<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (Date of earliest event reported) JUNE 25, 1997
AMERICAN GENERAL HOSPITALITY CORPORATION
(Exact Name of Registrant as Specified in its Charter)
MARYLAND 1-11903 75-2648842
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
5605 MACARTHUR BLVD., SUITE 1200, IRVING, TEXAS 75038
(Address of principal executive offices) (Zip Code)
REGISTRANTS TELEPHONE NUMBER, INCLUDING AREA CODE: (972) 550-6800
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On June 25, 1997 (i) American General Hospitality Operating Partnership,
L.P. (the "Operating Partnership"), a subsidiary of American General Hospitality
Corporation (the "Company" or "Registrant") acquired the Marriott Hotel West
Loop and the connected office building, 1700 West Loop Office Tower and (ii)
Lake Buena Vista Partners, Ltd. ("LBV Partners"), a subsidiary of the Operating
Partnership acquired the Radisson Twin Towers Hotel and Convention Center,
(together the "MUI Acquisition Hotels") from entities unaffiliated with the
Company and the Operating Partnership. The aggregate purchase price of the MUI
Acquisition Hotels was approximately $115.7 million. The purchase price was
arrived at through arms-length negotiations. A description of the hotels and an
allocation of the purchase price is as follows:
. MARRIOTT HOTEL WEST LOOP AND CONNECTED OFFICE BUILDING - On June 25, 1997
the Operating Partnership acquired the 302 room Marriott Hotel and the
connected 12 story, 256,000 square foot office building located in Houston,
Texas from 1700/1750 West Loop S. Limited Partnership for an allocated
purchase price of approximately $38.1. The Operating Partnership expects
to maintain the Marriott affiliation and invest approximately $6.1 million
to upgrade the hotel facilities.
The Marriott West Loop is leased by the Operating Partnership to AGH
Leasing, L.P. (the "Lessee") pursuant to a twelve-year participating lease
which is substantially similar in form to the Operating Partnership's other
hotel leases. Effective with the purchase of the property, the economic
terms of the participating lease provide for the payment of annual rent
equal to the greater of (i) base rent of $2,354,000 or (ii) participating
rent equal to the following percentages of the respective revenues: Rooms:
20% of the first $5,650,000; 65% of the next $1,091,000; and 72.5%
thereafter; Food & Beverage: 10% of the first $2,217,000; 12.5%
thereafter; Telephone & Other: 25%. Effective January 1, 1998, the
participating lease provides for the payment of annual rent equal to the
greater of (i) base rent of $2,680,000 or (ii) participating rent equal to
the following percentages of the respective revenues: Rooms: 20% of the
first $5,179,000; 65% of the next $1,598,000; and 72.5% thereafter; Food &
Beverage: 10% of the first $2,300,000; 12.5% thereafter; Telephone &
Other: 25%. Effective January 1, 1999, the participating lease provides
for the payment of annual rent equal to the greater of (i) base rent of
$2,781,000 or (ii) participating rent equal to the following percentages of
the respective revenues: Rooms: 20% of the first $5,477,000; 65% of the
next $1,248,000; and 72.5% thereafter; Food & Beverage: 10% of the first
$2,386,000; 12.5% thereafter; Telephone & Other: 25%. Effective January
1, 2000, base rent will increase annually by the percentage increase in the
Consumer Price Index ("CPI") and participating tiers will increase by CPI
plus .75%.
The Lessee has entered into a twelve-year management agreement, on terms
substantially similar to the Lessee's other management agreements, with
American General Hospitality, Inc. ("AGHI") to manage the hotel on behalf
of the Lessee and subject to its supervision.
The office building is currently 68% occupied. Two major leases are in the
process of being negotiated which, if consummated, would increase the
occupancy to approximately 80%. The Operating Partnership has engaged the
office buildings' current manager and leasing agent, Premisys, a subsidiary
of Prudential Life Insurance, to manage and lease the office building. The
office building, which is not part of the Company's business strategy, is
not intended to be a long-term asset.
. RADISSON TWIN TOWERS HOTEL AND CONVENTION CENTER - On June 25, 1997 LBV
Partners acquired the 742 room Radisson Twin Towers Hotel and convention
center located in Orlando, Florida from Zenith Properties (Orlando),
Limited Partnership ("Zenith") for an allocated purchase price of
approximately $77.6 million. LBV Partners expects to invest approximately
$14.3 million to upgrade and renovate the guest rooms and public areas.
The Radisson Twin Towers Hotel is leased by LBV Partners to Twin Towers
Leasing, L.P. ("Twin Towers Leasing") pursuant to a twelve-year
participating lease which is substantially similar in form to the Operating
Partnership's other hotel leases. Twin Towers Leasing is owned 51% by the
Lessee, which is the sole general partner, and 49% by Regent Carolina
Corporation, which is the sole limited partner. Regent Carolina
Corporation is the parent of Zenith.
2
<PAGE>
Effective with the purchase of the property, the economic terms of the
participating lease provide for the payment of annual rent equal to the
greater of (i) base rent of $5,881,000 or (ii) participating rent equal to
the following percentages of the respective revenues: Rooms: 30% of the
first $4,172,000; 65% of the next $1,364,000; and 75% thereafter; Food &
Beverage: 10% of the first $4,705,000; 15% thereafter; Telephone & Other:
35%. Effective January 1, 1998, the participating lease provides for the
payment of annual rent equal to the greater of (i) base rent of
$6,298,000 or (ii) participating rent equal to the following percentages of
the respective revenues: Rooms: 30% of the first $9,516,000; 65% of the
next $1,715,000; and 75% thereafter; Food & Beverage: 10% of the first
$4,882,000; 15% thereafter; Telephone & Other: 35%. Effective January 1,
1999, the participating lease provides for the payment of annual rent equal
to the greater of (i) base rent of $6,534,000 or (ii) participating rent
equal to the following percentages of the respective revenues: Rooms: 30%
of the first $12,300,000; 65% of the next $2,960,000; and 75% thereafter;
Food & Beverage: 10% of the first $5,065,000; 15% thereafter; Telephone &
Other: 35%. Effective January 1, 2000, base rent will increase annually
by the percentage increase in the CPI and participating tiers will increase
by CPI plus .75%.
Twin Towers Leasing has entered into a twelve-year management agreement, on
terms substantially similar to the Lessee's other management agreements
with AGHI to manage the hotel on behalf of Twin Towers Leasing and subject
to its supervision.
The cash required to purchase the MUI Acquisition Hotels was provided from
borrowings under the Operating Partnership's Line of Credit.
The Company currently owns an approximate 87.1% interest in the Operating
Partnership. AGH GP, Inc., a wholly owned subsidiary of the Company, is the
sole general partner of the Operating Partnership and owns a 1.0% interest in
the Operating Partnership. AGH LP, Inc., also a wholly owned subsidiary of the
Company, owns an 86.1% limited partnership interest in the Operating
Partnership. The remaining 12.9% is held by the former owners of the hotels
acquired by the Operating Partnership.
3
<PAGE>
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of Business Acquired
Audited financial statements of the MUI Acquisition Hotels as of
December 31, 1996 and unaudited information for the three months ended
March 31, 1997 are included in this Form 8-K.
Index to Financial Statements Page
----------------------------- ----
Report of Independent Accountants................................... F-1
Balance Sheets as of December 31, 1996 (audited) and March 31,
1997 (unaudited)................................................... F-2
Statements of Operations for the Year Ended December 31, 1996
(audited) and the Three Months Ended March 31, 1996 and 1997
(unaudited)........................................................ F-3
Statements of Equity for the Year Ended December 31, 1996 (audited)
and the Three Months Ended March 31, 1997 (unaudited).............. F-4
Statements of Cash Flows for the Years Ended December 31, 1996
(audited) and the Three Months Ended March 31, 1996 and 1997
(unaudited)........................................................ F-5
Notes to Financial Statements....................................... F-6
Schedule III - Real Estate and Accumulated Depreciation as of
December 31, 1996.................................................. F-11
(b) Pro forma Financial Information (unaudited)
The pro forma balance sheet information of the Company as of March
31, 1997 and the pro forma statements of operations information of the
Company and the Lessee for the year ended December 31, 1996 and the three
months ended March 31, 1997 are presented as if the Company had completed
its offerings of Common Stock and the acquisition of all of its current
26 hotels (the "Hotels") including the MUI Acquisition Hotels, the
Holiday Inn Select Bucks County and the Cocoa Beach Hilton Hotel as of
March 31, 1997 and January 1, 1996, respectively.
Index to Pro Forma Financial Statements
---------------------------------------
American General Hospitality Corporation
Pro forma Balance Sheet as of March 31, 1997 (unaudited)........... F-13
Pro forma Statements of Operations for the Year Ended
December 31, 1996 and the Three Months Ended March 31, 1997
(unaudited)....................................................... F-14
AGH Leasing, L.P.
Pro Forma Statements of Operations for the Year Ended
December 31, 1996 and the Three Months Ended March 31, 1997
(unaudited)....................................................... F-16
4
<PAGE>
(c) Exhibits
Exhibit No. Description
- ----------- -----------
2.1* Hotel Purchase Agreement by and between American General
Hospitality Operating Partnership, L.P. and 1700/1750 West Loop
S. Limited Partnership and Zenith Properties (Atlanta), Inc. and
Zenith Properties (Orlando) Limited Partnership dated April 15,
1997
2.2* First Amendment to Hotel Purchase Agreement by and between
American General Hospitality Operating Partnership, L.P. and
1700/1750 West Loop S. Limited Partnership and Zenith Properties
(Atlanta), Inc. and Zenith Properties (Orlando), Limited
Partnership dated April 15, 1997
23.1 Consent of Coopers & Lybrand, L.L.P.
* Filed as an exhibit to the Registrant's Current Reprt on Form 8-K (File No.
001-11903) filed with the Commission on July 9, 1997.
5
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused the report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: August 4, 1997
American General Hospitality Corporation
(Registrant)
By: /s/ Kenneth E. Barr
------------------------------------
Kenneth E. Barr
Executive Vice President and
Chief Financial Officer
6
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
American General Hospitality Corporation
We have audited the accompanying combined balance sheet and financial
statement schedule of the MUI Acquisition Hotels (described in Note 1) as of
December 31, 1996 and the related combined statements of operations, equity and
cash flows for the year then ended. These combined financial statements are the
responsibility of the MUI Acquisition Hotels' management. Our responsibility is
to express an opinion on these financial statements and financial statement
schedule based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the combined financial position of the MUI Acquisition
Hotels as of December 31, 1996, and the combined results of their operations and
their cash flows for the year then ended, in conformity with generally accepted
accounting principles. In addition, in our opinion, the financial statement
schedule referred to above, when considered in relation to the basic financial
statements taken as a whole, presents fairly, in all material respects, the
information required to be included therein.
COOPERS & LYBRAND L.L.P.
Dallas, Texas
June 16, 1997, except for Note 7, as to
which the date is June 25, 1997
F-1
<PAGE>
MUI ACQUISITION HOTELS
COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, 1996 MARCH 31, 1997
----------------- --------------
ASSETS (unaudited)
<S> <C> <C>
Investments in hotel and office properties, at cost:
Land and land improvements....................... $ 9,386,191 $ 9,386,191
Buildings and improvements....................... 43,086,258 43,434,125
Furniture, fixtures and equipment................ 5,788,877 5,721,630
----------------- --------------
58,261,326 58,541,946
Less accumulated depreciation......................... 3,631,732 4,191,291
----------------- --------------
Net investment in hotel and office properties......... 54,629,594 54,350,655
Cash and cash equivalents............................. 3,968,844 4,016,460
Restricted cash....................................... 1,433,838 1,136,043
Accounts receivable, net.............................. 1,230,743 2,023,861
Inventories........................................... 505,194 582,045
Prepaid expenses...................................... 216,065 314,307
Deferred expenses..................................... 627,034 621,477
Other assets.......................................... 130,637 193,459
----------------- --------------
Total assets................................ $62,741,949 $63,238,307
================= ==============
LIABILITIES AND EQUITY
Debt.................................................. $36,907,889 $36,730,690
Accounts payable, trade............................... 779,252 801,581
Accrued expenses and other liabilities................ 1,824,878 1,478,008
----------------- --------------
Total liabilities........................... 39,512,019 39,010,279
----------------- --------------
Commitments and contingencies (Notes 4 and 5)
Capital............................................... 14,669,842 13,070,901
Retained earnings..................................... 8,560,088 11,157,127
----------------- --------------
Total equity................................ 23,229,930 24,228,028
----------------- --------------
Total liabilities and equity................ $62,741,949 $63,238,307
================= ==============
</TABLE>
The accompanying notes are an integral part of these
combined financial statements.
F-2
<PAGE>
MUI ACQUISITION HOTELS
COMBINED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS ENDED MARCH 31,
------------ ----------------------------
DECEMBER 31,
1996 1996 1997
------------ ------------- -------------
<S> <C> <C> <C>
(unaudited)
Revenues:
Room revenue.............................. $ 21,583,179 $ 5,884,421 $ 6,913,275
Food and beverage revenue................. 8,205,843 2,256,169 2,642,425
Office building rental income............. 2,136,450 505,209 600,290
Other revenue............................. 1,740,722 464,071 428,659
------------ ------------- -------------
Total revenue........................ 33,666,194 9,109,870 10,584,649
------------ ------------- -------------
Expenses:
Property operating costs and expenses..... 5,836,039 1,494,911 1,578,612
Food and beverage costs and expenses...... 5,318,244 1,378,707 1,581,389
General and administrative................ 3,046,052 1,005,133 759,489
Advertising and promotion................. 2,909,291 814,978 750,085
Repairs and maintenance................... 2,286,527 483,122 571,732
Utilities................................. 1,787,523 409,118 440,180
Management fees........................... 848,493 280,759 325,021
Franchise costs........................... 642,752 237,399 270,626
Depreciation.............................. 2,110,778 468,556 559,559
Amortization.............................. 68,667 16,630 19,469
Real estate and personal property taxes,
and property insurance.................. 1,101,325 261,120 280,214
Interest expense.......................... 3,266,532 823,859 795,744
Other expense............................. 215,714 51,271 55,490
------------ ------------- -------------
Total expenses....................... 29,437,937 7,725,563 7,987,610
------------ ------------- -------------
Net income........................... $ 4,228,257 $ 1,384,307 $ 2,597,039
============ ============= =============
</TABLE>
The accompanying notes are an integral part of these
combined financial statements.
F-3
<PAGE>
MUI ACQUISITION HOTELS
COMBINED STATEMENTS OF EQUITY
<TABLE>
<CAPTION>
<S> <C>
Balance, December 31, 1995.............. $20,617,067
Net income......................... 4,228,257
Capital contributions.............. 4,219,606
Distributions...................... (5,835,000)
-----------
Balance, December 31, 1996.............. 23,229,930
Net income (unaudited)............. 2,597,039
Capital contributions (unaudited).. 972,943
Distributions (unaudited).......... (2,571,884)
-----------
Balance, March 31, 1997 (unaudited)..... $24,228,028
===========
</TABLE>
The accompanying notes are an integral part of these
combined financial statements
F-4
<PAGE>
MUI ACQUISITION HOTELS
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS ENDED MARCH 31,
------------ ----------------------------
DECEMBER 31,
1996 1996 1997
------------ ------------ -------------
(unaudited)
Cash flow from operating activities:
<S> <C> <C> <C>
Net income.................................... $ 4,228,257 $ 1,384,307 $ 2,597,039
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation................................ 2,110,778 468,556 559,559
Amortization................................ 68,667 16,630 19,469
Loss on fixed asset disposal................ 170
Changes in assets and liabilities:
Restricted cash............................. (213,769) (829,475) 297,795
Accounts receivable......................... (120,401) (1,351,721) (793,118)
Inventories................................. 144,860 (13,863) (76,851)
Prepaid expenses............................ (106,233) (17,145) (98,242)
Payment of deferred leasing costs........... (1,055) (11,727)
Other assets................................ (115,041) 1,900 (62,822)
Accounts payable............................ 23,519 189,423 22,329
Accrued expenses and other liabilities...... (617,134) (962,614) (346,870)
------------ ------------ ------------
Net cash used in operating activities.... 5,464,507 (1,115,057) 2,106,731
------------ ------------ ------------
Cash flows from investing activities:
Improvements and additions to properties...... (1,700,991) (86,804) (282,975)
------------ ------------ ------------
Net cash used in investing activities.... (1,700,991) (86,804) (282,975)
------------ ------------ ------------
Cash flows from financing activities:
Principal payments on borrowings.............. (708,900) (177,200) (177,199)
Capital contributions......................... 4,219,606 1,446,731 972,943
Distributions paid............................ (5,835,000) (645,000) (2,571,884)
------------ ------------ ------------
Net cash used in financing activities.... (2,324,294) 624,531 (1,776,140)
------------ ------------ ------------
Net change in cash and cash equivalents............ 1,439,222 (577,330) 47,616
Cash and cash equivalents at beginning of periods.. 2,529,622 2,529,622 3,968,844
------------ ------------ ------------
Cash and cash equivalents at end of periods........ $ 3,968,844 $ 1,952,292 $ 4,016,460
============ ============ ============
Supplemental disclosures of cash flow
information:
Cash paid during the year for interest........ $ 3,211,913 $ 823,859 $ 795,744
============ ============ ============
Supplemental schedule of non cash investing
activities:
MUI Acquisition Hotels disposed is $2,335 of
equipment in 1997.
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
MUI ACQUISITION HOTELS
NOTES TO COMBINED FINANCIAL STATEMENTS
1. ORGANIZATION AND BASIS OF PRESENTATION
Organization - On June 25, 1997 (i) American General Hospitality Operating
Partnership, L.P. (the "Operating Partnership"), a subsidiary of American
General Hospitality Corporation (the "Company" or "Registrant") acquired the
Marriott Hotel West Loop and the connected office building, 1700 West Loop
Office Tower and (ii) Lake Buena Vista Partners, Ltd. ("LBV Partners"), a
subsidiary of the Operating Partnership acquired the Radisson Twin Towers Hotel
and Convention Center, (together the "MUI Acquisition Hotels") from entities
unaffiliated with the Company and the Operating Partnership. The aggregate
purchase price of the MUI Acquisition Hotels was approximately $115.7 million.
The Operating Partnership, a subsidiary of American General Hospitality
Corporation (the "Company") which is a Maryland corporation real estate
investment trust ("REIT"), was established to acquire, own and lease hotel
properties. The Company completed its initial public offering on July 31, 1996.
Basis of Presentation - The accompanying combined financial statements of
the MUI Acquisition Hotels have been presented on a combined basis due to
anticipated common ownership since each of the entities were the subject of a
business combination with the Company (Note 7). The MUI Acquisition Hotels
consists of the following:
<TABLE>
<CAPTION>
NO. OF ROOMS/
PROPERTY NAME LOCATION SQUARE FOOTAGE
- ------------- ---------------- ---------------
<S> <C> <C>
Radisson Twin Towers Hotel and Convention Center Orlando, Florida 742 rooms
Marriott Hotel West Loop Houston, Texas 302 rooms
1700 West Loop Office Tower Houston, Texas 256,000 sq. ft.
</TABLE>
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Investment in Hotel and Office Properties - Hotel properties and office
properties are stated at the lower of cost or net realizable value and are
depreciated using the straight-line method over estimated useful lives of 39
years for building and improvements and 3 to 10 years for furniture, fixtures
and equipment.
The respective owners of the MUI Acquisition Hotels review the carrying
value of each property to determine if circumstances exist indicating an
impairment in the carrying value of the investment of the hotel or office
property or that depreciation periods should be modified. If facts or
circumstances support the possibility of impairment, the respective owners of
the MUI Acquisition Hotels will prepare a projection of the undiscounted future
cash flows, without interest charges, of the specific hotel or office property
and determine if the investment in the hotel or office property is recoverable
based on the undiscounted future cash flows.
Maintenance and repairs are charged to operations as incurred; major
renewals and betterments are capitalized. Upon the sale or disposition of a
fixed asset, the asset and the related accumulated depreciation are removed from
the accounts and the gain or loss is included in operations.
Cash and Cash Equivalents - All highly liquid investments with a maturity
of three months or less when purchased are considered to be cash equivalents.
Restricted Cash - Restricted cash consists primarily of amounts held in
escrow principally for capital and property tax reserves.
Inventories - Inventories consist primarily of supplies, food and beverage
items; china; glass and silver; and linen and are stated at the lower of cost
(generally, first-in, first-out) or market.
F-6
<PAGE>
MUI ACQUISITION HOTELS
NOTES TO COMBINED FINANCIAL STATEMENTS - (Continued)
Deferred Expenses - Deferred expenses primarily consist of deferred loan
costs and deferred leasing costs. Amortization of deferred loan cost is
computed using the effective yield method based upon the terms of the loan
agreements. Amortization of deferred leasing costs are computed using the
straight-line method based upon the terms of the agreements. Accumulated
amortization at December 31, 1996 is $107,081.
Income Taxes - The MUI Acquisition Hotels are included in limited
partnerships which are not taxable entities. The results of operations are
included in the tax returns of the partners, accordingly, the combined
statements of operations contain no provision for federal income taxes. The
partnerships' tax returns and the amount of allocable income or loss are subject
to examination by federal and state taxing authorities. If such examinations
result in changes to income or loss, the tax liability of the partners could be
changed accordingly.
Revenue Recognition - Revenue is recognized as earned. Ongoing credit
evaluations are performed and an allowance for potential credit losses is
provided against the portion of accounts receivable which is estimated to be
uncollectible.
Leases - The MUI Acquisition Hotels, as lessor, has retained substantially
all of the risks and benefits of ownership of its properties and accounts for
its leases at the office building as operating leases.
Use of Estimates - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Interim Financial Information - The unaudited interim financial statements
as of March 31, 1997 and for the three months ended March 31, 1996 and 1997 have
been prepared pursuant to the rules and regulations of the SEC. The notes to
the interim financial statements included herein are intended to highlight
significant changes to the notes to the December 31, 1996 financial statements
and present interim disclosures required by the SEC. The accompanying interim
financial statements reflect, in the opinion of management, all adjustments
necessary for a fair presentation of the interim financial statements. All such
adjustments are of a normal and recurring nature.
3. DEBT
Debt at December 31, 1996 consists of the following:
<TABLE>
<CAPTION>
<S> <C>
First mortgage note payable in quarterly installments including interest at the floating rate of
Prime (8.25% at December 31, 1996) plus .75% maturing October 2006............................. $28,000,000
First mortgage note payable in monthly installments including interest at a fixed rate of
7.46% maturing October 1998.................................................................... 8,907,889
-----------
$36,907,889
===========
</TABLE>
All debt is collateralized by the investments in hotel
and office properties.
F-7
<PAGE>
MUI ACQUISITION HOTELS
NOTES TO COMBINED FINANCIAL STATEMENTS - (Continued)
Aggregate annual principal payments for the MUI Acquisition Hotels' debt at
December 31, 1996 are as follows:
<TABLE>
<CAPTION>
YEAR AMOUNT
---- ------
<S> <C>
1997................. $ 1,381,858
1998................. 8,776,031
1999................. 750,000
2000................. 1,000,000
2001 and thereafter.. 25,000,000
-----------
Total...... $36,907,889
===========
</TABLE>
4. OFFICE PROPERTY
The MUI Acquisition Hotels' investment in office property is included in
the combined financial statements and consists solely of the 1700 West Loop
Office Tower. The following is summarized financial information for the West
Loop Office Tower.
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS ENDED MARCH 31,
------------ ----------------------------
DECEMBER 31,
1996 1996 1997
------------ ------------ -------------
(unaudited)
Balance Sheet:
- -------------
<S> <C> <C> <C>
Net investment in office property................ $ 12,348,981 $ 12,116,563 $ 12,283,888
Total assets..................................... 14,233,230 14,009,969 14,384,373
Total liabilities................................ 58,781 137,819 48,177
Total equity..................................... 14,174,449 13,872,150 14,336,196
Income Statement:
- -----------------
Office building rental income.................... $ 2,136,450 $ 505,209 $ 600,290
Total revenue.................................... 2,143,931 506,608 600,818
Total expenses................................... 1,698,209 390,491 439,073
Net income....................................... 445,722 116,117 161,745
</TABLE>
The future minimum lease payment to be received by the MUI Acquisition
Hotels for its investment in office property as of December 31, 1996, under
non-cancelable operating leases, which expire on various dates through 2007,
are as follows:
<TABLE>
<CAPTION>
YEAR AMOUNT
---- ------
<S> <C>
1997................................................. $ 1,854,642
1998................................................. 1,526,820
1999................................................. 1,377,291
2000................................................. 1,218,233
2001 and thereafter.................................. 2,177,786
-----------
$ 8,154,772
===========
</TABLE>
F-8
<PAGE>
MUI ACQUISITION HOTELS
NOTES TO COMBINED FINANCIAL STATEMENTS - (Continued)
5. COMMITMENTS
Minimum future rental payments required under operating leases for office
equipment and vehicles that have an initial term or remaining noncancellable
lease terms in excess of one year at December 31, 1996 are as follows:
<TABLE>
<CAPTION>
YEAR AMOUNT
---- ---------
<S> <C>
1997................. $151,970
1998................. 113,935
1999................. 78,464
2000................. 26,710
2001 and thereafter..
--------
$371,079
========
</TABLE>
Rental expense reported in general and administrative and other expenses
was $67,595 for the year ended December 31, 1996.
The Radisson Hotel's base management fee is 5.5% of gross operating profit.
The Marriott Hotel's base management fee is 1% of gross revenues and incentive
management fees are paid on 10% of Net Operating Income. Incentive fees of
$251,044 were paid in 1996. The Office Tower's management fee is the greater of
1.75% of gross income or $2,500 per month. Commissions are also payable to an
affiliate of the manager of the Office Tower manager related to leasing
activities based on 2% to 4% of base rent.
Franchise fees represent the annual expense for franchise royalties and
reservation services under the terms of hotel franchise agreements. The
Radisson Hotel franchise fees are 4% of gross room revenue. The agreement
expires in 2005. The Marriott Hotel franchise fees are 6% of gross room revenue
and 3% of food and beverage revenue. The agreement expires in 2004.
The two hotels are required to remit 1% to 3.5% of gross room revenue to
franchisors for sales and advertising expenses incurred to promote the hotels at
the national level. Additional sales and advertising costs are incurred at the
local property level.
6. FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards 107 requires all entities to
disclose the fair value of certain financial instruments in their financial
statements. Accordingly, the MUI Acquisition Hotels report the carrying amount
of cash and cash equivalents, restricted cash, accounts payable, accrued
expenses and other liabilities at cost which approximates fair value due to the
short maturity of these instruments. The carrying amount of the MUI Acquisition
Hotels' debt approximates fair value due to the MUI Acquisition Hotels' ability
to obtain such borrowings at comparable interest rates.
F-9
<PAGE>
MUI ACQUISITION HOTELS
NOTES TO COMBINED FINANCIAL STATEMENTS - (Continued)
7. SUBSEQUENT EVENTS
As discussed in Note 1, the MUI Acquisition Hotels were acquired by the
Company on June 25, 1997. The acquisitions were accounted for by the Company
using the purchase method of accounting. Accordingly, the cost basis of the
hotels changed to reflect the acquisition prices of the hotels by the Company.
In addition, the hotels were refinanced upon acquisition and postacquisition
debt is different than the historical debt reflected in the accompanying
financial statements. All management agreements were terminated concurrently
with the sales of the hotels to the Company. The combined financial statements
do not reflect any of the transactions in connection with the acquisition of the
MUI Acquisition Hotels by the Company.
F-10
<PAGE>
MUI ACQUISITION HOTELS
SCHEDULE III--REAL ESTATE AND ACCUMULATED DEPRECIATION
AS OF DECEMBER 31, 1996
<TABLE>
<CAPTION>
Cost Capitalized Gross Amounts At
Subsequent to Which Carried
Initial Cost Acquisition at Close of Period
-------------------------- ------------------ ------------------------
Building Building Building
and and and
Description Encumbrances Land Improvements Land Improvements Land Improvements
----------- ------------ ---- ------------ ---- ------------ ---- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Radisson Twin Towers Hotel
and Convention Center
Orlando, FL............... $28,000,000 $6,976,191 $27,174,275 $ 495,404 $6,976,191 $27,669,679
Marriott Hotel West Loop
Houston, TX.......... 8,907,889 4,804,241 271,665 4,875,906
1700 West Loop Office Tower
Houston, TX.......... 2,410,000 9,848,404 692,269 2,410,000 10,540,673
----------- ----------- ----------- ---- ---------- ---------- -----------
$36,907,889 $9,386,191 $41,626,920 $1,459,338 $9,386,191 $43,086,258
=========== =========== =========== ==== ========== ========== ===========
</TABLE>
<TABLE>
<CAPTION>
Accumulated Net Life
Depreciation Book Value Upon Which
Building Building Depreciation
and and Date of Date of Statement
Total Improvements Improvements Construction Acquisition is Computed
----------- ------------ ------------ ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Radisson Twin Towers Hotel
and Convention Center
Orlando, FL............... $34,645,870 $ 794,085 $33,851,785 1973 1995 39 YRS
Marriott Hotel West Loop
Houston, TX.......... 4,875,906 434,594 4,441,312 1976 1993 39 YRS
1700 West Loop Office Tower
Houston, TX.......... 12,950,673 863,768 12,086,905 1976 1993 39 YRS
----------- ---------- -----------
$52,472,449 $2,092,447 $50,380,002
=========== ========== ===========
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
(a) Reconciliation of Land and Buildings & Improvements:
Balance at January 1, 1996................................. $51,388,422
Additions for the year 1996........................... 1,084,027
-----------
Balance at December 31, 1996............................... $52,472,449
===========
(b) Reconciliation of Accumulated Depreciation of Buildings and Improvements:
Balance at January 1, 1996................................. $ 1,504,509
Depreciation for the year 1996........................ 587,938
-----------
Balance at December 31, 1996............................... $ 2,092,447
===========
</TABLE>
F-11
<PAGE>
AMERICAN GENERAL HOSPITALITY CORPORATION
PRO FORMA FINANCIAL INFORMATION (UNAUDITED)
The following unaudited Pro Forma Consolidated Balance Sheet and Statements
of Operations of the Company and the Lessee are presented as if the consummation
of the Initial Public Offering and related Formation Transactions, the
acquisition of the 26 Hotels acquired to date, including the MUI Acquisition
Hotels, the Holiday Inn Select Bucks County and the Cocoa Beach Hilton Hotel and
the consummation of the 1997 Public Offering and the application of net proceeds
therefrom had occurred on March 31, 1997 and January 1, 1996, respectively and
all of the Hotels had been leased pursuant to the Participating Leases since
January 1, 1996. Such pro forma information is based in part upon the
historical Consolidated Balance Sheet and Consolidated Statement of Operations
of the Company, the historical Combined Balance Sheets and Statements of
Operations of the MUI Acquisition Hotels, and the pro forma Statements of
Operations of the Lessee. In management's opinion, all adjustments necessary to
reflect the effects of the Initial Public Offering and related Formation
Transactions, the acquisition of all Hotels, and the consummation of the 1997
Public Offering and the application of net proceeds therefrom have been made.
The pro forma information does not purport to present what the financial
position or the results of operations of the Company would have been if the
previously mentioned transactions had occurred on such dates or to project the
future financial position or results of operations of the Company for any future
period.
F-12
<PAGE>
AMERICAN GENERAL HOSPITALITY CORPORATION
PRO FORMA CONSOLIDATED BALANCE SHEET
MARCH 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
HOTELS
ACQUIRED
COMPANY SUBSEQUENT TO LINE OF CREDIT PRO FORMA
HISTORICAL QUARTER END (1) INCREASE (2) BALANCE SHEET
------------ -------------- -------------- -------------
<S> <C> <C> <C> <C>
ASSETS
Investment in hotel properties, net............ $326,319,563 $193,736,379 $520,055,942
Cash and cash equivalents...................... 34,233,988 (32,975,000) 1,258,988
Restricted cash................................ 463,283 463,283
Accounts receivable, net....................... 4,403,806 4,403,806
Deferred expenses, net......................... 3,447,043 225,300 $1,137,500 4,809,843
Other assets................................... 831,499 831,499
Note receivable - Lessee....................... 274,833 274,833
------------ ------------ ---------- ------------
Total assets......................... $369,974,015 $160,986,679 $1,137,500 $532,098,194
============ ============ ========== ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Debt........................................... $ 36,717,670 $ 36,717,670
Debt, Line of Credit........................... 1,000 $154,542,195 $ 762,500 155,305,695
Distributions payable.......................... 6,745,811 6,745,811
Accounts payable, trade, accrued expenses
and other liabilities........................ 10,170,054 375,000 10,545,054
Minority interest in Operating Partnership..... 36,379,040 5,260,091 41,639,131
------------ ------------ ---------- ------------
Total liabilities.................... 90,013,575 159,802,286 1,137,500 250,953,361
------------ ------------ ---------- ------------
Common stock................................... 146,571 146,571
Additional paid in capital..................... 283,078,776 1,184,393 284,263,169
Unearned officers' compensation................ (828,333) (828,333)
Distributions in excess of earnings............ (2,436,574) (2,436,574)
------------ ------------ ---------- ------------
Total shareholders' equity........... 279,960,440 1,184,393 281,144,833
------------ ------------ ---------- ------------
Total liabilities and shareholders'
equity............................. $369,974,015 $160,986,679 $1,137,500 $532,098,194
============ ============ ========== ============
</TABLE>
(1) Hotels Acquired Subsequent to Quarter End refers to the six hotels
purchased after March 31, 1997, as follows:
<TABLE>
<CAPTION>
HOTEL LOCATION PURCHASE DATE PURCHASE PRICE*
----- -------- ------------- ---------------
<S> <C> <C> <C>
Holiday Inn Corporate Center..... Phoenix, Arizona April 1, 1997 $16,000,000
Hilton Airport Hotel............. Grand Rapids, Michigan April 18, 1997 16,900,000
Holiday Inn Select Bucks County.. Trevose, Pennsylvania June 20, 1997 21,455,000
Radisson Twin Towers Hotel....... Orlando, Florida June 25, 1997 78,566,186
Marriott Hotel West Loop
and office building........... Houston, Texas June 25, 1997 38,615,193
Cocoa Beach Hilton Hotel......... Cocoa Beach, Florida June 27, 1997 22,200,000
</TABLE>
*Including estimated closing costs
(2) The Line of Credit increase refers to $150 million dollar increase made to
the Company's Line of Credit on June 24, 1997. The Line of Credit was
increased from $150 million to $300 million. The Company paid a commitment
fee of $562,500 and expects to pay $200,000 in other costs. In addition, a
line of credit extension fee of $375,000 was accrued on the $150 million
increase.
F-13
<PAGE>
AMERICAN GENERAL HOSPITALITY CORPORATION
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
COMBINED HOTELS OFFERING
PRO FORMA ACQUIRED AND MUI TOTAL
DECEMBER 31, SUBSEQUENT TO LINE OF CREDIT ACQUISITION COMBINED
1996 (1) YEAR END (2) INCREASES (3) HOTELS PRO FORMA
------------ ------------- -------------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Revenues:
Participating Lease revenue........ $35,302,430 $18,205,535 $ $12,268,677 $65,776,642
Office building rental income...... 2,143,933 2,143,933
Interest income.................... 99,473 99,473
----------- ----------- -------------- ----------- -----------
Total revenue................. 35,401,903 18,205,535 14,412,610 68,020,048
----------- ----------- -------------- ----------- -----------
Expenses:
Depreciation....................... 7,235,664 4,576,218 4,589,391 16,401,273
Amortization....................... 659,739 25,050 604,633 7,530 1,296,952
Real estate and personal
property taxes and
property insurance............... 3,517,465 2,717,207 1,060,885 7,295,557
Office building operating expense.. 1,344,651 1,344,651
General and administrative......... 1,543,771 202,810 202,810 1,949,391
Ground lease expense............... 1,049,524 1,049,524
Amortization of unearned
officers' compensation........... 88,750 88,750
Interest expense................... 5,125,426 11,504,709 (11,754,590) 8,559,738 13,435,283
----------- ----------- -------------- ----------- -----------
Total expenses................ 19,220,339 19,025,994 (11,149,957) 15,765,005 42,861,381
----------- ----------- -------------- ----------- -----------
Income before minority interest......... 16,181,564 (820,459) 11,149,957 (1,352,395) 25,158,667
Minority interest....................... 3,009,771 3,245,468
----------- -----------
Net income applicable to
common shareholders................ $13,171,793 $21,913,199
=========== ===========
Per common share information:
Net income per common share............. $ 1.59 $ 1.50
=========== ===========
Weighted average number of
shares of Common Stock
outstanding........................ 8,288,841 14,657,141
=========== ============
</TABLE>
(1) Combined Pro Forma December 31, 1996 represents the pro forma operating
results of the Company's 15 Hotels owned at December 31, 1996.
(2) Hotels Acquired Subsequent to Year End refers to the nine hotels acquired
by the Company from January 1, 1997 through June 30, 1997, exclusive of the
MUI Acquisition Hotels.
(3) Offering and Line of Credit Increases refers to the Company's 1997 Public
Offering completed February 7, 1997, the first Line of Credit increase of
$50 million on February 11, 1997 and the second Line of Credit increase of
$150 million on June 24, 1997.
F-14
<PAGE>
AMERICAN GENERAL HOSPITALITY CORPORATION
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
HOTELS OFFERING
PRO FORMA ACQUIRED AND MUI
TOTAL CURRENT SUBSEQUENT LINE OF CREDIT ACQUISITION COMBINED
HOTELS (1) TO QUARTER END (2) INCREASE (3) HOTELS PRO FORMA
------------- ------------------ -------------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Revenues
Participating Lease revenue......... $11,344,914 $2,354,160 $ $4,215,266 $17,914,340
Office building rental income....... 600,818 600,818
Interest income..................... 394,713 394,713
----------- ----------- -------------- ---------- -----------
Total revenue................ 11,739,627 2,354,160 4,816,084 18,909,871
----------- ----------- -------------- ---------- -----------
Expenses
Depreciation........................ 2,433,045 541,774 1,147,348 4,122,167
Amortization........................ 199,727 3,750 92,230 1,883 297,590
Real estate and personal property
taxes and property insurance...... 1,496,261 294,587 265,221 2,056,069
Office building operating expense... 343,497 343,497
General and administrative.......... 502,391 502,391
Ground lease expense................ 314,462 314,462
Amortization of unearned officers'
compensation...................... 22,187 22,187
Interest expense.................... 1,244,098 1,317,385 (1,045,116) 2,198,563 3,714,930
----------- ----------- -------------- ---------- -----------
Total expenses............... 6,212,171 2,157,496 (952,886) 3,956,512 11,373,293
----------- ----------- -------------- ---------- -----------
Income before minority interest........ 5,527,456 196,664 952,886 859,572 7,536,578
Minority interest...................... 635,657 972,219
----------- -----------
Net income applicable to common
shareholders........................ $ 4,891,799 $ 6,564,359
=========== ===========
Per common share information:
Net income per common share............ $ 0.33 $ 0.45
=========== ===========
Weighted average number of shares of
Common shares outstanding........... 14,657,141 14,657,141
=========== ===========
</TABLE>
(1) Pro Forma Total Current Hotels refers to the 20 Hotels owned by the Company
at March 31, 1997.
(2) Hotels Acquired Subsequent to Quarter End refers to the four hotels
acquired from April 1, 1997 to June 30, 1997, exclusive of the MUI
Acquisition Hotels.
(3) Offering and Line of Credit Increase refers to the Company's 1997 Public
Offering completed February 7, 1997 and the $150 million increase in the
Line of Credit on June 24, 1997. Excess cash from the 1997 Public Offering
remained at March 31, 1997 and was utilized for property acquisitions after
that date.
F-15
<PAGE>
AGH LEASING, L.P.
CONSOLIDATED PRO FORMA STATEMENT OF OPERATIONS
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA HOTELS
TOTAL ACQUIRED MUI COMBINED
CURRENT SUBSEQUENT ACQUISITION PRO FORMA
HOTELS(1) TO YEAR END (2) HOTELS DECEMBER 31, 1996
------------ -------------- ----------- -----------------
<S> <C> <C> <C> <C>
Revenue
Room revenue.............................. $ 73,555,070 $41,812,956 $21,443,817 $136,811,843
Food and beverage revenue................. 20,761,969 15,208,625 8,205,843 44,176,437
Other revenue............................. 5,061,302 2,742,766 1,733,241 9,537,309
------------ ----------- ----------- ------------
Total revenue...................... 99,378,341 59,764,347 31,382,901 190,525,589
------------ ----------- ----------- ------------
Expense
Property operating costs and expenses..... 36,240,481 22,706,192 11,231,831 70,178,504
General and administrative................ 8,743,423 4,796,363 2,859,991 16,399,777
Advertising and promotion................. 6,089,628 3,864,709 2,765,277 12,719,614
Repairs and maintenance................... 4,290,666 2,894,655 1,769,331 8,954,652
Utilities................................. 4,225,240 2,780,457 1,458,578 8,464,275
Management fees........................... 2,527,121 2,023,642 767,605 5,318,368
Franchise costs........................... 2,615,896 1,468,558 642,752 4,727,206
Depreciation.............................. 63,000 63,000
Amortization.............................. 6,753 6,753
Real estate and personal property taxes,
and property insurance..................
Interest expense.......................... 31,689 31,689
Other expense............................. 198,232 93,732 121,825 413,789
Participating lease expense............... 35,302,430 18,205,535 12,268,677 65,776,642
------------ ----------- ----------- ------------
Total expense...................... 100,334,559 58,833,843 33,885,867 193,054,269
------------ ----------- ----------- ------------
Income (loss) before minority
interest........................ (956,218) 930,504 (2,502,966) (2,528,680)
Minority interest.................. 2,620,772 2,620,772
------------ ----------- ----------- ------------
Net income (loss).................. $ (956,218) $ 930,504 $ 117,806 $ 92,092
============ =========== =========== ============
</TABLE>
(1) Current Hotels refers to the 15 Hotels owned by the Company at December 31,
1996.
(2) Acquisitions Subsequent to Year End refers to the nine other hotels
acquired by the Company from January 1, 1997 through June 30, 1997.
F-16
<PAGE>
AGH LEASING, L.P.
CONSOLIDATED PRO FORMA STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA HOTELS
TOTAL ACQUIRED MUI ADJUSTMENT TO COMBINED
CURRENT SUBSEQUENT ACQUISITION MANAGEMENT PRO FORMA
HOTELS(1) TO QUARTER END(2) HOTELS FEES MARCH 31, 1997
------------ ----------------- ----------- ------------- --------------
<S> <C> <C> <C> <C> <C>
Revenue
Room revenue.................. $23,544,102 $5,525,056 $ 6,913,275 $35,982,433
Food and beverage revenue..... 6,317,296 2,038,592 2,642,425 10,998,313
Other revenue................. 1,539,320 322,871 428,131 2,290,322
----------- ---------- ----------- --------- -----------
Total revenue.......... 31,400,718 7,886,519 9,983,831 49,271,068
----------- ---------- ----------- --------- -----------
Expense
Property operating costs and
expenses.................... 6,290,887 1,350,244 1,578,612 9,219,743
Food and beverage costs and
expenses.................... 5,153,870 1,458,164 1,581,389 8,193,423
General and administrative.... 2,865,500 558,177 715,887 4,139,564
Advertising and promotion..... 2,129,662 385,659 749,383 3,264,704
Repairs and maintenance....... 1,306,614 304,367 446,672 2,057,653
Utilities..................... 1,438,158 320,207 355,338 2,113,703
Management fees............... 440,261 286,619 315,265 230,264 1,272,409
Franchise costs............... 753,254 284,162 270,626 1,308,042
Depreciation.................. 15,750 15,750
Amortization.................. 10,052 10,052
Interest expense.............. 7,192 7,192
Other expense................. 52,105 28,163 49,380 129,648
Participating lease expense... 11,344,914 2,354,160 4,215,266 17,914,340
----------- ---------- ----------- --------- -----------
Total expense.......... 31,808,219 7,329,922 10,277,818 230,264 49,646,223
----------- ---------- ----------- --------- -----------
Income (loss) before
minority interest.... (407,501) 556,597 (293,987) (230,264) (375,155)
Minority interest...... 346,976 346,976
----------- ---------- ----------- --------- -----------
Net income (loss)...... $ (407,501) $ 556,597 $ 52,989 $(230,264) $ (28,179)
=========== ========== =========== ========= ===========
</TABLE>
(1) Current Hotels refers to the 20 Hotels owned by the Company at March 31,
1997.
(2) Acquisitions subsequent to quarter end refers to the four properties
acquired after March 31, 1997, exclusive of the MUI Acquisition Hotels.
They are as follows:
<TABLE>
<CAPTION>
PROPERTY LOCATION PURCHASE DATE
-------- -------- --------------
<S> <C> <C>
Holiday Inn Corporate Center................. Phoenix, Arizona April 1, 1997
Hilton Airport Hotel......................... Grand Rapids, Michigan April 18, 1997
Holiday Inn Select Bucks County.............. Trevose, Pennsylvania June 20, 1997
Cocoa Beach Hilton Hotel..................... Cocoa Beach, Florida June 27, 1997
</TABLE>
F-17
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statements of
American General Hospitality Corporation in Form S-8 (File No. 333-08845) and on
Form S-8 (File No. 333-08841) of our report dated June 16, 1997, except for Note
7, as to which the date is June 25, 1997, on our audit of the combined financial
statements and financial statement schedule of the MUI Acquisition Hotels as of
December 31, 1996, which report is included in this Form 8-K/A.
Coopers & Lybrand L.L.P.
Dallas, Texas
August 4, 1997
