As filed with the Securities and Exchange Commission on February 8, 2002
Registration No. 333-____
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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HOST MARRIOTT CORPORATION
(Exact name of registrant as specified in its governing instrument)
Maryland 53-0085950
(State of organization) (I.R.S. employer identification number)
10400 Fernwood Road
Bethesda, Maryland 20817-1109
301-380-9000
(Address and telephone number of principal executive offices)
Robert E. Parsons, Jr.
Executive Vice President And Chief Financial Officer
10400 Fernwood Road
Bethesda, Maryland 20817-1109
301-380-9000
(Name, address and telephone number of agent for service)
Copy to:
Elizabeth A. Abdoo, Esq. J. Warren Gorrell, Jr., Esq.
Senior Vice President and General Counsel Eve N. Howard, Esq.
HOST MARRIOTT CORPORATION HOGAN & HARTSON L.L.P.
10400 Fernwood Road 555 Thirteenth Street, N.W.
Bethesda, Maryland 20817-1109 Washington, D.C. 20004-1109
(301) 380-9000 (202) 637-5600
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Approximate date of commencement of proposed sale to the public: From time
to time after this registration statement becomes effective.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. |_|
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. |X|
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. |_|
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_|
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. |_|
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CALCULATION OF REGISTRATION FEE
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Title of Class of Securities Amount to be Proposed Maximum Aggregate Proposed Maximum Amount of
Being Registered Registered Price per Common Stock (1) Aggregate Offering Price (1) Registration Fee (1)
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Common Stock, par value $.01
per share (2).................. 1,100,000 $9.835 $10,818,500 $996
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(1) Determined pursuant to Rule 457(c) under the Securities Act of 1933.
(2) Includes associated rights to purchase shares of Series A Junior
Participating Preferred Stock of the registrant.
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The registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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This information in this prospectus is not complete and may be changed. These
securities may not be sold until the Securities and Exchange Commission declares
the registration statement of which this prospectus is a part effective. This
prospectus is not an offer to sell these securities and it is not soliciting an
offer to buy these securities in any state where such an offer or sale is not
permitted.
PROSPECTUS
Subject to completion, dated February 8, 2002
1,100,000 Shares
HOST MARRIOTT CORPORATION
Common Stock
This prospectus relates to up to 1,100,000 shares of our common stock that
may be sold by Summit Resources, Ltd.
We will not receive any proceeds upon the sale of the common stock covered
by this prospectus, but we will incur expenses in connection with the filing of
the registration statement of which this prospectus forms a part.
Our common stock is listed on the New York Stock Exchange under the trading
symbol "HMT."
Consider carefully the risk factors beginning on page 1 of this prospectus
and the discussion of material federal income tax consequences incorporated by
reference from our Form 8-K dated February 8, 2002 for factors relevant to an
investment in the common stock.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
February __, 2002
You should only rely on the information provided in or incorporated by
reference into this prospectus. We have not authorized any person to make a
statement that differs from what is in this prospectus or incorporated by
reference into this prospectus. If any person does make a statement that differs
from what is in this prospectus or incorporated by reference into this
prospectus, you should not rely on it. We are not making an offer to sell, nor
an offer to buy, the common stock in any state where the offer or sale is not
permitted. The information in this prospectus is complete and accurate as of the
date on the front cover, but the information may change after that date.
TABLE OF CONTENTS
Page
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RISK FACTORS .............................................................. 1
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS ........................... 14
THE COMPANY ............................................................... 15
THE OFFERING .............................................................. 15
NO PROCEEDS TO THE COMPANY ................................................ 15
TAX STATUS OF THE COMPANY ................................................. 15
SELLING SHAREHOLDER ....................................................... 15
PLAN OF DISTRIBUTION ...................................................... 16
LEGAL MATTERS ............................................................. 16
EXPERTS ................................................................... 16
ABOUT THIS PROSPECTUS ..................................................... 16
WHERE YOU CAN FIND MORE INFORMATION ....................................... 17
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To understand this common stock offering, you should read the entire
prospectus and the information incorporated by reference into this prospectus
carefully, including the risk factors beginning below on this page and the
material federal income tax consequences incorporated by reference to our Form
8-K dated February 8, 2002
On December 29, 1998, we reincorporated in Maryland in connection with our
conversion to a real estate investment trust, or "REIT". As used in this
prospectus, references to "we", "our", the "company" and "Host Marriott" and
similar references are to Host Marriott Corporation, a Maryland corporation, and
its consolidated subsidiaries (including the Operating Partnership, as defined
below) from and after December 29, 1998, and to Host Marriott Corporation, a
Delaware corporation, and its consolidated subsidiaries before December 29,
1998, unless otherwise expressly stated or the context otherwise requires.
References to the "Operating Partnership" are to Host Marriott, L.P.
RISK FACTORS
Prospective investors should carefully consider, among other factors, the
material risks described below.
Risks of Ownership of Our Common Stock
There are limitations on the acquisition of our common stock and changes in
control. Our charter and bylaws, the partnership agreement of the Operating
Partnership, our shareholder rights plan and the Maryland General Corporation
Law contain a number of provisions that could delay, defer or prevent a
transaction or a change in control of us that might involve a premium price for
our shareholders or otherwise be in their best interests, including the
following:
o Ownership limit. The 9.8% ownership limit described under "Risk
Factors--Risks of Ownership of Our Common Stock--There are possible
adverse consequences of limits on ownership of our common stock" may
have the effect of precluding a change in control of us by a third
party without the consent of our Board of Directors, even if the
change in control would be in the interest of our shareholders, and
even if the change in control would not reasonably jeopardize our REIT
status.
o Staggered board. Our Board of Directors consists of eight members but
our charter provides that our number of directors may be increased or
decreased according to our bylaws, provided that the total number of
directors is not less than three nor more than 13. Pursuant to our
bylaws, the number of directors will be fixed by our Board of
Directors within the limits in our charter. Our Board of Directors is
divided into three classes of directors. Directors for each class are
chosen for a three-year term when the term of the current class
expires. The staggered terms for directors may affect shareholders'
ability to effect a change in control of us, even if a change in
control would be in the interest of our shareholders. Currently, there
are eight directors serving on our Board of Directors.
o Removal of board of directors. Our charter provides that, except for
any directors who may be elected by holders of a class or series of
shares of capital stock other than our common stock, directors may be
removed only for cause and only by the affirmative vote of
shareholders holding at least two-thirds of our outstanding shares
entitled to be cast for the election of directors. Vacancies on the
Board of Directors may be filled by the concurring vote of a majority
of the remaining directors and, in the case of a vacancy resulting
from the removal of a director by the shareholders, by at least
two-thirds of all the votes entitled to be cast in the election of
directors.
o Preferred shares; classification or reclassification of unissued
shares of capital stock without shareholder approval. Our charter
provides that the total number of shares of stock of all classes which
we have authority to issue is 800,000,000, initially consisting of
750,000,000 shares of common stock and 50,000,000 shares of preferred
stock, of which 14,140,000 shares of preferred stock were issued and
outstanding as of January 31, 2002. Our Board of Directors has the
authority, without a vote of shareholders, to classify or reclassify
any unissued shares of stock, including common stock into preferred
stock or vice versa, and to establish the preferences and rights of
any preferred or other class or series of shares to be issued. The
issuance of preferred shares or other shares having special
preferences or rights could delay or prevent a change in control even
if a change in control would be in the interests of our shareholders.
Because our Board of Directors has the power to establish the
preferences and rights of additional classes or series of shares
without a shareholder vote, our Board of Directors may give the
holders of any class or series preferences, powers and rights,
including voting rights, senior to the rights of holders of our common
stock.
o Consent rights of the limited partners. Under the partnership
agreement of the Operating Partnership, we generally will be able to
merge or consolidate with another entity with the consent of partners
holding percentage interests that are more than 50% of the aggregate
percentage interests of the outstanding limited partnership interests
entitled to vote on the merger or consolidation, including any limited
partnership interests held by us, as long as the holders of limited
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partnership interests either receive or have the right to receive the
same consideration as our shareholders. We, as holder of a majority of
the limited partnership interests, would be able to control the vote.
Under our charter, holders of at least two-thirds of our outstanding
shares of common stock generally must approve the merger or
consolidation.
o Maryland business combination law. Under the Maryland General
Corporation Law, specified "business combinations," including
specified issuances of equity securities, between a Maryland
corporation and any person who owns 10% or more of the voting power of
the corporation's then outstanding shares, or an "interested
shareholder," or an affiliate of the interested shareholder are
prohibited for five years after the most recent date in which the
interested shareholder becomes an interested shareholder. Thereafter,
any of these specified business combinations must be approved by 80%
of outstanding voting shares, and by two-thirds of voting shares other
than voting shares held by an interested shareholder unless, among
other conditions, the corporation's common shareholders receive a
minimum price, as defined in the Maryland General Corporation Law, for
their shares and the consideration is received in cash or in the same
form as previously paid by the interested shareholder. We are subject
to the Maryland business combination statute.
o Maryland control share acquisition law. Under the Maryland General
Corporation Law, "control shares" acquired in a "control share
acquisition" have no voting rights except to the extent approved by a
vote of two-thirds of the votes entitled to be cast on the matter,
excluding shares owned by the acquiror and by officers or directors
who are employees of the corporation. "Control shares" are voting
shares which, if aggregated with all other voting shares previously
acquired by the acquiror or over which the acquiror is able to
exercise or direct the exercise of voting power (except solely by
virtue of a revocable proxy), would entitle the acquiror to exercise
voting power in electing directors within one of the following ranges
of voting power: (1) one-fifth or more but less than one-third, (2)
one-third or more but less than a majority or (3) a majority or more
of the voting power. Control shares do not include shares the
acquiring person is then entitled to vote as a result of having
previously obtained shareholder approval. A "control share
acquisition" means the acquisition of control shares, subject to
specified exceptions. We are subject to these control share provisions
of Maryland law, subject to an exemption for Marriott International
pursuant to its purchase right discussed below. See "Risk
Factors--Risks of Ownership of Our Common Stock--There are limitations
on the acquisition of our common stock and changes in
control--Marriott International purchase right."
o Merger, consolidation, share exchange and transfer of our assets.
Pursuant to our charter, subject to the terms of any outstanding class
or series of capital stock, we can merge with or into another entity,
consolidate with one or more other entities, participate in a share
exchange or transfer our assets within the meaning of the Maryland
General Corporation Law if approved (1) by our Board of Directors in
the manner provided in the Maryland General Corporation Law and (2) by
our shareholders holding two-thirds of all the votes entitled to be
cast on the matter, except that any merger of us with or into a trust
organized for the purpose of changing our form of organization from a
corporation to a trust requires only the approval of our shareholders
holding a majority of all votes entitled to be cast on the merger.
Under the Maryland General Corporation Law, specified mergers may be
approved without a vote of shareholders and a share exchange is only
required to be approved by a Maryland corporation by its Board of
Directors. Our voluntary dissolution also would require approval of
shareholders holding two-thirds of all the votes entitled to be cast
on the matter.
o Amendments to our charter and bylaws. Our charter contains provisions
relating to restrictions on transferability of our common stock, the
classified Board of Directors, fixing the size of our Board of
Directors within the range set forth in our charter, removal of
directors and the filling of vacancies, all of which may be amended
only by a resolution adopted by the Board of Directors and approved by
our shareholders holding two-thirds of the votes entitled to be cast
on the matter. As permitted under the Maryland General Corporation
Law, our charter and bylaws provide that directors have the exclusive
right to amend our bylaws. Amendments of this provision of our charter
also would require action of our Board of Directors and approval by
shareholders holding two-thirds of all the votes entitled to be cast
on the matter.
o Marriott International purchase right. As a result of our spin-off of
Marriott International in 1993, Marriott International has the right
to purchase up to 20% of each class of our outstanding voting shares
at the then fair market value when specific change of control events
involving us occur, subject to specified limitations to protect our
REIT status. The Marriott International purchase right may have the
effect of discouraging a takeover of us, because any person
considering acquiring a substantial or controlling block of our common
stock will face the possibility that its ability to obtain or exercise
control would be impaired or made more expensive by the exercise of
the Marriott International purchase right.
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o Shareholder rights plan. We adopted a shareholder rights plan which
provides, among other things, that when specified events occur, our
shareholders will be entitled to purchase from us a newly created
series of junior preferred shares, subject to our ownership limit
described below. The preferred share purchase rights are triggered by
the earlier to occur of (1) ten days after the date of a public
announcement that a person or group acting in concert has acquired, or
obtained the right to acquire, beneficial ownership of 20% or more of
our outstanding shares of common stock or (2) ten business days after
the commencement of or announcement of an intention to make a tender
offer or exchange offer, the consummation of which would result in the
acquiring person's becoming the beneficial owner of 20% or more of our
outstanding common stock. The preferred share purchase rights would
cause substantial dilution to a person or group that attempts to
acquire us on terms not approved by our Board of Directors.
There are possible adverse consequences of limits on ownership of our
common stock. To maintain our qualification as a REIT for federal income tax
purposes, not more than 50% in value of our outstanding shares of capital stock
may be owned, directly or indirectly, by five or fewer individuals, as defined
in the Internal Revenue Code to include some entities. In addition, a person who
owns, directly or by attribution, 10% or more of an interest in a tenant of
ours, or a tenant of any partnership in which we are a partner, cannot own,
directly or by attribution, 10% or more of our shares without jeopardizing our
qualification as a REIT. Primarily to facilitate maintenance of our
qualification as a REIT for federal income tax purposes, the ownership limit
under our charter prohibits ownership, directly or by virtue of the attribution
provisions of the Internal Revenue Code, by any person or persons acting as a
group, of more than 9.8% of the issued and outstanding shares of our common
stock, subject to an exception for shares of our common stock held prior to our
conversion into a REIT (referred to as the "REIT conversion") so long as the
holder would not own more than 9.9% in value of our outstanding shares after the
REIT conversion, and prohibits ownership, directly or by virtue of the
attribution provisions of the Internal Revenue Code, by any person, or persons
acting as a group, of more than 9.8% of the issued and outstanding shares of any
class or series of our preferred shares. Together, these limitations are
referred to as the "ownership limit." Our Board of Directors, in its sole and
absolute discretion, may waive or modify the ownership limit with respect to one
or more persons who would not be treated as "individuals" for purposes of the
Internal Revenue Code if the Board of Directors is satisfied, based upon
information required to be provided by the party seeking the waiver and, if it
determines necessary or advisable, upon an opinion of counsel satisfactory to
our Board of Directors, that ownership in excess of this limit will not cause a
person who is an individual to be treated as owning shares in excess of the
ownership limit, applying the applicable constructive ownership rules, and will
not otherwise jeopardize our status as a REIT for federal income tax purposes
(for example, by causing any of our tenants to be considered a "related party
tenant" for purposes of the REIT qualification rules). Common stock acquired or
held in violation of the ownership limit will be transferred automatically to a
trust for the benefit of a designated charitable beneficiary, and the person who
acquired the common stock in violation of the ownership limit will not be
entitled to any distributions thereon, to vote those shares of common stock or
to receive any proceeds from the subsequent sale of the common stock in excess
of the lesser of the price paid for the common stock or the amount realized from
the sale. A transfer of shares of our common stock to a person who, as a result
of the transfer, violates the ownership limit may be void under certain
circumstances, and, in any event, would deny that person any of the economic
benefits of owning shares of our common stock in excess of the ownership limit.
The ownership limit may have the effect of delaying, deferring or preventing a
change in control and, therefore, could adversely affect the shareholders'
ability to realize a premium over the then-prevailing market price for our
common stock in connection with such transaction.
We depend on external sources of capital for future growth. As with other
REITs, but unlike corporations generally, our ability to reduce our debt and
finance our growth largely must be funded by external sources of capital because
we generally will have to distribute to our shareholders 90% of our taxable
income in order to qualify as a REIT, including taxable income we recognize for
tax purposes but with regard to which we do not receive corresponding cash. Our
access to external capital will depend upon a number of factors, including
general market conditions, the market's perception of our growth potential, our
current and potential future earnings, cash distributions and the market price
of our common stock.
Shares of our common stock that are or become available for sale could
affect the price for shares of our common stock. Sales of a substantial number
of shares of our common stock, or the perception that sales could occur, could
adversely affect prevailing market prices for our common stock. In addition,
holders of units of limited partnership interest in the Operating Partnership
(referred to as "OP Units"), who redeem their OP Units and receive common stock
upon redemption will be able to sell those shares freely, unless the person is
our affiliate and resale of the affiliate's shares is not covered by an
effective registration statement. There are currently approximately 22.1 million
OP Units outstanding (not including OP Units held directly or indirectly by us),
all of which are currently redeemable. Further, a substantial number of shares
of our common stock have been and will be issued or reserved for issuance from
time to time under our employee benefit plans, including shares of our common
stock reserved for options, and these shares of common stock would be available
for sale in the public markets from time to time pursuant to exemptions from
registration or upon registration. Moreover, the issuance of additional shares
of our common stock by us in the future would be available for sale in the
public markets. We can make no prediction about the effect that future sales of
our common stock would have on the market price of our common stock.
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Our earnings and cash distributions will affect the market price of shares
of our common stock. We believe that the market value of a REIT's equity
securities is based primarily upon the market's perception of the REIT's growth
potential and its current and potential future cash distributions, whether from
operations, sales, acquisitions, development or refinancings, and is secondarily
based upon the value of the underlying assets. For that reason, shares of our
common stock may trade at prices that are higher or lower than the net asset
value per share. To the extent we retain operating cash flow for investment
purposes, working capital reserves or other purposes rather than distributing
the cash flow to shareholders, these retained funds, while increasing the value
of our underlying assets, may negatively affect the market price of our common
stock. Our failure to meet the market's expectation with regard to future
earnings and cash distributions would likely adversely affect the market price
of our common stock.
Market interest rates may affect the price of shares of our common stock.
We believe that one of the factors that investors consider important in deciding
whether to buy or sell shares of a REIT is the distribution rate on the shares,
considered as a percentage of the price of the shares, relative to market
interest rates. If market interest rates increase, prospective purchasers of
REIT shares may expect a higher distribution rate. Thus, higher market interest
rates could cause the market price of our shares to go down.
Risks of Operation
Our revenues and the value of our properties are subject to conditions
affecting the lodging industry. Our revenues and the value of our properties are
subject to conditions affecting the lodging industry. These include:
o changes in the national, regional and local economic climate
o changes in business and pleasure travel
o local conditions such as an oversupply of hotel properties or a
reduction in demand for hotel rooms
o the attractiveness of our hotels to consumers and competition from
comparable hotels
o the quality, philosophy and performance of the managers of our hotels
o changes in room rates and increases in operating costs due to inflation
and other factors and
o the need to periodically repair and renovate our hotels.
As a result of the effects of the economic recession and the September 11,
2001 terrorist attacks, the lodging industry has experienced a significant
decline in business caused by a reduction in travel for both business and
pleasure. We currently expect that the decline in operating levels will continue
in 2002. Additionally, as a result of the September 11 terrorist attacks and the
collapse of the World Trade Center Towers, our New York World Trade Center
Marriott hotel was destroyed. We also sustained considerable damage to a second
property, the New York Marriott Financial Center hotel.
Room revenues of our hotels decreased during 2001 as a result of the
continuing economic recession. For the third quarter ended September 7, 2001 our
comparable RevPAR decreased 11.9% due to a decrease in occupancy of 5.9
percentage points to 73.8% combined with a decline in the average room rate of
4.9% to $140.17. Our comparable RevPAR for the three quarters ended September 7,
2001 showed a more moderate decline of 6.1% as a result of a decline of 5.0
percentage points in occupancy, offset by a slight increase of 0.3% in average
room rate. Comparable RevPAR refers to revenues per available room for hotels
which were owned for the full comparison period in both the current and the
previous year.
During the 4-week period subsequent to the events of September 11, 2001,
our hotels recorded average weekly occupancy rates of 38% to 63%. During that
period, we had a very high level of large group cancellations in the fourth
quarter which represented approximately $70 million in future revenue primarily
affecting our luxury and larger convention hotels. We do not believe that this
period will be representative of the fourth quarter results. However, we do
expect that our results from operations for the fourth quarter will reflect a
significant decline in RevPAR. We have been actively working with the managers
of our hotels to reduce the operating costs of our hotels, as well as to provide
economic incentives to individuals and business travelers in selected markets to
increase demand. In addition, based on our assessment of the current operating
environment and to conserve capital, we have reduced or suspended all
non-essential capital expenditure projects.
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As a result of a gradual return to more normal levels of business, we have
begun to see modest improvements in occupancy and average room rates, though
they remain below prior year levels. However, it is likely that our fourth
quarter results will be significantly lower than the prior year period. There
can be no assurance that the current economic recession will not continue for an
extended period of time and that it will not significantly affect our
operations.
If, as a result of conditions such as those referenced above affecting the
lodging industry, our assets do not generate income sufficient to pay our
expenses, we will be unable to service our debt and maintain our properties.
Thirty-one of our hotels and assets related thereto are subject to
mortgages in an aggregate amount of approximately $2.3 billion. If these hotels
do not produce adequate cash flow to service the debt represented by such
mortgages, the mortgage lenders could foreclose on such assets and we would lose
such assets. If the cash flow on such properties were not sufficient to provide
us with an adequate return, we could opt to allow such foreclosure rather than
making necessary mortgage payments with funds from other sources.
Our expenses may remain constant even if our revenue drops. The expenses of
owning property are not necessarily reduced when circumstances like market
factors and competition cause a reduction in income from the property. Because
of the effects of the September 11, 2001 terrorist attacks and the current
economic recession, we are working with our managers to substantially reduce the
operating costs of our hotels. In addition, based on our assessment of the
current operating environment, and in order to conserve capital, we have reduced
or suspended all non-essential capital expenditure projects. Nevertheless, our
financial condition could be adversely affected by the following costs:
o interest rate levels
o debt service levels (including on loans secured by mortgages)
o the availability of financing
o the cost of compliance with government regulation, including zoning and
tax laws and
o changes in governmental regulations, including those governing usage,
zoning and taxes.
If we are unable to reduce our expenses to reflect our current reduction in
revenue and the reduction that we expect in the future, our business will be
adversely affected.
We do not control our hotel operations, and we are dependent on the
managers of our hotels. Because federal income tax laws restrict REITs and their
subsidiaries from operating a hotel, we do not manage our hotels. Instead, we
retain third-party managers including, among others, Marriott International,
Hyatt, Four Seasons and Swissotel, to manage our hotels pursuant to management
agreements. Our income from the hotels may be adversely affected if the managers
fail to provide quality services and amenities and competitive room rates at our
hotels or fail to maintain the quality of the hotel brand names. While HMT
Lessee LLC, a taxable REIT subsidiary of ours that is the lessee of
substantially all of our full-service properties, monitors the hotel managers'
performance, we have limited specific recourse if we believe that the hotel
managers are not performing adequately. Underperformance by our hotel managers
could adversely affect our results of operations.
Our relationships with our hotel managers are primarily contractual in
nature, although certain of our managers owe fiduciary duties to us under
applicable law. We are in discussions with various managers of our hotels
regarding their performance under management agreements for our hotels. We have
had, and continue to have, differences with the managers of our hotels over
their performance and compliance with the terms of our agreements. We generally
resolve disputes with our managers through discussions and negotiations.
However, if we are unable to reach satisfactory results through discussions and
negotiations, we also occasionally may engage in litigation with our managers.
For example, we are currently engaged in litigation with Swissotel, the manager
of four of our hotels. If we fail to reach satisfactory resolution with respect
to any disputes, the operation of our hotels could be adversely affected.
Our relationship with Marriott International may result in conflicts of
interest. Marriott International, a public hotel management company, and its
affiliates, manages or franchises 109 of our 121 hotels. In addition, Marriott
International manages
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and in some cases may own or be invested in hotels that compete with our hotels.
As a result, Marriott International may make decisions regarding competing
lodging facilities that it manages that would not necessarily be in our best
interests. J.W. Marriott, Jr. is a member of our Board of Directors and his
brother, Richard E. Marriott, is our Chairman of the Board. Both J.W. Marriott,
Jr. and Richard E. Marriott serve as directors, and J.W. Marriott, Jr. also
serves as an executive officer, of Marriott International. J.W. Marriott, Jr.
and Richard E. Marriott beneficially owned, as determined for securities law
purposes, as of January 31, 2001, approximately 12.6% and 12.2%, respectively,
of the outstanding shares of common stock of Marriott International. As a
result, J.W. Marriott, Jr. and Richard E. Marriott have potential conflicts of
interest as our directors when making decisions regarding Marriott
International, including decisions relating to the management agreements
involving the hotels and Marriott International's management of competing
lodging properties.
Our Board of Directors follows policies and procedures intended to limit
the involvement of J.W. Marriott, Jr. and Richard E. Marriott in conflict
situations, including requiring them to abstain from voting as directors on
matters which present a conflict between the companies. If appropriate, these
policies and procedures will apply to other directors and officers.
We have substantial leverage. We have a significant amount of indebtedness
that could have important consequences. It currently requires us to dedicate a
substantial portion of our cash flow from operations to payments on our
indebtedness, which reduces the availability of our cash flow to fund working
capital, capital expenditures, expansion efforts, distributions to our partners
and other general purposes. Additionally, it could:
o limit our ability in the future to undertake refinancings of our debt
or obtain financing for expenditures, acquisitions, development or
other general business purposes on terms and conditions acceptable to
us, if at all, or
o affect adversely our ability to compete effectively or operate
successfully under adverse economic conditions.
If our cash flow and working capital were not sufficient to fund our
expenditures or service our indebtedness, we would have to raise additional
funds through:
o the sale of our equity
o the incurrence of additional permitted indebtedness or
o the sale of our assets.
We cannot assure you that any of these sources of funds would be available
to us or, if available, would be on terms that we would find acceptable or in
amounts sufficient for us to meet our obligations or fulfill our business plan.
For example, under the terms of our bank credit facility, the proceeds from
these activities must be used to repay amounts outstanding and may not be
otherwise available for our use.
There is no limitation on the amount of debt we may incur. There are no
limitations in our organizational documents that limit the amount of
indebtedness that we may incur. However, our existing debt instruments contain
restrictions on the amount of indebtedness that we may incur. If we became more
highly leveraged, our debt service payments would increase and our cash flow and
our ability to service our debt and other obligations might be adversely
affected.
The terms of our debt place restrictions on us and our subsidiaries,
reducing operational flexibility and creating default risks. The documents
governing the terms of our senior notes and bank credit facility contain
covenants that place restrictions on us and our subsidiaries. The activities
upon which such restrictions exist include, but are not limited to:
o acquisitions, merger and consolidations
o the incurrence of additional debt
o the creation of liens
o the sale of assets
o capital expenditures
6
o raising capital
o the payment of dividends and
o transactions with affiliates.
In addition, certain covenants in our bank credit facility require us and
our subsidiaries to meet financial performance tests. The restrictive covenants
in the indenture, the bank credit facility and the documents governing our other
debt (including our mortgage debt) will reduce our flexibility in conducting our
operations and will limit our ability to engage in activities that may be in our
long-term best interest. Our failure to comply with these restrictive covenants
could result in an event of default that, if not cured or waived, could result
in the acceleration of all or a substantial portion of our debt or a significant
increase in the interest rates on our debt, either of which could adversely
affect our operations and ability to maintain adequate liquidity.
As a result of the effects on our business of the economic recession and
the events of September 11, 2001, we anticipate that in the future we may fail
to comply with certain financial covenants under the documents governing certain
of our indebtedness. As a result of the effects on our business of the economic
recession and the events of September 11, 2001, we have entered into an
amendment to our bank credit facility, effective November 19, 2001, which among
other things:
o adjusts certain financial covenants so as to require us to meet less
stringent levels in respect of (a) a minimum consolidated interest
coverage ratio and a minimum unsecured interest coverage ratio until
September 6, 2002 and (b) the maximum leverage ratio through August
15, 2002
o suspends until September 6, 2002 the minimum fixed charge coverage
ratio test that we must meet
o limits draws under the revolver portion of our bank credit facility to
(a) $50 million in the first quarter of 2002 and (b) up to $25 million
in the second quarter of 2002 (but only if draws in the second quarter
of 2002 do not cause the aggregate amount drawn in 2002 and then
outstanding to exceed $25 million) and
o increases the interest rate based on higher leverage levels.
In addition, the amendment imposes restrictions and requirements through
August 15, 2002 which include, among others:
o restricting our ability to pay on our equity securities and our QUIPs
convertible debt obligations unless projections indicate such payment
is necessary to maintain our REIT status and/or unless we are below
certain leverage levels
o restricting our ability to incur additional indebtedness and requiring
that we apply all net proceeds of permitted incurrences of
indebtedness to repay outstanding amounts under the bank credit
facility
o requiring us to apply all net proceeds from capital contributions to
the Operating Partnership or from sales of equity by us to repay
outstanding amounts under the bank credit facility
o requiring us to use all net proceeds from the sale of assets to repay
indebtedness under the bank credit facility
o restricting our ability to make acquisitions and investments unless the
asset to be acquired has a leverage ratio of 3.5 to 1.0 or below
o restricting our investments in subsidiaries and
o restricting our capital expenditures.
The amendment also permits us (i) to retain in escrow any casualty
insurance proceeds that we receive from insurance policies covering the New York
World Trade Center Marriott and the New York Marriott Financial Center until
such proceeds are applied toward the restoration of the New York Marriott
Financial Center and the construction of a new hotel that replaces the New York
World Trade Center Marriott, or (ii) to apply such insurance proceeds to the
payment of amounts due to certain third parties, including the New York World
Trade Center Marriott ground lessor, mortgage lender and Marriott International
as manager. Any proceeds (other than business interruption insurance proceeds)
not so used would be used to repay amounts outstanding under the bank credit
facility. The amendment also allows us to include business interruption proceeds
that we
7
receive for the New York World Trade Center Marriott and the New York Marriott
Financial Center hotels in our calculation of consolidated EBITDA for purposes
of our financial covenants.
As of December 31, 2001 we have no amounts outstanding under our bank
credit facility.
We anticipate that if we decide to re-draw the amounts available under the
bank credit facility, we would have to refinance or repay our bank credit
facility or obtain another amendment from our lenders to adjust the leverage
ratio applicable after August 15, 2002 and, possibly, other financial covenants
applicable at the end of our third quarter of 2002. We intend to amend or
replace the bank credit facility prior to August 15, 2002. There can be no
assurance that we will be able to amend or replace the bank credit facility on
terms any more favorable than those currently in effect, if at all. Any default
under the bank credit facility or any successor credit facility that results in
an acceleration of its final stated maturity could constitute an event of
default under the indenture with respect to all outstanding series of senior
notes issued thereunder.
We are currently in compliance with the terms and restrictive covenants of
our bank credit facility. As a result of entering into the recent amendment, and
obtaining the relief from the financial covenants described above, we expect to
remain in compliance with our bank credit facility through at least August 15,
2002, the date after which our maximum leverage ratio will return to the levels
that were in effect prior to this amendment. We anticipate that, if adverse
operating conditions continue at currently forecasted levels, we will not be
able to comply with the leverage ratio applicable after August 15, 2002 or other
financial tests applicable at the end of our third quarter of 2002 (September 6,
2002). If we fail to comply with the leverage ratio or any other covenant of the
bank credit facility, we would be in default under the bank credit facility.
Under the indenture pursuant to which nearly all of our outstanding senior
notes were issued, we and our restricted subsidiaries are generally prohibited
from incurring additional indebtedness unless, at the time of such incurrence,
we would satisfy the requirements set forth in the indenture. One of these
requirements is that, after giving effect to any such new incurrence, on a pro
forma basis, our consolidated coverage ratio cannot be less than 2.0 to 1.0. As
a result of the effects on our business of the economic recession and the
September 11, 2001 terrorist attacks, we anticipate that any consolidated
coverage ratio that is calculated under the indenture after the end of our first
quarter 2002 may be less than 2.0 to 1.0. If this occurs, then we will be
prohibited from incurring indebtedness and from issuing disqualified stock under
the indenture other than the indebtedness that we and our restricted
subsidiaries are specifically permitted to incur under certain exceptions to
this prohibition set forth in the indenture. Our failure to maintain a
consolidated coverage ratio of greater than or equal to 2.0 to 1.0 could limit
our ability to engage in activities that may be in our long-term best interest.
Our management agreements could impair the sale or financing of our hotels.
Under the terms of the management agreements, we generally may not sell, lease
or otherwise transfer the hotels unless the transferee is not a competitor of
the manager, and the transferee assumes the related management agreements and
meets specified other conditions. Our ability to finance, refinance or sell any
of the properties may, depending upon the structure of such transactions,
require the manager's consent. If the manager does not consent, we would be
prohibited from financing, refinancing or selling the property without breaching
the management agreement.
The acquisition contracts relating to some hotels limit our ability to sell
or refinance those hotels. For reasons relating to federal income tax
considerations of the former and current owners of approximately 20 of our
full-service hotels, we agreed to restrictions on selling some hotels or
repaying or refinancing the mortgage debt on those hotels for varying periods
depending on the hotel. We anticipate that, in specified circumstances, we may
agree to similar restrictions in connection with future hotel acquisitions. As a
result, even if it were in our best interests to sell or refinance the mortgage
debt on these hotels, it may be difficult or impossible to do so during their
respective lock-out periods.
Our ground lease payments may increase faster than the revenues we receive
on the hotels. As of January 31, 2002, we leased 45 of our hotels pursuant to
ground leases. These ground leases generally require increases in ground rent
payments every five years. Our ability to service our debt could be adversely
affected to the extent that our revenues do not increase at the same or a
greater rate as the increases under the ground leases. In addition, if we were
to sell a hotel encumbered by a ground lease, the buyer would have to assume the
ground lease, which could result in a lower sales price. Moreover, to the extent
that such ground leases are not renewed at their expiration, our revenues could
be adversely affected.
We may be unable to sell properties when appropriate because real estate
investments are illiquid. Real estate investments generally cannot be sold
quickly. We may not be able to vary our portfolio promptly in response to
economic or other conditions. The inability to respond promptly to changes in
the performance of our investments could adversely affect our financial
condition and ability to service debt. In addition, there are limitations under
the federal tax laws applicable to REITs and
8
agreements that we have entered into when we acquired some of our properties
that may limit our ability to recognize the full economic benefit from a sale of
our assets.
We depend on our key personnel. We depend on the efforts of our executive
officers and other key personnel. While we believe that we could find
replacements for these key personnel, the loss of their services could have a
significant adverse effect on our operations. None of our key personnel have
employment agreements. We do not have or intend to obtain key-man life insurance
with respect to any of our personnel.
Partnership and other litigation judgments or settlements could have a
material adverse effect on our financial condition. We are a party to various
lawsuits relating to previous partnership transactions, including transactions
relating to our conversion into a REIT. While we and the other defendants to
such lawsuits believe all of the lawsuits in which we are a defendant are
without merit and we are vigorously defending against such claims, we can give
no assurance as to the outcome of any of the lawsuits. If any of the lawsuits
were to be determined adversely to us or a settlement involving a payment of a
material sum of money were to occur, there could be a material adverse effect on
our financial condition.
We may acquire hotel properties through joint ventures with third parties
that could result in conflicts. Instead of purchasing hotel properties directly,
we may invest as a co-venturer. Joint venturers often share control over the
operation of the joint venture assets. For example, through our subsidiary
Rockledge Hotel Properties, Inc., we entered into a joint venture with Marriott
International through which the joint venture owns two limited partnerships
holding, in the aggregate, 120 Courtyard by Marriott hotels. Subsidiaries of
Marriott International manage these Courtyard by Marriott hotels. Actions by a
co-venturer, particularly Marriott International, could subject the assets to
additional risk, including:
o our co-venturer in an investment might have economic or business
interests or goals that are inconsistent with our interests or goals
o our co-venturer may be in a position to take action contrary to our
instructions or requests or contrary to our policies or objectives or
o a joint venture partner could go bankrupt, leaving us liable for its
share of joint venture liabilities.
Although we generally will seek to maintain sufficient control of any joint
venture to permit our objectives to be achieved, we might not be able to take
action without the approval of our joint venture partners. Also, our joint
venture partners could take actions binding on the joint venture without our
consent. For further discussion of the risks associated with entering into a
joint venture with Marriott International, see the discussion above under "Our
relationship with Marriott International may result in conflicts of interest".
Environmental problems are possible and can be costly. We believe that our
properties are in compliance in all material respects with applicable
environmental laws. Unidentified environmental liabilities could arise, however,
and could have a material adverse effect on our financial condition and
performance. Federal, state and local laws and regulations relating to the
protection of the environment may require a current or previous owner or
operator of real estate to investigate and clean up hazardous or toxic
substances or petroleum product releases at the property. The owner or operator
may have to pay a governmental entity or third parties for property damage and
for investigation and clean-up costs incurred by the parties in connection with
the contamination. These laws typically impose clean-up responsibility and
liability without regard to whether the owner or operator knew of or caused the
presence of the contaminants. Even if more than one person may have been
responsible for the contamination, each person covered by the environmental laws
may be held responsible for all of the clean-up costs incurred. In addition,
third parties may sue the owner or operator of a site for damages and costs
resulting from environmental contamination emanating from that site.
Environmental laws also govern the presence, maintenance and removal of
asbestos. These laws require that owners or operators of buildings containing
asbestos properly manage and maintain the asbestos, that they notify and train
those who may come into contact with asbestos and that they undertake special
precautions, including removal or other abatement, if asbestos would be
disturbed during renovation or demolition of a building. These laws may impose
fines and penalties on building owners or operators who fail to comply with
these requirements and may allow third parties to seek recovery from owners or
operators for personal injury associated with exposure to asbestos fibers.
Compliance with other government regulations can also be costly. Our hotels
are subject to various other forms of regulation, including Title III of the
Americans with Disabilities Act, building codes and regulations pertaining to
fire safety. Compliance with those laws and regulations could require
substantial capital expenditures. These regulations may be changed from time to
time, or new regulations adopted, resulting in additional or unexpected costs of
compliance. Any increased costs could have a material adverse effect on our
business, financial condition or results of operations.
9
Some potential losses are not covered by insurance. We carry comprehensive
insurance coverage for general liability, property, business interruption and
other risks with respect to all of our hotels and other properties. These
policies offer coverage features and insured limits that we believe are
customary for similar type properties. Generally, the policies provide coverage
and limits on a blanket basis, combining the claims of our properties together
for evaluation against policy aggregate limits and sub-limits and, in the case
of our Marriott-managed hotels, with other Marriott-managed hotels of other
owners. Thus, for certain risks (e.g., earthquake), multiple claims from several
hotels or owners may exceed policy sub-limits. Certain other risks (e.g., war
and environmental hazards), however, may be uninsurable or too expensive to
justify insuring against. Furthermore, an insurance provider could elect to deny
or limit coverage under a claim. Should an uninsured loss or a loss in excess of
insured limits occur, or should an insurance carrier deny or limit coverage
under a claim, we could lose all, or a portion of, the capital we have invested
in a property, as well as the anticipated future revenue from the hotel. In that
event, we might nevertheless remain obligated for any mortgage debt or other
financial obligations related to the property.
As discussed below in "Recent or future terrorist attacks could adversely
affect us", on September 11, 2001, terrorist attacks on the World Trade Center
Towers in New York City resulted in the destruction of our New York World Trade
Center Marriott hotel and caused considerable damage to our New York Marriott
Financial Center hotel. Although we have both casualty and business interruption
insurance for our two affected hotels with a major insurer through our manager,
Marriott International, from which we expect to receive business interruption
insurance and property damage insurance proceeds to cover all or a substantial
portion of the losses at both hotels, we cannot currently determine the amount
or timing of those payments. Under the terms of the New York World Trade Center
Marriott ground lease, any proceeds from the casualty portion of the hotel claim
are required to be placed in an insurance trust for the exclusive purpose of
rebuilding the hotel. As of December 1, 2001, we had received business
interruption and casualty advances from our insurers in an aggregate amount of
$11.1 million of which approximately $2.5 million was for casualty insurance
proceeds relating to the New York Marriott Financial Center. Under the terms of
our amended bank credit facility, casualty insurance proceeds that we receive
from insurance coverage on the New York World Trade Center Marriott and New York
Marriott Financial Center are to be retained in escrow until applied as
described in "--As a result of the effects on our business of the economic
recession and the events of September 11, 2001, we anticipate that in the future
we may fail to comply with certain financial covenants under the documents
governing certain of our indebtedness." If the amount of such insurance proceeds
is substantially less than our actual losses or if the payments are
substantially delayed, it could have a material adverse effect on our business.
Recent or future terrorist attacks could adversely affect us. On September
11, 2001, several aircraft that were hijacked by terrorists destroyed the World
Trade Center Towers in New York City and damaged the Pentagon in northern
Virginia. As a result of the attacks and the collapse of the World Trade Center
Towers, our New York World Trade Center Marriott hotel was destroyed and we
sustained considerable damage to our New York Marriott Financial Center hotel.
Subsequent to the attacks, the Federal Aviation Administration closed United
States airspace to commercial traffic for several days. The aftermath of these
events, together with an economic recession, has adversely affected the travel
and hospitality industries, including the full-service hotel industry. The
impact which these terrorist attacks, or future events such as military or
police activities in the United States or foreign countries, future terrorist
activities or threats of such activities, biological or chemical weapons
attacks, political unrest and instability, interruptions in transportation
infrastructure, riots and protests, could have on our business in particular and
the United States economy, the global economy, and global financial markets in
general cannot presently be determined. It is possible that these factors could
have a material adverse effect on our business, our ability to finance our
business, our ability to insure our properties (see "We may not be able to
obtain new insurance for our hotels or to obtain insurance at acceptable premium
levels" below), and on our financial condition and results of operations as a
whole.
We may not be able to obtain new insurance for our hotels or to obtain
insurance at acceptable premium levels. Due to changes in the insurance market
arising prior to September 11, 2001 and the effects of the terrorist attacks on
September 11, 2001, it is becoming more difficult and more expensive to obtain
insurance. Our current insurance policies on our hotels generally reach the end
of their terms on April 1, 2002. We may encounter difficulty in obtaining or
renewing property or casualty insurance on our properties. In addition, such
insurance may be more limited and for some catastrophic risks (e.g., earthquake,
flood and terrorism) may not be generally available at all or at current levels.
Even if we are able to renew our policies or to obtain new policies at levels
and with limitations consistent with our current policies, we cannot be sure
that we will be able to obtain such insurance at premium rates that are
commercially reasonable. Our inability to obtain insurance on our properties
could cause us to be in default under covenants on our debt instruments or other
contractual commitments we have which require us to maintain adequate insurance
on our properties to protect against the risk of loss. If this were to occur, or
if we were unable to obtain insurance and our properties experienced damages
which would otherwise have been covered by insurance, it could materially
adversely affect our business and the conditions of our properties.
10
Federal Income Tax Risks
To qualify as a REIT, we are required to distribute at least 90% of our
taxable income, irrespective of our available cash or outstanding obligations.
To continue to qualify as a REIT, we currently are required to distribute to our
shareholders with respect to each year at least 90% of our taxable income,
excluding net capital gain. In addition, we will be subject to a 4%
nondeductible excise tax on the amount, if any, by which distributions made by
us with respect to the calendar year are less than the sum of 85% of our
ordinary income and 95% of our capital gain net income for that year and any
undistributed taxable income from prior periods. We intend to make distributions
to our shareholders to comply with the distribution requirement and to avoid the
nondeductible excise tax and will rely for this purpose on distributions from
the Operating Partnership. However, there are differences in timing between our
recognition of taxable income and our receipt of cash available for distribution
due to, among other things, the seasonality of the lodging industry and the fact
that some taxable income will be "phantom" income, which is taxable income that
is not matched by cash flow, or EBITDA, to us. Due to some transactions entered
into in years prior to the REIT conversion, we expect to recognize substantial
amounts of "phantom" income. There is a distinct possibility that these timing
differences could require us to borrow funds or to issue additional equity to
enable us to meet the distribution requirement and, therefore, to maintain our
REIT status, and to avoid the nondeductible excise tax. In addition, because the
REIT distribution requirements prevent us from retaining earnings, we will
generally be required to refinance debt that matures with additional debt or
equity. We cannot assure you that any of these sources of funds, if available at
all, would be sufficient to meet our distribution and tax obligations.
Adverse tax consequences would apply if we failed to qualify as a REIT. We
believe that we have been organized and have operated in such a manner so as to
qualify as a REIT under the Internal Revenue Code, commencing with our taxable
year beginning January 1, 1999, and we currently intend to continue to operate
as a REIT during future years. No assurance can be provided, however, that we
qualify as a REIT or that new legislation, Treasury Regulations, administrative
interpretations or court decisions will not significantly change the tax laws
with respect to our qualification as a REIT or the federal income tax
consequences of our REIT qualification. If we fail to qualify as a REIT, we will
be subject to federal and state income tax, including any applicable alternative
minimum tax, on our taxable income at regular corporate rates. In addition,
unless entitled to statutory relief, we would not qualify as a REIT for the four
taxable years following the year during which REIT qualification is lost. The
additional tax burden on us would significantly reduce the cash available for
distribution by us to our shareholders, and we would no longer be required to
make any distributions to shareholders. Our failure to qualify as a REIT could
reduce materially the value of our common stock and would cause any
distributions to shareholders that otherwise would have been subject to tax as
capital gain dividends to be taxable as ordinary income to the extent of our
current and accumulated earnings and profits, or "E&P." However, subject to
limitations under the Internal Revenue Code, corporate distributees may be
eligible for the dividends received deduction with respect to our distributions.
Our failure to qualify as a REIT also would cause an event of default under our
credit facility that could lead to an acceleration of the amounts due under the
credit facility, which, in turn, would constitute an event of default under our
outstanding debt securities.
We will be disqualified as a REIT at least for taxable year 1999 if we
failed to distribute all of our E&P attributable to our non-REIT taxable years.
In order to qualify as a REIT, we cannot have at the end of any taxable year any
undistributed E&P that is attributable to one of our non-REIT taxable years. A
REIT has until the close of its first taxable year as a REIT in which it has
non-REIT E&P to distribute its accumulated E&P. We were required to have
distributed this E&P prior to the end of 1999, the first taxable year for which
our REIT election was effective. If we failed to do this, we will be
disqualified as a REIT at least for taxable year 1999. We believe that
distributions of non-REIT E&P that we made were sufficient to distribute all of
the non-REIT E&P as of December 31, 1999, but we cannot guarantee that we met
this requirement.
If our leases are not respected as true leases for federal income tax
purposes, we would fail to qualify as a REIT. To qualify as a REIT, we must
satisfy two gross income tests, under which specified percentages of our gross
income must be passive income, like rent. For the rent paid pursuant to the
leases, which constitutes substantially all of our gross income, to qualify for
purposes of the gross income tests, the leases must be respected as true leases
for federal income tax purposes and not be treated as service contracts, joint
ventures or some other type of arrangement. In addition, the lessees must not be
regarded as "related party tenants," as defined in the Internal Revenue Code. We
believe that the leases will be respected as true leases for federal income tax
purposes. There can be no assurance, however, that the IRS will agree with this
view. We also believe that Crestline Capital Corporation, the lessee of
substantially all of our full-service hotels prior to January 1, 2001, was not a
"related party tenant" and, as a result of changes in the tax laws effective
January 1, 2001, HMT Lessee will not be treated as a "related party tenant" so
long as it qualifies as a "taxable REIT subsidiary." If the leases were not
respected as true leases for federal income tax purposes or if the lessees were
regarded as "related party tenants," we would not be able to satisfy either of
the two gross income tests applicable to REITs and we would lose our REIT
status. See "Risk Factors--Federal Income Tax Risks--Adverse tax consequences
would apply if we failed to qualify as a REIT" above.
11
If HMT Lessee fails to qualify as a taxable REIT subsidiary, we would fail
to qualify as a REIT. For our taxable years beginning on and after January 1,
2001, as a result of REIT tax law changes under the specific provisions of the
Ticket to Work and Work Incentives Improvement Act of 1999 relating to REITs (we
refer to those provisions as the "REIT Modernization Act"), we are permitted to
lease our hotels to a subsidiary of the Operating Partnership that is taxable as
a corporation and that elects to be treated as a "taxable REIT subsidiary."
Accordingly, effective January 1, 2001, HMT Lessee directly or indirectly
acquired all but one of the full-service hotel leasehold interests formerly held
by Crestline. So long as HMT Lessee and other affiliated lessees qualify as
taxable REIT subsidiaries of ours, they will not be treated as "related party
tenants." As of June 15, 2001, we acquired the one remaining leasehold interest
from Crestline. In addition, as of July 1, 2001, we acquired the four remaining
leasehold interests from third parties. We believe that HMT Lessee qualifies to
be treated as a taxable REIT subsidiary for federal income tax purposes. We
cannot assure you, however, that the IRS will not challenge its status as a
taxable REIT subsidiary for federal income tax purposes, or that a court would
not sustain such a challenge. If the IRS were successful in disqualifying HMT
Lessee from treatment as a taxable REIT subsidiary, we would fail to meet the
asset tests applicable to REITs and substantially all of our income would fail
to qualify for the gross income tests and, accordingly, we would cease to
qualify as a REIT. See "Risk Factors--Federal Income Tax Risks--Adverse tax
consequences would apply if we failed to qualify as a REIT" above.
Despite our REIT status, we remain subject to various taxes, including
substantial deferred and contingent tax liabilities. Notwithstanding our status
as a REIT, we are subject, through our ownership interest in the Operating
Partnership, to certain federal, state, local and foreign taxes on our income
and property. In addition, we will be required to pay federal tax at the highest
regular corporate rate upon our share of any "built-in gain" recognized as a
result of any sale before January 1, 2009, by the Operating Partnership of
assets, including the hotels, in which interests were acquired by the Operating
Partnership from our predecessor and its subsidiaries as part of the REIT
conversion. Built-in gain is the amount by which an asset's fair market value
exceeded our adjusted basis in the asset on January 1, 1999, the first day of
our first taxable year as a REIT. The total amount of gain on which we would be
subject to corporate income tax if the assets that we held at the time of the
REIT conversion were sold in a taxable transaction prior to January 1, 2009
would be material to us. In addition, at the time of the REIT conversion, we
expected that we or Rockledge Hotel Properties, Inc. or Fernwood Hotel Assets,
Inc. (each of which is a taxable corporation in which the Operating Partnership
owned a 95% nonvoting interest until April, 2001 when the Operating Partnership
purchased the remaining 5% voting interest) likely would recognize substantial
built-in gain and deferred tax liabilities in the next ten years without any
corresponding receipt of cash by us or the Operating Partnership. We may have to
pay certain state income taxes because not all states treat REITs the same as
they are treated for federal income tax purposes. We may also have to pay
certain foreign taxes to the extent we own assets or conduct operations in
foreign jurisdictions. The Operating Partnership is obligated under its
partnership agreement to pay all such taxes (and any related interest and
penalties) incurred by us, as well as any liabilities that the IRS may assert
against us for corporate income taxes for taxable years prior to the time we
qualified as a REIT. Our taxable REIT subsidiaries, including Rockledge,
Fernwood and HMT Lessee, are taxable as corporations and will pay federal, state
and local income tax on their net income at the applicable corporate rates, and
foreign taxes to the extent they own assets or conduct operations in foreign
jurisdictions.
If the IRS were to challenge successfully the Operating Partnership's
status as a partnership for federal income tax purposes, we would cease to
qualify as a REIT and suffer other adverse consequences. We believe that the
Operating Partnership qualifies to be treated as a partnership for federal
income tax purposes. As a partnership, it is not subject to federal income tax
on its income. Instead, each of its partners, including us, is required to pay
tax on its allocable share of the Operating Partnership's income. No assurance
can be provided, however, that the IRS will not challenge its status as a
partnership for federal income tax purposes, or that a court would not sustain
such a challenge. If the IRS were successful in treating the Operating
Partnership as a corporation for tax purposes, we would fail to meet the income
tests and certain of the asset tests applicable to REITs and, accordingly, cease
to qualify as a REIT. If the Operating Partnership fails to qualify as a
partnership for federal income tax purposes or we fail to qualify as a REIT,
either failure would cause an event of default under our credit facility that,
in turn, could constitute an event of default under our outstanding debt
securities. Also, the failure of the Operating Partnership to qualify as a
partnership would cause it to become subject to federal and state corporate
income tax, which would reduce significantly the amount of cash available for
debt service and for distribution to its partners, including us. Finally, the
classification of the Operating Partnership as a corporation would cause us to
recognize gain at least equal to our "negative capital account," if any.
As a REIT, we are subject to limitations on our ownership of debt and
equity securities. Subject to the exceptions discussed in this paragraph, a REIT
is prohibited from owning securities in any one issuer if the value of those
securities exceeds 5% of the value of the REIT's total assets or the securities
owned by the REIT represent more than 10% of the issuer's outstanding voting
securities or more than 10% of the value of the issuer's outstanding securities.
A REIT is permitted to own securities of a subsidiary in an amount that exceeds
the 5% value test and the 10% vote or value test if the subsidiary elects to be
a "taxable REIT subsidiary," which is taxable as a corporation. However, a REIT
may not own securities of taxable REIT subsidiaries that
12
represent in the aggregate more than 20% of the value of the REIT's total
assets. Effective January 1, 2001, each of Fernwood, Rockledge and HMT Lessee
has elected to be treated as a taxable REIT subsidiary.
Our taxable REIT subsidiaries are subject to special rules that may result
in increased taxes. Several Internal Revenue Code provisions ensure that a
taxable REIT subsidiary is subject to an appropriate level of federal income
taxation. For example, a taxable REIT subsidiary is limited in its ability to
deduct interest payments made to an affiliated REIT. In addition, the REIT has
to pay a 100% penalty tax on some payments that it receives if the economic
arrangements between the REIT and the taxable REIT subsidiary are not comparable
to similar arrangements between unrelated parties.
We may be required to pay a penalty tax upon the sale of a hotel. The
federal income tax provisions applicable to REITs provide that any gain realized
by a REIT on the sale of property held as inventory or other property held
primarily for sale to customers in the ordinary course of business is treated as
income from a "prohibited transaction" that is subject to a 100% penalty tax.
Under existing law, whether property, including hotels, is held as inventory or
primarily for sale to customers in the ordinary course of business is a question
of fact that depends upon all of the facts and circumstances with respect to the
particular transaction. The Operating Partnership intends that it and its
subsidiaries will hold the hotels for investment with a view to long-term
appreciation, to engage in the business of acquiring and owning hotels and to
make occasional sales of hotels as are consistent with the Operating
Partnership's investment objectives. We cannot assure you, however, that the IRS
might not contend that one or more of these sales is subject to the 100% penalty
tax.
13
FORWARD-LOOKING STATEMENTS
This prospectus and the information incorporated by reference into this
prospectus contain forward-looking statements within the meaning of Section 27A
of the Securities Act and Section 21E of the Securities Exchange Act. Such
statements include statements regarding our expectations, hopes or intentions
regarding the future, including our strategy, competition, financing,
indebtedness, revenues, operators, regulations and compliance with applicable
laws. We identify forward-looking statements in this prospectus and the
information incorporated by reference into this prospectus by using words or
phrases such as "anticipate", "believe", "estimate", "expect", "intend", "may
be", "objective", "plan", "predict", "project", and "will be" and similar words
or phrases, or the negative thereof.
Forward-looking statements are subject to numerous assumptions, risks and
uncertainties. Factors which may cause our actual results, performance or
achievements to be materially different from any future results, performance or
achievements expressed or implied by us in those statements include, among
others, the following:
o national and local economic and business conditions, including the
effect of the terrorist attacks of September 11, 2001 on travel, that
will affect, among other things, demand for products and services at
our hotels, the level of room rates and occupancy that can be achieved
by such properties and the availability and terms of financing and our
liquidity
o our ability to restructure or refinance our existing bank credit
facility in order to maintain operating flexibility and liquidity
o our ability to maintain the properties in a first-class manner,
including meeting capital expenditure requirements
o our ability to compete effectively in areas such as access, location,
quality of accommodations and room rate structures
o our degree of leverage which may affect our ability to obtain financing
in the future
o our degree of compliance with current debt covenants
o our ability to acquire or develop additional properties and the risk
that potential acquisitions or developments may not perform in
accordance with expectations
o changes in travel patterns, taxes and government regulations which
influence or determine wages, prices, construction procedures and costs
o government approvals, actions and initiatives, including the need for
compliance with environmental and safety requirements, and changes in
laws and regulations or the interpretation thereof
o the effects of tax legislative action, including specified provisions
of the REIT Modernization Act
o our ability to satisfy complex rules in order for us to qualify as a
REIT for federal income tax purposes, the Operating Partnership's
ability to satisfy the rules in order for it to qualify as a
partnership for federal income tax purposes, and the ability of
certain of our subsidiaries to qualify as taxable REIT subsidiaries
for federal income tax purposes, and our ability and the ability of
our subsidiaries to operate effectively within the limitations imposed
by these rules, and
o other factors discussed under the heading "Risk Factors" in this
prospectus and in our other filings with the Commission.
All forward-looking statements in this prospectus and the information
incorporated by reference into this prospectus are made as of the date hereof or
thereof, and we caution you not to rely on these statements without also
considering the risks and uncertainties associated with these statements and our
business that are addressed in this prospectus and the information incorporated
by reference into this prospectus. Moreover, although we believe the
expectations reflected in our forward-looking statements are based upon
reasonable assumptions, we can give no assurance that we will attain these
expectations or that any deviations will not be material. Except as otherwise
required by the federal securities laws, we disclaim any obligations or
undertaking to disseminate to you any updates or revisions to any
forward-looking statement contained in this prospectus or any information
incorporated by reference into this prospectus.
14
THE COMPANY
We are a self-managed and self-administered REIT owning full-service hotel
properties. Through our subsidiaries, we currently own or hold controlling
interests in 121 hotels, containing approximately 58,000 rooms located
throughout the United States, in Toronto and Calgary, Canada and in Mexico City,
Mexico. Our hotels are generally operated under the Marriott, Ritz- Carlton,
Four Seasons, Hyatt, Hilton and Swissotel brand names. These brands are among
the most respected and widely recognized names in the lodging industry.
We were formed as a Maryland corporation in 1998. As part of our efforts to
reorganize our business operations to qualify as a REIT for federal income tax
purposes, on December 29, 1998 we succeeded by merger to the hotel ownership
business formerly conducted by Host Marriott Corporation, a Delaware
corporation. We conduct our business as an umbrella partnership REIT, or UPREIT,
through the Operating Partnership, which is a Delaware limited partnership of
which we are the sole general partner and in which we currently hold
approximately 92% of the partnership interests. The Operating Partnership leases
substantially all of our full-service hotels to HMT Lessee, a wholly owned
subsidiary of it that is taxed as a corporation.
Our principal executive offices are located at 10400 Fernwood Road,
Bethesda, Maryland 20817-1109, and our telephone number is (301) 380-9000.
THE OFFERING
This prospectus relates to up to 1,100,000 shares of our common stock that
may be sold by Summit Resources. Summit Resources received these shares of our
common stock upon the exchange of a portion of its limited partnership interests
in our subsidiary, Pacific Gateway, Ltd., pursuant to an agreement among Host
Marriott, the Operating Partnership, Pacific Gateway, Summit Resources and
affiliates of Summit Resources that are also limited partners of Pacific
Gateway. We refer to this agreement as the "Exchange Agreement."
NO PROCEEDS TO THE COMPANY
We will not receive any proceeds upon the sale of the common stock covered
by this prospectus, but we will incur expenses in connection with the filing of
the registration statement of which this prospectus forms a part.
TAX STATUS OF THE COMPANY
We believe that we have been organized and have operated in such a manner
so as to qualify as a REIT under the Internal Revenue Code, commencing with our
taxable year beginning January 1, 1999. A REIT generally is not taxed at the
corporate level on income it currently distributes to its shareholders as long
as it distributes currently at least 90% of its taxable income (excluding net
capital gain). No assurance can be provided that we will qualify as a REIT or
that new legislation, Treasury Regulations, administrative interpretations or
court decisions will not significantly change the tax laws with respect to our
qualification as a REIT or the federal income tax consequences of such
qualification. Even if we qualify as a REIT, we will be subject to corporate
level taxes on specified gains that we recognize prior to January 1, 2009,
including significant deferred tax gains that are likely to be recognized during
that period without our receipt of any cash. In addition, some of our
subsidiaries, including HMT Lessee, are subject to corporate income taxes. See
"Material Federal Income Tax Consequences" incorporated by reference to our Form
8-K dated February 8, 2002 for a more detailed explanation.
SELLING SHAREHOLDER
All of the 1,100,000 shares of common stock offered by Summit Resources
under this prospectus represent shares of common stock that have been issued by
us upon the exchange of limited partnership interests of Pacific Gateway. Summit
Resources owns no shares of common stock other than the shares of common stock
offered under this prospectus. Since Summit Resources may sell all, some or none
of the shares of common stock covered by this prospectus, no estimate can be
made of the number of shares of common stock that will be sold by Summit
Resources or that will be owned by Summit Resources upon completion of the
offering. The shares of common stock covered by this prospectus represent less
than 1% of the total shares of common stock outstanding as of January 31, 2002.
Summit Resources and various affiliates of Summit Resources that are
limited partners of Pacific Gateway have elected pursuant to the Exchange
Agreement to exchange an additional portion of their limited partnership
interests in Pacific Gateway
15
for approximately 2,500,000 OP Units. The Operating Partnership expects to issue
these OP Units to Summit Resources and its affiliates in March 2002. Beginning
one year after the date of their issuance, each of these OP Units will be
redeemable at the election of the holder for cash or, at our election, one share
of our common stock (subject to adjustment).
PLAN OF DISTRIBUTION
Summit Resources may from time to time, in one or more transactions, sell
all or a portion of the shares of common stock covered by this prospectus on the
New York Stock Exchange, in the over-the-counter market, on any other national
securities exchange on which the common stock is listed or traded, in negotiated
transactions or otherwise, at prices then prevailing or related to the then
current market price or at negotiated prices. The offering price of the shares
of common stock covered by this prospectus will be determined from time to time
by Summit Resources and, at the time of such determination, may be higher or
lower than the market price of the common stock on the New York Stock Exchange.
The shares of common stock may be sold directly or through broker-dealers acting
as principal or agent. The methods by which the offered shares may be sold
include:
o a block trade in which a broker-dealer will attempt to sell the shares
of common stock as agent but may position and resell a portion of the
block as principal to facilitate the transaction
o purchases by a broker-dealer as principal and resale by the
broker-dealer for its account pursuant to this prospectus
o ordinary brokerage transactions and transactions in which the broker
solicits purchasers
o an exchange distribution in accordance with the rules of the New York
Stock Exchange and
o privately negotiated transactions.
Summit Resources and any broker-dealers or agents participating in the
distribution of the offered shares may be deemed to be "underwriters" within the
meaning of the Securities Act, and any profit on the sale of the offered shares
by Summit Resources and any commissions received by any such broker-dealers may
be deemed to be underwriting commissions under the Securities Act.
In order to comply with the securities laws of certain states, if
applicable, the shares of common stock covered by this prospectus may be sold
only through registered or licensed brokers or dealers. In addition, in certain
states, the shares of common stock may not be sold unless they have been
registered or qualified for sale in such state or an exemption from such
registration or qualification requirement is available and is complied with.
We have agreed to pay all costs and expenses incurred in connection with
the filing of the registration statement of which this prospectus forms a part,
including registration and filing fees, printing expenses and fees and expenses
of our legal counsel and accountants. Summit Resources will pay any brokerage
fees and commissions, fees and disbursements of legal counsel for Summit
Resources and stock transfer and other taxes attributable to the sale of the
shares of common stock covered by this prospectus.
LEGAL MATTERS
In connection with this prospectus, Hogan & Hartson L.L.P. has provided its
opinion as to the validity of the issuance of the common stock offered by this
prospectus and as to our qualification as a REIT for federal income tax
purposes.
EXPERTS
The audited financial statements and schedules incorporated by reference in
this prospectus and elsewhere in this registration statement have been audited
by Arthur Andersen LLP, independent public accountants, as indicated in their
reports with respect thereto, and are included therein in reliance upon the
authority of said firm as experts in giving said reports.
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that we filed with the
Commission under the Securities Act of 1933.
16
This prospectus does not contain all of the information included in the
registration statement. We have omitted parts of the registration statement in
accordance with the rules and regulations of the Commission. For further
information, we refer you to the registration statement on Form S-3, including
its exhibits. Statements contained in this prospectus about the provisions or
contents of any agreement or other document are not necessarily complete. If the
Commission rules and regulations require that such agreement or document be
filed as an exhibit to the registration statement, please see such agreement or
document for a complete description of these matters. This prospectus may be
accompanied by a prospectus supplement. You should not assume that the
information in this prospectus or any prospectus supplement is accurate as of
any date other than the date on the front cover of this prospectus or such
prospectus supplement. You should read this prospectus together with additional
information described under the heading "Where You Can Find More Information."
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the Commission. You may read and copy materials that we have
filed with the Commission, including the registration statement, at the
following Commission public reference rooms:
450 Fifth Street, N.W. 500 West Madison Street
Room 1024 Suite 1400
Washington, D.C. 20549 Chicago, Illinois 60661
Please call the Commission at 1-800-SEC-0330 for further information on the
public reference rooms.
Our Commission filings can also be read at the following address:
New York Stock Exchange
20 Broad Street
New York, New York 10005
Our Commission filings are also available to the public on the Commission's
Web Site at http://www.sec.gov.
The Commission allows us to "incorporate by reference" the information we
file with them, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
an important part of this prospectus, and information that we file later with
the Commission will automatically update and supersede this information. We
incorporate by reference the documents listed below. In addition, any future
filings made with the Commission under Sections 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act of 1934 until we have sold all of the offered securities
to which this prospectus relates or the offering is otherwise terminated will be
deemed to be incorporated by reference into this prospectus.
1. Annual Report on Form 10-K/A for the fiscal year ended December 31,
2000 (filed with the Commission on December 3, 2001).
2. Annual Report on Form 10-K for the fiscal year ended December 31, 2000
(filed with the Commission on April 2, 2001).
3. Quarterly Report on Form 10-Q for the quarter ended September 7, 2001
(filed with the Commission on October 22, 2001).
4. Quarterly Report on Form 10-Q for the quarter ended June 15, 2001
(filed with the Commission on July 30, 2001).
5. Quarterly Report on Form 10-Q for the quarter ended March 23, 2001
(filed with the Commission on May 7, 2001).
6. Current Report on Form 8-K (filed with the Commission on February 8,
2002).
7. Current Report on Form 8-K (filed with the Commission on December 21,
2001).
17
8. Current Report on Form 8-K (filed with the Commission on December 5,
2001).
9. Current Report on Form 8-K (filed with the Commission on June 4, 2001).
10. Current Report on Form 8-K (filed with the Commission on May 25, 2001).
11. Current Report on Form 8-K (filed with the Commission on May 8, 2001).
12. Current Report on Form 8-K (filed with the Commission on May 3, 2001).
13. Current Report on Form 8-K/A (filed with the Commission on May 2,
2001).
14. Current Report on Form 8-K (filed with the Commission on April 13,
2001).
15. Current Report on Form 8-K (filed with the Commission on March 23,
2001).
16. Current Report on Form 8-K (filed with the Commission on February 7,
2001).
17. Description of our common stock included in a Registration Statement on
Form 8-A (filed with the Commission on November 18, 1998) (as amended
on December 28, 1998).
18. Description of our Rights included in a Registration Statement on
Form 8-A (filed with the Commission on December 11, 1998) (as amended
on December 24, 1998).
Additional federal income tax consequences that are reasonably anticipated
to be material to prospective holders in connection with the purchase, ownership
and disposition of our securities are described in our Current Report on Form
8-K, filed with the SEC on February 8, 2002 (together with any amendments to
such filing), which filing is incorporated by reference herein, as indicated
above.
You may request a copy of any filing incorporated by reference into this
prospectus, at no cost, by writing us at the following address or contacting us
by telephone at (301) 380-2070 between the hours of 9:00 a.m. and 4:00 p.m.,
Eastern Time:
Corporate Secretary
Host Marriott Corporation
10400 Fernwood Road
Bethesda, Maryland 20817
18
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
The following table sets forth those expenses for distribution to be
incurred in connection with the issuance and distribution of the securities
being registered.
Registration Fee................................. $ 996
Printing and Duplicating Expenses................ 5,000
Legal Fees and Expenses.......................... 50,000
Accounting Fees and Expenses..................... 5,000
Miscellaneous.................................... 5,000
-------
Total.............................. $65,996
=======
Item 15. Indemnification of Directors and Officers
The Maryland General Corporation Law, as amended (the "MGCL"), permits a
Maryland corporation to indemnify and advance expenses to its directors,
officers, employees and agents, and permits a corporation to indemnify its
present and former directors and officers, among others, against judgments,
penalties, fines, settlements and reasonable expenses actually incurred by them
in connection with any proceeding to which they may be made a party by reason of
their service in those or other capacities unless it is established that (a) the
act or omission of the director or officer was material to the matter giving
rise to the proceeding and (i) was committed in bad faith or (ii) was the result
of active and deliberate dishonesty, (b) the director or officer actually
received an improper personal benefit in money, property or services or (c) in
the case of any criminal proceeding, the director or officer had reasonable
cause to believe that the act or omission was unlawful. However, under the MGCL,
a Maryland corporation may not indemnify a director or officer in a suit by or
in the right of the corporation if such director or officer has been adjudged to
be liable to the corporation.
Host Marriott's Articles of Amendment and Restatement of Articles of
Incorporation (the "Articles of Incorporation") require it to indemnify its
directors and officers, whether serving Host Marriott or at Host Marriott's
request any other entity, to the full extent permitted by Maryland law,
including the advance of expenses to the full extent permitted by law. The
Articles of Incorporation permits Host Marriott to indemnify other employees and
agents of Host Marriott to such extent as shall be authorized by the Board of
Directors or Host Marriott's Bylaws (the "Bylaws") and be permitted by law.
The Bylaws require Host Marriott, to the maximum extent permitted by
Maryland law, to indemnify (i) any director or officer of Host Marriott or
former director or officer of Host Marriott (including any individual who, while
a director or officer of Host Marriott and at the express request of Host
Marriott, serves or has served another corporation, partnership, joint venture,
trust, employee benefit plan or any other enterprise as a director, officer,
partner or trustee of such entity) who has been successful, on the merits or
otherwise, in the defense of a proceeding to which the individual was made a
party by reason of service in such capacity, against reasonable expenses
incurred by him in connection with the proceeding, and (ii) any director or
officer or any former director or officer against any claim or liability to
which he or she may become subject by reason of such status unless it is
established that (a) his act or omission was material to the matter giving rise
to the proceeding and was committed in bad faith or was the result or active and
deliberate dishonesty, (b) he or she actually received an improper personal
benefit in money, property or services or (c) in the case of a criminal
proceeding, he or she had reasonable cause to believe that his act or omission
was unlawful.
Host Marriott's Bylaws obligate it to indemnify and to pay or reimburse
reasonable expenses in advance of final disposition of a proceeding to any
present or former director or officer who is made a party to the proceeding by
reason of his service in that capacity, provided that, in the case of a director
or officer, Host Marriott shall have received (a) a written affirmation by the
director or officer of the officer's good faith belief that he or she has met
the applicable standard of conduct necessary for indemnification by Host
Marriott as authorized by the Bylaws and (ii) a written undertaking by or on his
or her behalf to repay the amount paid or reimbursed by Host Marriott if it
shall ultimately be determined that the applicable standard of conduct was not
met.
The Amended and Restated Agreement of Limited Partnership of the Operating
Partnership also provides for indemnification of Host Marriott and its officers
and directors to the same extent that indemnification is provided to officers
and directors of Host Marriott in its Articles of Incorporation, and limits the
liability of Host Marriott and its officers and directors to the Operating
II - 1
Partnership and its respective partners to the same extent that the liability of
the officers and directors of Host Marriott to the Company and its stockholders
is limited under Host Marriott's Articles of Incorporation.
Item 16. Exhibits
Exhibit Index
-------------
2.1 Agreement and Plan of Merger by and among Host Marriott Corporation,
HMC Merger Corporation and Host Marriott L.P. (incorporated by
reference to Host Marriott Corporation Registration Statement No.
333-64793).
4.1 Indenture, dated as of December 2, 1996, between Host Marriott
Corporation and IBJ Schroeder Bank & Trust Company, as Indenture
Trustee (incorporated herein by reference to Exhibit 4.3 of Host
Marriott Corporation's Registration Statement on Form S-3 (SEC File
No. 333-19923))
4.2 Guarantee Agreement, dated as of December 2, 1996, between
Host Marriott Corporation and IBJ Schroeder Bank & Trust
Company, as Guarantee Trustee (incorporated herein by
reference to Exhibit 4.6 of Host Marriott Corporation's
Registration Statement on Form S-3 (SEC File No. 333-19923))
4.3 Amended and Restated Trust Agreement, dated December 2, 1996, among
Host Marriott Corporation, IBJ Schroeder Bank & Trust Company, as
Property Trustee, Delaware Trust Capital Management, Inc., as Delaware
Trustee, and Robert E. Parsons, Jr., Bruce D. Wardinski and
Christopher G. Townsend, as Administrative Trustees (incorporated
herein by reference to Exhibit 4.2 of Host Marriott Corporation's
Registration Statement on Form S-3 (SEC File No. 333-19923))
4.4 Amended and Restated Indenture, dated as of August 5, 1998,
by and among HMH Properties, Marine Midland Bank and the
guarantors named therein (incorporated herein by reference
to Exhibit 4.1 to Host Marriott's Current Report on Form 8-K
filed with the SEC on August 6, 1998)
4.5 Rights Agreement between Host Marriott and The Bank of New
York, as Rights Agent, dated as of November 23, 1998
(incorporated herein by reference to Exhibit 4.1 to Host
Marriott Corporation's Registration Statement on Form 8-A
filed with the SEC on December 11, 1998)
4.6 Articles Supplementary of the Company Classifying and
Designating a Series of Preferred Stock as Series A Junior
Participating Preferred Stock and Fixing Distribution and
Other Preferences and Rights of Such Series (incorporated
herein by reference to Exhibit 4.2 to Host Marriott
Corporation's Registration Statement on Form 8-A filed with
the SEC on December 11, 1998)
4.7 Form of Rights Certificate (incorporated herein by reference to
Exhibit 4.3 to Host Marriott Corporation's Registration Statement on
Form 8-A filed with the SEC on December 11, 1998)
4.8 Amendment No. 1 to Rights Agreement between Host Marriott and The Bank
of New York, as Rights Agent, dated as of December 18, 1998
(incorporated herein by reference to Exhibit 4.2 to Host Marriott's
Current Report on Form 8-K filed with the SEC on December 24, 1998)
4.9 Amended and Restated Trust Agreement, dated as of December 29, 1998,
among HMC Merger Corporation, as Depositor, IBJ Schroder Bank & Trust
Company, as Property Trustee, Delaware Trust Capital Management, Inc.,
as Delaware Trustee, and Robert E. Parsons, Jr., W. Edward Walter and
Christopher G. Townsend, as Administrative Trustees (incorporated
herein by reference to Exhibit 4.9 to Host Marriott Corporation's
Annual Report on Form 10-K for the year ended December 31, 1998)
II - 2
4.10 Specimen Common Stock Certificate (incorporated herein by reference to
Exhibit 4.7 to Host Marriott Corporation's Registration Statement on
Form S-4 (SEC File No. 333-55807))
4.11 Articles Supplementary of Host Marriott Corporation Classifying and
Designating Preferred Stock of the Registrant as 10% Class A
Cumulative Redeemable Preferred Stock (incorporated herein by
reference to Exhibit 4.1 to Host Marriott Corporation's Registration
Statement on Form 8-A filed with the SEC on July 30, 1999)
4.12 Articles Supplementary of Host Marriott Corporation Classifying and
Designating Preferred Stock of the Registrant as 10% Class B
Cumulative Redeemable Preferred Stock (incorporated herein by
reference to Exhibit 4.1 to Host Marriott Corporation's Registration
Statement on Form 8-A filed with the SEC on November 23, 1999)
4.13 Articles Supplementary of Host Marriott Corporation Classifying and
Designating Preferred Stock of the Registrant as 10% Class C
Cumulative Redeemable Preferred Stock (incorporated herein by
reference to Exhibit 4.2 to Host Marriott Corporation's Registration
Statement on Form 8-A filed with the SEC on March 23, 2001)
5.1 Opinion of Hogan & Hartson L.L.P. regarding the legality of the
securities being registered
8.1 Opinion of Hogan & Hartson L.L.P. regarding certain tax matters
23.1 Consent of Hogan & Hartson L.L.P. (included as part of Exhibit 5.1)
23.2 Consent of Hogan & Hartson L.L.P. (included as part of Exhibit 8.1)
23.3 Consent of Arthur Andersen LLP, independent public accountants
24.1 Power of Attorney (included in signature page)
99.1 Description of Material Federal Income Tax Consequences (incorporated
by reference to Exhibit 99.1 to Host Marriott Corporation's Current
Report on Form 8-K filed with the SEC on February 8, 2002)
II - 3
Item 17. Undertakings
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in this registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in
the aggregate, the changes in volume and price represent no more than
a 20 percent change in the maximum aggregate offering price set forth
in the "Calculation of Registration Fee" table in the effective
registration statement; and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in this registration statement
or any material change to such information in this registration
statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) above shall not
apply if the information required to be included in a post-effective amendment
by those paragraphs is contained in periodic reports filed with or furnished to
the Commission by the Registrant pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference in this
registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered herein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned Registrant hereby further undertakes that, for
purposes of determining any liability under the Securities Act of 1933, each
filing of the Registrant's annual report pursuant to Section 13(a) or Section
15(d) of the Securities Exchange Act of 1934 that is incorporated by reference
in this registration statement shall be deemed to be a new registration
statement relating to the securities offered herein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to existing provisions or arrangements
whereby the Registrant may indemnify a director, officer or controlling person
of the Registrant against liabilities arising under the Securities Act of 1933,
or otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other than
the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the Registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
II - 4
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF THE
REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS REGISTRATION
STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY
AUTHORIZED, IN BETHESDA, MARYLAND, ON THIS 8TH DAY OF FEBRUARY, 2002.
Host Marriott Corporation
By: /s/ ROBERT E. PARSONS, JR.
--------------------------------
ROBERT E. PARSONS, JR.
EXECUTIVE VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER
POWER OF ATTORNEY
We, the undersigned directors and officers of Host Marriott Corporation, a
Maryland corporation, do hereby constitute and appoint Robert E. Parsons, Jr.,
our true and lawful attorney-in-fact and agent, with full power of substitution
and resubstitution, to do any and all acts and things in our names and our
behalf in our capacities as directors and officers and to execute any and all
instruments for us and in our name in the capacities indicated below, which said
attorney and agent may deem necessary or advisable to enable said corporation to
comply with the Securities Act of 1933 and any rules, regulations and
requirements of the Securities and Exchange Commission, in connection with this
registration statement, or any registration statement for this offering that is
to be effective upon filing pursuant to Rule 462(b) under the Securities Act of
1933, including specifically, but without limitation, any and all amendments
(including post-effective amendments) hereto; and we hereby ratify and confirm
all that said attorney and agent shall do or cause to be done by virtue thereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS REGISTRATION
STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES INDICATED
AS OF THE 8TH DAY OF FEBRUARY, 2002.
SIGNATURE TITLE
--------- -----
/s/ CHRISTOPHER J. NASSETTA President, Chief Executive Officer and Director
----------------------------------------- (principal executive officer)
CHRISTOPHER J. NASSETTA
/s/ ROBERT E. PARSONS, JR. Executive Vice President and Chief Financial Officer
----------------------------------------- (principal financial officer)
ROBERT E. PARSONS, JR.
/s/ DONALD D. OLINGER Senior Vice President and Corporate Controller
----------------------------------------- (principal accounting officer)
DONALD D. OLINGER
/s/ RICHARD E. MARRIOTT Chairman of the Board of Directors
-----------------------------------------
RICHARD E. MARRIOTT
II - 5
/s/ ROBERT M. BAYLIS Director
-----------------------------------------
ROBERT M. BAYLIS
Director
-----------------------------------------
TERENCE C. GOLDEN
/s/ ANN MCLAUGHLIN KOROLOGOS Director
-----------------------------------------
ANN MCLAUGHLIN KOROLOGOS
/s/ J.W. MARRIOTT, JR. Director
-----------------------------------------
J.W. MARRIOTT, JR.
/s/ JOHN G. SCHREIBER Director
-----------------------------------------
JOHN G. SCHREIBER
/s/ HARRY L. VINCENT, JR. Director
-----------------------------------------
HARRY L. VINCENT, JR.
II - 6
EXHIBIT INDEX
Item 16 of the accompanying registration statement is incorporated by reference
herein.
II - 7