminated. In 1990, the Partnership determined that the probability of collecting the receivable from the minority partner in Ivy was remote. Thus, the Partnership wrote off this receivable and is now recording 100% of the income/(loss) of Ivy until such excess income allocated to the Partnership equals the excess losses previously recorded by the Partnership. 3. For financial reporting purposes, the net income/(loss) of the Partnership is allocated 99% to the limited partners and 1% to Marriott Marquis Corporation (the "General Partner"), a wholly-owned subsidiary of Host Marriott Corporation. Significant differences exist between the net income/(loss) for financial reporting purposes and the net income/(loss) reported for Federal income tax purposes. These differences are due primarily to the use, for income tax purposes, of accelerated depreciation methods, shorter depreciable lives for the assets, differences in the timing of the recognition of incentive management fee expense and the treatment of the minority interest receivable. 4. Hotel revenues represent house profit of the Hotel since Ivy has delegated substantially all of the operating decisions related to the generation of house profit of the Hotel to Marriott International, Inc. (the "Manager"). House profit reflects hotel operating results which flow to Ivy as property owner and represents gross hotel sales less property-level expenses, excluding depreciation and amortization, base and incentive management fees, property taxes and certain other costs, which are disclosed separately in the condensed consolidated statement of operations. 4 Partnership revenues generated by the Hotel for 1997 and 1996 consist of (in thousands):
Twelve Weeks Ended Thirty-Six Weeks Ended -------------------------------- ------------------------------- September 12, September 6, September 12, September 6, 1997 1996 1997 1996 ---------------- --------------- -------------- -------------- HOTEL SALES Rooms.......................................... $ 11,138 $ 12,696 $ 38,848 $ 39,051 Food and beverage.............................. 5,016 5,971 18,270 18,209 Other.......................................... 1,194 1,937 3,994 4,548 -------------- -------------- -------------- -------------- 17,348 20,604 61,112 61,808 -------------- -------------- -------------- -------------- HOTEL EXPENSES Departmental direct costs Rooms....................................... 2,515 2,449 8,267 7,916 Food and beverage........................... 3,954 4,435 12,324 12,694 Other....................................... 4,266 4,735 13,735 14,226 -------------- -------------- -------------- -------------- 10,735 11,619 34,326 34,836 -------------- -------------- -------------- -------------- REVENUES......................................... $ 6,613 $ 8,985 $ 26,786 $ 26,972 ============== ============== ============== ==============
5. Pursuant to the terms of the Management Agreement, the Manager is obligated to transfer, not less than once each accounting period, all funds derived from the operation of the Hotel after all Hotel operating expenses. Such amounts from the Manager are owned by Ivy. 6. Certain reclassifications were made to the prior year financial statements to conform to the 1997 presentation. 5 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FORWARD-LOOKING STATEMENTS Certain matters discussed herein are forward-looking statements within the meaning of the Private Litigation Reform Act of 1995 and as such may involve known and unknown risks, uncertainties, and other factors which may cause the actual results, performance or achievements of the Partnership to be different from any future results, performance or achievements expressed or implied by such forward-looking statements. Although the Partnership believes the expectations reflected in such forward-looking statements are based upon reasonable assumptions, it can give no assurance that its expectations will be attained. These risks are detailed from time to time in the Partnership's filings with the Securities and Exchange Commission. The Partnership undertakes no obligation to publicly release the result of any revisions to these forward-looking statements that may be made to reflect any future events or circumstances. CAPITAL RESOURCES AND LIQUIDITY The Partnership's financing needs have been historically funded through loan agreements with independent financial institutions. The General Partner believes that the Partnership's ability to continue to conduct its operations in the ordinary course of business is contingent upon the General Partner's ability to successfully refinance the Partnership's Mortgage Debt. Principal Sources and Uses of Cash The Partnership's principal source of cash is cash from operations. Its principal uses of cash are to pay debt service payments on the Mortgage Debt, to make guarantee repayments and to fund the property improvement fund. Cash provided by operations was $10.3 million and $6.9 million for the thirty-six weeks ended September 12, 1997 and September 6, 1996, respectively. The increase is primarily attributable to quicker turnover of receivables in 1997. The Partnership paid $28.5 million and $10.9 million of interest expense on the Mortgage Debt for the thirty-six weeks ended September 12, 1997 and September 6, 1996, respectively. The increase is due to the payment of $17,590,000, representing the Deferred Interest on the Mortgage Debt. Contributions to the property improvement fund were $2.8 million and $2.9 million for the thirty-six weeks ended September 12, 1997 and September 6, 1996, respectively. Capital Expenditures The Partnership is required to maintain the Hotel in good repair and condition. The management agreement provides for the establishment of a property improvement fund to cover the cost of non-routine repairs and maintenance and renewals and replacements to the Hotel's property and equipment. Contributions to the fund for 1994 through June of 1995 were 4% of Hotel gross sales and increased to 5% thereafter. Currently, the funds available in the property improvement fund are sufficient for the scheduled $7.0 million rooms refurbishment for approximately half of the Hotel's rooms which began in August. The General Partner expects that the funds for the refurbishment of the remaining rooms will be provided for in conjunction with the refinancing of the Mortgage Debt or will be provided for with future years' contributions to the property improvement fund. The General Partner believes that cash from Hotel operations, the Interest/Principal Guarantee, the availability of funds from the refinancing and capital reserves will provide adequate funds in the short-term to meet the operational needs of the Partnership. Although there can be no assurance, the General Partner anticipates that the debt maturity in February will be successfully refinanced with a new third-party lender. Mortgage Debt On July 10, 1997 (the "Extension Date"), the Partnership and Ivy entered into a Letter Agreement which effectively extends the maturity of the Mortgage Debt until February 2, 1998 (the "New Maturity Date"). On the Extension Date, the Partnership and Ivy were required to pay $17,590,000 representing the Deferred Interest on the Mortgage Debt in addition 6 to the scheduled interest payment due of $10,119,000. As a result, the Mortgage Debt balance outstanding was reduced to $199,000,000. Cash flow from operations provided the Partnership with adequate funds to meet the scheduled interest payment of $10,119,000. The payment of the Deferred Interest was funded from $7,200,000 of Ivy cash reserves and $10,390,000 drawn pursuant to a Host Marriott interest guarantee (the "Interest Guarantee"). Host Marriott had agreed to advance up to $50,000,000 to cover interest and principal shortfalls. Should cash flow from operations be insufficient to fund fully interest due, $20,000,000 was available under the Interest Guarantee through loan maturity. The remaining $30,000,000 was available under the Principal Guarantee. Prior to the $10,390,000 advance on July 10, 1997, there were no amounts outstanding under either the Principal Guarantee or the Interest Guarantee. However, $20.1 million was outstanding under the original debt service guarantee due to Host Marriott. In conjunction with the extension, Host Marriott reaffirmed its obligations pursuant to these guarantees through the New Maturity Date. The Principal Guarantee is available at maturity or in case of a sale, refinancing or acceleration of the principal amount of the underlying Notes resulting from an Event of Default. To the extent the Interest Guarantee is not used, it becomes available as a Principal Guarantee. The General Partner estimates that a sale of the Hotel would generate sufficient proceeds to repay the maturing Mortgage Debt, outstanding guarantees to and advances from Host Marriott and cover transaction costs; therefore, no advances under the guarantees would be required. During the term of the Letter Agreement, the Mortgage Debt continues to be nonrecourse, and will accrue interest at 12.3% per annum with interest payments due on January 10 and February 2, 1998. Additionally, all funds remitted by the Manager during the term of the extension will be held by the Partnership for the benefit of the lender. In conjunction with the Letter Agreement, Ivy paid an extension fee of $500,000 as well as approximately $410,000 representing costs and expenses related to the transaction. It is expected that cash flow from operations will provide adequate funds to meet the scheduled interest payments. The General Partner is continuing to explore alternatives to repay the Mortgage Debt upon maturity on February 2, 1998 and to obtain the additional funds needed for capital repairs and refurbishment's at the Hotel. The General Partner has contacted several lenders active in current hotel lending markets. To date, the General Partner has not found a lender, or a combination of lenders, that would provide the entire amount necessary to refinance the maturing Mortgage Debt of the Hotel and obtain sufficient funds to complete the necessary refurbishments. The General Partner is currently working with a lender that will provide approximately $160 to $165 million in first mortgage financing and is exploring alternatives to fund the shortfall, including the possibility of a contribution of equity from the General Partner. In addition, the General Partner has considered a sale of the Hotel to payoff the existing lender. However, the General Partner does not believe that the Hotel has realized the appreciation necessary to generate material cash proceeds that would be available for distribution to the limited partners of AMMLP and, furthermore, such a sale would likely result in a significant taxable event to the limited partners of AMMLP. There can be no assurance that the General Partner will be successful in its attempts to refinance the Hotel's Mortgage Debt. Failure to refinance or payoff the Mortgage Debt at maturity could lead to a foreclosure of the Hotel. As previously reported, in 1996 the General Partner established a reserve in anticipation of a potential principal paydown and the costs which will be incurred to refinance the Mortgage Debt. Though these refinancing costs are not currently estimable, based on the General Partner's experiences with other partnerships, such costs are expected to be substantial. These costs include lender property appraisals, legal expenses, bank fees, environmental studies and other transaction costs. The initial reserve was funded from 1996 cash available after payment of debt service which would have otherwise been distributable to the Partnership. In addition, it is expected that the Partnership will be required to establish various capital, tax and insurance reserve accounts with the lender upon closing of a new loan. The Partnership will continue to reserve all available cash flow for the refinancing. In 1996 Ivy reserved all cash flow in excess of ground rent for refinancing costs and owner funded capital needs. On July 10, 1997, Ivy utilized all available reserves to make a payment of the Partnership's Deferred Interest on the Mortgage Debt. As of September 12, 1997, total cash reserves approximated $3.6 million. As a result of establishing these reserves and the utilization of funds to pay down the Deferred Interest, the Partnership did not make a cash distribution from 1996 operations to the partners. In addition, cash distributions for 1997 and thereafter will be dependent upon the outcome of the debt refinancing. 7 RESULTS OF OPERATIONS Partnership revenues for the third quarter of 1997 decreased 26% when compared to the same period in 1996 primarily due to an approximately 16%, or $1,624,000 decrease in room revenues, coupled with a 31%, or $474,000 decrease in food and beverage revenues. Room revenues decreased primarily due to a 12% decrease in REVPAR, or revenues per available room. The decrease in REVPAR was due to a 20% decrease in the average room rate from approximately $142 to approximately $113. This is offset by a 6.5 percentage point increase in average occupancy to approximately 70%. The average room rate in the third quarter of 1996 was positively impacted by Summer Olympics. The improvement in third quarter 1997 average occupancy occurred toward the beginning of the period when compared to the same period last year. In July 1996, the upcoming Summer Olympics negatively impacted average occupancy. Food and beverage revenues in the third quarter of 1997 decreased when compared with the same period in prior year. This is due to the fact that Catering Sales were positively impacted by numerous off-site Olympic events in third quarter 1996. On a year-to-date basis, Partnership revenues remained consistent with prior year. Food and beverage revenues increased by 8% while room revenues remained flat when compared to the same period last year. Room revenues remained constant with prior year due primarily to a 4% decrease in the average room rate from approximately $132 to approximately $126 offset by a 2.8 percentage point increase in average occupancy to approximately 73%. Based on current forecasts, 1997 Hotel operating results are expected to be comparable to 1996 results. The Atlanta market has not realized significant demand growth during the year. Hotel management has reviewed its pricing strategies and analyzed operating costs in order to implement an aggressive cost savings plan to enable them to maximize revenue where possible. Operating costs for the third quarter 1997 decreased approximately 16.8% when compared to the same period in 1996 as a result of these initiatives. Additionally, Hotel management has formed an alliance with the Westin, Hyatt and Hilton (the "Atlanta Alliance"). The Atlanta Alliance is a formal arrangement among the four hotels to present a meeting alternative to customers' groups that are too large for a single hotel but too small for the Georgia World Congress Center, Atlanta's convention center. The national sales forces for all four hotel companies are actively promoting the Atlanta Alliance. Depreciation: Depreciation decreased $1,301,000, or 27%, for the thirty-six weeks ended September 12, 1997 when compared to 1996 due to a portion of the Hotel's furniture and equipment becoming fully depreciated. Incentive Management Fees: For the twelve weeks ended September 12, 1997, incentive management fees were ($551,000) as compared to $280,000 for the same period in 1996. The decrease in incentive management fees earned was the result of a decrease in Hotel operating results. For the thirty-six weeks ended September 12, 1997, $1,447,000 of incentive management fees were accrued as compared to $1,307,000 for the same period in 1996. 8 PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS Neither the Partnership, Ivy nor the Hotel are presently subject to any material litigation nor, to the General Partner's knowledge is any material litigation threatened against the Partnership or the Hotel, other than routine litigation and administrative proceedings arising in the ordinary course of business, some of which are expected to be covered by liability insurance and which, collectively, are not expected to have a material adverse effect on the business, financial conditions, or results of operations of the Partnership. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K a. Exhibits - 27 - Financial Data Schedule b. Reports on Form 8-K - None. 9 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Form 10-Q to be signed on its behalf by the undersigned, thereunto duly authorized. ATLANTA MARRIOTT MARQUIS LIMITED PARTNERSHIP By: MARRIOTT MARQUIS CORPORATION General Partner November 10, 1997 By: /s/ Patricia K. Brady ---------------------------- Patricia K. Brady Vice President and Chief Accounting Officer 10 EX-27 2 FINANCIAL DATA SCHEDULE
5 This schedule contains summary financial information extracted from Third Quarter 10-Q and is qualified in its entirety by refernce to such financial statements. 0000770809 Atlanta Marriott Marquis Limited Partnership 1,000 U.S. Dollars 9-MOS DEC-31-1997 JAN-01-1997 SEP-12-1997 1.00 6,709 6,100 6,107 0 0 18,916 233,420 (70,766) 181,570 8,411 229,543 0 0 0 (56,384) 181,570 0 26,786 0 8,793 0 0 16,838 1,155 0 1,155 0 0 0 1,155 0 0 This is other assets. This includes amounts held by MII and working capital and supplies held by MII. This includes due MII and accounts payable and accrued expenses. This includes mortgage note payable and due to HMC.
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