Guarantees of loans to subsidiaries or 50% owned companies
were: First Mortgage loan of $1,893,695 on the Hilton Inn,
New Orleans; and, the first maturing $7,500,000 of a
$15,000,000 First Mortgage loan of Hilton-Burns Hotels Company, Inc. which had been paid down to $14,586,710 at
December 31, 1963. The Company has also guaranteed payment of principal and interest under a land contract payable
by its wholly-owned subsidiary, 145 West Elizabeth Street
Garage Corporation for the first three years of the contract
term. The contract, dated September 30, 1963, in the original
amount of $250,000, was paid down to $248,052 at December
31, 1963. The Company has agreed to guarantee $2,500,000 of
a $10,000,000 loan commitment of the 25% owned Rock-Hil-
Uris, Inc. Of the amount so guaranteed by the Company,
$2,100,000 had been drawn down at December 31, 1963.
The costs of construction and equipping the New York Hilton
Hotel, owned by Rock-Hil-Uris, Inc. have not been finally
determined. Claims of $3,000,000 made by the builder in
connection with certain construction work are in dispute and
such claims have not as yet been resolved but are being
The subsidiary, Hilton Hotels International, Inc., has subscribed and paid for a 50% interest ($375,000) in the share
capital and $875,000 face value of 5% subordinated notes,
maturing December 31, 1974, of Kahala Hilton Hotel Company, Inc. In addition, International has agreed to further
invest $250,000 in Kahala, to be evidenced by a note bearing
interest at 5% per annum, to be repaid in five years in equal
annual installments of $50,000. A loan in the amount of
$900,000 maturing November 15, 1966, entered into by lessor
companies of the Acapulco Hilton and Continental Hilton has
been guaranteed by International and another person. Securities of two Mexican companies have been pledged to secure the
loan, which was paid down to $705,000 at December 31, 1963.
International is also guarantor of a $150,000 obligation of
Hilton of Panama, S. A., a wholly-owned subsidiary; $3,500,000,
Canadian, first mortgage bonds of a 50% owned Canadian
subsidiary; a $375,000 demand bank loan of its wholly-owned
Japanese subsidiary; a $153,000 obligation of the Athens branch
of Hilton of Panama, Ltd., a wholly-owned subsidiary; and,
$1,000,000 of a $5,000,000 mortgage bond issue of a 50%
owned Hawaiian subsidiary. Hilton Hotels (UK), Ltd., a wholly-
owned subsidiary of International, has arranged to borrow a
total of 1,450,000 pounds sterling ($4,060,000) from Lloyds
Bank, Ltd. in connection with furnishing the London Hilton
Hotel. At December 31, 1963, the sterling equivalent to
$3,695,366.61 had been drawn by an overdraft.
The Company is contingently liable as guarantor respecting
two second mortgage notes aggregating $7,164,929 which were
sold as part of the transaction involving the sale and leaseback
of The Beverly Hilton Hotel under which sale the Company
has the option to repurchase the hotel together with an adjoining garage in 1966 or 1967 at a price of $14,315,050, the
original sale price attributable to the land and buildings comprising said hotel and garage.
The Company has purchased $2,200,000 of 6K% notes,
maturing January 1, 1971, of the 50% owned Hilton-Uris, Inc.
(hotel under construction) and is committed to purchase an
additional $800,000 of such notes. Under an agreement with
Rock-Hil-Uris, Inc., (owner of the New York Hilton) in which
the Company has a $500,000 investment, representing 25% of
the capital stock, the Company is obliged to purchase up to
$3,750,000 principal amount of Series "A" notes of the affiliate
and $2,507,000 of such notes had been purchased to December
31, 1963. In addition, in accordance with the terms of the
agreement, the Company has also purchased a total of $250,000
Series "B" notes of the affiliate. Both series of notes bear interest
at 5lA% per annum and mature January 1, 1971.
On October 15, 1963, the Company sold an undivided one-
half interest in The San Francisco Hilton (under construction)
to Houston International Hotels, Inc. Concurrently the co-
owners arranged a $17,000,000 interim construction loan and
an additional $1,500,000 unsecured loan. At December 31,
1963, $8,960,426 of the funds available under the construction
loan had been drawn down. Of this amount 50% or $4,480,213
represented the obligation of the Company. A $17,000,000 first
mortgage commitment has been obtained by the co-owners for
the permanent financing of the hotel.
The Company is obligated to make an additional contribution of $225,000 to the partnership in which it now has a
majority interest (Hawaiian Village Development Company),
and is to further purchase $1,294,200 of subordinated notes of
the partnership unless such additional capital contribution and
purchase of subordinated notes are made by other persons.
During the current year, under an offer dated December 17,
1962 which expired January 24, 1963, the Company acquired
an additional 300,000 shares of its $2.50 par value common
stock for the Treasury at a total cost of $8,572,021.
The Palmer House Company, a wholly-owned subsidiary,
has a first mortgage loan commitment in the amount of
$15,000,000 under which an initial draw down of $10,500,000
was made December 11, 1962. The commitment for the additional borrowing expires December 11, 1965 unless detailed
plans and contractors' bids, in connection with a proposed
building program, have been submitted to and approved by
the mortgagee prior to that date.
The Company, its officers, directors and subsidiaries are
engaged in various litigation, but the Company's legal counsel
does not anticipate that any amounts that the Company, its
officers, directors or its subsidiaries may be required to pay by
reason thereof will be of material importance.
(9) LONG-TERM LEASES
The Company and its subsidiaries operate or will operate
certain properties under leases ranging from one year and ten
months to fifty-one years and three months from December 31,
1963 with options to renew in some instances. The total minimum annual fixed or basic rentals payable (exclusive of real
estate taxes, insurance and other occupancy charges) under
such leases for each of the next five years ending December 31,
follows: 1964, $6,809,789; 1965, $6,791,456; 1966, 1967 and
Rental based on a percentage of gross operating profit and
other lease obligations of a Canadian subsidiary of Hilton
Hotels International, Inc., are guaranteed by both International
and by the Company. Under the terms of The Caribe Hilton
lease, International and the Company are liable for the tenant's
obligations under the lease which, among other things, require
payment of a small fixed rental and additional rental based on
gross operating profit. International is contingently liable for
performance under all other leases entered into by or assigned
to its foreign subsidiaries.
The Company has not been released from its obligations
under a ground lease which was assigned to Hilton Inns, Inc.
The subsidiary, International, has negotiated preliminary
contracts and agreements for the operation of hotels (certain of
which are now under construction), or under consideration, on
sites outside the Continental United States, subject to fulfillment
of certain conditions and execution of final leases. In general,
International or its subsidiaries are required to furnish initial
operating inventories and maintain sufficient working capital.
Leases basically provide for a rental based on a percentage of
gross operating profit.
HILTON HOTELS CORPORATION AND CONSOLIDATED SUBSIDIARIES