Rule 424(b)(3)
No. 333-9943
CNL HOSPITALITY PROPERTIES, INC.
This Supplement is part of, and should be read in conjunction with, the
Prospectus dated October 6, 1998 and the Prospectus Supplement dated December
22, 1998. Capitalized terms used in this Supplement have the same meaning as in
the Prospectus unless otherwise stated herein.
Information as to proposed properties for which the Company has
received initial commitments is presented as of February 19, 1999, and all
references to commitments should be read in that context. Proposed properties
for which the Company receives initial commitments, as well as property
acquisitions that occur after February 19, 1999, will be reported in a
subsequent Supplement.
SUMMARY
RECENT DEVELOPMENTS
The three independent directors of the Company, G. Richard Hostetter,
J. Joseph Kruse and Richard C. Huseman, have determined, in order to focus on
CNL American Properties Fund, Inc., a public, unlisted real estate investment
trust for which they also serve as independent directors, that it is in the best
interests of the Company that they resign as directors of the Company.
Therefore, the Board of Directors has appointed three new independent directors
to serve on the Board of Directors until the 1999 stockholder meeting. On
February 11, 1999, G. Richard Hostetter, J. Joseph Kruse and Richard C. Huseman
resigned from their positions on the Board of Directors. The following describes
Charles E. Adams, John A. Griswold and Craig M. McAllaster, the newly appointed
directors.
Charles E. Adams. Independent Director. Mr. Adams is the President and
a founding principal with Celebration Associates, Inc., a real estate advisory
and development firm with offices in Celebration, Florida and Charlotte, North
Carolina. Celebration Associates specializes in large-scale master planned
communities, seniors housing and specialty commercial developments. Mr. Adams
joined the Walt Disney World Company in 1990 and from 1996 until May 1997 served
as vice president of community business development for The Celebration Company
and Walt Disney Imagineering. He was responsible for Celebration Education,
Celebration Network, Celebration Health and Celebration Foundation, as well as
New Business Development, Strategic Alliances, Retail Sales and Leasing,
Commercial Sales and Leasing, the development of Little Lake Bryan and
Celebration. Previously, Mr. Adams was responsible for the initial residential,
amenity, sales and marketing, consumer research and master planning efforts for
Celebration. Additionally, Mr. Adams participated in the planning for
residential development at EuroDisney in Paris. He was a founding member of the
Celebration School Board of Trustees and served as president and founding member
of the Celebration Foundation Board of Directors. Mr. Adams is a founding member
of the Health Magic Steering Committee and council member on the Recreation
Development Council for Urban Land Institute. Before joining The Walt Disney
Company in 1990, Mr. Adams worked with Trammell Crow Residential developing
luxury apartment communities in the Orlando and Jacksonville, Florida areas. Mr.
Adams received a Masters of Business Administration from Harvard Graduate School
of Business in 1989 and a B.A. from Northeast Louisiana University in 1984.
John A. Griswold. Independent Director. Mr. Griswold serves as
president of Tishman Hotel Corporation, an operating unit of Tishman Realty &
Construction Co., Inc., founded in 1898. Tishman Hotel Corporation is a hotel
developer, owner and operator, and has provided such services for more than 85
hotels, totalling more than 30,000 rooms. Mr. Griswold joined Tishman Hotel
Corporation in 1985. From 1981 to 1985, Mr. Griswold served as general manager
of the Buena Vista Palace Hotel in the Walt Disney World Village. From 1978 to
1981, he served as vice president and general manager of the Homestead Resort, a
February 23, 1999 Prospectus Dated October 6, 1998
<PAGE>
luxury condominium resort in Glen Arbor, Michigan. Mr. Griswold served as an
operations manager for the Walt Disney Company from 1971 to 1978. He was
responsible for operational, financial and future planning for multi-unit dining
facilities in Walt Disney World Village and Lake Buena Vista Country Club. He is
a member of the board of directors of the Florida Hotel & Motel Association and
the First Orlando Foundation. Mr. Griswold received a B.S. from the School of
Hotel Administration at Cornell University in Ithaca, New York.
Craig M. McAllaster. Independent Director. Dr. McAllaster has served as
director of the executive MBA program at the Roy E. Crummer Graduate School of
Business at Rollins College since 1994. Besides his duties as director, he is on
the management faculty and serves as executive director of the international
consulting practicum programs at the Crummer School. Prior to Rollins College,
Dr. McAllaster was on the faculty at the School of Industrial and Labor
Relations and the Johnson Graduate School of Management, both at Cornell
University, and the University of Central Florida. Dr. McAllaster spent over ten
years in the consumer services and electronics industry in management,
organizational and executive development positions. He is a consultant to many
domestic and international companies in the areas of strategy and leadership.
Dr. McAllaster received a B.S. from the University of Arizona in 1973, a M.S.
from Alfred University in 1981 and a M.A. and Doctorate from Columbia University
in 1987.
THE OFFERING
As of February 19, 1999, the Company had received total subscription
proceeds of $63,277,999 (6,327,800 Shares), including $37,299 (3,730 Shares)
issued pursuant to the Reinvestment Plan, from 2,778 stockholders in connection
with this offering. As of February 19, 1999, net offering proceeds received by
the Company from this offering, after deduction of selling commissions,
marketing support and due diligence expense reimbursement fees and offering
expenses totalled approximately $55,951,000. In addition, the Company received
three advances under the Line of Credit totalling $9,600,000. As of February 19,
1999, the Company had used net offering proceeds and borrowings 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 $4,399,000
in acquisition fees and certain acquisition expenses. As of February 19, 1999,
approximately $28,906,000 of net offering proceeds was available to invest in
Properties.
BUSINESS
PENDING INVESTMENTS
As of February 19, 1999, the Company had initial commitments to acquire
indirectly, 11 hotel properties. The acquisition of each of these properties is
subject to the fulfillment of certain conditions. In order to acquire these
properties, the Company must obtain additional funds through the receipt of
additional offering proceeds and/or debt financing. 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. If acquired, the
leases of these properties are expected to be entered into on substantially the
same terms described in the section of the Prospectus entitled "Business -
Description of Property Leases."
Set forth below are summarized terms expected to apply to the leases
for each of the properties. More detailed information relating to a property and
its related lease will be provided at such time, if any, as the property is
acquired.
<PAGE>
<TABLE>
<CAPTION>
Estimated Purchase Lease Term and Minimum Annual
Property Price Renewal Options Rent Percentage Rent
- -------- ------------------ --------------- -------------- ---------------
<S> <C>
Courtyard by Marriott (2) 15 years; two ten- 10% of the Company's for each lease year after the
Orlando, FL (1) year renewal options total cost to purchase second lease year, 7% of revenues
(the "Courtyard Little Lake the property in excess of revenues for the
Bryan Property") second lease year
Hotel to be constructed
Fairfield Inn by Marriott (2) 15 years; two ten- 10% of the Company's for each lease year after the
Orlando, FL (1) year renewal options total cost to purchase second lease year, 7% of revenues
(the "Fairfield Inn Little the property in excess of revenues for the
Lake Bryan Property") second lease year
Hotel to be constructed
SpringHill Suites by Marriott (2) 15 years; two ten- 10% of the Company's for each lease year after the
Orlando, FL (1) year renewal options total cost to purchase second lease year, 7% of revenues
(the "SpringHill Suites Little the property in excess of revenues for the
Lake Bryan Property") second lease year
Hotel to be constructed
Courtyard by Marriott $17,085,000 approximately 20 10.309% of the total for the first and second lease
Addison, TX (3)(4)(5)(6) years; three 15-year cost to purchase the years, 7.75% of room revenues in
(the "Courtyard Addison renewal options property; increases to excess of the second year pro
Property") 10.567% after the first forma revenues; and for the third
Hotel to be constructed lease year lease year and thereafter, 7.75%
of room revenues in excess of the
second year actual revenues
Courtyard by Marriott $12,694,000 approximately 20 10.309% of the total for the first and second lease
Plano, TX (3)(4)(5)(6) years; three 15-year cost to purchase the years, 7.75% of room revenues in
(the "Courtyard Plano Property") renewal options Property; increases to excess of the second year pro
Newly constructed hotel 10.567% after the first forma revenues; and for the third
lease year lease year and thereafter, 7.75%
of room revenues in excess of the
second year actual revenues
<PAGE>
Estimated Purchase Lease Term and Minimum Annual
Property Price Renewal Options Rent Percentage Rent
- -------- ------------------ --------------- -------------- ---------------
Courtyard by Marriott $19,614,000 approximately 20 years; 10.309% of the total for the first and second lease
Scottsdale, AZ (3)(4)(5)(6) three 15-year renewal cost to purchase the years, 7.75% of room revenues in
(the "Courtyard Scottsdale options Property; increases excess of the second year pro
Property") to 10.567% after the forma revenues; and for the third
Hotel to be constructed first lease year lease year and thereafter, 7.75%
of room revenues in excess of the
second year actual revenues
Courtyard by Marriott $35,801,000 approximately 20 years; 10.309% of the total for the first and second lease
Seattle, WA (3)(4)(5)(6) three 15-year renewal cost to purchase the years, 7.75% of room revenue in
(the "Courtyard Seattle options Property; increases excess of the second year pro
Property") to 10.567% after the forma revenues; and for the third
Hotel to be constructed first lease year lease year and thereafter, 7.75%
of room revenues in excess of the
second year actual revenues
Marriott Suites $32,973,000 approximately 20 years; 10.309% of the total for the first and second lease
Dallas, TX (3)(4)(5)(6) three 15-year renewal cost to purchase the years, 7.75% of room revenue in
(the "Marriott Suites options Property; increases excess of the second year pro
Dallas Property") to 10.567% after the forma revenues; and for the third
Newly constructed hotel first lease year lease year and thereafter, 7.75%
of room revenues in excess of the
second year actual revenues
Residence Inn by Marriott $33,097,000 approximately 20 years; 10.309% of the total for the first and second lease
Las Vegas, NV (3)(4)(5)(6) three 15-year renewal cost to purchase the years, 7.75% of room revenue in
(the Residence Inn Las options Property; increases excess of the second year pro
Vegas Property") to 10.567% after the forma revenues; and for the third
Newly constructed hotel first lease year lease year and thereafter, 7.75%
of room revenues in excess of the
second year actual revenues
<PAGE>
Estimated Purchase Lease Term and Minimum Annual
Property Price Renewal Options Rent Percentage Rent
- -------- ------------------ --------------- -------------- ---------------
Residence Inn by Marriott $21,352,000 approximately 20 years; 10.309% of the total for the first and second lease
Phoenix, AZ (3)(4)(5)(6) three 15-year renewal cost to purchase the years, 7.75% of room revenue in
(the "Residence Inn Phoenix options Property; increases excess of the second year pro
Property") to 10.567% after the forma revenues; and for the third
Hotel to be constructed first lease year lease year and thereafter, 7.75%
of room revenues in excess of the
second year actual revenues
Residence Inn by Marriott $11,684,000 approximately 20 years; 10.309% of the total for the first and second lease
Plano, TX (3)(4)(5)(6) three 15-year renewal cost to purchase the years, 7.75% of room revenue in
(the "Residence Inn Plano options Property; increases excess of the second year pro
Property") to 10.567% after the forma revenues; and for the third
Newly constructed hotel first lease year lease year and thereafter, 7.75%
of room revenues in excess of the
second year actual revenues
</TABLE>
- ------------------------------------
FOOTNOTES:
(1) The leases for the Courtyard Little Lake Bryan, the Fairfield Inn
Little Lake Bryan and the SpringHill Suites Little Lake Bryan
Properties are expected to be with the same unaffiliated lessee.
(2) The anticipated aggregate purchase price for the Courtyard Little Lake
Bryan, Fairfield Inn Little Lake Bryan and SpringHill Suites Little
Lake Bryan Properties is approximately $100 million.
(3) The leases for the Courtyard Addison, the Courtyard Plano, the
Courtyard Scottsdale, the Courtyard Seattle, the Marriott Suites
Dallas, the Residence Inn Las Vegas, the Residence Inn Phoenix and the
Residence Inn Plano Properties are expected to be with the same
unaffiliated lessee.
(4) The Company, together with an institutional investor, will indirectly
acquire these eight hotel properties through the formation of a
separate, privately-held real estate investment trust, CNL Hotel
Investors, Inc. (the "Private REIT"). The Company will acquire
$39,982,000 of Class B preferred stock in the Private REIT and the
institutional investor will acquire $50,886,000 of Class A preferred
stock in the Private REIT. The Company and the institutional investor
will also hold a 49% and 51% common share interest, respectively, in
the Private REIT. In addition, the institutional investor is expected
to subscribe to $15,000,000 of the Company's Shares and to acquire a
ten percent interest in the Advisor. Cash flow from operations of the
Private REIT is expected to be distributed first to the institutional
investor with respect to its preferred shares to pay a quarterly,
compounded, cumulative eight percent preferred return on an amount
equal to its "special investment amount." Its "special investment
amount" shall be $1,294.78 per share adjusted for any dividends
received from the Company, which represents the sum of its investment
in the Private REIT and its $15,000,000 investment in the Company on a
per share basis. Then, cash flow from operations
<PAGE>
will be distributed to the Company with respect to its preferred shares
to pay a quarterly, compounded, cumulative 9.76% return on its
unreturned capital contribution in the Private REIT. Next, cash flow
will be distributed to 100 CNL associates who each own one share of
Class C preferred stock, to provide a quarterly cumulative compounded
8% return. All remaining cash flow from operations will be distributed
pro rata with respect to the interest in the common shares.
(5) In connection with the acquisition of the eight properties, the Private
REIT is expected to obtain approximately $96,567,500 in long-term,
permanent financing to be used to fund a portion of the purchase
prices. Such financing will be secured by the properties, bear interest
at a market rate and be nonrecourse to the Private REIT.
(6) In connection with the acquisition of the eight hotel properties and
the investment of $15,000,000 in the Company and the acquisition of a
ten percent interest in the Advisor by the institutional investor, the
Advisor and certain of its Affiliates intend to waive or reduce certain
fees otherwise payable by the Company. In connection with these
transactions, the Private REIT will pay the advisor of the
institutional investor a commitment fee.
