Marriott Corp. said yesterday that it will take a $32 million charge against second-quarter earnings after federal securities regulators questioned the method of valuing the hotel chain's lower-priced Residence Inn, Fairfield Inn and Courtyard hotels.
The Bethesda-based company also said its annual meeting will be held July 23, giving shareholders a chance to vote on Marriott's controversial plan to break into two companies.
Marriott had classified its 113 company-owned discount hotels as "assets held for sale" until March 1992, and accounted for them at the premium price the hotels might have commanded if they were sold in groups during reasonably good economic conditions, company spokesman Robert T. Souers said.
The hotels are worth less, however, if listed for sale individually. The company said staff regulators at the U.S. Securities and Exchange Commission requested the write-down, which based the hotels' estimated value on individual sales in today's market.
"They've never been on the market individually, and they're not on the market now," said Mr. Souers, who contended that the company's accounting method and the SEC's view were both valid. "This is not a good time to be selling real estate," he said.
SEC spokesman John Heine said the commission would not comment on the dispute.
The charge will depress Marriott's second-quarter income by about 29 cents a share, the company said, nearly equal to the 30 cents a share stock analysts expected the company to earn during the three months that end Friday.
Mr. Souers said the move was an accounting maneuver that will not require the company to spend money. It also will offset a $30 million addition to profits that was recorded during the first quarter, stemming from a change in Marriott's tax accounting.
The disputed hotels were built with the idea that Marriott would sell them to investors but continue to manage the properties through a subsidiary. But the real estate recession prevented Marriott from selling them, Mr. Souers said. The company has said that its inability to sell the properties contributed to problems it has had sustaining profits and managing its estimated $2.9 billion debt load.
The company said its annual meeting will be held at the J. W. Marriott Hotel in downtown Washington. Stockholders will consider the plan to break Marriott into Marriott International Inc., which would own the company's profitable hotel management business, and Host Marriott Corp., which would inherit most of the company's debt and real estate.
Holders of Marriott Corp. bonds, most of which would be transferred to Host Marriott, have taken their fight against the plan to federal court. They claim that the value of their bonds fell 30 percent after the plan became public in October and that the company failed to disclose the plan before it offered $400 million in bonds earlier last year.
Marriott has said that it didn't consider the restructuring plan until after it sold the bonds.
Marriott also faces a legal skirmish with holders of its preferred stock today in Delaware Chancery Court.