<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (Date of earliest event reported) MARCH 17, 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.)
3860 W. NORTHWEST HIGHWAY, SUITE 300, DALLAS, TEXAS 75220
(Address of principal executive offices) (Zip Code)
REGISTRANTS TELEPHONE NUMBER, INCLUDING AREA CODE: (214) 904-2000
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On March 17, 1997, American General Hospitality Operating Partnership, L.P.
(the "Operating Partnership"), a subsidiary of American General Hospitality
Corporation (the "Company"or the "Registrant") acquired a portfolio of hotels,
including the Four Points by Sheraton, which was converted to a Wyndham Garden
Hotel on March 17, 1997, the Sheraton Key Largo and the French Quarter Suites
Hotel (the "Portfolio Purchase" or "AKL Acquisition Hotels"). The aggregate
purchase price for the Portfolio Purchase was approximately $59.1 million, which
was payable as follows: (i) approximately $49.5 million in cash and (ii) the
assumption of approximately $9.6 million of mortgage indebtedness collateralized
by the French Quarter Suites Hotel. The Purchase Price was arrived at through
arms-length negotiations. A description of the hotels and an allocation of the
portfolio purchase price is as follows:
. WYNDHAM GARDEN HOTEL - MARIETTA (FORMERLY THE FOUR POINTS BY SHERATON) -
On March 17, 1997, the Operating Partnership acquired the 219 room Four
Points by Sheraton hotel located in Marietta, Georgia from SNA of Georgia,
Inc. ("SNA") a Georgia Corporation for an allocated purchase price of
approximately $17.0 million. The Operating Partnership expects to invest
approximately $2.8 million to upgrade and renovate the guest rooms, public
areas and restaurant. The Company converted the hotel to a Wyndham Garden
Hotel on March 17, 1997.
The Wyndham Garden Hotel - Marietta is leased by the Operating Partnership
to AGH Leasing, L.P. (the "Lessee") pursuant to a twelve-year
participating lease that is substantially similar to the Operating
Partnership's other hotel leases. Effective with the purchase of the
property, the participating lease provides for the payment of annual rent
equal to the greater of (i) base rent of $1,350,000 or (ii) participating
rent equal to the following percentages of the respective revenues: Rooms:
20% of the first $2,400,000; 65% of the next $1,150,000; and 75%
thereafter; Food & Beverage: 7.5% of the first $1,090,000; 20% thereafter;
Telephone and Other: 30%. Effective January 1, 1998, the participating
lease provides for the payment of annual rent equal to the greater of (i)
base rent of $1,460,000 or (ii) participating rent equal to the following
percentages of the respective revenues: Rooms: 20% of the first
$2,625,000; 65% of the next $1,275,000; and 75% thereafter; Food &
Beverage: 7.5% of the first $1,130,000; 20% thereafter; Telephone and
Other: 30%. Effective January 1, 1999, 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 with
Wyndham Hotel Corporation to manage the hotel on behalf of the Lessee and
subject to its supervision. The management agreement with Wyndham will
provide for the payment of a base management fee equal to 1.5% of gross
revenues at the hotel plus an incentive management fee of up to 1.5% of
gross revenues. Wyndham will be entitled to receive the incentive
management fee during the first two years of the term of the agreement if
(i) annualized 1997 gross revenues for the hotel exceed 1996 gross
revenues for the hotel by at least 6% and (ii) 1998 gross revenues for the
hotel exceed 1996 gross revenues for the hotel by at least 12%.
Thereafter, the incentive management fee will be earned if annual gross
revenues for the hotel exceed the 1998 gross revenues for the hotel by at
least the cumulative percentage increase in CPI since 1998. The Lessee's
payment of the base management fee to Wyndham will be subordinated to the
payment of Base Rent under the Participating Lease relating to the hotel,
and the payment of the incentive management fee to Wyndham will be
subordinated to the payment of the Base Rent and Participating Rent
thereunder. In addition, Wyndham will be reimbursed by the Lessee, at an
initial rate of approximately $4,960 per month, for accounting and
financial services performed by Wyndham.
. SHERATON KEY LARGO - On March 17, 1997, the Operating Partnership
acquired the 200 room Sheraton Key Largo hotel located in Key Largo,
Florida from SKL of Florida, Inc. ("SKL") a Florida corporation for an
allocated purchase price of approximately $26.1 million. The Operating
Partnership expects to invest approximately $4.0 million to upgrade and
renovate the guest rooms, public areas and exterior. The Company expects
to convert the Key Largo hotels' brand affiliation from a Sheraton to a
Westin Resort in January 1998.
The Sheraton Key Largo is leased by the Operating Partnership to AGH
Leasing, L.P. (the "Lessee") pursuant to a twelve-year participating lease
that is substantially similar to the Operating Partnership's other hotel
leases. Effective with the purchase of the property, the participating
lease provides for the payment of annual rent equal to the greater of (i)
base rent of $2,184,000 or (ii) participating rent equal to the following
percentages of the respective revenues: Rooms: 20% of the first
$3,950,000; 60% of the next $1,875,000; and 70% thereafter;
2
<PAGE>
Food & Beverage: 2.5% of the first $1,674,000; 5% thereafter; Telephone
and 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 $2,284,000 or (ii) participating rent equal to the following
percentages of the respective revenues: Rooms: 20% of the first
$3,875,000; 60% of the next $2,200,000; and 70% thereafter; Food &
Beverage: 2.5% of the first $1,737,000; 5% thereafter; Telephone and
Other: 25%. Effective January 1, 1999, base rent will increase annually by
the percentage increase in CPI and participating tiers will increase by
CPI plus .75%. There will be an additional adjustment to the room
department participating tiers thresholds of 2.5% in 1999, 2.5% in 2000
and 1% in 2001.
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.
. FRENCH QUARTER SUITES HOTEL - On March 17, 1997, the Operating
Partnership acquired the 155 room French Quarter Suites Hotel located in
Atlanta, Georgia from French Quarter Suites, Inc. ("FQS") a Georgia
corporation for an allocated purchase price of approximately $16.0 million
that was payable as follows: (i) approximately $6.4 million in cash and
(ii) the assumption of approximately $9.6 million in mortgage indebtedness
which bears interest at the rate of 9.75% per annum, payable to State
Street Bank and Trust Company, as Trustee for J. P. Morgan Commercial
Mortgage Finance Corp. Pass-Through Certificate Series 1996-C2. The
Operating Partnership expects to spend approximately $2.8 million to
upgrade and renovate the guest rooms, atrium and public areas. The
Company expects to convert the French Quarter Suites Hotel to a DoubleTree
Guest Suites in May, 1997.
The French Quarter Suites Hotel is leased by the Operating Partnership to
AGH Leasing, L.P. (the "Lessee") pursuant to a twelve-year participating
lease that is substantially similar to the Operating Partnership's other
hotel leases. Effective with the purchase of the property, the
participating lease provides for the payment of annual rent equal to the
greater of (i) base rent of $1,373,000 or (ii) participating rent equal to
the following percentages of the respective revenues: Rooms: 25% of the
first $2,050,000; 65% of the next $925,000; and 75% thereafter; Food &
Beverage: 5% of the first $715,000; 10% thereafter; Telephone and 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 $1,466,000
or (ii) participating rent equal to the following percentages of the
respective revenues: Rooms: 25% of the first $2,450,000; 65% of the next
$1,050,000; and 75% thereafter; Food & Beverage: 5% of the first $742,000;
10% thereafter; Telephone and Other: 25%. Effective January 1, 1999, base
rent will increase annually by the percentage increase in CPI and
participating tiers will increase by CPI plus .75%. There will be an
additional adjustment to the room department participating tiers
thresholds of 3% in 1999 and 1% in 2000.
The Lessee 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 the Lessee and subject to its
supervision.
The Registrant currently owns an approximate 88.5% 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 87.5% limited partnership interest in the
Operating Partnership. The remaining 11.5% limited partner interest in the
Operating Partnership is held by the former owners of the hotels acquired by the
Operating Partnership on July 31, 1996.
The cash required to acquire the Portfolio Purchase was provided by the
Company's second offering which was completed February 7, 1997 of 5.8 million
shares of Common Stock and an additional 568,300 shares of Common Stock issued
in connection with the exercise of the underwriters' over-allotment (the "1997
Public Offering"). Each of SNA, SKI nd FQS are affiliates of each other.
3
<PAGE>
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of Business Acquired
Audited financial statements of the AKL Acquisition Hotels as of December
31, 1995 and for the year then ended and unaudited information as of December
31, 1996 are included in this Form 8-K.
Index to Financial Statements Page
---------------------------------------- ----
Report of Independent Accountants........... F-1
Balance Sheets as of December 31, 1995
(audited) and December 31,
1996 (unaudited).......................... F-2
Statements of Operations for the Years
Ended December 31, 1995
(audited) and 1996 (unaudited)............ F-3
Statements of Equity for the Years
ended December 31, 1995 (audited)
and 1996 (unaudited)...................... F-4
Statements of Cash Flows for the Years
Ended December 31, 1995
(audited) and 1996 (unaudited)............ F-5
Notes to Financial Statements............... F-6
Schedule III - Real Estate and
Accumulated Depreciation
as of December 31, 1995................... F-11
(b) Pro forma Financial Information (unaudited)
The pro forma balance sheet information of the Company as of December 31,
1996 and the pro forma Statements of Operations information of the Company and
the Lessee for the years ended December 31, 1995 and 1996 are presented as if
the Company had completed its initial public offering of Common Stock, the
principal transactions in connection with the formation if the Company and the
acquisition of its initial thirteen hotels (the "Formation Transactions"), the
acquisition of all of its current 20 hotels (the "Hotels") including the AKL
Acquisition Hotels, and the consummation of the 1997 Public Offering and the
application of net proceeds therefrom had occurred on December 31, 1996 and
January 1, 1995, respectively.
Index to Pro Forma Financial Statements Page
---------------------------------------- ----
American General Hospitality Corporation
Pro Forma Balance Sheet as of December
31, 1996 (unaudited)..................... F-13
Pro Forma Statements of Operations for
the Years Ended December 31, 1995 and
1996 (unaudited).......................... F-14
AGH Leasing, L.P.
Pro Forma Statements of Operations for
the Years Ended December 31, 1995
and 1996 (unaudited)................... F-16
(c) Exhibits
Exhibit No. Description
----------- -----------
2.1*** Hotel Purchase Agreement by and between American General
Hospitality Operating Partnership, L.P. and SNA of Georgia,
Inc., dated as of December 31, 1996.
2.2*** Hotel Purchase Agreement by and between American General
Hospitality Operating Partnership, L.P. and SKL of Florida,
Inc., dated December 31, 1996.
4
<PAGE>
Exhibit No. Description
----------- -----------
2.3*** Hotel Purchase Agreement by and between American General
Hospitality Operating Partnership, L.P. and French Quarter
Suites, Inc., dated December 31, 1996.
23.1** Consent of Coopers & Lybrand L.L.P.
*** Filed as an Exhibit to the Registrant's registration statement on Form S-11
(Registration No. 333-19585).
** Filed herewith.
5
<PAGE>
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: March 28, 1997
American General Hospitality Corporation
(Registrant)
By: /s/ Kenneth E. Barr
------------------------------------------
Kenneth E. Barr
Executive Vice President and
Chief Financial Officer
(Principal 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 AKL Acquisition Hotels (described in Note 1) as of
December 31, 1995 and the related combined statement of operations, equity and
cash flows for the year then ended. These combined financial statements are the
responsibility of the AKL 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.
The accompanying financial statements were prepared for the purpose of
complying with the rules and regulations of the Securities and Exchange
Commission as described in Note 1 to the financial statements and are not
intended to be a complete presentation of the AKL Acquisition Hotels.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the combined financial position of the AKL Acquisition
Hotels as of December 31, 1995, 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
February 21, 1997, except for
Note 8, as to which the date
is March 17, 1997
F-1
<PAGE>
AKL ACQUISITION HOTELS
COMBINED BALANCE SHEETS
DECEMBER 31, 1995 AND 1996
<TABLE>
<CAPTION>
1995 1996
-----------------------------
ASSETS (unaudited)
<S> <C> <C>
Investments in hotel properties, at
cost:
Land and land improvement......... $ 3,612,180 $ 3,894,903
Buildings and improvements........ 24,268,411 26,767,662
Furniture, fixtures and equipment. 8,200,135 9,282,664
-----------------------------
36,080,726 39,945,229
Less accumulated depreciation.......... (4,665,958) (3,164,302)
-----------------------------
Net investment in hotel properties..... 31,414,768 36,780,927
Cash and cash equivalents.............. 169,454 467,860
Restricted cash........................ 302,108 143,055
Accounts receivable, net............... 640,451 525,871
Inventories............................ 215,225 177,263
Prepaid expenses....................... 376,807 222,086
Deferred expenses...................... 1,168,309 2,086,252
Other assets........................... 11,653 266,808
-----------------------------
Total assets................. $34,298,775 $40,670,122
=============================
LIABILITIES AND EQUITY
Debt................................... $28,449,243 34,017,524
Accounts payable, trade................ 575,565 114,212
Payable to affiliates.................. 1,205,811 1,211,720
Accrued expenses and other liabilities. 1,043,609 1,238,940
-----------------------------
Total liabilities............ 31,274,228 36,582,396
-----------------------------
Commitments and contingencies
(Notes 4 and 5)
Capital................................ 6,117,504 5,376,298
Accumulated deficit.................... (3,092,957) (1,288,573)
-----------------------------
Total equity................. 3,024,547 4,087,726
-----------------------------
Total liabilities and equity. $34,298,775 $40,670,122
=============================
</TABLE>
The accompanying notes are an integral part of these
combined financial statements.
F-2
<PAGE>
AKL ACQUISITION HOTELS
COMBINED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1996
<TABLE>
<CAPTION>
1995 1996
-----------------------------
<S> <C> <C>
(unaudited)
Revenues:
Room revenue...................... $11,733,054 $15,189,074
Food and beverage revenue......... 3,729,626 4,543,281
Other revenue..................... 609,210 730,276
-----------------------------
Total revenue................ 16,071,890 20,462,631
-----------------------------
Expenses:
Property operating costs and
expenses......................... 3,152,678 3,745,802
Food and beverage costs and
expenses......................... 3,177,354 3,502,211
General and administrative........ 1,210,401 1,490,689
Advertising and promotion......... 947,776 1,173,433
Repairs and maintenance........... 844,331 1,114,578
Utilities......................... 841,393 1,103,288
Management fees................... 534,618 1,354,956
Franchise costs................... 191,365 347,300
Depreciation...................... 1,381,861 1,874,915
Amortization...................... 146,615 319,781
Real estate and personal property
taxes, and property insurance... 654,433 919,852
Interest expense.................. 2,714,286 3,192,942
Other expense..................... 476,683 214,732
-----------------------------
Total expenses............... 16,273,794 20,354,479
-----------------------------
Net income (loss)............ $ (201,904) $ 108,152
=============================
</TABLE>
The accompanying notes are an integral part of these
combined financial statements.
F-3
<PAGE>
AKL ACQUISITION HOTELS
COMBINED STATEMENTS OF EQUITY
<TABLE>
<CAPTION>
Equity
-------------
<S> <C>
Balance, December 31, 1994................................ $ 3,438,290
Net loss............................................. (201,904)
Capital contributions................................ 2,504,273
Distributions........................................ (2,716,112)
-------------
Balance, December 31, 1995................................ 3,024,547
Net income (unaudited)............................... 108,152
Capital contributions (unaudited).................... 2,559,798
Distributions (unaudited)............................ (1,604,771)
-------------
Balance, December 31, 1996 (unaudited).................... $ 4,087,726
=============
</TABLE>
The accompanying notes are an integral part of these
combined financial statements.
F-4
<PAGE>
AKL ACQUISITION HOTELS
COMBINED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1996
<TABLE>
<CAPTION>
1995 1996
------------- -------------
<S> <C> <C>
Cash flow from operating activities: (unaudited)
Net income (loss)........................... $ (201,904) $ 108,152
Adjustments to reconcile net
income (loss) to net cash
provided by operating activities:
Depreciation.............................. 1,381,861 1,874,915
Amortization.............................. 146,615 319,781
Changes in assets and liabilities:
Restricted cash........................... (184,063) 159,053
Accounts receivable....................... (218,054) 114,580
Inventories............................... (41,606) 37,962
Prepaid expenses.......................... (104,786) 154,721
Organization costs........................ (55,465) (541,871)
Other assets.............................. 46,643 (255,155)
Accounts payable, trade................... 125,095 (461,353)
Payable to affiliates..................... 5,909
Accrued expenses and other
liabilities.............................. 99,965 195,331
-------------- -------------
Net cash provided by
operating activities.................. 994,301 1,712,025
-------------- -------------
Cash flows from investing activities:
Improvements and additions to
hotel properties........................... (566,366) (5,276,074)
Acquisition of hotel properties,
net of cash acquired....................... (11,643,540) (1,965,000)
-------------- -------------
Net cash used in investing
activities............................ (12,209,906) (7,241,074)
-------------- -------------
Cash flows from financing activities:
Proceeds from borrowings.................... 19,655,655 5,967,993
Principal payments on borrowings............ (8,190,275) (399,712)
Payment of deferred loan costs.............. (1,040,221) (695,853)
Capital contributions....................... 2,504,273 2,559,798
Distributions paid.......................... (2,716,112) (1,604,771)
-------------- -------------
Net cash provided by
financing activities.................. 10,213,320 5,827,455
-------------- -------------
Net change in cash and cash equivalents
Cash and cash equivalents at beginning........... (1,002,285) 298,406
of periods...................................... 1,171,739 169,454
-------------- -------------
Cash and cash equivalents at end of
periods......................................... $ 169,454 $ 467,860
-------------- -------------
Supplemental disclosures of cash flow
information:
Cash paid during the year for
interest................................... $ 2,842,450 $ 3,271,052
============== ==============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
AKL ACQUISITION HOTELS
NOTES TO COMBINED FINANCIAL STATEMENTS
1. ORGANIZATION AND BASIS OF PRESENTATION
Organization - American General Hospitality Operating Partnership, L.P.
(the "Operating Partnership") acquired a 100% equity interest in three hotels
(the "AKL Acquisition Hotels") from entities unaffiliated with the Operating
Partnership (the "Selling Corporations"). 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 AKL 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 8). The AKL Acquisition Hotels
consist of the following:
<TABLE>
<CAPTION>
PROPERTY NAME LOCATION NO. OF ROOMS
------------- ------------------ ------------
<S> <C> <C>
Four Points by Sheraton (currently
the Wyndham Garden Hotel-Marietta)..... Marietta, Georgia 219
French Quarter Suites Hotel.............. Atlanta, Georgia 155
Sheraton Key Largo....................... Key Largo, Florida 200
</TABLE>
The Four Points by Sheraton and the Sheraton Key Largo were acquired by the
Selling Corporations in August 1995 and May 1996 respectively. Prior to those
dates, these two hotels were owned by a corporation and a partnership
respectively.
The Four Points by Sheraton was acquired for $11 million plus additional
renovation costs of $500,000. The hotel was purchased from the net proceeds of
two mortgage notes with face amounts of $9.75 million, approximately $2 million
in cash and the assumption of $64,000 of property tax liabilities. The
acquisition was accounted for under the purchase method of accounting and,
accordingly, the results of operations of the acquired hotel have been included
in the combined statement of operations since the date of acquisition.
The Sheraton Key Largo was acquired for $16 million. The hotel was
purchased from the net proceeds of two mortgage notes totalling $14 million and
approximately $2 million in cash.
The results of operations for periods prior to acquisition by the Selling
Corporations have been included in the accompanying financial statements.
The Selling Corporations conducted business as taxable corporations and
were managed so that income taxes were the responsibility of the owners. These
financial statements have been prepared to show the operations and financial
position of the combined AKL Acquisition Hotels, substantially all of whose
assets and operations have been acquired by the Company. The Company is a REIT
and accordingly, will not pay any federal income taxes; therefore the financial
statements have been presented with no provision for federal income taxes.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Investment in Hotel Properties - Hotel properties are stated at the lower
of cost or net realizable value and are depreciated using the straight-line
method over estimated useful lives ranging from 39 to 40 years for building and
improvements and 5 to 10 years for furniture, fixtures and equipment.
The respective owners of the AKL 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 property or that
depreciation periods should be modified. If facts or circumstances support the
possibility of impairment, the respective owners of the AKL Acquisition Hotels
will prepare a projection of the undiscounted future cash flows, without
interest charges, of the
F-6
<PAGE>
AKL ACQUISITION HOTELS
NOTES TO COMBINED FINANCIAL STATEMENTS - (CONTINUED)
specific hotel property and determine if the investment in the hotel 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 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.
Deferred Expenses - Deferred expenses primarily consist of deferred loan
costs, franchise fees, and organization costs. Amortization of deferred loan
cost is computed using the effective yield method based upon the terms of the
loan agreements. Amortization of franchise fees is computed using the straight-
line method based upon the terms of the agreements. Amortization of organization
costs is computed using the straight-line method over five years. Accumulated
amortization at December 31, 1995 is $116,553.
Income Taxes - The Sheraton Key Largo hotel was not a taxable entity prior
to the acquisition by the Selling Corporation in 1996. The results of
operations were included in the tax returns of the partners. 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. The Company is a REIT under the Code and will therefore
not be subject to corporate income taxes. Accordingly, the combined statements
of operations contain no provision for federal income taxes.
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.
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.
Recently Issued Statement of Financial Accounting Standards - The AKL
Acquisition Hotels adopted Statement of Financial Accounting Standards (SFAS")
No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of" during the year ended December 31, 1995. The adoption
of SFAS No. 121 had no material effect on the AKL Acquisition Hotels' financial
statements.
Interim Financial Information - The unaudited interim financial statements
as of December 31, 1996 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, 1995
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.
F-7
<PAGE>
AKL ACQUISITION HOTELS
NOTES TO COMBINED FINANCIAL STATEMENTS - (CONTINUED)
3. DEBT
Debt at December 31, 1995 consists of the following:
<TABLE>
<CAPTION>
1995
--------------
<S> <C>
First mortgage note payable in monthly installments
including interest at a fixed rate of 9.75% maturing
July 1, 2002 at which time a balloon payment of
approximately $8.2 million will be due and payable.......... $ 9,733,588
First mortgage note payable in monthly installments
including interest at a fixed rate of 8.23% maturing
December 1, 2000............................................ 5,875,000
Subordinated mortgage note payable in monthly installments
including interest at the fixed subordinated rate of
9.38% maturing September 1, 2005............................ 3,840,655
First mortgage note payable in monthly installments
including interest at the floating rate of LIBOR
(5.44% at December 31, 1995) plus 3% maturing June 30,
1996 (Mortgage was paid in full in conjunction with the
May 1996 purchase by the Selling Corporation)............... 9,000,000
-----------
$28,449,243
===========
</TABLE>
All debt is collateralized by the investments in hotel properties.
In addition to base interest, the subordinated note requires monthly
payments of additional interest equal to 25% of Adjusted Gross Revenue, defined
as Net Operating Income less interest paid on the senior and subordinated notes.
The Company is also obligated under the subordinated note to pay Shared
Appreciation interest based upon 25% of the excess of market value of the
property over acquisition cost with a maximum total internal rate of return of
22% and a minimal internal rate of return of 11% payable upon retirement of the
loan. For prepayments of the subordinated note prior to September 2000, the
internal rate of return to be utilized in the calculation of Shared Appreciation
Interest increased by 1% to 2%.
In June 1995, a note payable in the amount of $1,000,000 was repaid. The
note agreement contained an interest premium payment payable upon the sale of
the French Quarter Suites Hotel based upon the increase in fair market value
over the Hotel's original purchase price. In March 1996, the Company reached a
settlement with the lender whereby the Company paid approximately $731,000 in
complete satisfaction of the interest premium payment due.
Aggregate annual principal payments for the AKL Acquisition Hotels debt at
December 31, 1995 are as follows:
<TABLE>
<CAPTION>
YEAR AMOUNT
---- --------------
<S> <C>
1996................................ $ 9,291,542
1997................................ 334,687
1998................................ 366,748
1999................................ 401,893
2000 and thereafter................. 18,054,373
--------------
Total............................. $28,449,243
==============
</TABLE>
F-8
<PAGE>
AKL ACQUISITION HOTELS
NOTES TO COMBINED FINANCIAL STATEMENTS - (CONTINUED)
4. LEASES
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, 1995, are as follows:
<TABLE>
<CAPTION>
YEAR AMOUNT
---- --------
<S> <C>
1996.............................. $ 21,628
1997.............................. 18,278
1998.............................. 17,808
1999.............................. 17,808
2000 and thereafter............... 26,712
--------
$102,234
========
</TABLE>
Rental expense reported in General and Administrative and Other expenses
was $51,600 for the year ended December 31, 1995.
5. COMMITMENTS
Management fees represent amounts paid to affiliated parties. The Sheraton
Key Largo base management fee is based upon 3.5% of gross revenues. An
incentive fee is paid on 20% of the amount by which operating income exceeds
debt service in any given year. No incentive fee was payable in 1995. The
French Quarter Suites Hotel and the Four Points by Sheraton each pay annual base
management fees of $100,000. Incentive fees are paid on 7.5% of the excess of
Gross Operating Profit over $1.3 million. Incentive fees of $91,919 were paid
in 1995.
Franchise fees represent the annual expense for franchise royalties and
reservation services under the terms of hotel franchise agreements expiring in
various years ranging from 1996 to 2005. Franchise fees are based upon 3% of
gross room revenue.
Two hotels are required to remit 1% 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 AKL 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 AKL Acquisition
Hotels' debt approximates fair value due to the AKL Acquisition Hotels' ability
to obtain such borrowings at comparable interest rates.
7. RELATED PARTY TRANSACTIONS
The Hotels paid annual management fees to affiliates of the entity owning
the hotels for the year ended December 31, 1995 of $534,618. The contract
expired December 31, 1996.
An oral consulting agreement for purchasing and management/financial
services exists between the Hotels and an affiliate of the Owner. Fees paid to
the affiliate for the year ended December 31, 1995 are $55,000.
F-9
<PAGE>
AKL ACQUISITION HOTELS
NOTES TO COMBINED FINANCIAL STATEMENTS - (CONTINUED)
A payable is due to an affiliate of the Owner of $1,205,812 as of December
31, 1995 which is non-interest bearing and payable upon demand.
8. SUBSEQUENT EVENTS
As discussed in Note 1, the three AKL Acquisition Hotels were acquired by
the Company on March 17, 1997. The acquisitions were accounted for by the
Company under 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, with the exception of the French Quarter Suites Hotel,
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 three
hotels by the Company.
F-10
<PAGE>
AKL ACQUISITION HOTELS
SCHEDULE III-REAL ESTATE AND ACCUMULATED DEPRECIATION
AS OF DECEMBER 31, 1995
<TABLE>
<CAPTION>
Cost Capitalized Cross Amounts
Subsequent to At Which Carried
Initial Cost Acquisition at Close of Period
----------------------- ------------------- ------------------------
Building Building Building
and and and
Description Encumbrances Land Improvements Land Improvements Land Improvements Total
----------- ------------ ---------- ------------ ------- ------------ ---------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Sheraton Key Largo
Key Largo, FL.............. $ 9,715,655 $ 727,277 $ 9,195,500 $369,512 $ 727,277 $ 9,565,012 $10,292,289
French Quarter Suites Hotel
Atlanta, GA................ 9,733,588 1,269,834 6,010,173 $30,985 179,550 1,300,819 6,189,723 7,490,542
Four Points by Sheraton
Marietta, GA............... 9,000,000 1,584,084 8,513,676 1,584,084 8,513,676 10,097,760
----------- ---------- ----------- ------- -------- ---------- ----------- -----------
$28,449,243 $3,581,195 $23,719,349 $30,985 $549,062 $3,612,180 $24,268,411 $27,880,591
=========== ========== =========== ======= ======== ========== =========== ===========
Accumulated Net
Depreciation Book Value Upon Which
Building Building Depreciation
Description and and Date of Date of in Statement
----------- Improvements Improvements Construction Acquisition is Computed
<S> ------------ ------------ ------------ ----------- ------------
Sheraton Key Largo
Key Largo, FL.............. $ 1,225,951 $ 8,339,061 1985 1990 39 YRS
French Quarter Suites Hotel
Atlanta, GA................ 402,961 5,786,762 1985 1993 39 YRS
Four Points by Sheraton
Marietta, GA............... 94,333 8,419,343 1985 1995 40 YRS
----------- -----------
$ 1,723,245 $22,545,166
=========== ===========
Balance at January 1, 1995............................... $17,637,475
Additions for the year 1995............................ 10,243,116
-----------
Balance at December 31, 1995............................. $27,880,591
===========
(b) Reconciliation of Accumulated Depreciation:
Balance at January 1, 1995............................... $ 1,246,905
Depreciation for the year 1995..................... 476,340
-----------
Balance at December 31, 1995............................. $ 1,723,245
===========
</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 20 Hotels acquired to date, including the AKL Acquisition
Hotels, and the consummation of the 1997 Public Offering and the application of
net proceeds therefrom had occurred on December 31, 1996 and January 1, 1995,
respectively and all of the Hotels had been leased pursuant to the Participating
Leases since January 1, 1995. Such pro forma information is based in part upon
the Consolidated Balance Sheet and Consolidated Statement of Operations of the
Company, the Statements of Operations of the AGH Predecessor 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, including the AKL
Acquisition 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
DECEMBER 31, 1996
<TABLE>
<CAPTION>
1997 ACQUISITIONS
AND 1997 PUBLIC AKL
COMPANY OFFERING SUBSEQUENT ACQUISITION PRO FORMA
HISTORICAL TO YEAR END (1) HOTELS (2) BALANCE SHEET
------------ ------------------- ------------- -------------
(unaudited) (unaudited) (unaudited)
<S> <C> <C> <C> <C>
ASSETS
Investment in hotel properties, net....... $230,760,818 $ 24,218,755 $59,975,000 $314,954,573
Cash and cash equivalents................. 3,888,281 37,435,180 41,323,461
Restricted cash........................... 544,541 544,541
Participating lease receivable - AGH
Leasing, L.P........................... 3,982,424 40,000 4,022,424
Deferred expenses, net.................... 2,986,946 825,000 100,000 3,911,946
Other assets.............................. 664,661 664,661
Note receivable - Lessee.................. 287,684 287,684
------------ ------------- ----------- ------------
Total assets.................... $243,115,355 $ 62,518,935 $60,075,000 $365,709,290
============ ============= =========== ============
LIABILITIES AND SHAREHOLDERS EQUITY
Debt...................................... $ 19,122,398 $ 8,218,755 $ 9,559,810 $ 36,900,963
Debt, Line of Credit...................... 57,500,000 (108,015,190) 50,515,190
Distributions Payable..................... 4,150,729 4,150,729
Accounts payable, trade, accrued
expenses and other liabilities........... 5,756,097 125,000 5,881,097
Minority interest in Operating
Partnership.............................. 29,125,020 7,534,278 36,659,298
------------ ------------- ----------- ------------
Total liabilities............... 115,654,244 (92,137,157) 60,075,000 83,592,087
------------ ------------- ----------- ------------
Common stock.............................. 82,888 63,683 146,571
Additional paid in capital................ 128,746,013 154,592,409 283,338,422
Unearned officers' compensation........... (850,521) (850,521)
Distributions in excess of earnings....... (517,269) (517,269)
------------ ------------- ----------- ------------
Total shareholders' equity...... 127,461,111 154,656,092 282,117,203
------------ ------------- ----------- ------------
Total liabilities and
shareholders' equity........... $243,115,355 $ 62,518,935 $60,075,000 $365,709,290
============ ============= =========== ============
</TABLE>
(1) The 1997 acquisitions refers to two hotels purchased subsequent to
December 31, 1996. They are: the Hilton Hotel-Durham, Durham, North
Carolina purchased on January 8, 1997 and the Radisson Hotel Arlington
Heights, Arlington Heights, Illinois purchased on February 28, 1997.
The 1997 Public Offering refers to the second offering by the Company of
5,800,000 shares of Common Stock completed on February 7, 1997 and the
exercise of the underwriters over-allotment of 568,300 shares of Common
Stock completed on March 7, 1997.
(2) Investment in hotel properties, net - The hotels were acquired in a
Portfolio Purchase for approximately $59.1 million plus related closing
costs of approximately $875,000.
Deferred expenses, net - Franchise transfer costs related to the purchase
of the AKL Acquisition Hotels.
F-13
<PAGE>
AMERICAN GENERAL HOSPITALITY CORPORATION
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
1997 ACQUISITIONS
TOTAL AND 1997 PUBLIC AKL
INITIAL ACQUIRED CURRENT OFFERING SUBSEQUENT ACQUISITION COMBINED
HOTELS HOTELS HOTELS (1) TO YEAR END (2) HOTELS PRO FORMA
----------- ---------- ----------- ------------------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Participating Lease revenue.... $24,754,071 $6,440,994 $31,195,065 $ 2,503,707 $6,138,918 $39,837,690
Interest income................ 31,500 31,500 31,500
----------- ---------- ----------- ------------------- ----------- -----------
Total revenue............. 24,785,571 6,440,994 31,226,565 2,503,707 6,138,918 39,869,190
----------- ---------- ----------- ------------------- ----------- -----------
Expenses:
Depreciation................... 7,404,235 1,299,158 8,703,393 685,577 1,697,754 11,086,724
Amortization................... 640,128 14,783 654,911 239,714 10,000 904,625
Real estate and personal
property taxes and
property insurance........... 2,165,073 933,682 3,098,755 732,400 806,460 4,637,615
General and administrative..... 1,137,857 160,612 1,298,469 160,613 240,918 1,700,000
Ground lease expense........... 881,217 881,217 881,217
Amortization of unearned
officers' compensation....... 88,750 88,750 88,750
Interest expense............... 1,886,733 1,886,733 300,407 932,081 3,119,221
----------- ---------- ----------- ------------------- ----------- -----------
Total expenses............ 14,203,993 2,408,235 16,612,228 2,118,711 3,687,213 22,418,152
----------- ---------- ----------- ------------------- ----------- -----------
Estimated revenues less
expenses before minority
interest....................... 10,581,578 4,032,759 14,614,337 384,996 2,451,705 17,451,038
Minority interest................... 1,978,755 2,721,754 2,006,869
----------- ----------- -----------
Estimated revenues less
expenses applicable to
common shareholders............ $ 8,602,823 $11,892,583 $15,444,169
=========== =========== ===========
Per common share information:
Estimated revenues less
expenses per common share...... $ 1.04 $ 1.43 $ 1.05
=========== =========== ===========
Weighted average number of
shares of Common Stock
outstanding.................... 8,262,208 8,288,841 14,657,141
=========== =========== ===========
</TABLE>
(1) Current Hotels refers to the fifteen hotels owned by the Company at
December 31, 1996.
(2) The 1997 acquisitions refers to two hotels purchased subsequent to
December 31, 1996. They are: the Hilton Hotel-Durham, Durham, North
Carolina purchased on January 8, 1997 and the Radisson Hotel Arlington
Heights, Arlington Heights, Illinois purchased on February 28, 1997.
The 1997 Public Offering refers to the second offering by the Company of
5,800,000 shares of Common Stock completed on February 7, 1997 and the
exercise of the underwriters over-allotment of 568,300 shares of Common
Stock completed on March 7, 1997.
F-14
<PAGE>
AMERICAN GENERAL HOSPITALITY CORPORATION
PRO FORMA CONSOLIDATED STATEMENT OF ESTIMATED REVENUES LESS EXPENSES
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
---------------------------------------------------------------------------
1997
ACQUISITIONS
COMBINED AND 1997
HISTORICAL PUBLIC
JULY 31, 1996 TOTAL OFFERING AKL COMBINED
THROUGH PRO FORMA INITIAL ACQUIRED CURRENT SUBSEQUENT ACQUISITION PRO
DECEMBER 31, ADJUSTMENTS HOTELS HOTELS HOTELS(1) TO YEAR END(2) HOTELS FORMA
------------- ----------- ----------- ---------- ----------- -------------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Participating Lease
Revenue................ $13,387,719 $16,357,390 $29,745,109 $5,557,321 $35,302,430 $3,340,965 $6,809,139 $45,452,534
Interest income.......... 108,075 (8,602) 99,473 99,473 99,473
----------- ----------- ----------- ---------- ----------- ---------- ---------- -----------
Total revenue........ 13,495,794 16,348,788 29,844,582 5,557,321 35,401,903 3,340,965 6,809,139 45,552,007
----------- ----------- ----------- ---------- ----------- ---------- ---------- -----------
Expenses:
Depreciation............. 2,635,380 3,490,162 6,125,542 1,110,122 7,235,664 685,577 1,697,754 9,618,995
Amortization............. 273,425 373,941 647,366 12,373 659,739 239,714 10,000 909,453
Real estate and
personal property taxes
and property insurance.. 1,444,592 1,262,960 2,707,552 809,913 3,517,465 732,400 806,460 5,056,325
General and
administrative.......... 822,113 659,167 1,481,280 62,491 1,543,771 62,492 93,737 1,700,000
Ground lease expense..... 545,279 504,245 1,049,524 1,049,524 1,049,524
Amortization of
unearned officers'
compensation............ 36,979 51,771 88,750 88,750 88,750
Interest expense......... 1,412,117 810,090 2,222,207 2,222,207 (35,067) 932,081 3,119,221
----------- ----------- ----------- ---------- ----------- ---------- ---------- -----------
Total expenses 7,169,885 7,152,336 14,322,221 1,994,899 16,317,120 1,685,116 3,540,032 21,542,268
----------- ----------- ----------- ---------- ----------- ---------- ---------- -----------
Estimated revenues less
expenses before minority
interest .................. 6,325,909 9,196,452 15,522,361 3,562,422 19,084,783 1,655,849 3,269,107 24,009,739
Minority interest........... 1,196,728 2,887,159 3,549,770 2,761,120
----------- ----------- ----------- -----------
Estimated revenues less
expenses applicable to
common shareholders........ $ 5,129,181 $12,635,202 $15,535,013 $21,248,619
=========== =========== =========== ===========
Per common share
information:
Estimated revenues less
expenses per common
share...................... $ 0.63 $ 1.53 $ 1.87 $ 1.45
=========== =========== =========== ===========
Weighted average number of
shares of Common Stock
outstanding................ 8,170,029 8,288,841 8,288,841 14,657,141
=========== =========== =========== ===========
</TABLE>
(1) Current Hotels refers to the fifteen hotels owned by the Company at
December 31, 1996.
(2) The 1997 acquisitions refers to two hotels purchased subsequent to December
31, 1996. They are: the Hilton Hotel-Durham, Durham, North Carolina
purchased on January 8, 1997 and the Radisson Hotel Arlington Heights,
Arlington Heights, Illinois purchased on February 28, 1997.
The 1997 Public Offering refers to the second offering by the Company of
5,800,000 shares of Common Stock completed on February 7, 1997 and the
exercise of the underwriters over-allotment of 568,300 shares of Common
Stock completed on March 7, 1997.
F-15
<PAGE>
AGH LEASING, L.P.
PRO FORMA STATEMENT OF OPERATIONS
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
REDUCTION 1997
TOTAL IN TOTAL ACQUISITIONS
INITIAL ACQUIRED MANAGEMENT CURRENT SUBSEQUENT
HOTELS HOTELS FEES HOTELS(1) TO YEAR END(2)
----------- ----------- ---------- ---------- --------------
<S> <C> <C> <C> <C> <C>
Revenues:
Room revenue........ $55,330,171 $11,157,846 $66,488,017 $ 6,247,443
Food and beverage
revenue............ 18,191,504 1,848,408 20,039,912 2,347,590
Other revenue....... 4,363,432 847,028 5,210,460 475,374
----------- ----------- ----------- -----------
Total revenue...... 77,885,107 13,853,282 91,738,389 9,070,407
----------- ----------- ----------- -----------
Expenses:
Property operating
costs and expenses. 29,624,254 5,152,475 34,776,729 3,501,375
General and
administrative..... 7,020,088 1,188,852 8,208,940 865,849
Advertising and
promotion.......... 4,625,086 846,565 5,471,651 793,835
Repairs and
maintenance........ 3,296,167 877,905 4,174,072 457,503
Utilities........... 3,546,149 761,943 4,308,092 399,949
Management fees..... 2,352,918 213,365 (543,952) 2,022,331 213,553
Franchise costs..... 2,117,338 377,931 2,495,269 217,710
Depreciation........ 63,000 63,000
Amortization........
Real estate and
personal property
taxes, and property
insurance..........
Interest expense.... 31,500 31,500
Other expense....... 58,084 (3,441) 54,643 82,705
Participating lease
expense............ 24,754,071 6,440,994 31,195,065 2,503,707
----------- ----------- --------- ----------- ----------
Total expenses.... 77,488,655 15,856,589 (543,952) 92,801,292 9,036,186
----------- ----------- --------- ----------- ----------
Net income (loss). $ 396,452 $(2,003,307) $ 543,952 $(1,062,903) $ 34,221
=========== =========== ========= =========== ==========
</TABLE>
<TABLE>
<CAPTION>
ADJUSTMENT
AKL TO COMBINED
ACQUISITION MANAGEMENT PROFORMA
HOTELS FEES 1995
------------ ---------- ------------
<S> <C> <C> <C>
Revenues: $14,189,412 $ 86,924,872
Room revenue........
Food and beverage
revenue............ 4,731,687 27,119,189
Other revenue....... 772,563 6,458,397
----------- ------------
Total revenue...... 19,693,662 120,502,458
----------- ------------
Expenses:
Property operating
costs and expenses. 7,710,309 45,988,413
General and
administrative..... 1,588,153 10,662,942
Advertising and
promotion.......... 1,237,882 7,503,368
Repairs and
maintenance........ 959,785 5,591,360
Utilities........... 973,841 6,681,882
Management fees..... 689,109 54,077 2,979,070
Franchise costs..... 359,006 3,071,985
Depreciation........ 63,000
Amortization........
Real estate and
personal property
taxes, and property
insurance..........
Interest expense.... 31,500
Other expense....... 16,803 154,151
Participating lease
expense............ 6,138,918 39,837,690
----------- -------- ------------
Total expenses.... 19,673,806 54,077 121,565,361
----------- -------- ------------
Net income (loss). $ 19,856 $(54,077) $ (1,062,903)
=========== ======== ============
</TABLE>
(1) Current Hotels refers to the fifteen hotels owned by the Company at
December 31, 1996.
(2) The 1997 acquisitions refers to two hotels purchased subsequent to December
31, 1996. They are: the Hilton Hotel-Durham, North Carolina purchased on
January 8, 1997 and the Radisson Hotel Arlington Heights, Arlington
Heights, Illinois purchase on February 28, 1997.
The 1997 Public Offering refers to the second offering by the Company of
5,800,000 shares of Common Stock completed on February 7, 1997 and the
exercise of the underwriters over-allotment of 568,300 shares of Common
Stock completed on March 7, 1997.
F-16
<PAGE>
AGH LEASING, L.P.
PRO FORMA STATEMENT OF OPERATIONS
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
COMBINED
HISTORICAL
JULY 31,1996 REDUCTION
THROUGH TOTAL IN TOTAL
DECEMBER 31, PROFORMA INITIAL ACQUIRED MANAGEMENT CURRENT
1996 ADJUSTMENTS HOTELS HOTELS FEES HOTELS(1)
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Room revenue $26,725,200 $35,215,932 $61,941,132 $11,613,938 $ 73,555,070
Food and beverage
revenue 8,374,459 10,885,595 19,260,054 1,501,915 20,761,969
Other revenue 1,691,472 2,518,325 4,209,797 851,505 5,061,302
----------- ----------- ----------- ----------- --------- ------------
Total revenue 36,791,131 48,619,852 85,410,983 13,967,358 99,378,341
----------- ----------- ----------- ----------- --------- ------------
Expenses:
Property operating
costs and expenses 13,497,368 18,079,623 31,576,991 4,663,490 36,240,481
General and
administrative 3,270,481 4,334,289 7,604,770 1,138,653 8,743,423
Advertising and
promotion 2,305,776 2,880,823 5,186,599 903,029 6,089,628
Repairs and maintenance 1,450,987 1,989,338 3,440,325 850,341 4,290,666
Utilities 1,628,490 1,961,997 3,590,487 634,753 4,225,240
Management fees 947,632 1,185,515 2,133,147 146,623 247,351 2,527,121
Franchise costs 950,307 1,266,021 2,216,328 399,568 2,615,896
Depreciation 26,250 36,750 63,000 63,000
Amortization 6,753 6,753 6,753
Real estate and
personal property
taxes, and property
insurance
Interest expense 13,314 18,375 31,689 31,689
Other expense 27,093 171,139 198,232 198,232
Participating Lease
expense 13,387,719 16,357,390 29,745,109 5,557,321 35,302,430
----------- ----------- ----------- ----------- --------- ------------
Total expense 37,512,170 48,281,260 85,793,430 14,293,778 247,351 100,334,559
----------- ----------- ----------- ----------- --------- ------------
Net income(loss) $ (721,039) $ 338,592 $ (382,447) $ (326,420) $(247,351) $ (956,218)
=========== =========== =========== =========== ========= ============
<CAPTION>
1997 ADJUSTMENT
ACQUISITIONS AKL TO COMBINED
SUBSEQUENT ACQUISITION MANAGEMENT PRO FORMA
TO YEAR END(2) HOTELS FEES 1996
--------------- ------------ ---------- -------------
<S> <C> <C> <C> <C>
Revenues:
Room revenue $ 7,458,295 $15,189,073 $ 96,202,438
Food and beverage
revenue 2,264,904 4,588,168 27,615,041
Other revenue 508,580 763,835 6,333,717
----------- ----------- -------- ------------
Total revenue 10,231,779 20,541,076 130,151,196
----------- ----------- -------- ------------
Expenses:
Property operating
costs and expenses 3,679,169 7,804,293 47,723,943
General and
administrative 968,136 1,458,684 11,170,243
Advertising and
promotion 748,431 1,245,902 8,083,961
Repairs and maintenance 493,853 1,142,089 5,926,608
Utilities 366,604 1,025,995 5,617,839
Management fees 217,908 1,091,827 (77,078) 3,759,778
Franchise costs 338,307 328,693 3,282,896
Depreciation 63,000
Amortization 6,753
Real estate and
personal property
taxes, and property
insurance
Interest expense 31,689
Other expense 87,665 6,067 291,964
Participating Lease
expense 3,340,964 6,809,140 45,452,534
----------- ----------- -------- ------------
Total expense 10,241,037 20,912,690 (77,078) 131,411,208
----------- ----------- -------- ------------
Net income(loss) $ (9,258) $ (371,614) $ 77,078 $ (1,260,012)
=========== =========== ======== ============
</TABLE>
(1) Current Hotels refers to the fifteen hotels owned by the Company at
December 31, 1996.
(2) The 1997 acquisitions refers to two hotels purchased subsequent to December
31, 1996. They are: the Hilton Hotel-Durham, Durham, North Carolina
purchased on January 8, 1997 and the Radisson Hotel Arlington Heights,
Arlington Heights, Illinois purchased on February 28, 1997.
The 1997 Public Offering refers to the second offering by the Company of
5,800,000 shares of Common Stock completed on February 7, 1997 and the
exercise of the underwriters over-allotment of 568,300 shares of Common
Stock completed on March 7, 1997.
F-17
<PAGE>
EXHIBIT 23.1
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 February 21, 1997 except for
Note 8, as to which the date is March 17, 1997, on our audit of the combined
financial statements and financial statement schedule of the AKL Acquisition
Hotels as of December 31, 1995, which report is included in this Form 8-K.
Coopers & Lybrand L.L.P.
Dallas, Texas
March 28, 1997
