Host Marriott Corp. yesterday announced the acquisition of a thin majority of shares in a group that owns four upscale hotels, less than a week after a Delaware judge denied a motion that would have blocked the deal.
The $56.5 million deal for 51 percent of the limited ownership shares in Marriott Hotel Properties II Ltd. Partnership, a group the Bethesda-based lodging owner created in 1988, is expected to consolidate Host Marriott's control and ability to profit from the 3,402 hotel rooms.
"This transaction fits Host Marriott's strategy of investing in quality full-service hotels and has allowed some of the limited partners the opportunity to liquidate their investment," said Terence C. Golden, Host Marriott's president and chief executive officer.
Thus far this year, Host Marriott has invested $825 million to acquire 11 hotels.
The purchase was not without contention, however.
After an initial offer of $92.5 million or $125,000 each for the partnership's shares in April, Marriott Hotel Properties II investors sued the company, contending that the shares were worth at least 80 percent more.
Host Marriott late last month raised the offer for the 745 shares to $150,000 each. The former Marriott Corp. had originally sold the shares for $100,000 each.
"This places the remaining limited investors in the unfortunate position of being subject to Marriott control," said Lawrence P. Kolker, a New York attorney representing limited partnership investors.
He added that, despite a judge's ruling that denied blocking the Host Marriott purchase at $150,000 per share, the lawsuit will continue.
And Host Marriott may soon face a raft of litigation over other partnerships it controls. Last week, for instance, a group of Courtyard by Marriott investors filed a lawsuit against the company, claiming fraud, misrepresentation and breach of fiduciary duty.
Other groups are currently reviewing Host Marriott's business practices and failure to pay dividends, and may as a result also file lawsuits, sources said.
Prior to the Marriott Hotel Properties II share offer, Host Marriott essentially controlled the group as general partner, but paid limited partner investors dividends that last year were in excess of $15,000 per share.
With majority control of the limited partnership shares, Host Marriott will collect roughly an additional $20 million from the four properties in New Orleans, San Antonio and in San Ramon and Santa Clara, Calif., said Andrea Jacob, the company's director of investor relations.
In all, the four hotels last year earned $45 million before interest, taxes and noncash charges.
The $20 million figure may change, however, because Host Marriott is working to refinance $225 million in Marriott Hotel Properties II debt that matures next month.
Pub Date: 6/18/96