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Sarofim Realty Advisors to Invest in Courtyard Joint Venture

Marriott International,
Inc. and Host Marriott Corporation today
announced the signing of a purchase and sale agreement with Sarofim Realty
Advisors, on behalf of an institutional investor, by which
that investor will obtain a 75 percent interest in the Courtyard Joint
Venture. The transaction will be subject to certain closing conditions,
including closing of the refinancing described below. Today, Marriott and
Host Marriott own equal shares in the 120 property joint venture. As a
result of the transaction, the pace of Courtyard hotel reinventions, a
program that renovates and upgrades Courtyard hotels, will be accelerated
and Marriott International will recycle a significant amount of Marriott
capital now invested in the joint venture. Sarofim’s investor will acquire approximately 85 percent of Host
Marriott’s interest in the joint venture for $92 million and invest
approximately $240 million of new equity into the joint venture. Host
Marriott has the right to cause the partnership to redeem its remaining
interest under certain conditions between 2007 and 2009. Thereafter, the
joint venture will have the right to redeem Host Marriott’s remaining

“We are delighted to have Sarofim and their client join us in the
Courtyard Joint Venture,” said Arne Sorenson, Marriott’s Executive Vice
President and Chief Financial Officer. “The Courtyard brand leads its tier
of the U.S. lodging industry in revenue per available room (REVPAR) index.
As a result of this transaction, we expect to accelerate property
reinventions and thereby generate even higher returns on investment.
Reinvented Courtyards in the Marriott system are showing dramatic
increases in guest intent to return, guest satisfaction, house profit
margins and REVPAR index.”

Reinvented Courtyards feature fresh, crisp designs for guestrooms and
public spaces. Reinventions include 24 hour food availability, new guest
room furnishings with rich, new fabrics and colors, larger desks, brighter
lighting, and granite bathroom vanities. To date, the joint venture has
reinvented 46 of its hotels. Reinventions of an additional 22 properties
are expected to be completed by the end of the first quarter 2005 with the
remainder complete by the first quarter 2006.

C.A. Galpern, President and Chief Executive Officer of Sarofim Realty
Advisors noted, “We are very pleased to be partnering with Marriott in
this transaction and look forward to strong returns from this outstanding
portfolio of hotels.”

Marriott’s existing mezzanine loan to the joint venture (including accrued
interest) totals approximately $260 million and will be repaid at closing.
With the addition of the new equity, Marriott’s percentage interest in the
joint venture will decline from 50 percent to 21 percent. Marriott has
agreed to retain its joint venture interest for at least three years.
Additionally, Marriott expects to make available a seven year subordinated
loan of approximately $100 million to fund remaining reinvention costs in
2005 and 2006. Cash interest on the loan will be paid currently. Sarofim
and Marriott expect to lower the joint venture’s cost of capital as they
arrange a refinancing of the joint venture’s senior debt secured by its
Courtyard by Marriott II limited partnership properties. The new financing
is expected to total approximately $500 million to $550 million.


Marriott will enter into a new, long-term management agreement with the
joint venture at the closing of the transaction which is expected to occur
in the first quarter of 2005. The new management agreement has comparable
fees, duration and other terms to the existing management agreement but
because the existing agreement will be terminated, accounting rules
require Marriott to record a one-time, non-cash write-off of its
investment in the existing management contract totaling approximately $13
million pre-tax in the 2004 fourth quarter. Upon closing in the first
quarter 2005, Marriott expects to book a gain on the repayment of the
mezzanine loan, substantially offset by the company’s share of the joint
venture’s costs of prepaying the existing senior loan.

On an ongoing basis, Marriott will see its interest income decline as a
result of the repayment of the mezzanine loan and with a substantial
reduction in Marriott’s equity percentage in the joint venture, Marriott
expects lower ongoing book losses from the joint venture. Excluding the
one-time gains and losses described above and until such time as the
proceeds from the loan payoff are redeployed, the net impact of the
transaction is expected to reduce Marriott’s earnings per share by
approximately $0.01 per quarter.