Host Marriott to issue $460 million in new securities Funds will help firm keep buying hotels

it bought another in Utah

November 14, 1996|By Kevin L. McQuaid | Kevin L. McQuaid,SUN STAFF

Host Marriott Corp. said yesterday that it would issue up to $460 million in new securities, capital the lodging owner plans to use to keep up its breakneck hotel buying spree.

The Bethesda-based company furthered that trend yesterday as well, declining to wait until year-end and the proceeds of the new debt issue to acquire a controlling stake in a partnership that owns the Salt Lake City Marriott.

That $41 million investment marks the fourth time this year that Host Marriott has bought out partners to augment its growing portfolio of upscale hotels. Combined, the company has spent $216.4 million to acquire majority interests in groups that control 10 hotels.

"This is a built-in pipeline of growth for us," said Andrea Jacob, the company's director of investor relations. "And because there's virtually no competition for these partnership stakes, the pricing is better. And we already know the other partners and the properties."

With the $41 million, Host Marriott bought an 80 percent general partnership stake it had not previously controlled from an insurer it declined to name.

As part of the deal, it will also assume a $15.7 million mortgage.

The 515-room hotel, completed in 1981, is projected to generate $8 million in earnings before interest expense, taxes and noncash charges in 1996.

The Utah hotel will continue to be managed by sister company Marriott International Inc.

In all, Host Marriott has acquired 22 upscale and luxury hotels carrying the Marriott and Ritz-Carlton flag thus far in 1996, projects valued at $1.3 billion, said Robert E. Parsons Jr., a Host Marriott executive vice president and its chief financial officer.

Host Marriott intends to issue the convertible preferred bonds later this week, with closing scheduled just before year-end.

Under terms of the securities offer, the debt will convert into equity in three years, Jacob said. The $460 million includes a $60 million provision for a sales over-allotment.

Host Marriott has just $200 million remaining on its balance sheet from prior financings, Jacob said.

Pub Date: 11/14/96

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