FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1998
---------------------------------------
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
------------------- -------------------
Commission file number
0-24097
--------------------
CNL Hospitality Properties, Inc.
------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Maryland 59-3396369
---------------------------------- -------------------------------
(State of other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
400 E. South Street
Orlando, Florida 32801
---------------------------------- -------------------------------
(Address of principal executive
offices) (Zip Code)
Registrant's telephone number
(including area code) (407) 422-1574
-------------------------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No ------ ------ Indicate the number of
shares outstanding of each of the issuer's classes of common stock as of the
latest practicable date.
3,146,865 shares of common stock, $.01 par value, outstanding as of November 2,
1998.
<PAGE>
CONTENTS
Part I Page
Item 1. Financial Statements:
Condensed Consolidated Balance Sheets 1
Condensed Consolidated Statements of Earnings 2
Condensed Consolidated Statements of
Stockholders' Equity 3
Condensed Consolidated Statements of Cash Flows 4-5
Notes to Condensed Consolidated Financial Statements 6-14
Item 2. Management's Discussion and Analysis
of Financial Condition
and Results of Operations 15-22
Part II
Other Information 23-25
<PAGE>
CNL HOSPITALITY PROPERTIES, INC.
AND SUBSIDIARIES
(formerly known as CNL American Realty Fund, Inc.)
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
------------- ------------
ASSETS
<S> <C> <C>
Land, building and equipment on
operating leases, less accumulated
depreciation $28,598,883 $ --
Cash and cash equivalents 2,012,110 8,869,838
Certificate of deposit 5,015,822 --
Receivables 41,099 --
Due from related party -- 7,500
Prepaid expenses 1,893 11,179
Organization costs, less accumulated
amortization of $3,971 and $833, respectively 21,000 19,167
Loan costs, less accumulated
amortization of $3,700 87,562 --
Accrued rental income 28,255 --
Other assets 580,606 535,792
--------- --------
$36,387,230 $9,443,476
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Line of credit $9,600,000 $ --
Accounts payable and accrued expenses 28,513 16,305
Due to related parties 705,117 193,254
Security deposits 1,417,500 --
Other payables 68,445 --
----------- -----------
Total liabilities 11,819,575 209,559
Commitments (Note 11)
Stockholders' equity:
Preferred stock, without par value.
Authorized and unissued
3,000,000 shares -- --
Excess shares, $.01 par value per share.
Authorized and unissued
63,000,000 shares -- --
Common stock, $.01 par value per share.
Authorized 60,000,000 shares,
issued and outstanding 2,865,872 and
1,152,540 shares, respectively 28,659 11,525
Capital in excess of par value 24,581,209 9,229,316
Accumulated distributions in
excess of net earnings (42,213) (6,924)
----------- ----------
Total stockholders' equity 24,567,655 9,233,917
----------- ----------
$36,387,230 $9,443,476
============ ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
1
<PAGE>
CNL HOSPITALITY PROPERTIES, INC.
AND SUBSIDIARIES
(formerly known as CNL American Realty Fund, Inc.)
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
<TABLE>
<CAPTION>
Quarter Ended Nine Months Ended
September 30, September 30,
1998 1997 1998 1997
--------- -------- ---------- ---------
<S> <C> <C> <C> <C>
Revenues:
Rental income from
operating leases $ 487,400 $ -- $ 487,400 $ --
FF&E Reserve Income 41,099 -- 41,099 --
Interest income 127,082 -- 498,241 --
--------- -------- --------- ----------
655,581 -- 1,026,740 --
--------- -------- --------- ----------
Expenses:
Interest Expense 139,416 -- 139,416 --
General operating and
administrative 44,979 -- 212,165 --
Asset management fees
to related party 27,246 -- 27,246 --
Reimbursement of
operating expenses (92,733) -- (92,733) --
Depreciation and
amortization 154,804 -- 156,804 --
--------- -------- --------- ----------
273,712 -- 442,898 --
--------- -------- --------- ----------
Net Earnings $ 381,869 $ -- $ 583,842 $ --
========= ======== ========= ==========
Earnings Per Share of
Common Stock (Basic and
Diluted) $ 0.15 $ -- $ 0.28 $ --
========= ======== ========= ==========
Weighted Average Number
of Shares of Common Stock
Outstanding 2,599,251 -- 2,082,845 --
========= ======== ========= ==========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
2
<PAGE>
CNL HOSPITALITY PROPERTIES, INC.
AND SUBSIDIARIES
(formerly known as CNL American Realty Fund, Inc.)
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Nine Months Ended September 30, 1998 and Year Ended December 31, 1997
<TABLE>
<CAPTION>
Accumulated
Common stock distributions
----------------- Capital in in excess
Number Par excess of net
Shares value of par value earnings Total
------- ------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Balance at
December 31,
1996 20,000 $ 200 $ 199,800 $ -- $ 200,000
Subscriptions
received for
common stock through
public
offering and
distribution
reinvestment
plan 1,132,540 11,325 11,314,077 -- 11,325,402
Stock issuance
costs -- -- (2,284,561) -- (2,284,561)
Net earnings -- -- -- 22,852 22,852
Distributions
declared and
paid ($.05 per
share) -- -- -- (29,776) (29,776)
-------- ------ --------- --------- ---------
Balance at
December 31,
1997 1,152,540 11,525 9,229,316 (6,924) 9,233,917
Subscriptions
received for
common
stock through
public
offering and
distribution
reinvestment
plan 1,713,332 17,134 17,116,185 -- 17,133,319
Stock issuance
costs -- -- (1,764,292) -- (1,764,292)
Net earnings -- -- -- 583,842 583,842
Distributions
declared and
paid ($.29 per
share) -- -- -- (619,131) (619,131)
-------- ------ --------- --------- ---------
Balance at
September 30, 1998 2,865,872 $28,659 $24,581,209 $(42,213) $24,567,655
======== ====== ========= ========= ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE>
CNL HOSPITALITY PROPERTIES, INC.
AND SUBSIDIARIES
(formerly known as CNL American Realty Fund, Inc.)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
1998 1997
----------- ----------
<S> <C>
Increase (Decrease) in Cash and Cash
Equivalents:
Net Cash Provided by Operating
Activities $2,047,046 $ --
---------- -----------
Cash Flows from Investing
Activities:
Additions to land, buildings
and equipment
on operating leases (27,245,538) --
Investment in certificate of
deposit (5,000,000) --
Increase in other assets (983,305) --
Other -- (68)
---------- -----------
Net cash used in investing
activities (33,228,843) (68)
---------- -----------
Cash Flows from Financing
Activities:
Reimbursement of acquisition
and stock issuance costs paid by
related parties on behalf
of the Company (168,369) --
Proceeds from borrowing on
line of credit 9,600,000 --
Subscriptions received from
stockholders 17,133,319 --
Distributions to stockholders (619,131) --
Payment of stock issuance costs (1,634,250) --
Other 12,500 --
---------- -----------
Net cash provided by
financing activities 24,324,069 --
---------- -----------
Net Decrease in Cash and Cash
Equivalents (6,857,728) (68)
Cash and Cash Equivalents at
Beginning of Period 8,869,838 2,084
---------- -----------
Cash and Cash Equivalents at End of
Period $ 2,012,110 $ 2,016
========== ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
<PAGE>
CNL HOSPITALITY PROPERTIES, INC.
AND SUBSIDIARIES
(formerly known as CNL American Realty Fund, Inc.)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
Nine Months Ended
September 30,
1998 1997
----------- -----------
Supplemental Schedule of Non-Cash
Investing and Financing
Activities:
Related parties paid certain
acquisition and stock
issuance costs on behalf
of the Company
as follows:
Acquisition costs $ 220,575 $ --
Stock issuance costs 158,184 916,478
----------- ----------
$ 378,759 $ 916,478
=========== ==========
See accompanying notes to condensed consolidated financial statements.
5
<PAGE>
CNL HOSPITALITY PROPERTIES, INC.
AND SUBSIDIARIES
(formerly known as CNL American Realty Fund, Inc.)
NOTES TO CONDENSED FINANCIAL STATEMENTS
Quarters and Nine Months Ended September 30, 1998 and 1997
1. Organization and Nature of Business:
CNL Hospitality Properties, Inc., formerly known as CNL American Realty
Fund, Inc., was organized in Maryland on June 12, 1996. CNL Hospitality GP
Corp. and CNL Hospitality LP Corp. are wholly owned subsidiaries of CNL
Hospitality Properties, Inc., organized in Delaware in June 1998. CNL
Hospitality Partners, LP is a Delaware limited partnership formed in June
1998. CNL Hospitality GP Corp. and CNL Hospitality LP Corp. are the
general and limited partners, respectively, of CNL Hospitality Partners,
LP. The term "Company" includes, unless the context otherwise requires,
CNL Hospitality Properties, Inc., CNL Hospitality Partners, LP, CNL
Hospitality GP Corp. and CNL Hospitality LP Corp.
The Company was formed primarily to acquire properties (the "Properties")
located across the United States to be leased on a long-term, triple-net
basis. The Company intends to invest the proceeds from its public
offering, after deducting offering expenses, in hotel Properties to be
leased to operators of national and regional limited service, extended
stay and full service hotel chains (the "Hotel Chains") and in restaurant
properties to be leased to operators of selected national and regional
fast-food, family-style and casual dining restaurant chains (the
"Restaurant Chains"). The Company may also provide mortgage financing (the
"Mortgage Loans"). The Company also intends to offer furniture, fixture
and equipment financing ("Secured Equipment Leases") to operators of Hotel
Chains and Restaurant Chains.
2. Basis of Presentation:
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with the instructions to Form 10-Q and do
not include all of the information and note disclosures required by
generally accepted accounting principles. The financial statements reflect
all adjustments, consisting of normal recurring adjustments, which are, in
the opinion of management, necessary to a fair statement of the results
for the interim period presented. Operating results for the quarter and
nine months ended September 30, 1998, may not be indicative of the results
that may be expected for the year ending December 31, 1998. Amounts as of
December 31, 1997, included in the financial statements, have been derived
from audited financial statements as of that date.
6
<PAGE>
CNL HOSPITALITY PROPERTIES, INC.
AND SUBSIDIARIES
(formerly known as CNL American Realty Fund, Inc.)
NOTES TO CONDENSED FINANCIAL STATEMENTS
Quarters and Nine Months Ended September 30, 1998 and 1997
2. Basis of Presentation - Continued:
These unaudited financial statements should be read in conjunction with
the financial statements and notes thereto included in the Company's Form
10-K for the year ended December 31, 1997.
The accompanying unaudited condensed consolidated financial statements
include the accounts of the Company, CNL Hospitality Properties, Inc., and
its wholly owned subsidiaries, CNL Hospitality GP Corp. and CNL
Hospitality LP Corp., as well as the accounts of CNL Hospitality Partners,
LP. All significant intercompany balances and transactions have been
eliminated.
The Company was a development stage enterprise from June 12, 1996 through
October 15, 1997. Since operations had not begun, activities through
October 15, 1997 were devoted to organization of the Company.
Effective January 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income." This
Statement requires the reporting of net earnings and all other changes to
equity during the period, except those resulting from investments by
owners and distributions to owners, in a separate statement that begins
with net earnings. Currently, the Company's only component of
comprehensive income is net earnings.
In March 1998, the Emerging Issues Task Force of the Financial Accounting
Standards Board ("FASB") reached a consensus in EITF 97-11, entitled
"Accounting for Internal Costs Relating to Real Estate Property
Acquisitions." EITF 97-11 provides that internal costs of identifying and
acquiring Property should be expensed as incurred. Due to the fact that
the Company does not have an internal acquisitions function and instead,
contracts these services from an external advisor, the effectiveness of
EITF 97-11 had no material effect on the Company's financial position or
results of operations.
In April 1998, the American Institute of Certified Public Accountants
issued Statement of Position (SOP) 98-5, "Reporting on the Costs of
Start-Up Activities," which will be effective for the Company as of
January 1, 1999. This SOP requires start-up and organization costs to be
expensed as incurred and also requires previously deferred start-up costs
to be recognized as a cumulative effect adjustment in the statement of
earnings. Management of the Company does not believe that adoption of this
SOP will have a material effect on the Company's financial position or
results of operations.
7
<PAGE>
CNL HOSPITALITY PROPERTIES, INC.
AND SUBSIDIARIES
(formerly known as CNL American Realty Fund, Inc.)
NOTES TO CONDENSED FINANCIAL STATEMENTS
Quarters and Nine Months Ended September 30, 1998 and 1997
2. Basis of Presentation - Continued:
In May 1998, the Emerging Issues Task Force of the FASB reached a
consensus in EITF 98-9, entitled "Accounting for Contingent Rent in the
Interim Financial Periods." Management of the Company does not expect that
the consensus will have a material effect on the Company's financial
position or results of operations.
3. Leases:
The Company leases its land, buildings and equipment to an operator of a
national limited service extended stay hotel chain. The leases are
accounted for under the provisions of Statement of Financial Accounting
Standards No. 13, "Accounting for Leases," and have been classified as
operating leases. The leases are for 19 years, provide for minimum and
contingent rentals and require the tenant to pay executory costs. In
addition, the tenant pays all property taxes and assessments and carries
insurance coverage for public liability, property damage, fire and
extended coverage. The lease options allow the tenants to renew the lease
for three successive five-year periods subject to the same terms and
conditions of the initial lease.
4. Land, Buildings and Equipment on Operating Leases:
Land, buildings and equipment on operating leases consisted of the
following at:
September 30, December 31,
1998 1997
------------ -----------
Land $ 2,926,976 $ --
Buildings 23,476,442 --
Equipment 2,349,131 --
------------ -----------
28,752,549 --
Less accumulated depreciation (153,666) --
============ ===========
$28,598,883 $ --
============ ===========
8
<PAGE>
CNL HOSPITALITY PROPERTIES, INC.
AND SUBSIDIARIES
(formerly known as CNL American Realty Fund, Inc.)
NOTES TO CONDENSED FINANCIAL STATEMENTS
Quarters and Nine Months Ended September 30, 1998 and 1997
4. Land, Building and Equipment on Operating Leases - Continued:
The leases provide for automatic increases in the minimum annual rent at
predetermined intervals during the term of the lease. Such amounts are
recognized on a straight-line basis over the terms of the leases
commencing on the date the Property is placed in service. For the quarter
and nine months ended September 30, 1998, the Company recognized $28,255
of such rental income.
The following is a schedule of future minimum lease payments to be
received on the noncancellable operating leases at September 30, 1998:
1998 $ 715,195
1999 2,889,162
2000 2,928,895
2001 2,928,895
2002 2,928,895
Thereafter 42,957,127
------------
$55,348,169
============
Since leases are renewable at the option of the tenant, the above table
only presents future minimum lease payments due during the initial lease
terms. In addition, this table does not include any amounts for future
contingent rents which may be received on the leases based on a percentage
of the tenant's gross sales.
5. Other Assets:
Other assets consisted of the following at:
September 30, December 31,
1998 1997
------------ -----------
Acquisition fees and
miscellaneous
acquisition expenses to be
allocated to future
properties $ 555,606 $ 535,792
Deposits on properties 25,000 --
----------- -----------
$ 580,606 $ 535,792
=========== ===========
9
<PAGE>
CNL HOSPITALITY PROPERTIES, INC.
AND SUBSIDIARIES
(formerly known as CNL American Realty Fund, Inc.)
NOTES TO CONDENSED FINANCIAL STATEMENTS
Quarters and Nine Months Ended September 30, 1998 and 1997
6. Line of Credit:
On July 31, 1998, the Company entered into an initial revolving line of
credit and security agreement with a bank to be used by the Company to
acquire hotel Properties. The line of credit provides that the Company may
receive advances of up to $30,000,000 until July 30, 2003, with an annual
review to be performed by the bank to indicate that there has been no
substantial deterioration, in the bank's reasonable discretion, of the
credit quality. Interest expense on each advance shall be payable monthly,
with all unpaid interest and principal due no later than five years from
the date of the advance. Advances under the line of credit will bear
interest at either (i) a rate per annum equal to 318 basis points above
the London Interbank Offered Rate (LIBOR) or (ii) a rate per annum equal
to 30 basis points above the bank's base rate, whichever the Company
selects at the time advances are made. In addition, a fee of .5% per
advance will be due and payable to the bank on funds as advanced. Each
advance made under the line of credit will be secured by the assignment of
rents and leases. In addition, the line of credit provides that the
Company will not be able to further encumber the applicable hotel Property
during the term of the advance without the bank's consent. The Company
will be required, at each closing, to pay all costs, fees and expenses
arising in connection with the line of credit. The Company must also pay
the bank's attorneys fees, subject to a maximum cap, incurred in
connection with the line of credit and each advance.
On July 31, 1998, the Company obtained two advances totalling $8,600,000
relating to the line of credit. In connection with the line of credit, the
Company incurred a commitment fee, legal fees and closing costs of
$62,149. The proceeds were used in connection with the purchase of two
hotel Properties. In addition, on September 9, 1998, the Company obtained
an advance totalling $1,000,000 in connection with the agreement to
acquire the three hotel Properties (see Note 11). In connection with this
advance, the Company incurred legal fees and closing costs of $6,613. The
interest rate of the line of credit at September 30, 1998 was 8.55%.
7. Stock Issuance Costs:
The Company has incurred certain expenses of its offering of shares,
including commissions, marketing support and due diligence expense
reimbursement fees, filing fees, legal, accounting, printing and escrow
fees, which have been deducted from the gross proceeds of the offering.
Preliminary costs incurred prior to raising capital were advanced by an
affiliate of the Company, CNL Hospitality Advisors, Inc., (formerly known
as CNL Real Estate Advisors, Inc.) (the "Advisor"). The Advisor has agreed
to pay all organizational and offering expenses (excluding commissions and
marketing support and due diligence expense reimbursement fees) which
exceed three percent of the gross offering proceeds received from the sale
of shares of the Company in connection with the offering.
10
<PAGE>
CNL HOSPITALITY PROPERTIES, INC.
AND SUBSIDIARIES
(formerly known as CNL American Realty Fund, Inc.)
NOTES TO CONDENSED FINANCIAL STATEMENTS
Quarters and Nine Months Ended September 30, 1998 and 1997
7. Stock Issuance Costs - Continued:
During the nine months ended September 30, 1998 and the year ended
December 31, 1997, the Company incurred $1,769,263 and $2,304,561,
respectively, in organizational and offering costs, including $1,370,665
and $906,032, respectively, in commissions and marketing support and due
diligence expense reimbursement fees (see Note 9). Of these amounts
$1,764,292 and $2,284,561, respectively, have been treated as stock
issuance costs and $4,971 and $20,000, respectively, have been treated as
organization costs. The stock issuance costs have been charged to
stockholders' equity subject to the three percent cap described above.
8. Distributions:
For the nine months ended September 30, 1998, approximately 94 percent of
the distributions paid to stockholders were considered ordinary income and
approximately six percent were considered a return of capital to
stockholders for federal income tax purposes. No amounts distributed to
the stockholders for the nine months ended September 30, 1998 are required
to be or have been treated by the Company as a return of capital for
purposes of calculating the stockholders' return on their invested
capital. The characterization for tax purposes of distributions declared
for the nine months ended September 30, 1998 may not be indicative of the
results that may be expected for the year ending December 31, 1998.
9. Related Party Transactions:
During the nine months ended September 30, 1998 and 1997, the Company
incurred $1,284,999 and $86,873, respectively, in selling commissions due
to CNL Securities Corp. for services in connection with the offering of
shares. A substantial portion of these amounts ($1,199,289 and $81,081,
respectively) were or will be paid by CNL Securities Corp. as commissions
to other broker.
In addition, CNL Securities Corp. is entitled to receive a marketing
support and due diligence expense reimbursement fee equal to 0.5% of the
total amount raised from the sale of shares, a portion of which may be
reallowed to other broker-dealers. During the nine months ended September
30, 1998 and 1997, the Company incurred $85,667 and $5,792, respectively,
of such fees, the majority of which were reallowed to other broker-dealers
and from which all bona fide due diligence expenses were paid.
11
<PAGE>
CNL HOSPITALITY PROPERTIES, INC.
AND SUBSIDIARIES
(formerly known as CNL American Realty Fund, Inc.)
NOTES TO CONDENSED FINANCIAL STATEMENTS
Quarters and Nine Months Ended September 30, 1998 and 1997
9. Related Party Transactions - Continued:
The Advisor is entitled to receive acquisition fees for services in
finding, negotiating the leases of and acquiring Properties on behalf of
the Company equal to 4.5% of gross proceeds, loan proceeds from permanent
financing and amounts outstanding on the line of credit, if any, at the
time of listing, but excluding that portion of the permanent financing
used to finance Secured Equipment Leases. During the nine months ended
September 30, 1998 and 1997, the Company incurred $770,999 and $52,124,
respectively, of such fees. Such fees are included in land, buildings and
equipment on operating leases and other assets at September 30, 1998.
The Company and the Advisor have entered into an advisory agreement
pursuant to which the Advisor will receive a monthly asset management fee
of one-twelfth of 0.60% of the Company's real estate asset value and the
outstanding principal balance of any Mortgage Loans as of the end of the
preceding month. The management fee, which will not exceed fees which are
competitive for similar services in the same geographic area, may or may
not be taken, in whole or in part as to any year, in the sole discretion
of the Advisor. All or any portion of the management fee not taken as to
any fiscal year shall be deferred without interest and may be taken in
such other fiscal year as the Advisor shall determine. During the nine
months ended September 30, 1998, the Company incurred $27,246 of such
fees.
The Company has incurred operating expenses which, in general, are those
expenses relating to administration of the Company on an ongoing basis.
Pursuant to the advisory agreement, the Advisor is required to reimburse
the Company the amount by which the total operating expenses paid or
incurred by the Company exceed in any four consecutive fiscal quarters
(the "Expense Year"), the greater of two percent of average invested
assets or 25 percent of net income (the "Expense Cap"). During the four
quarters ended September 30, 1998, the Company's operating expenses
exceeded the Expense Cap by $92,733; therefore the Advisor reimbursed the
Company such amount in accordance with the advisory agreement.
12
<PAGE>
CNL HOSPITALITY PROPERTIES, INC.
AND SUBSIDIARIES
(formerly known as CNL American Realty Fund, Inc.)
NOTES TO CONDENSED FINANCIAL STATEMENTS
Quarters and Nine Months Ended September 30, 1998 and 1997
9. Related Party Transactions - Continued:
The Advisor and its affiliates provide various administrative services to
the Company, including services related to accounting; financial, tax and
regulatory compliance reporting; stockholder distributions and reporting;
due diligence and marketing; and investor relations (including
administrative services in connection with the offering of shares), on a
day-to-day basis. The expenses incurred for these services were classified
as follows for the nine months ended September 30:
1998 1997
---------- ----------
Deferred offering costs $ -- $ 92,657
Stock issuance costs 236,942 --
General operating and
administrative expenses 95,441 --
---------- ----------
$332,383 $ 92,657
========== ==========
As of September 30, 1998, the Company has reversed the amounts above
classified as general operating and administrative expenses which exceed
the Expense Cap.
The amounts due to related parties consisted of the following at:
September 30, December 31,
1998 1997
---------- ----------
Due to CNL Securities Corp.:
Commissions $ 57,790 $ 100,709
Marketing support and due
diligence expense
reimbursement fee 4,884 7,268
---------- ----------
62,674 107,977
---------- ----------
Due to Advisor:
Expenditures incurred
on behalf of the
Company
and accounting and
administrative
services 155,792 39,105
Acquisition fees 486,651 46,172
---------- ----------
642,443 85,277
---------- ----------
$705,117 $193,254
========== ==========
13
<PAGE>
CNL HOSPITALITY PROPERTIES, INC.
AND SUBSIDIARIES
(formerly known as CNL American Realty Fund, Inc.)
NOTES TO CONDENSED FINANCIAL STATEMENTS
Quarters and Nine Months Ended September 30, 1998 and 1997
10. Concentration of Credit Risk:
All of the Company's rental income for the nine months ended September 30,
1998 was earned from one lessee, STC Leasing Associates, LLC, which
operates each property as Residence Inn by Marriott.
Although the Company intends to acquire Properties located in various
states and regions and to carefully screen its tenants in order to reduce
risks of default, failure of any one hotel chain or lessee that
contributes more than ten percent of the Company's rental income could
significantly impact the results of operations of the Company. However,
management believes that the risk of such a default is reduced due to the
essential or important nature of these Properties for the ongoing
operations of the lessee.
It is expected that the percentage of total rental income contributed by
this lessee will decrease as additional Properties are acquired and leased
in 1998 and subsequent years.
11. Commitments:
In July 1998, the Company entered into agreements to acquire three hotel
Properties. In connection with these agreements, the Company was required
to obtain a letter of credit, to be used by the seller of the Properties,
secured by a $5,000,000 certificate of deposit. In connection with the
letter of credit, the Company incurred $22,500 in closing costs.
12. Subsequent Events:
During the period October 1, 1998 through November 2, 1998, the Company
received subscription proceeds for an additional 280,993 shares
($2,809,932) of common stock.
On October 1, 1998 and November 1, 1998, the Company declared
distributions totalling $167,846 and $183,405, respectively, or $.0583 per
share of common stock, payable in December 1998, to stockholders of record
on October 1, 1998 and November 1, 1998, respectively.
14
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
This information contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities Act
of 1934. Although the Company believes that the expectations reflected in such
forward-looking statements are based upon reasonable assumptions, the Company's
actual results could differ materially from those set forth in the
forward-looking statements. Certain factors that might cause such a difference
include the following: changes in general economic conditions, changes in local
and national real estate conditions, continued availability of proceeds from the
Company's offering, the ability of the Company to obtain permanent financing on
satisfactory terms, the ability of the Company to identify suitable investments,
the ability of the Company to locate suitable tenants for its properties and
borrowers for its mortgage loans and secured equipment leases, and the ability
of such tenants and borrowers to make payments under their respective leases,
mortgage loans or secured equipment leases.
Introduction
CNL Hospitality Properties, Inc., formerly known as CNL American Realty
Fund, Inc., is a Maryland corporation that was organized on June 12, 1996. On
June 15, 1998, CNL Hospitality Properties, Inc. formed CNL Hospitality Partners,
LP, a wholly owned Delaware limited partnership (the "Partnership"). Properties
acquired are expected to be held by the Partnership and, as a result, owned by
CNL Hospitality Properties, Inc. through the Partnership. The term "Company"
includes CNL Hospitality Properties, Inc. and its subsidiaries, CNL Hospitality
GP Corp., CNL Hospitality LP Corp. and CNL Hospitality Partners, LP.
The Company was formed to acquire properties (the "Properties") located
across the United States to be leased on a long-term, "triple-net" basis to
operators of selected national and regional limited service, extended stay and
full service hotel chains (the "Hotel Chains") and operators of national and
regional fast-food, family-style and casual dining restaurant chains (the
"Restaurant Chains"). The Company is not obligated to invest in both hotel
Properties and restaurant Properties. The Company may also provide mortgage
financing (the "Mortgage Loans") in the aggregate principal amount of
approximately 5% to 10% of the gross offering proceeds. The Company also may
offer furniture, fixture and equipment financing ("Secured Equipment Leases") to
operators of Hotel Chains and Restaurant Chains. Secured Equipment Leases will
be funded from the proceeds of financing has been obtained. The aggregate
outstanding principal amount of Secured Equipment Leases will not exceed 10% of
gross proceeds from the Company's offerings of shares of common stock.
Liquidity and Capital Resources
On July 9, 1997, the Company commenced an offering to the public of up to
16,500,000 shares of common stock pursuant to a registration statement on Form
S-11 under the Securities Act of 1933, as amended. As of September 30, 1998, the
Company had received aggregate subscription proceeds of (Securities and Exchange
Commission File No. 333-9943) $28,458,720 (2,845,872 shares), from the offering,
including $20,615 (2,062 shares) through the Company's reinvestment plan. The
Company anticipates significant additional sales of shares prior to the
termination of the offering. In accordance with the Company's prospectus, the
Company has elected to extend the offering of shares until a date no later than
July 9, 1999.
15
<PAGE>
Liquidity and Capital Resources - Continued
The managing dealer of the offering of shares is CNL Securities
Corporation, an affiliate of the Company's.
As of September 30, 1998, net proceeds to the Company from its offering of
shares and capital contributions from CNL Hospitality Advisors, Inc. (formerly
known as CNL Real Estate Advisors, Inc.) (the "Advisor") and advances on the
line of credit, after deduction of selling commissions, marketing support and
due diligence expense reimbursement fees and organizational and offering
expenses totalled approximately $34,200,000. As of September 30, 1998, the
proceeds have been invested in two hotel properties or committed for investment
in additional hotel properties and to pay acquisition fees and certain
acquisition expenses.
The Company expects to use net offering proceeds from the sale of
additional shares to purchase additional Properties and to invest in Mortgage
Loans. In addition, the Company intends to borrow money to acquire additional
Properties, to invest in Mortgage Loans and Secured Equipment Leases, and to pay
certain related fees. The Company intends to encumber assets in connection with
such borrowing.
On July 31, 1998, the Company acquired two Residence Inn by Marriott
properties in Georgia for a total purchase price of $27,245,539. In connection
therewith, the Company entered into a 19 year lease for each Property.
On July 31, 1998, the Company entered into an initial line of credit and
security agreement with a bank to be used by the Company to acquire hotel
Properties. The initial line of credit provides that the Company will be able to
receive advances of up to $30,000,000 until July 30, 2003, with an annual review
to be performed by the bank to indicate that there has been no substantial
deterioration, in the bank's reasonable discretion, of the credit quality.
Interest expense on each advance shall be payable monthly, with all unpaid
interest and principal due no later than five years from the date of the
advance. Advances under the line of credit will bear interest at either (i) a
rate per annum equal to 318 basis points above the London Interbank Offered Rate
(LIBOR) or (ii) a rate per annum equal to 30 basis points above the bank's base
rate, whichever the Company selects at the time advances are made. In addition,
a fee of .5% per advance will be due and payable to the bank on funds as
advanced. Each advance made under the line of credit will be secured by the
assignment of rents and leases. In addition, the line of credit provides that
the Company will not be able to further encumber the applicable hotel Property
during the term of the advance without the bank's consent. The Company will be
required, at each closing, to pay all costs, fees and expenses arising in
connection with the line of credit. The Company must also pay the bank's
attorneys fees, subject to a maximum cap, incurred in connection with the line
of credit and each advance. On July 31, 1998, the Company obtained two advances
totalling $8,600,000 relating to the line of credit. In connection with the line
of credit, the Company incurred a commitment fee, legal fees and closing costs
of $62,149. The proceeds were used in connection with the purchase of the two
hotel Properties referenced above. In addition, on September 9, 1998, the
Company obtained an advance totalling $1,000,000 relating to the line of credit.
In connection with this advance, the Company incurred legal fees and closing
costs of $6,613. The Company has not yet received a commitment for any long-term
financing and there is no assurance that the Company will obtain any long-term
financing on satisfactory terms.
16
<PAGE>
Liquidity and Capital Resources - Continued
As of November 2, 1998, the Company had received subscription proceeds of
$31,268,652 (3,126,865 shares) from its offering of shares. As of November 2,
1998, net proceeds to the Company from its offering of shares and capital
contributions from the Advisor, after deduction of selling commissions,
marketing support and due diligence expense reimbursement fees and
organizational and offering expenses totalled approximately 27,175,000. In
addition, the Company received an advance of $9,600,000 under its line of
credit. The Company has used total net proceeds from the offering and borrowing
to invest approximately $27,246,000 in two hotel properties, to pay $5,000,000
as a deposit on three additional hotel properties and to pay approximately
$2,214,000 in acquisition fees and expenses, leaving approximately $2,315,000
available for investment in properties and mortgage loans.
As of November 2, 1998, the Company had initial commitments to acquire
three hotel Properties. The acquisition of each of these Properties is subject
to the fulfillment of certain conditions, including, but not limited to, a
satisfactory environmental survey and property appraisal. In order to acquire
these Properties, the Company must obtain additional funds through the receipt
of additional offering proceeds and/or debt financing. In connection with these
agreements, the Company was required to obtain a letter of credit, to be used by
the seller of the Properties, secured by a $5,000,000 certificate of deposit. In
connection with the letter of credit, the Company incurred $22,500 in closing
costs. There can be no assurance that any or all of the conditions will be
satisfied or, if satisfied, that one or more of these Properties will be
acquired by the Company. In addition, as of November 2, 1998, the Company had
not entered into any arrangements creating a reasonable probability a particular
Mortgage Loan or Secured Equipment Lease would be funded.
The Company is presently negotiating to acquire additional Properties, but
as of November 2, 1998, the Company had not acquired any such Properties or
entered into any Mortgage Loans.
Properties are and are expected to be leased on a long-term, triple-net
basis, meaning that tenants are generally required to pay all repairs and
maintenance, property taxes, insurance and utilities. Rental payments under the
leases are expected to exceed the Company's operating expenses. For these
reasons, no short-term or long-term liquidity problems associated with operating
the Properties are currently anticipated by management.
17
<PAGE>
Liquidity and Capital Resources - Continued
Until Properties are acquired, or Mortgage Loans are entered into, net
offering proceeds are held in short-term, highly liquid investments which
management believes to have appropriate safety of principal. This investment
strategy provides high liquidity in order to facilitate the Company's use of
these funds to acquire Properties at such time as Properties suitable for
acquisition are located or to fund Mortgage Loans. At September 30, 1998, the
Company had $2,012,110 invested in such short-term investments as compared to
$8,869,838 at December 31, 1997. The decrease in the amount invested in
short-term investments reflects funds used to acquire the two Properties
referenced above. The remaining funds will be used primarily to purchase
Properties, to make Mortgage Loans, to pay offering and acquisition expenses, to
pay distributions to stockholders, to meet other Company expenses and, in
management's discretion, to create cash reserves.
During the nine months ended September 30, 1998 and 1997, affiliates of
the Company incurred on behalf of the Company $158,184 and $360,706,
respectively, for certain organizational and offering expenses. In addition,
during the nine months ended September 30, 1998, affiliates of the Company
incurred on behalf of the Company $220,575 for certain acquisition expenses and
$64,422 for certain operating expenses. As of September 30, 1998, the Company
owed the Advisor $642,443 for such amounts, unpaid fees and administrative
expenses (including services for accounting; financial, tax and regulatory
compliance and reporting; stockholder distributions and reporting; due diligence
and marketing; and investor relations). The Advisor has agreed to pay or
reimburse to the Company all organizational and offering expenses in excess of
three percent of gross offering proceeds. In addition, the Advisor is required
to reimburse the Company the amount by which total operating expenses paid or
incurred by the Company exceed in any four consecutive fiscal quarters (the
"Expense Year") the greater of two percent of average invested assets or 25
percent of net income (the "Expense Cap"). During the four quarters ended
September 30, 1998, the Company's operating expenses exceeded the Expense Cap by
$92,733; therefore the Advisor reimbursed the Company such amount in accordance
with the advisory agreement.
During the nine months ended September 30, 1998, the Company generated
cash from operations (which includes rental income and interest received less
cash paid for operating expenses) of $2,047,046. Based on cash from operations,
the Company declared distributions to its stockholders of $619,131 during the
nine months ended September 30, 1998. No distributions were paid or declared for
the nine months ended September 30, 1997. In addition, on October 1, 1998 and
November 1, 1998, the Company declared distributions to stockholders of record
on October 1, 1998 and November 1, 1998, totalling $167,846 and $183,405,
respectively ($.0583 per share), payable in December 1998.
For the nine months ended September 30, 1998, approximately 94 percent of
the distributions received by stockholders were considered to be ordinary income
and approximately 6 percent were considered a return of capital for federal
income tax purposes. No amounts distributed or to be distributed to the
stockholders as of November 2, 1998, were required to be or have been treated by
the Company as a return of capital for purposes of calculating the stockholders'
return on their invested capital.
18
<PAGE>
Liquidity and Capital Resources - Continued
Management believes that the Properties are adequately covered by
insurance. In addition, the Advisor has obtained contingent liability coverage
for the Company. This insurance policy is intended to reduce the Company's
exposure in the unlikely event a tenant's insurance policy lapses or is
insufficient to cover a claim relating to a Property.
The tenant of the two Properties owned by the Company as of November 2,
1998 has established capital expenditure reserve funds which will be used for
the replacement and renewal of furniture, fixtures and equipment relating to the
hotel properties (the "FF&E Reserve"). Funds in the FF&E Reserve and all
property purchased with funds from the FF&E Reserve will be paid, granted and
assigned to the Company as additional rent. For the nine months ended September
30, 1998 revenues from the FF&E Reserve totalled $41,099 and are included in
receivables. Management has the right to cause the Company to maintain
additional reserves if, in their discretion, they determine such reserves are
required to meet the Company's working capital needs.
Management expects that the cash to be generated from operations will be
adequate to pay operating expenses and to make distributions to stockholders.
Results of Operations
No operations commenced until the Company received the minimum offering
proceeds of $2,500,000 on October 15, 1997. As of September 30, 1998, the
Company had acquired two Properties consisting of land, building and equipment,
and entered into long-term, triple-net lease agreements relating to these
Properties.
The Property leases provide for minimum base annual rental payments
ranging from approximately $1,209,000 to $1,651,800, which are payable in
monthly installments. The leases also provide that, commencing in the second
lease year, the annual base rent required under the terms of the leases will
increase. The Company's leases also require the establishment of the FF&E
Reserves. The FF&E Reserves established for the tenant at September 30, 1998 are
owned by the Company and are thus reported as additional rent. In connection
therewith, the Company earned $528,499 (including $41,099 in FF&E Reserve
income) from two Properties during the nine months ended September 30, 1998.
Because the Company has not yet acquired all of its Properties, revenues for the
nine months ended September 30, 1998, represent only a portion of revenues which
the Company is expected to earn in future periods.
During the quarter and nine months ended September 30, 1998, the Company
earned $127,082 and $498,241, respectively, in interest income from investments
in money market accounts and other short-term highly liquid investments. As net
offering proceeds are invested in Properties and used to make Mortgage Loans,
the percentage of the Company's total revenues from interest income from
investments in money market accounts or other short term, highly liquid
investments is expected to decrease.
19
<PAGE>
Results of Operations - Continued
Operating expenses, including depreciation and amortization expense, were
$273,712 and $442,898 for the quarter and nine months ended September 30, 1998,
respectively. Operating expenses, including asset management fees and
depreciation and amortization expense, represent only a portion of operating
expenses which the Company is expected to incur during a full year in which the
Company owns Properties. The dollar amount of operating expenses is expected to
increase as the Company acquires additional Properties and invests in Mortgage
Loans. However, general and administrative expenses as a percentage of total
revenues is expected to decrease as the Company acquires additional Properties
and invests in Mortgage Loans.
As of September 30, 1998, the Company has reduced operating expenses
payable to the Advisor an amount which exceeds the Expense Cap totalling
$92,733.
Effective January 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income." This Statement
requires the reporting of net earnings and all other changes to equity during
the period, except those resulting from investments by owners and distributions
to owners, in a separate statement that begins with net earnings. Currently, the
Company's only component of comprehensive income is net earnings.
In March 1998, the Emerging Issues Task Force of the Financial Accounting
Standards Board ("FASB") reached a consensus in EITF 97-11, entitled "Accounting
for Internal Costs Relating to Real Estate Property Acquisitions." EITF 97-11
provides that internal costs of identifying and acquiring operating Property
should be expensed as incurred. Due to the fact that the Company does not have
an internal acquisitions function and instead, contracts these services from an
external advisor, the effectiveness of EITF 97-11 had no material effect on the
Company's financial position or results of operations.
In April 1998, the American Institute of Certified Public Accountants
issued Statement of Position (SOP) 98-5, "Reporting on the Costs of Start-Up
Activities," which is effective for the Company as of January 1, 1999. This SOP
requires start-up and organization costs to be expensed as incurred and also
requires previously deferred start-up costs to be recognized as a cumulative
effect adjustment in the statement of income. Management of the Company does not
believe that adoption of this SOP will have a material effect on the Company's
financial position or results of operations.
In May 1998, the Emerging Issues Task Force of the FASB reached a
consensus in EITF 98-9, entitled "Accounting for Contingent Rent in the Interim
Financial Periods." Management of the Company does not expect that the consensus
will have a material effect on the Company's financial position or results of
operations.
The Year 2000 problem is the result of information technology systems and
embedded systems (products which are made with microprocessor (computer) chips
such as HVAC systems, physical security systems and elevators) using a two-digit
format, as opposed to four digits, to indicate the year. Such information
technology and embedded systems may be unable to properly recognize and process
date-sensitive information beginning January 1, 2000.
20
<PAGE>
Results of Operations - Continued
The Company does not have any information technology systems. Affiliates
of the Advisor provide all services requiring the use of information technology
systems pursuant to a management agreement with the Company. The maintenance of
embedded systems, if any, at the Company's properties is the responsibility of
the tenants of the properties in accordance with the terms of the Company's
leases. The Advisor and affiliates have established a team dedicated to
reviewing the internal information technology systems used in the operation of
the Company, and the information technology and embedded systems and the Year
2000 compliance plans of the Company's tenants, significant suppliers, financial
institutions and transfer agent.
The information technology infrastructure of the affiliates of the Advisor
consists of a network of personal computers and servers that were obtained from
major suppliers. The affiliates utilize various administrative and financial
software applications on that infrastructure to perform the business functions
of the Company. The inability of the Advisor and affiliates to identify and
timely correct material Year 2000 deficiencies in the software and/or
infrastructure could result in an interruption in, or failure of, certain of the
Company's business activities or operations. Accordingly, the Advisor and
affiliates have requested and are evaluating documentation from the suppliers of
the affiliates regarding the Year 2000 compliance of their products that are
used in the business activities or operations of the Company. The costs expected
to be incurred by the Advisor and affiliates to become Year 2000 compliant will
be incurred by the Advisor and affiliates; therefore, these costs will have no
impact on the Company's financial position or results of operations.
The Company has material third party relationships with its tenants,
financial institutions and transfer agent. The Company depends on its tenants
for rents and cash flows, its financial institutions for availability of cash
and its transfer agent to maintain and track investor information. If any of
these third parties are unable to meet their obligations to the Company because
of the Year 2000 deficiencies, such a failure may have a material impact on the
Company. Accordingly, the Advisor has requested and is evaluating documentation
from the Company's tenants, financial institutions, and transfer agent relating
to their Year 2000 compliance plans. At this time, the Advisor has not yet
received sufficient certifications to be assured that the tenants, financial
institutions, and transfer agent have fully considered and mitigated any
potential material impact of the Year 2000 deficiencies. Therefore, Advisor does
not, at this time, know of the potential costs to the Company of any adverse
impact or effect of any Year 2000 deficiencies by these third parties.
21
<PAGE>
Results of Operations - Continued
The Advisor currently expects that all year 2000 compliance testing and
any necessary remedial measures on the information technology systems used in
the business activities and operations of the Company will be completed prior to
June 30, 1999. Based on the progress the Advisor and affiliates have made in
identifying and addressing the Company's Year 2000 issues and the plan and
timeline to complete the compliance program, the Advisor does not foresee
significant risks associated with the Company's Year 2000 compliance at this
time. Because the Advisor and affiliates are still evaluating the status of the
systems used in business activities and operations of the Company and the
systems of the third parties with which the Company conducts its business, the
Advisor has not yet developed a comprehensive contingency plan and is unable to
identify "the most reasonably likely worst case scenario" at this time. As the
Advisor identifies significant risks related to the Company's Year 2000
compliance or if the Company's Year 2000 compliance program's progress deviates
substantially from the anticipated timeline, the Advisor will develop
appropriate contingency plans.
22
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings. Inapplicable.
Item 2. Changes in Securities and Use of Proceeds.
(d) The information required by this item is set forth in Part I.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations, and is hereby
incorporated by reference.
Item 3. Defaults upon Senior Securities. Inapplicable.
Item 4. Submission of Matters to a Vote of Security Holders.
Inapplicable.
Item 5. Other Information.
The form of proxy solicited by the Board of Directors in
connection with the Company's 1999 annual meeting of
stockholders will confer discretionary authority to vote on
any matter, if the Company did not have notice of the matter
on or before February 9, 1999. Such notice should be submitted
to Lynn E. Rose, Secretary, 400 E. South Street, Orlando,
Florida 32801.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
3.1 CNL American Realty Fund, Inc. Amended and
Restated Articles of Incorporation (Included as
Exhibit 3.4 to Registration Statement No. 333-9943
on Form S-11 and incorporated herein by reference.)
3.2 CNL American Realty Fund, Inc. Bylaws (Included as
Exhibit 3.3 to Registration Statement No. 333-9943 on
Form S-11 and incorporated herein by reference.)
4.1 Reinvestment Plan (Included as Exhibit 4.4 to
Registration Statement No. 333-9943 on Form S-11 and
incorporated herein by reference.)
10.1 Advisory Agreement, dated as of July 9, 1997,
between CNL American Realty Fund, Inc. and CNL Real
Estate Advisor, Inc. (Included as Exhibit 10.9 to
registration Statement No. 333-9943 on Form S-11 and
incorporated herein by reference.
23
<PAGE>
10.2 Form of Indemnification Agreement dated as of
July 9, 1997, between CNL American Realty Fund,
Inc. and each of James M. Seneff, Jr., Robert A.
Bourne, G. Richard Hostetter, J. Joseph Kruse,
Richard C. Huseman, Charles A. Muller, John T.
Walker, Jeanne A. Wall and Lynn E. Rose (Filed as
exhibit 10.2 to the Registrant's Annual Report on Form
10-K for the fiscal year ended December 31, 1997 and
incorporated herein by reference.)
10.3 Agreement of Limited Partnership of CNL Hospitality
Partners, LP (Included as Exhibit 10.10 to Registration
Statement No. 333-9943 on Form S-11 and incorporated
herein by reference.)
10.4 Hotel Purchase and Sale Contract between CNL Real Estate
Advisors, Inc. and CNL Hospitality Partners, LP,
relating to the Residence Inn - Gwinnett Place (Included
as Exhibit 10.11 to Registration Statement No. 333-9943
on Form S-11 and incorporated herein by reference.)
10.5 Assignment and Assumption Agreement between CNL Real
Estate Advisors, Inc. and CNL Hospitality Partners, LP,
relating to the Residence Inn - Gwinnett Place (Included
as Exhibit 10.12 to Registration Statement No. 333-9943
on form S-11 and incorporated herein by reference.)
10.6 Hotel Purchase and Sale Contract between CNL Real Estate
Advisors, Inc. and Buckhead Residence Associates, LLC,
relating to the Residence Inn - Buckhead (Lenox Park)
(Included as Exhibit 10.13 to Registration Statement No.
333-9943 on Form S-11 and incorporated herein by
reference.)
10.7 Assignment and Assumption Agreement between CNL Real
Estate Advisors, Inc. and CNL Hospitality Partners, LP,
relating to the Residence Inn - Buckhead (Lenox Park)
(Included as Exhibit 10.14 to Registration Statement No.
333-9943 on Form S-11 and incorporated herein by
reference.)
10.8 Lease Agreement between CNL Hospitality Partners, LP and
STC Leasing Associates, LLP, dated August 1, 1998,
relating to the Residence Inn - Gwinnett Place (Included
as Exhibit 10.15 to Registration Statement No. 333-9943
on Form S-11 and incorporated herein by reference.)
10.9 Lease Agreement between CNL Hospitality Partners, LP and
STC Leasing Associates, LLC, dated August 1, 1998,
relating to the Residence Inn - Buckhead (Lenox Park)
(Included as Exhibit 10.16 to Registration Statement No.
333-9943 on Form S-11 and incorporated herein by
reference.)
24
<PAGE>
10.10 Master Revolving Line of credit Loan Agreement with CNL
Hospitality Properties, Inc. and Colonial bank, dated
July 31, 1998 (Included as Exhibit 10.17 to Registration
Statement No. 333-9943 on form S-11 and incorporated
herein by reference.)
27 Financial Data Schedule (Filed herewith.)
(b) The Company filed one report on Form 8-K, reporting the
acquisition of Properties, on August 17, 1998.
25
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
DATED this 16th day of November, 1998.
CNL HOSPITALITY PROPERTIES, INC.
By: /s/ James M. Seneff, Jr.
--------------------------------------
JAMES M. SENEFF, JR.
Chairman of the Board and
Chief Executive Officer
(Principal Executive Officer)
By: /s/ C. Brian Strickland
---------------------------------------
C. BRIAN STRICKLAND
Vice President, Finance & Administration
(Principal Financial and
Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
BALANCE SHEET OF CNL HOSPITALITY PROPERTIES, INC. AT SEPTEMBER 30, 1998,
AND ITS STATEMENT OF INCOME FOR THE NINE MONTHS THEN ENDED AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FORM 10-Q OF CNL HOSPITALITY
PROPERTIES, INC. FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 7,027,932<F1>
<SECURITIES> 0
<RECEIVABLES> 41,099
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F2>
<PP&E> 28,752,549
<DEPRECIATION> (153,666)
<TOTAL-ASSETS> 36,387,230
<CURRENT-LIABILITIES> 0<F2>
<BONDS> 0
0
0
<COMMON> 28,659
<OTHER-SE> 24,538,996
<TOTAL-LIABILITY-AND-EQUITY> 36,387,230
<SALES> 0
<TOTAL-REVENUES> 1,026,740
<CGS> 0
<TOTAL-COSTS> 442,898
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 139,416
<INCOME-PRETAX> 583,842
<INCOME-TAX> 0
<INCOME-CONTINUING> 583,842
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 583,842
<EPS-PRIMARY> .28
<EPS-DILUTED> .28
<FN>
<F1>Cash includes a certificate of deposit totalling $5,015,822.
<F2>Due to the nature of its industry, CNL Hospitality Properties, Inc. has an
unclassified balance sheet; therefore, no values are listed above for
current assets and current liabilities.
</FN>
</TABLE>
