1998 Annual Report - Four Seasons Hotels and Resorts

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(continued)5. I N V E S T M E N T S I N H O T E L P A R T N E R S H I P SA N D C O R P O R A T I O N S:1998 1997The Regent Hong Kong ((a) and note 2) $ 7,730 $ 15,270Four Seasons Hotel London (c) 10,581 —Four Seasons Hotel Prague (d) 8,782 —Four Seasons Resort Scottsdale (e) 4,027 2,866Other hotel partnerships and corporations 45,641 48,552$ 76,761 $ 66,688(a) Investment in The Regent Hong Kong:The Corporation has a 25% leasehold interest in The Regent Hong Kong. The initial term of the leasehold terminates inDecember 2000 with an option to renew for a further 10 years exercisable by the lessee. The Corporation amortizes thecost of its investment in The Regent Hong Kong on a straight-line basis over the remaining term of the initial leasehold.Amortization expense during the year was $2,766 (1997 – $2,586).(b) Disposition of investments in The Ritz-Carlton Hotel Chicago and the FourSeasons Hotel Chicago:Effective January 1, 1998, the Corporation reached an agreement to exchange its 25% ownership interest in The Ritz-CarltonHotel Chicago for the elimination of certain termination provisions contained in the management agreement of the hotel, andalso reached an agreement to exchange its 7.7% ownership interest in the Four Seasons Hotel Chicago for relief from certainlease funding obligations. In a separate transaction, the terms of the management agreement of The Ritz-Carlton Hotel Chicagowere improved. The net book value of the assets and liabilities disposed of were as follows:Current assets (net of cash of $2,593) $ 1,670Long-term assets 30,977Accounts payable and accrued liabilities (3,987)Long-term debt due within one year (322)Long-term debt (15,557)Net assets disposed of $ 12,781The Corporation has accounted for the disposition of its ownership interests in The Ritz-Carlton Hotel Chicago andthe Four Seasons Hotel Chicago as non-monetary exchanges of assets that do not represent the culmination of the earningsprocess. Accordingly, no gain was recognized on these transactions, and the excess of $15,374 of the net book value of theCorporation’s investments in these hotels over the cash proceeds received has been reclassified to “Investment in managementcontracts” (note 7). Management believes that the incremental fair value of the amended management contracts exceed theamounts reclassified.(c) Investment in the Four Seasons Hotel London:Effective January 1, 1998, the Corporation and an affiliate of Kingdom acquired the 50% ownership interest in the FourSeasons Hotel London that the affiliate did not already own. The Corporation acquired a 12.5% ownership interest in thehotel and the affiliate increased its ownership interest in the hotel from 50%, which it acquired from the Corporation in1995 (note 4(a)) to 87.5%. To facilitate the acquisition, the Corporation invested £16.3 million, which includes a loan of£12.2 million (note 4(c)) and an investment in preferred shares of £4.1 million.70Four Seasons Hotels Inc.