<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)
January 3, 1997 (October 22, 1996)
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 October 22, 1996, American General Hospitality Operating Partnership,
L.P. (the "Operating Partnership"), a subsidiary of American General
Hospitality Corporation (the "Company" or "Registrant") purchased 100.0% of
the limited and general partnership interest in the Days Inn Lake Buena Vista
Partnership, L.P. (the "Partnership") from the limited partners of the
Partnership, Kessler Lake Buena Vista, Ltd., Milstein Lake Buena Vista Limited
Partnership and Edward L. Milstein. The Partnership, which owns the 490 room
Days Inn Hotel & Suites in the Lake Buena Vista area of Orlando, Florida (the
"AGH Orlando Acquisition Hotel"), was acquired for a purchase price of
$30,500,000, which was payable as follows: (i) $30,000,000 in cash, and (ii)
$500,000 through the issuance of 25,397 shares of restricted common stock of
the Company. In connection with this acquisition, the Operating Partnership
also entered into agreements to purchase a license and an association
membership, as well as construction, design and other services related to the
AGH Orlando Acquisition Hotel from parties affiliated with one of the sellers
for approximately $2,350,000. Pursuant to the Membership Agreement, a copy of
which is attached to the Registrant's Current Report on Form 8-K (File
No. 1-11903) filed with the Commission on November 5, 1996 and is incorporated
herein by reference, the Partnership is obligated to pay certain fees and to
make contingent payments. The purchase price was arrived at through arms-
length negotiations.
After the acquisition, the Company owns an approximate 81.4% 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 80.4% limited partnership interest in the
Operating Partnership. The remaining 18.6% 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 Partnership was provided from borrowings
under the Operating Partnership's $100 million line of credit from a
consortium of banks led by Societe Generale and Bank One Texas, N.A.
The AGH Orlando Acquisition Hotel is leased by the Operating Partnership
to AGH Leasing, L.P. (the "Lessee"), the lessee of the Operating Partnership's
other hotel properties, pursuant to a twelve-year percentage lease that is
substantially similar to the Operating Partnership's other hotel leases.
Effective with the purchase of the property, the percentage lease provides for
the payment of annual rent equal to the greater of (i) base rent of $1,261,000
or (ii) participating rent equal to the following percentages of the
respective revenues: Rooms: 25% of the first $1,613,000; 60% of the next
$3,228,000; and 70% thereafter; Food & Beverage: 5% of the first $547,000; 10%
thereafter; Telephone and Other: 50%. Effective January 1, 1997, the
percentage lease provides for the payment of annual rent equal to the greater
of (i) base rent of $4,127,000 or (ii) participating rent equal to the
following percentages of the respective revenues: Rooms: 25% of the first
$1,913,000; 60% of the next $3,825,000; and 70% thereafter; Food & Beverage:
5% of the first $582,000; 10% thereafter; Telephone and Other: 50%. Effective
January 1, 1998, the percentage lease is adjusted as follows: payment of
annual rent equal to the greater of (i) base rent of $4,441,000 or
(ii) participating rent equal to the following percentages of the respective
revenues: Rooms: 25% of the first $5,744,000; 60% of the next $4,723,000; and
70% thereafter; Food & Beverage: 5% of the first $745,000; and 10% thereafter;
Telephone and Other: 50%. Effective January 1, 1999, base rent will increase
annually by the percentage increase in CPI (Consumer Price Index) and the
participation tiers will increase by CPI plus 0.75%.
2
<PAGE>
As with other hotels leased by the Lessee from the Operating Partnership
and on substantially similar terms to such other management agreements, the
Lessee has entered into a twelve-year management agreement with American
General Hospitality, Inc. to manage the hotel on behalf of the Lessee and
subject to its supervision.
The Operating Partnership expects to spend approximately $9.3 million to
renovate all guest rooms and suites and add convention/meeting space. The
Company expects to convert the AGH Orlando Acquisition Hotels' brand
affiliation from Days Inn to a Wyndham Hotel in October, 1997. There can be no
assurance however, that this brand conversion will occur.
Item 7 Financial Statements and Exhibits
(a) Financial Statements of Business Acquired
Audited financial statements of the AGH Orlando Acquisition Hotel as of
December 31, 1995 and for the year then ended and unaudited information as of
September 30, 1996 and for the nine months ended September 30, 1996, and 1995
are included in this Form 8-K/A.
Page
----
Report of Independent Accounts................................ 5
Balance Sheets as of December 31, 1995 (audited) and
September 30, 1996 (unaudited).............................. 6
Statements of Operations for the Year Ended December 31,
1995 (audited) and the Nine Months Ended September 30,
1996 and 1995 (unaudited)................................... 7
Statements of Equity for the Year ended December 31, 1995
(audited) and the Nine Months Ended September 30, 1996
and 1995 (unaudited)........................................ 8
Statements of Cash Flows for the Year Ended December 31,
1995 (audited) and the Nine Months Ended September 30,
1996 and 1995 (unaudited)................................... 9
Notes to Financial Statements................................. 10
(b) Pro Forma Financial Information
The pro forma financial information of the Company as of September 30,
1996 and the pro forma financial information of the Company and AGH Leasing,
L.P. (the "Lessee") for the year ended December 31, 1995 and the nine months
ended September 30, 1996 and 1995 are presented as if the Company had
completed its initial public offering of Common Stock and related Formation
Transactions and the AGH Orlando Acquisition Hotel was acquired on
September 30, 1996 and January 1, 1995, respectively.
Page
----
American General Hospitality Corporation
Pro Forma Balance Sheet as of September 30, 1996 (unaudited) 14
Pro Forma Statements of Operations for the Year Ended
December 31, 1995 and the Nine Months Ended September 30,
1996 (unaudited) 16
AGH Leasing, L.P.
Pro Forma Statements of Operations for the Year Ended
December 31, 1995 and the Nine Months Ended September 30,
1996 (unaudited) 18
(c ) Exhibits
Exhibit No. Description
------------ -----------
2.1* Purchase Agreement by and among American General
Hospitality Operating Partnership, L.P., American General
Hospitality Corporation, Kessler Lake Buena Vista, Ltd.,
Milstein Lake Buena Vista Limited Partnership and Edward L.
Milstein, dated as of October 17, 1996.
10.1* Grand Theme Hotel Association Membership Agreement between
Grand Theme Hotels, Ltd. and Lake Buena Vista Partners,
Ltd., dated as of October 22, 1996.
10.2* Hotel Services Agreement between Lake Buena Vista Partners,
Ltd., and the Kessler Enterprises, Inc. dated as of
October 22, 1996.
23.1*** Consent of Coopers & Lybrand, L.L.P.
99.1** Registration Statement on Form S-11 (Registration Statement
No. 333-4568).
* Filed as an exhibit to the Registrant's Current Report on
Form 8-K (File No. 0-24794) filed with the Commission on
October 22, 1996.
** The Company's Registration Statement on Form S-11 (Registration
Statement No.333-4568) and incorporated by reference as an
exhibit to this Form 8-K/A.
*** Filed herewith
3
<PAGE>
SIGNATURES
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: January 3, 1997
American General Hospitality Corporation
(Registrant)
By: /s/ Kenneth E. Barr
--------------------------------
Kenneth E. Barr
Executive Vice President and
Chief Financial Officer
(Principal Financial Officer)
4
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
American General Hospitality Corporation
We have audited the accompanying balance sheet of the AGH Orlando Acquisition
Hotel (described in Note 1) as of December 31, 1995 and the related statements
of operations, equity and cash flows for the period then ended. These financial
statements are the responsibility of management. Our responsibility is to
express an opinion on these financial statements 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 financial position of the AGH Orlando Acquisition
Hotel as of December 31, 1995, and the result of its operations and its cash
flows for the period then ended in conformity with generally accepted
accounting principles.
Coopers & Lybrand L.L.P.
Dallas, Texas
November 26, 1996
5
<PAGE>
AGH ORLANDO ACQUISITION HOTEL
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31 SEPTEMBER
ASSETS 1995 30 1996
------ ----------- -----------
(UNAUDITED)
<S> <C> <C>
Investments in hotel properties, at cost:
Land and land improvement........................... $ 2,096,028 $ 2,096,028
Buildings and improvements.......................... 18,859,256 18,889,376
Furniture, fixtures and equipment................... 3,165,265 3,623,972
----------- -----------
24,120,549 24,609,376
Less accumulated depreciation......................... (1,003,306) (1,754,155)
----------- -----------
Net investment in hotel properties.................... 23,117,243 22,855,221
Cash and cash equivalents............................. 73,606 258,807
Restricted cash....................................... 8,340 418,947
Accounts receivable, net.............................. 409,542 323,559
Inventories........................................... 20,972 13,925
Prepaid expenses...................................... 58,580 98,168
Deferred expenses..................................... 304,581 246,407
Other assets.......................................... 2,151
----------- -----------
Total assets...................................... $23,995,015 $24,215,034
=========== ===========
LIABILITIES AND EQUITY
----------------------
Debt.................................................. $20,000,000 $20,000,000
Capital lease obligation.............................. 253,506
Accounts payable, trade............................... 261,583 130,769
Accrued expenses and other liabilities................ 50,660 790,740
----------- -----------
Total liabilities................................. 20,312,243 21,175,015
----------- -----------
Commitments and contingencies (Note 4)................
Capital............................................... 4,292,000 3,242,000
Accumulated deficit................................... (609,228) (201,981)
----------- -----------
Total equity...................................... 3,682,772 3,040,019
----------- -----------
Total liabilities and equity...................... $23,995,015 $24,215,034
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
<PAGE>
AGH ORLANDO ACQUISITION HOTEL
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
AND THE NINE MONTHS ENDED SEPTEMBER 31, 1995 AND 1996
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30
DECEMBER ----------------------
31 1995 1995 1996
---------- ---------- ----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
Revenues:
Room revenue............................. $6,825,271 $5,438,660 $6,337,410
Food and beverage revenue................ 810,066 671,266 561,985
Other revenue............................ 668,959 511,060 594,208
---------- ---------- ----------
Total revenue.......................... 8,304,296 6,620,986 7,493,603
---------- ---------- ----------
Expenses:
Property operating costs and expenses.... 2,054,677 1,632,694 1,703,115
Food and beverage costs and expenses..... 627,923 496,344 478,086
General and administrative............... 782,649 575,386 623,056
Advertising and promotion................ 468,824 328,469 441,557
Repairs and maintenance.................. 485,870 354,280 400,059
Utilities................................ 512,447 415,098 409,586
Management fees.......................... 131,004 98,253 144,007
Franchise costs.......................... 443,643 353,513 411,932
Depreciation............................. 929,559 697,170 750,849
Amortization............................. 77,043 57,651 58,174
Real estate and personal property taxes,
and property insurance ................. 459,228 399,197 424,267
Interest expense......................... 1,770,833 1,333,333 1,241,668
---------- ---------- ----------
Total expense.......................... 8,743,700 6,741,388 7,086,356
---------- ---------- ----------
Net income (loss)...................... $ (439,404) $ (120,402) $ 407,247
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements
7
<PAGE>
AGH ORLANDO ACQUISITION HOTEL
STATEMENTS OF EQUITY
<TABLE>
<CAPTION>
EQUITY
----------
<S> <C>
Balance, December 31, 1994 $4,430,176
Net loss.......................................................... (439,404)
Distributions..................................................... (308,000)
----------
Balance December 31, 1995 3,682,772
Net income (unaudited)............................................ 407,247
Distributions (unaudited)......................................... (1,050,000)
----------
Balance, September 30, 1996 (unaudited)............................. $3,040,019
==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
8
<PAGE>
AGH ORLANDO ACQUISITION HOTEL
STATEMENTS OF CASH FLOWS
FOR THE YEAR MONTHS ENDED DECEMBER 31, 1995
AND THE NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1996
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30
DECEMBER 31 ------------------------
1995 1995 1996
----------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
Cash flow from operating activities:
Net income (loss)....................... $ (439,404) $ (120,402) $ 407,247
Adjustments to reconcile net income
(loss) to net cash provided by operat-
ing activities:
Depreciation.......................... 929,559 697,170 750,849
Amortization.......................... 77,043 57,651 58,174
Changes in assets and liabilities:
Restricted cash....................... 30,827 (686,417) (410,607)
Accounts receivable................... (125,246) (121,875) 85,983
Inventories........................... (1,833) (1,609) 7,047
Prepaid expenses...................... 69,876 88,342 (39,588)
Other assets.......................... (2,151) (2,151) 2,151
Organization costs.................... (15,679) (15,679)
Accounts payable, trade............... 113,824 (29,042) (130,814)
Accrued expenses and other liabili-
ties................................. (369,360) 347,603 740,080
---------- ---------- -----------
Net cash provided by operating ac-
tivities........................... 267,456 213,591 1,470,522
---------- ---------- -----------
Cash flows from investing activities:
Improvements and additions to hotel
properties............................. (496,076) (380,902) (224,299)
---------- ---------- -----------
Cash flows from financing activities:
Payments on capital lease obligation.... (11,022)
Distributions paid...................... (308,000) (108,000) (1,050,000)
---------- ---------- -----------
Net cash used in financing activi-
ties............................... (308,000) (108,000) (1,061,022)
---------- ---------- -----------
Net change in cash and cash equivalents .. (536,620) (275,311) 185,201
Cash and cash equivalents at beginning of
period................................... 610,226 610,226 73,606
---------- ---------- -----------
Cash and cash equivalents at end of peri-
ods...................................... $ 73,606 $ 334,915 $ 258,807
========== ========== ===========
Supplemental disclosures of cash flow in-
formation:
Cash paid during the year for interest.. $1,770,833 $1,333,333 $ 1,241,668
========== ========== ===========
</TABLE>
Supplemental schedule of non cash financing activities
The partnership entered into a capital lease obligation in the amount of
$264,528 in August 1996.
The accompanying notes are an integral part of these financial statements.
9
<PAGE>
AGH ORLANDO ACQUISITION HOTEL
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND BASIS OF PRESENTATION
Organization--American General Hospitality Corporation (the "Company")
acquired a 100% ownership interest in a 490 room Days Inn hotel located in Lake
Buena Vista, Florida (the "AGH Orlando Acquisition Hotel") from parties
controlled by persons unaffiliated with the Company on October 22, 1996. The
Company is a Maryland corporation which intends to qualify as a real estate
investment trust ("REIT"), which 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 financial statements of the AGH
Orlando Acquisition Hotel have been presented on a basis consistent with the
Company due to the anticipated common ownership and management since the entity
will be the subject of a business combination with the Company.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Investment in Hotel Property--The hotel property is stated at the lower of
cost or net realizable value and is depreciated using the straight-line method
over estimated useful lives ranging from 39 years for building and improvements
and 3 to 7 years for furniture, fixtures and equipment.
The owners of the AGH Orlando Acquisition Hotel review the carrying value of
the 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 owners of the AGH Orlando Acquisition Hotel will prepare a
projection of the undiscounted future cash flows, without interest charges, of
the specific hotel property and determine if the investment in hotel property
is recoverable based on the undiscounted future cash flows. The owners of the
AGH Orlando Acquisition Hotel do not believe that there are any factors or
circumstances indicating impairment of any of its investment in hotel
properties.
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
for capital and property tax reserves.
Inventories--Inventories consist of food and beverage items and are stated at
the lower of cost (generally, first-in first-out) or market.
Deferred Expenses--Deferred expenses primarily consist of organization costs.
Amortization of organization costs is computed using the straight-line method
over five years. Accumulated amortization at December 31, 1995 is $83,245.
Income Taxes--The AGH Orlando Acquisition Hotel is included in a limited
partnership which is not a taxable entity. The results of operations are
included in the tax returns of the partners. The partnership's tax return 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.
10
<PAGE>
AGH ORLANDO ACQUISITION HOTEL
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
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.
Concentration of Credit Risk--At December 31, 1995, bank account balances
exceeded federal depository insurance limits by approximately $148,642.
Recently Issued Statement of Financial Accounting Standards--The AGH Orlando
Acquisition Hotel 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 AGH Orlando Acquisition Hotel's
financial statements.
Interim Financial Information--The unaudited interim financial statements as
of September 30, 1996 and for the nine months ended September 31, 1995 and 1996
have been prepared pursuant to the rules and regulations of the Securities and
Exchange Commission ("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.
3. DEBT
Debt as of December 31, 1995, consists of a $20,000,000 first mortgage note
payable in monthly interest-only payments at the prime rate (8.5% at December
31, 1995) through December 31, 1997, and monthly principal plus interest
payments at prime plus 1.5% from January 1998 through the maturity date of
November 30, 2004. A final principal payment of $17,642,267 is due at maturity.
All debt is collateralized by the investment in hotel property.
Aggregate annual principal payments for the AGH Orlando Acquisition Hotel's
debt at December 31, 1995, are as follows:
<TABLE>
<CAPTION>
YEAR AMOUNT
---- -----------
<S> <C>
1998.......................................................... $ 261,764
1999.......................................................... 306,837
2000 and thereafter........................................... 19,431,399
-----------
Total..................................................... $20,000,000
===========
</TABLE>
11
<PAGE>
AGH ORLANDO ACQUISITION HOTEL
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
4. COMMITMENTS
Management fees represent amounts paid to an affiliated party. The basic
management fee is $10,917 per month. The incentive management fee is paid
based on net cash flow as follows:
NET CASH FLOW ("NCF").............................................INCENTIVE FEE
- ------------- -------------
Less than $600,000.........................................................None
$ 600,000-$ 750,000....................$ 29,000 x [NCF--$600,000) / $150,000]
$ 750,001-$ 900,000...........$ 29,000 +[31,000 x (NCF--$750,000) / $150,000]
$ 900,001-$1,000,000.........$ 60,000 + [$14,000 x (NCF--$900,000) / $100,000]
$1,000,001-$1,200,000......$ 74,000 + [$101,000 x (NCF--$1,000,000) / $200,000]
$1,200,001-$1,500,000......$175,000 + [$116,000 x (NCF--$1,200,000) / $300,000]
Greater than $1,500,000...$291,000 + [$.0045 x (annual gross room revenues less
gross room revenues at date on which
NCF surpassed $1,500,000)] to a
maximum of 20% x (NCF--$1,500,000)
An incentive management fee of $45,754 was paid as of September 30, 1996. No
incentive fee was paid in 1995. Net cash flow for a particular year is defined
in the management agreement as gross revenues attributable to the Property
less (i) all amounts required to service indebtedness, (ii) operating expenses
including the basic management fee, and (iii) all reserves including but not
limited to the 3% FF&E reserve.
Franchise costs represent the annual expense for franchise royalties and
reservation services under the terms of the franchise agreement expiring in
2004. Franchise costs are based upon 6.5% of gross room revenue.
The AGH Orlando Acquisition Hotel pays, on a program by program basis, the
franchisor for sales and advertising expenses incurred to promote the hotel at
the national level. These costs are included in advertising and promotion
expenses in the Statements of Operations. Additional sales and advertising
costs are incurred at the local property level.
5. 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 AGH Orlando Acquisition Hotel reports 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 AGH Orlando Acquisition Hotel's debt approximates fair value due to the
AGH Orlando Acquisition Hotel's ability to obtain such borrowings at
comparable interest rates.
6. RELATED PARTY TRANSACTIONS
The AGH Orlando Acquisition Hotel's annual management fee for all periods
presented was paid to a company owned by Richard Kessler, a partner of the AGH
Orlando Acquisition Hotel.
The AGH Orlando Acquisition Hotel purchased property insurance for all
periods presented from an entity affiliated with Howard Milstein, a partner of
the AGH Orlando Acquisition Hotel.
7. SUBSEQUENT EVENTS
In August 1996, the AGH Orlando Acquisition Hotel entered into a capital
lease obligation in exchange for equipment. Leased capital assets included in
furniture, fixtures, and equipment as of September 30, 1996, were $264,528
with $16,613 in accumulated depreciation.
12
<PAGE>
AGH ORLANDO ACQUISITION HOTEL
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
On October 22, 1996, the Company and the Operating Partnership purchased
100.0% of the limited and general partnership interest in the Days Inn Lake
Buena Vista Partnership, L.P. (the "Partnership") from the limited partners of
the Partnership, Kessler Lake Buena Vista, Ltd., Milstein Lake Buena Vista
Limited Partnership and Edward L. Milstein. The Partnership, which owns the AGH
Orlando Acquisition Hotel was acquired for a purchase price of $30,500,000,
plus estimated closing costs of $300,000, which is payable as follows: (i)
$30,000,000 in cash, and (ii) $500,000 through the issuance of 25,397 shares of
restricted common stock of the Company. In connection with this acquisition,
the Operating Partnership also entered into agreements to purchase a license
and an association membership, as well as construction, design and other
services related to the AGH Orlando Acquisition Hotel from parties affiliated
with one of the sellers for approximately $2,350,000.
The cash required to acquire the Partnership was provided from borrowings
under the Company's Line of Credit.
13
<PAGE>
AMERICAN GENERAL HOSPITALITY CORPORATION
PRO FORMA FINANCIAL INFORMATION
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 Formation Transactions, the application of the net proceeds of the
Offering and the acquisition of the AGH Orlando Acquisition Hotel had occurred
on September 30, 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 Balance Sheet and 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. These financial
statements and the notes thereto are either included in this Current Report on
Form 8-K/A or incorporated herein from the Company's Registration Statement on
Form S-11 (Registration Statement No. 333-4568). In management's opinion, all
adjustments necessary to reflect the effects of the Formation Transactions, the
Offering and the AGH Orlando Acquisition Hotel acquisition 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.
14
<PAGE>
AMERICAN GENERAL HOSPITALITY CORPORATION
PRO FORMA CONSOLIDATED BALANCE SHEET
September 30, 1996
(Unaudited)
<TABLE>
<CAPTION>
September 30, 1996
---------------------------------------------------------------
Company Orlando Pro Forma
Historical Hotel Balance Sheet
------------------ ------------------ --------------
<S> <C> <C> <C>
ASSETS
Investment in hotel properties, net ......................... $175,613,813 $31,850,000 $207,463,813
Cash and cash equivalents ................................... 4,186,235 (3,686,235) 500,000
Accounts receivable, net .................................... 4,100,406 4,100,406
Deferred expenses, net ...................................... 3,106,315 1,300,000 4,406,315
Other assets ................................................ 538,323 538,323
Advances to Lessee .......................................... 315,000 315,000
------------- ------------ -------------
Total assets ........................................... $187,860,092 $29,463,765 $217,323,857
============= ============ =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Debt ........................................................ $19,297,508 $ 19,297,508
Debt, Line of Credit ........................................ 3,000,000 $ 28,963,765 31,963,765
Distributions payable ....................................... 2,790,057 2,790,057
Accounts payable, trade, accrued
expenses and other liabilities ........................... 6,069,701 6,069,701
Minority interest in Operating
Partnership .............................................. 29,303,428 (63,703) 29,239,725
------------- ------------ -------------
Total liabilities ...................................... 60,460,694 28,900,062 89,360,756
============= ============ =============
Common stock ............................................. 82,620 254 82,874
Additional paid in capital ............................... 128,163,784 563,449 128,727,233
Unearned officers' compensation .......................... (872,708) (872,708)
Earnings in excess of distributions ...................... 25,702 25,702
------------- ------------ -------------
Total shareholders' equity ............................. 127,399,398 563,703 127,963,101
------------- ------------ -------------
Total liabilities and shareholders'
equity .............................................. $187,860,092 $29,463,765 $217,323,857
============= ============ =============
</TABLE>
15
<PAGE>
AMERICAN GENERAL HOSPITALITY CORPORATION
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
For the Year Ended December 31, 1995
(Unaudited)
<TABLE>
<CAPTION>
Initial Orlando Combined
Hotels Hotels Pro Forma
-------------------- -------------------- -----------------
<S> <C> <C> <C>
Revenues:
Participating Lease revenue......................... $24,871,628 $4,103,558 $28,975,186
Interest income..................................... 31,500 31,500
-------------------- -------------------- -----------------
Total revenues...................................... 24,903,128 4,103,558 29,006,686
-------------------- -------------------- -----------------
Expenses:
Depreciation........................................ 7,404,235 901,600 8,305,835
Amortization........................................ 646,660 112,917 759,577
Real estate and personal property taxes and
property insurance................................ 2,165,073 713,795 2,878,868
General and administrative.......................... 1,130,000 70,268 1,200,268
Ground lease expense................................ 881,217 881,217
Amortization of unearned officer
compensation...................................... 88,750 88,750
Interest expense.................................... 1,886,733 2,116,180 4,002,913
-------------------- -------------------- -----------------
Total expenses...................................... 14,202,668 3,914,760 18,117,428
-------------------- -------------------- -----------------
Estimated revenues less expenses before minority
interest.............................................. 10,700,460 188,798 10,889,258
Minority interest....................................... 2,000,986 2,025,402
-------------------- -------------------- -----------------
Estimated revenues less expenses applicable to
common shareholders................................... $8,699,474 $8,863,856
==================== =================
Per Common Share Information:
Estimated revenue less expenses per common
share................................................. $1.05 $1.07
==================== =================
Weighted average number of shares of Common
Stock outstanding..................................... 8,262,008 8,287,405
==================== =================
</TABLE>
16
<PAGE>
AMERICAN GENERAL HOSPITALITY CORPORATION
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
For the Nine Months Ended September 30, 1996
(Unaudited)
<TABLE>
<CAPTION>
Combined
Historical
July 31, 1996
Through Pro Forma
September 30, 1996 Adjustments
--------------------- ---------------
<S> <C> <C>
Revenues:
Participating Lease revenue ................................... $5,218,526 $16,409,625
Interest income ............................................... 32,227 (8,602)
--------------- ---------------
Total revenue ............................................. 5,250,753 16,401,023
--------------- ---------------
Expenses
Depreciation .................................................. 1,008,874 3,490,162
Amortization .................................................. 116,572 410,399
Real estate and personal property taxes and
property insurance ........................................ 511,115 1,262,960
General and administrative .................................... 194,226 659,167
Ground lease expense .......................................... 218,000 504,245
Amortization of unearned officers'
compensation .............................................. 14,792 51,771
Interest expense .............................................. 347,622 810,090
--------------- ---------------
Total expenses ............................................ 2,411,201 7,188,794
--------------- ---------------
Estimated revenues less expenses before minority
interest ........................................................... 2,839,552 9,212,229
Minority interest ...................................................... 545,102
---------------
Estimated revenues less expenses applicable to
common shareholders ................................................ $2,294,450
===============
Per common share information:
Estimated revenues less expenses per common
share .............................................................. $0.29
===============
Weighted average number of shares of Common
shares outstanding ................................................. 8,002,331
===============
<CAPTION>
Nine Months Ended
September 30, 1996
---------------------------------------------------
Initial Orlando Combined
Hotels Hotel Pro Forma
----------------- -------------- ---------------
<S> <C> <C> <C>
Revenues:
Participating Lease revenue ................................... $21,628,151 $ 3,979,151 $25,607,302
Interest income ............................................... 23,625 23,625
----------------- -------------- ---------------
Total revenue ............................................. 21,651,776 3,979,151 25,630,927
----------------- -------------- ---------------
Expenses
Depreciation .................................................. 4,499,036 676,200 5,175,236
Amortization .................................................. 526,971 81,250 608,221
Real estate and personal property taxes and
property insurance ........................................ 1,774,075 423,678 2,197,753
General and administrative .................................... 853,393 853,393
Ground lease expense .......................................... 722,245 722,245
Amortization of unearned officers'
compensation .............................................. 66,563 66,563
Interest expense .............................................. 1,157,712 1,647,314 2,805,026
----------------- -------------- --------------
Total expenses ............................................ 9,599,995 2,828,442 12,428,437
----------------- -------------- --------------
Estimated revenues less expenses before minority
interest ........................................................... 12,051,781 1,150,709 13,202,490
Minority interest ...................................................... 2,253,683 2,455,663
----------------- -------------- --------------
Estimated revenues less expenses applicable to
common shareholders ................................................ $ 9,798,098 $10,746,827
================= ==============
Per common share information:
Estimated revenues less expenses per common
share .............................................................. $1.19 $1.30
================= ==============
Weighted average number of shares of Common
shares outstanding ................................................. 8,262,008 8,287,405
================= ===============
</TABLE>
17
<PAGE>
AGH LEASING, L.P.
PRO FORMA STATEMENT OF OPERATIONS
For the Year Ended December 31, 1995
(Unaudited)
<TABLE>
<CAPTION>
Prior to Pro forma
Historical (1) Acquisition (2) Adjustments Pro Forma
------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues:
Room revenue $53,756,926 $1,532,369 $6,866,147 $62,155,442
Food and beverage revenue 17,717,760 420,569 863,242 19,001,571
Other revenue 4,147,900 92,884 1,930,937 6,171,721
------------------------------------------------------------
Total revenue 75,622,586 2,045,822 9,660,326 87,328,734
------------------------------------------------------------
Expenses:
Property operating costs and expenses 29,253,888 743,827 2,395,831 32,393,546
General and administrative 7,050,904 157,452 506,988 7,715,344
Advertising and promotion 4,537,445 97,924 524,904 5,160,273
Repairs and maintenance 3,198,506 104,843 476,269 3,779,618
Utilities 3,455,020 91,129 512,449 4,058,598
Management fees 1,668,992 61,199 753,254 2,483,445
Franchise costs 2,033,620 83,718 204,758 2,322,096
Depreciation 7,907,813 126,676 (7,971,489) 63,000
Amortization 223,431 (223,431) 0
Real estate and personal property taxes, 0 0
and property insurance 1,871,213 37,406 (1,908,619) 0
Interest expense 6,307,202 (6,275,702) 31,500
Other expense 1,261,652 (1,203,568) 58,084
Participating lease expenses 28,887,455 28,887,455
------------------------------------------------------------
Total expenses 68,769,686 1,504,174 16,679,099 86,952,959
------------------------------------------------------------
Net income (loss) $6,852,900 $541,648 ($7,018,773) $375,775
============================================================
</TABLE>
(1) AGH Predecessor Hotels and AGH Acquisition Hotels combined historical
statements of operations for the year ended December 31, 1995.
(2) Represents the historical results of operations of the Holiday Inn Dallas
DFW Airport West prior to the acquisition by the AGH Predecessor Hotels in
June 1995.
18
<PAGE>
AGH LEASING, L.P.
PRO FORMA STATEMENT OF OPERATIONS
For the Nine Months Ended September 30, 1996
(Unaudited)
<TABLE>
<CAPTION>
Lessee Historical
July 31, 1996 January 1, 1996
Through Through
September 30, July 30, Pro Forma
1996 1996 (1) Adjustments (2) Pro Forma
------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues
Room revenue $11,185,140 $35,200,441 $6,352,901 $52,738,482
Food and beverage revenue 2,982,331 10,836,410 611,170 14,429,911
Other revenue 623,824 2,518,325 1,957,745 5,099,894
------------------------------------------------------------------------------------------
Total revenue 14,791,295 48,555,176 8,921,816 72,268,287
------------------------------------------------------------------------------------------
Expenses:
Property operating costs and expenses 5,396,204 18,167,985 2,240,067 25,804,256
General and administrative 1,205,355 4,425,849 527,269 6,158,473
Advertising and promotion 772,999 2,890,082 432,298 4,095,379
Repairs and maintenance 522,792 1,997,826 391,571 2,912,189
Utilities 668,296 1,959,274 412,309 3,039,879
Management fees 390,736 962,503 485,288 1,838,527
Franchise costs 404,025 1,266,021 264,704 1,934,750
Depreciation 10,500 2,641,420 (2,604,670) 47,250
Amortization 478,438 (478,438)
Real estate and personal property taxes,
and property insurance 1,122,606 (1,122,606)
Interest expense 5,250 3,838,271 (3,819,896) 23,625
Other expense 17,448 1,411,272 (1,219,074) 209,646
Participating Lease expenses 5,218,526 20,388,776 25,607,302
------------------------------------------------------------------------------------------
Total expenses $14,612,131 $41,161,547 15,897,598 71,671,276
------------------------------------------------------------------------------------------
Net income (loss) $179,164 $7,393,629 ($6,975,782) $597,011
==========================================================================================
</TABLE>
(1) AGH Predecessor Hotels and AGH Acquisition Hotels combined historical
statements of operations for the period from January 1, 1996 through July
30, 1996.
(2) Pro forma adjustments for the AGH Predecessor Hotels, AGH Acquisition Hotels
and Orlando Hotel.
19
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this Current Report on Form
8-K/A of our reports dated April 12, 1996, on our audit of the balance sheet of
American General Hospitality Corporation as of April 12, 1996; dated May 29,
1996, on our audit of the balance sheet of AGH Leasing, L.P. as of May 29, 1996;
dated March 29, 1996, on our audit of the combined financial statements of the
AGH Predecesser Hotels as of December 30, 1994 and December 29, 1995 and for the
period from December 30, 1993 through December 31, 1993 and the years ended
December 30, 1994 and December 29, 1995; and dated April 8, 1996, on our audit
of the combined financial statements of the AGH Acquisition Hotels as of
December 31, 1994 and 1995 and for each of the three years in the period ended
December 31, 1995, appearing in the registration statement on Form S-11 (File
No. 333-4568)
Coopers & Lybrand, LLP
Dallas, Texas
January 2, 1997
