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 nine month period ended September 30, 2000
-----------------------------------------------------
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.
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(Exact name of registrant as specified in its charter)
Maryland 59-3396369
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(State of other jurisdiction (I.R.S. Employer of incorporation
or organization) Identification No.)
450 South Orange Avenue
Orlando, Florida 32801
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number
(including area code) (407) 650-1000
--------------------------------------------
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. 46,360,225 shares of common stock, $.01 par value, outstanding
as of November 3, 2000.
<PAGE>
<TABLE>
CONTENTS
<CAPTION>
Part I Page
<S><C>
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 15-21
Item 3. Quantitative and Qualitative Disclosures about Market Risk 22
Part II
Other Information 23-29
</TABLE>
<PAGE>
CNL HOSPITALITY PROPERTIES, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, 2000 December 31, 1999
----------------------- --------------------
<S><C>
ASSETS
Land, buildings and equipment on operating leases, less
accumulated depreciation of $5,522,091 and $1,603,334,
respectively $278,813,679 $112,227,771
Investment in unconsolidated subsidiary 37,202,729 38,364,157
Cash and cash equivalents 76,838,139 101,972,441
Restricted cash 1,062,752 275,630
Certificate of deposit 5,000,000 5,000,000
Dividends receivable 1,150,602 1,215,993
Receivables 482,452 112,184
Prepaid expenses 691,500 41,165
Loan costs, less accumulated amortization of $112,782 and
$86,627, respectively 124,527 51,969
Accrued rental income 149,643 79,399
Other assets 6,969,135 7,627,565
---------------- ------------------
$408,485,158 $266,968,274
================ ==================
LIABILITIES AND STOCKHOLDERS' EQUITY
Note payable $ 9,684,609 $ --
Accounts payable and accrued expenses 1,006,098 405,855
Distributions payable 5,372,782 89,843
Due to related parties 1,281,404 995,500
Security deposits 11,810,719 5,042,054
Rents paid in advance 410,274 255,568
---------------- ------------------
Total liabilities 29,565,886 6,788,820
---------------- ------------------
Commitments and contingencies (Note 12)
Minority interest -- 7,124,615
---------------- ------------------
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. 150,000,000
and 60,000,000 authorized shares, respectively;
issued and outstanding 44,179,244 and 28,902,914
shares, respectively 441,792 289,029
Capital in excess of par value 390,263,511 256,231,833
Accumulated distributions in excess of net earnings (9,096,245) (3,466,023)
Minority interest distributions in excess of
contributions and accumulated earnings (2,689,786) --
---------------- ------------------
Total stockholders' equity 378,919,272 253,054,839
---------------- ------------------
$408,485,158 $ 266,968,274
================ ==================
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>
CNL HOSPITALITY PROPERTIES, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
<TABLE>
<CAPTION> Quarters Ended Nine Months Ended
September 30, September 30,
2000 1999 2000 1999
-------------- --------------- ------------- ------------
<S><C>
Revenues:
Rental income from operating
leases $5,839,998 $ 769,442 $ 11,816,801 $2,255,968
FF&E Reserve income 421,658 68,268 901,771 194,301
Dividend income 926,831 926,687 2,780,566 1,826,818
Interest and other income 1,351,809 1,217,304 5,312,997 2,125,043
--------------- --------------- --------------- --------------
8,540,296 2,981,701 20,812,135 6,402,130
--------------- --------------- --------------- --------------
Expenses:
Interest and loan cost amortization 9,933 6,592 26,155 239,922
General operating and
administrative 382,216 107,216 1,079,101 421,213
Professional services 35,626 16,206 117,263 45,478
Asset management fees to
related party 641,136 19,710 1,003,416 87,146
Depreciation and amortization 1,956,354 243,178 3,956,498 736,593
--------------- --------------- --------------- --------------
3,025,265 392,902 6,182,433 1,530,352
--------------- --------------- --------------- --------------
Earnings Before Equity in Loss of
Unconsolidated Subsidiary and
Minority Interest 5,515,031 2,588,799 14,629,702 4,871,778
Equity in Loss of Unconsolidated
Subsidiary After Deduction of
Preferred Stock Dividends (126,190) (167,283) (386,627) (557,733)
Minority Interest (137,217) -- (403,427) --
--------------- --------------- --------------- --------------
Net Earnings $ 5,251,624 $ 2,421,516 $13,839,648 $4,314,045
=============== =============== =============== ==============
Earnings Per Share of Common Stock:
Basic $ 0.13 $ 0.13 $ 0.38 $ 0.34
=============== =============== =============== ==============
Diluted $ 0.13 $ 0.12 $ 0.37 $ 0.33
=============== =============== =============== ==============
Weighted Average Number of Shares
of Common Stock Outstanding:
Basic 41,094,629 19,073,159 36,178,713 12,652,059
=============== =============== =============== ==============
Diluted 48,653,567 26,437,719 43,767,651 17,509,791
=============== =============== =============== ==============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>
CNL HOSPITALITY PROPERTIES, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Nine Months Ended September 30, 2000 and Year Ended December 31, 1999
<TABLE>
Minority interest
Common stock Accumulated excess of con-
------------------------------ Capital in distributions tributions and
Number Par excess of in excess of net accumulated
of Shares value par value earnings earnings Total
-------------- ------------ -------------- ----------------- -------------- --------------
<S><C>
Balance at December 31, 1998 4,321,908 $ 43,219 $37,289,402 $ (216,130) $ -- $37,116,491
Subscriptions received for
common stock through public
offerings and distribution
reinvestment plan 24,593,891 245,939 245,692,968 -- -- 245,938,907
Retirement of common stock (12,885) (129) (118,413) -- -- (118,542)
Stock issuance costs -- -- (26,632,124 ) -- -- (26,632,124)
Net earnings -- -- -- 7,515,988 -- 7,515,988
Distributions declared and paid
($.72 per share) -- -- -- (10,765,881) -- (10,765,881)
------------- ------------ --------------- --------------- -------------- ----------------
Balance at December 31, 1999 28,902,914 289,029 256,231,833 (3,466,023) -- 253,054,839
Subscriptions received for
common stock through public
offerings and distribution
reinvestment plan 15,403,895 154,039 153,935,981 -- -- 154,090,020
Retirement of common stock (127,565) (1,276) (1,172,324) -- -- (1,173,600)
Stock issuance costs -- -- (18,731,979) -- -- (18,731,979)
Net earnings -- -- -- 13,839,648 -- 13,839,648
Minority interest distributions in
excess of contributions and
accumulated earnings -- -- -- -- (2,689,786) (2,689,786)
Distributions declared
($.55 per share) -- -- -- (19,469,870) -- (19,469,870)
------------- ------------ --------------- --------------- -------------- ----------------
Balance at September 30, 2000 44,179,244 $441,792 $ 390,263,511 $ (9,096,245) $ (2,689,786) $378,919,272
============= ============ =============== =============== ============== ================
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>
CNL HOSPITALITY PROPERTIES, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION> Nine Months Ended September 30,
2000 1999
------------- -------------
<S><C>
Cash flows from operating activities:
Net earnings $ 13,839,648 $ 4,314,045
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation 3,918,757 692,085
Amortization 63,896 109,984
Distributions received from investment in
unconsolidated subsidiary, net
of equity in loss 1,123,687 679,989
Minority interest 403,427 --
Changes in operating assets and
liabilities:
Dividends receivable 65,391 (951,431)
Receivables (370,268) (38,970)
Prepaid expenses (650,335) (44,179)
Accrued rental income (70,244) (36,363)
Accounts payable and accrued
expenses 600,243 (65,588)
Due to related parties - operating expenses 285,904 (13,965)
Security deposits 6,768,665 --
Rents paid in advance 154,706 (3,489)
--------------- ---------------
Net cash provided by operating activities 26,133,477 4,642,118
--------------- ---------------
Cash flows from investing activities:
Additions to land, buildings and equipment on
operating leases (170,504,665) --
Investment in unconsolidated subsidiary -- (37,172,644)
Increase in restricted cash (787,122) (167,770)
Deletions (additions) to other assets 658,430 (7,529,504)
--------------- ---------------
Net cash used in investing activities (170,633,357) (44,869,918)
--------------- ---------------
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>
CNL HOSPITALITY PROPERTIES, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
<TABLE>
<CAPTION> Nine Months Ended September 30,
2000 1999
---------------- --------------
<S><C>
Cash flows from financing activities:
Proceeds from note payable 10,000,000 --
Repayment of borrowings on line of credit -- (9,600,000)
Subscriptions received from stockholders 154,090,020 180,301,963
Distributions to stockholders (14,280,431) (6,331,072)
Distributions to minority interest (10,439,719) --
Retirement of common stock (1,173,600) (27,600)
Payment of stock issuance costs (18,731,979) (19,268,627)
Other (98,713) (56,163)
----------------- --------------
Net cash provided by financing activities 119,365,578 145,018,501
----------------- --------------
Net increase (decrease) in cash and cash equivalents (25,134,302) 104,790,701
Cash and cash equivalents at beginning of period 101,972,441 13,228,923
----------------- --------------
Cash and cash equivalents at end of period $ 76,838,139 $118,019,624
================= ==============
Supplemental schedule of non-cash financing activities:
Distributions declared but not paid to minority
interest $ 183,343 $ --
================= ==============
Distributions declared but not paid to
stockholders $ 5,189,439 $ --
================= ==============
Reduction of TIF Note from property
taxes paid by tenant $ 315,391 $ --
================= ==============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>
CNL HOSPITALITY PROPERTIES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Quarters and Nine Months Ended September 30, 2000 and 1999
1. Significant Accounting Policies:
Organization and Nature of Business -
CNL Hospitality Properties, 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 partner, 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., CNL
Hospitality LP Corp. and CNL Philadelphia Annex, LLC (the "LLC").
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
to hotel operators. The Company may also provide mortgage financing (the
"Mortgage Loans") and furniture, fixture and equipment financing ("Secured
Equipment Leases") to operators of hotel chains. 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.
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 and CNL Philadelphia Annex,
LLC (an 89% owned limited liability company). All significant intercompany
balances and transactions have been eliminated in consolidation. Interest of an
unaffiliated third party is reflected as minority interest.
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 condensed consolidated 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 periods presented. Operating results for the quarter and nine months
ended September 30, 2000 may not be indicative of the results that may be
expected for the year ending December 31, 2000. Amounts as of December 31, 1999,
included in the condensed consolidated financial statements have been derived
from audited consolidated financial statements as of that date.
These unaudited consolidated financial statements should be read in conjunction
with the consolidated financial statements and notes thereto included in the
Company's Form 10-K for the year ended December 31, 1999.
Certain items in the prior period's financial statements have been reclassified
to conform with the 2000 presentation, including a change in the presentation of
the cash flow from the direct to the indirect method. These reclassifications
had no effect on stockholders' equity or net earnings.
In December 1999, the Securities and Exchange Commission released Staff
Accounting Bulletin No. 101 ("SAB 101"), which provides the staff's views in
applying generally accepted accounting principles to selected revenue
recognition issues. SAB 101 is not expected to have a material impact on the
Company's results of operations. SAB 101 requires the Company to defer
recognition of certain percentage rental income until certain thresholds are
met. We have adopted SAB 101 beginning January 1, 2000 without restatement of
prior periods.
<PAGE>
CNL HOSPITALITY PROPERTIES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Quarters and Nine Months Ended September 30, 2000 and 1999
2. Public Offerings:
On June 17, 1999, the Company completed its offering of 16,500,000 shares of
common stock ($165,000,000) (the "Initial Offering"), which included 1,500,000
shares available only to stockholders who elected to participate in the
Company's reinvestment plan. Following the completion of the Initial Offering,
the Company commenced an offering of up to 27,500,000 additional shares of
common stock ($275,000,000) (the "1999 Offering"), which included 2,500,000
shares available only to stockholders who elected to participate in the
Company's reinvestment plan. On September 14, 2000, the Company completed the
1999 Offering and commenced an offering of up to 45,000,000 additional shares of
common stock ($450,000,000) (the "2000 Offering"). Of the 45,000,000 shares of
common stock to be offered, up to 5,000,000 will be available to stockholders
purchasing shares through the reinvestment plan. The price per share and other
terms of the 2000 Offering, including the percentage of gross proceeds payable
(i) to the managing dealer for selling commissions and expenses in connection
with the offering and (ii) to CNL Hospitality Corp. (the "Advisor") for
acquisition fees, are substantially the same as the Company's Initial Offering
and the 1999 Offering. As of September 30, 2000, the Company had received total
subscription proceeds from the Initial Offering, the 1999 Offering and the 2000
Offering of $443,001,390 (44,300,139 shares), including $1,369,740 (136,974
shares) through the reinvestment plan. The Company expects to use the net
proceeds from the 2000 Offering to purchase additional Properties and, to a
lesser extent, make Mortgage Loans.
3. Investment in Unconsolidated Subsidiary:
During 1999, the Company with Five Arrows Realty Securities II L.L.C. ("Five
Arrows") formed a jointly owned real estate investment trust, CNL Hotel
Investors, Inc. ("Hotel Investors"), which acquired seven hotel Properties. In
order to fund the acquisition of the Properties, Five Arrows invested
approximately $48 million and the Company invested approximately $38 million in
Hotel Investors. Hotel Investors funded the remaining amount of approximately
$88 million with permanent financing, collateralized by Hotel Investors'
interests in the Properties. In return for their respective investments, Five
Arrows received a 51% common stock interest and the Company received a 49%
common stock interest in Hotel Investors. Five Arrows received 48,337 shares of
Hotel Investors' 8% Class A cumulative, preferred stock ("Class A Preferred
Stock"), and the Company received 37,979 shares of Hotel Investors' 9.76% Class
B cumulative, preferred stock. The Class A Preferred Stock is exchangeable upon
demand into common stock of the Company, using an exchange ratio based on the
relationship between the Company's operating results and those of Hotel
Investors.
Five Arrows also invested approximately $14 million in the Company through the
purchase of common stock pursuant to the Company's Initial Offering and the 1999
Offering, the proceeds of which were used by the Company to fund approximately
38% of its funding commitment to Hotel Investors (See Note 13 - Subsequent
Events).
<PAGE>
CNL HOSPITALITY PROPERTIES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Quarters and Nine Months Ended September 30, 2000 and 1999
3. Investment in Unconsolidated Subsidiary - Continued:
The following presents condensed financial information for Hotel Investors as of
and for the nine months ended and year ended:
<TABLE>
<CAPTION> September 30, December 31,
2000 1999
----------------- ----------------
<S><C>
Land, buildings and equipment on operating leases, net $161,600,822 $165,088,059
Cash and cash equivalents (including restricted cash) 8,445,237 5,172,658
Loan costs, net 663,188 708,006
Accrued rental income 400,553 283,914
Prepaid expenses, receivables and other assets 123,138 3,422,806
Liabilities 91,079,932 92,229,193
Redeemable preferred stock - Class A and Class B 85,361,864 85,361,864
Stockholders' deficit (5,208,858) (2,915,614)
Revenues 14,356,898 13,025,978
Net earnings 4,936,832 4,104,936
Preferred stock dividends (5,725,866) (5,693,642)
Loss applicable to common stockholders (789,034) (1,588,706)
</TABLE>
During the nine months ended September 30, 2000 and 1999, the Company recorded
$2,780,566 and $1,826,818, respectively, in dividend income and $386,627 and
$557,733, respectively, in equity in loss after deduction of preferred stock
dividends resulting in net earnings of $2,393,939 and $1,269,085, respectively,
attributable to this investment ($800,641 and $759,404 which represented net
earnings from this investment for the quarters ended September 30, 2000 and
1999, respectively).
4. Other Assets:
Other assets consist of acquisition fees and miscellaneous acquisition expenses
that will be allocated to future Properties and deposits.
5. Redemption of Shares:
The Company has a redemption plan under which the Company may elect to redeem
shares, subject to certain conditions and limitations. During the nine months
ended September 30, 2000, 127,565 shares of common stock, respectively, were
redeemed and retired.
6. Indebtedness:
The Company has a line of credit in the amount of $30,000,000 which expires on
July 30, 2003. 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 0.5% per advance will be due and payable to the bank on
funds as advanced. Each advance made under the line of credit will be
collateralized by the assignment of rents and leases. As of September 30, 2000
and December 31, 1999, the Company had no amounts outstanding under the line of
credit.
<PAGE>
CNL HOSPITALITY PROPERTIES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Quarters and Nine Months Ended September 30, 2000 and 1999
6. Indebtedness - Continued:
In March 2000, the Company through the LLC entered into a Tax Increment
Financing Agreement with the Philadelphia Authority for Industrial Development
("TIF Note") for $10 million, which is collateralized by the LLC's hotel
Property. The principal and interest on the TIF Note is expected to be fully
paid by the LLC's hotel Property's incremental property taxes over a period of
18 years. The payment of the incremental property taxes is the responsibility of
the tenant of the hotel property. Interest on the TIF Note is 12.85% and
payments are due yearly through 2017. In the event that incremental property
taxes are insufficient to cover the principal and interest due, Marriott
International, Inc. is required to fund such shortfall pursuant to its guarantee
of the TIF Note.
7. Stock Issuance Costs:
The Company has incurred certain expenses in connection with its offerings of
common stock, 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 offerings. The Advisor
has agreed to pay all offering expenses (excluding commissions and marketing
support and due diligence expense reimbursement fees) which exceed three percent
of the gross proceeds received from the sale of shares of the Company in
connection with the offerings.
During the nine months ended September 30, 2000 and 1999, the Company incurred
$18,731,979 and $18,913,477, respectively, in stock issuance costs, including
$12,323,459 and $13,224,189, respectively, in commissions and marketing support
and due diligence expense reimbursement fees (see Note 9). 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, 2000 and 1999, approximately 54 percent
and 73 percent, respectively, of the distributions paid to stockholders were
considered ordinary income, and approximately 46 percent and 27 percent,
respectively, 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, 2000 and 1999 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, 2000
may not be indicative of the characterization of distributions that may be
expected for the year ended December 31, 2000.
9. Related Party Transactions:
Certain directors and officers of the Company hold similar positions with the
Advisor and the managing dealer, CNL Securities Corp. These affiliates are
entitled to receive fees and compensation in connection with the offerings, and
the acquisition, management and sale of the assets of the Company.
During the nine months ended September 30, 2000 and 1999, the Company incurred
$11,553,242 and $12,397,677, respectively, in selling commissions due to CNL
Securities Corp. for services in connection with its offerings. A substantial
portion of these amounts ($11,017,401 and $11,569,902, respectively) was or will
be paid by CNL Securities Corp. as commissions to other broker-dealers.
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, 2000 and 1999, the
Company incurred $770,217 and $826,512, 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.
<PAGE>
CNL HOSPITALITY PROPERTIES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Quarters and Nine Months Ended September 30, 2000 and 1999
9. Related Party Transactions - Continued:
CNL Securities Corp. will also receive, in connection with the Company's initial
offering of up to 16,500,000 shares of common stock (the "Initial Offering"), a
soliciting dealer servicing fee payable annually by the Company beginning on
December 31, 2000 in the amount of 0.20% of "invested capital," as defined in
the Company's prospectus, from the Initial Offering. CNL Securities Corp. in
turn may reallow all or a portion of such fee to soliciting dealers whose
clients hold shares on such date. As of September 30, 2000, no such fees had
been incurred.
In addition, in connection with its 1999 Offering, the Company has agreed to
issue and sell soliciting dealer warrants ("Soliciting Dealer Warrants") to CNL
Securities Corp. The price for each warrant will be $0.0008 and one warrant will
be issued for every 25 shares sold by the managing dealer. All or a portion of
the Soliciting Dealer Warrants may be reallowed to soliciting dealers with prior
written approval from, and in the sole discretion of, the managing dealer,
except where prohibited by either federal or state securities laws. The holder
of a Soliciting Dealer Warrant will be entitled to purchase one share of common
stock from the Company at a price of $12.00 during the five year period
commencing the date the 1999 Offering began. No Soliciting Dealer Warrants,
however, will be exercisable until one year from the date of issuance. During
the nine months ended September 30, 2000, the Company issued approximately
819,000 Soliciting Dealer Warrants to CNL Securities Corp. In addition, as of
September 30, 2000, CNL Securities Corp. was entitled to approximately 141,900
additional Soliciting Dealer Warrants for shares sold during the quarter then
ended.
The Advisor is entitled to receive acquisition fees for services in identifying
Properties and structuring the terms of leases of the Properties and Mortgage
Loans equal to 4.5% of the gross proceeds of the offerings, 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,
2000 and 1999, the Company incurred $6,873,751 and $8,007,241, respectively, of
such fees. Additionally, during the nine months ended September 30, 2000, the
Company incurred $1,935,794 of such fees as a result of permanent financing used
to acquire certain Properties. Acquisition fees are included in land, buildings
and equipment on operating leases, investment in unconsolidated subsidiary and
other assets.
The Company incurs operating expenses which, in general, are those expenses
relating to administration of the Company on an ongoing basis. Pursuant to the
advisory agreement described below, 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"). For the Expense Years ended September 30, 2000 and 1999,
the Company's operating expenses did not exceed the Expense Cap.
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, 2000 and 1999, the Company
incurred $1,003,416 and $87,146, respectively, of such fees.
<PAGE>
CNL HOSPITALITY PROPERTIES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Quarters and Nine Months Ended September 30, 2000 and 1999
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 offerings), on a day-to-day basis. The expenses incurred for
these services were classified as follow for the nine months ended September 30:
<TABLE>
<CAPTION> 2000 1999
------------------ ----------------
<S><C>
Stock issuance costs $ 3,156,163 $ 1,709,008
General operating and
administrative expenses 334,850 150,380
================== ================
$ 3,491,013 $ 1,859,388
================== ================
The amounts due to related parties consisted of the following at:
September 30, 2000 December 31, 1999
--------------------- ------------------
Due to the Advisor:
Expenditures incurred on behalf
of the Company for accounting
and administrative services $ 556,626 $ 387,690
Acquisition fees 140,178 337,797
Management fees 361,536 19,642
------------------ ----------------
1,058,340 745,129
------------------ ----------------
Due to CNL Securities Corp.:
Commissions 209,075 229,834
Marketing support and due diligence
expense reimbursement fee 13,989 16,764
------------------ ----------------
223,064 246,598
------------------ ----------------
Due to other related party -- 3,773
------------------ ----------------
$ 1,281,404 $ 995,500
================== ================
</TABLE>
During 1999, the Company opened three bank accounts in a bank in which certain
officers and directors of the Company serve as directors, and in which an
affiliate of the Advisor is a stockholder. The amount deposited with this
affiliate was $16,437,410 and $15,275,629 at September 30, 2000 and December 31,
1999, respectively.
10. Concentration of Credit Risk:
Crestline Capital Corp. and City Center Annex Tenant Corporation each
contributed more than ten percent of the Company's total rental income for the
quarter and nine months ended September 30, 2000. In addition, a significant
portion of the Company's rental income was earned from Properties operating as
Marriott(R) brand chains. 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 these lessees or the Marriott brand
chains 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 lessees.
It is expected that the percentage of total rental income contributed by these
lessees will decrease as additional Properties are acquired and leased during
2000 and subsequent years.
<PAGE>
CNL HOSPITALITY PROPERTIES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Quarters and Nine Months Ended September 30, 2000 and 1999
11. Earnings Per Share:
Basic earnings per share ("EPS") excludes dilution and is computed by dividing
income available to common stockholders by the weighted average number of common
shares outstanding for the period. Diluted EPS reflects the potential dilution
that could occur if other contracts to issue common stock were exercised and
shared in the earnings of the Company. For the nine months ended September 30,
2000, approximately 7.6 million shares related to the conversion of Hotel
Investors' Class A Preferred Stock into the Company's common stock were
considered dilutive after the application of the "if converted method" and were
included in the denominator of the diluted EPS calculation. Subsequent to
September 30, 2000, the Company entered into a transaction whereby the exchange
ratio was set at 157.000609 resulting in 7,588,938 shares of the Company's
common stock being considered dilutive (see Note 13 - Subsequent Events). The
numerator in the diluted EPS calculation includes an adjustment for the net
earnings of Hotel Investors for the applicable period.
The following represents the calculation of earnings per share and the weighted
average number of shares of potentially dilutive common stock for the quarters
and nine months ended September 30:
<TABLE>
<CAPTION>
Quarters Ended Nine Months Ended
2000 1999 2000 1999
-------------- ---------------- ---------------- ------------------
<S><C>
Basic Earnings Per Share:
Net earnings $ 5,251,624 $ 2,421,516 $ 13,839,648 $ 4,314,045
============== ================ ================ ==================
Weighted average number of shares
outstanding 41,094,629 19,073,159 36,178,713 12,652,059
============== ================ ================ ==================
Basic earnings per share $ 0.13 $ 0.13 $ 0.38 $ 0.34
============== ================ ================ ==================
Diluted Earnings Per Share:
Net earnings $ 5,251,624 $ 2,421,516 $ 13,839,648 $ 4,314,045
Additional income attributable to
investment in unconsolidated subsidiary
assuming all Class A Preferred Shares
were converted 850,450 807,823 2,542,894 1,377,703
-------------- ---------------- ---------------- ------------------
Adjusted net earnings assuming
dilution $6,102,074 $ 3,229,339 $ 16,382,542 $ 5,691,748
============== ================ ================ ==================
Weighted average number of shares
outstanding 41,094,629 19,073,159 36,178,713 12,652,059
Assumed conversion of Class A Preferred
Stock 7,588,938 7,364,560 7,588,938 4,857,732
------------- ---------------- ---------------- ------------------
Adjusted weighted average number of
shares outstanding
48,653,567 26,437,719 43,767,651 17,509,791
============== ================ ================ ==================
Diluted earnings per share $ 0.13 $ 0.12 $ 0.37 $ 0.33
============== ================ ================ ==================
</TABLE>
<PAGE>
CNL HOSPITALITY PROPERTIES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Quarters and Nine Months Ended September 30, 2000 and 1999
12. Commitments and Contingencies:
The Company has commitments to acquire eight hotel Properties for an anticipated
aggregate purchase price of approximately $161 million. In connection with these
commitments, the Company had deposits of approximately $5.7 million held in
escrow as of September 30, 2000.
In connection with the acquisition of two Properties in 1998, the Company may be
required to make an additional payment (the "Earnout Amount") of up to $1
million if certain earnout provisions are achieved by July 31, 2001. After July
31, 2001, the Company will no longer be obligated to make any payments under the
earnout provision. The Earnout Amount is equal to the difference between
earnings before interest, taxes, depreciation and amortization expense adjusted
by an earnout factor (7.44), and the initial purchase price. Rental income will
be adjusted upward in accordance with the lease agreements for any amount paid.
As of September 30, 2000, approximately $135,000 was payable under this
agreement.
In connection with the purchase of two Properties in June 2000, the Company may
be required to make an additional payment (the "Earnout Provision") not to
exceed $2,471,500 if certain earnout provisions are achieved by the thirty-sixth
month following the closing date of the two properties ("Earnout Termination
Date"). After the Earnout Termination Date, the Company will no longer be
obligated to make any payments under the Earnout Provision. The Earnout
Provision is equal to the difference between earnings before interest, taxes,
depreciation and amortization expense adjusted by the earnout factor (7.33), and
the initial purchase price. Rental income will be adjusted upward in accordance
with the lease agreements for any amount paid. As of September 30, 2000, no such
amounts were payable under this agreement.
In addition, in connection with the acquisition of the 89% interest in the LLC,
the Company and the minority interest holder each have the right to obligate the
other to sell or buy, respectively, the 11% interest in the LLC. These rights
are effective five years after the hotel's opening or November 2004. The price
for the 11% interest is equal to 11% of the lesser of (a) an amount equal to the
product of 8.5 multiplied times net house profit (defined as total hotel
revenues less property expenses) for the 13 period accounting year preceding the
notice of the option exercise or (b) the appraised fair market value.
13. Subsequent Events:
During the period October 1, 2000 through November 3, 2000, the Company received
subscription proceeds for an additional 2,060,086 shares ($20,600,862) of common
stock.
On October 1, 2000 and November 1, 2000, the Company declared distributions
totaling $2,766,393 and $2,877,134, respectively or $0.0625 per share of common
stock, payable in December 2000, to stockholders of record on October 1 and
November 1, 2000, respectively.
<PAGE>
CNL HOSPITALITY PROPERTIES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Quarters and Nine Months Ended September 30, 2000 and 1999
13. Subsequent Events - Continued:
In October 2000, Five Arrows, the Company and Hotel Investors entered into an
agreement with the following terms:
o Hotel Investors agreed to redeem 2,104 shares of both Class A Preferred
Stock and common stock of Hotel Investors held by Five Arrows for
$2,104,000;
o Hotel Investors agreed to redeem 1,653 shares of both Class B Preferred
Stock and common stock of Hotel Investors held by the Company for
$1,653,000;
o The Company purchased 7,563 shares of both the Class A Preferred Stock and
common stock of Hotel Investors from Five Arrows for $11,395,000;
o The Company rescinded 65,285 shares of the Company's common stock owned by
Five Arrows for $620,207;
o The remaining Class A Preferred Stock owned by Five Arrows (38,670 shares)
and the Company (7,563 shares) were exchanged for an equivalent number of
shares of Class E Preferred Stock par value $0.01 ("Class E Preferred
Stock") of Hotel Investors;
o Five Arrows granted the following options (1) on or before January 31,
2001, the Company has the option to purchase 7,250 shares of both Class E
Preferred Stock and an equal number of shares of common stock of Hotel
Investors held by Five Arrows for $1,000 per pair of Class E Preferred
Stock and common stock of Hotel Investors, and (2) provided that the
Company purchased all of the shares under the first option, the Company
will have the option, until June 30, 2001, to purchase 7,251 shares of both
Class E Preferred Stock and an equal number of shares of common stock of
Hotel Investors for $1,000 for each pair. If the Company elects not to
purchase the remaining shares under the first and/or second options, Five
Arrows will have the right, at certain defined dates, to exchange its
shares in Hotel Investors for common stock of the Company at an exchange
rate of 157.000609 shares of the Company's common stock for each share of
Class E Preferred Stock, subject to adjustment in the event of stock
dividends, stock splits and certain other corporate actions by the Company;
o The Company has agreed to pay Five Arrows a fee for agreeing to defer the
conversion of its Class A Preferred Stock (prior to its conversion to Class
E Preferred Stock) to common stock of the Company. These payments are
equivalent to the difference between any distributions received by Five
Arrows from Hotel Investors and the distributions that Five Arrows would
have received from the Company if Five Arrows had converted its Class A
Preferred Stock into the Company's common stock on June 30, 2000;
o Five Arrows has agreed to forfeit its priority cash distributions from
Hotel Investors;
o Cash available for distributions of Hotel Investors is distributed to 100
CNL Holdings, Inc. and affiliates' associates who each own one share of
Class C Preferred Stock in Hotel Investors, to provide a quarterly,
cumulative, compounded 8% return. All remaining cash available for
distributions is distributed pro rata with respect to the interest in the
common shares of Hotel Investors.
Upon consummation of this transaction, the Company owns an interest of
approximately 53% and Five Arrows owns approximately 47% of Hotel Investors.
On September 12, 2000, the LLC entered into a commitment with a lender to borrow
$32.5 million to be secured by a mortgage lien on the real property owned by the
LLC known as the Courtyard by Marriott located in Philadelphia, Pennsylvania at
a fixed interest rate of 8.29%. It is the Company's intent to close on this loan
prior to November 15, 2000.
On November 3, 2000, the Company acquired a Property located in Newark,
California for approximately $13.6 million. This Property is being operated by a
subsidiary of Marriott International, Inc. as a TownePlace Suites by Marriott.
The Company, as lessor, entered into a long-term, triple-net lease in connection
with the acquisition of this Property.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following 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. These statements generally are characterized by the use of terms
such as "believe," "expect" and "may." 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, availability
of capital from borrowings under the Company's line of credit and security
agreement, 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 continue to identify suitable investments, the ability
of the Company to continue 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. Given these uncertainties, readers
are cautioned not to place undue reliance on such statements. The Company
undertakes no obligation to update these forward-looking statements to reflect
any future events or circumstances.
Introduction
The Company
CNL Hospitality Properties, 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 partner, 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., CNL
Hospitality LP Corp, and CNL Philadelphia Annex, LLC (formerly known as
Courtyard Annex, L.L.C.) (the "LLC"). The Company was formed to acquire
properties ("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 Company may also provide mortgage financing ("Mortgage Loans") and
furniture, fixture and equipment financing ("Secured Equipment Leases") to
operators of hotel chains. Secured Equipment Leases will be funded from the
proceeds of financing to be obtained by the Company. 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
Common Stock Offerings
The Company was formed in June 1996, at which time it received initial capital
contributions of $200,000 for 20,000 shares of common stock from CNL Hospitality
Corp. On July 9, 1997, the Company commenced an offering to the public of up to
16,500,000 shares of common stock ($165,000,000) (the "Initial Offering")
pursuant to a registration statement on Form S-11 under the Securities Act of
1933, as amended. Of the 16,500,000 shares of common stock offered, 1,500,000
($15,000,000) were available only to stockholders who elected to participate in
the Company's reinvestment plan. Upon completion of the Initial Offering on June
17, 1999, the Company had received aggregate subscription proceeds of
$150,072,637 (15,007,264 shares), including $72,637 (7,264 shares) through the
Company's reinvestment plan. Following the completion of its Initial Offering,
the Company commenced a second offering of up to 27,500,000 shares of common
stock ($275,000,000) (the "1999 Offering"). Upon completion of the 1999
Offering, on September 14, 2000, the Company had received subscription proceeds
of $274,998,988 (27,499,899 shares), including $965,194 (96,520) through the
Company's reinvestment plan. Following the completion of the 1999 Offering, the
Company commenced a third offering of up to 45,000,000 shares of common stock
($450,000,000) (the "2000 Offering"). As of September 30, 2000, the Company had
received subscription proceeds of $17,929,765 (1,792,977 shares) from its 2000
Offering, including 33,191 shares ($331,909) issued pursuant to the reinvestment
plan. The price per share and the other terms of the 2000 Offering, including
the percentage of gross proceeds payable (i) to the managing dealer for selling
commissions and expenses in connection with the offering and (ii) to the CNL
Hospitality Corp. (the "Advisor") for acquisition fees, are substantially the
same as those for the Initial Offering and the 1999 Offering.
As of September 30, 2000, net proceeds to the Company from its Initial Offering,
1999 Offering and 2000 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
totaled approximately $390,000,000. The Company has used net proceeds from the
offerings to invest, directly or indirectly, approximately $296,000,000 in 22
hotel Properties, to pay $5,680,000 as deposits on four additional hotel
Properties, to redeem 140,450 Shares of common stock for approximately
$1,292,000 and to pay approximately $24,000,000 in acquisition fees and
expenses, leaving approximately $63,000,000 available for investment in
Properties and Mortgage Loans.
During the period October 1, 2000 through November 3, 2000, the Company received
additional net offering proceeds of approximately $20,600,000 and had
approximately $83,600,000 available for investment in Properties and Mortgage
Loans. The Company expects to use the uninvested net proceeds, plus any
additional net proceeds from the sale of shares from the 2000 Offering to
purchase additional Properties and, to a lesser extent, 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 borrowings. The Company currently has a $30,000,000 line of credit
available, as described below. Borrowings on the line of credit may be repaid
with offering proceeds, working capital or permanent financing. The maximum
amount the Company may borrow, absent a satisfactory showing that a higher level
of borrowing is appropriate as approved by a majority of the Independent
Directors, is 300% of the Company's net assets.
Redemptions
In October 1998, the Board of Directors elected to implement the Company's
redemption plan. Under the redemption plan, the Company elected to redeem
shares, subject to certain conditions and limitations. During the nine months
ended September 30, 2000, 127,565 shares were redeemed at $9.20 per share
($1,173,600) and retired from shares outstanding of common stock.
Indebtedness
The Company has a line of credit and security agreement in the amount of
$30,000,000 which expires on July 30, 2003. 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 0.5% per advance will be due
and payable to the bank on funds as advanced. Each advance made under the line
of credit will be collateralized by an assignment of rents and leases. In
connection with the line of credit, the Company incurred a commitment fee, legal
fees and closing costs of approximately $138,000. As of September 30, 2000 and
December 31, 1999, the Company had no amounts outstanding under the line of
credit.
In March 2000, the Company through the LLC entered into a Tax Increment
Financing Agreement with the Philadelphia Authority for Industrial Development
("TIF Note") for $10 million, which is collateralized by the LLC's hotel
Property. The principal and interest on the TIF Note is expected to be fully
paid by the LLC's hotel Property's incremental property taxes over a period of
18 years. The payment of the incremental property taxes is the responsibility of
the tenant of the hotel property. Interest on the TIF Note is 12.85% and
payments are due yearly through 2017. In the event that incremental property
taxes are insufficient to cover the principal and interest due, Marriott
International, Inc. is required to fund such shortfall pursuant to its guarantee
of the TIF Note.
On September 12, 2000, the LLC entered into a commitment with a lender to borrow
$32.5 million to be secured by a mortgage lien on the real property owned by the
LLC known as the Courtyard by Marriott located in Philadelphia, Pennsylvania at
a fixed interest rate of 8.29%. It is the Company's intent to close on this loan
prior to November 15, 2000.
Market Risk
The Company may be subject to interest rate risk through any outstanding
balances on its variable rate line of credit. The Company may mitigate this risk
by paying down any outstanding balances on the line of credit from offering
proceeds should interest rates rise substantially. There were no amounts
outstanding on the Company's variable line of credit at September 30, 2000 and
December 31, 1999.
Property Acquisitions and Investments
As of December 31, 1998, the Company owned two Properties in the Atlanta,
Georgia area both of which were being operated by Crestline Capital Corp. as
Residence Inn(R) by Marriott(R). During 1999, the Company, with Five Arrows
Realty Securities II L.L.C., formed a jointly owned real estate investment
trust, CNL Hotel Investors, Inc. ("Hotel Investors"), which acquired seven hotel
Properties. In order to fund the acquisition of the Properties, Five Arrows
invested approximately $48 million and the Company invested approximately $38
million in Hotel Investors. Hotel Investors funded the remaining amount of
approximately $88 million with permanent financing, collateralized by Hotel
Investors' interests in the Properties. In return for their respective
investments, Five Arrows received a 51% common stock interest and the Company
received a 49% common stock interest in Hotel Investors. Five Arrows received
48,337 shares of Hotel Investors' 8% Class A cumulative, preferred stock and the
Company received 37,979 shares of Hotel Investors' 9.76% Class B cumulative,
preferred stock. The Class A Preferred Stock is exchangeable upon demand into
common stock of the Company, as determined pursuant to a formula that is
intended to make the conversion not dilutive to funds from operations (based on
the revised definition adopted by the Board of Governors of the National
Association of Real Estate Investment Trusts which means net earnings determined
in accordance with generally accepted accounting principles, excluding gains or
losses from debt restructuring and sales of property, plus depreciation and
amortization of real estate assets and after adjustments for unconsolidated
partnerships and joint ventures) per share of the Company's common stock.
Five Arrows also invested approximately $14 million in the Company through the
purchase of common stock pursuant to the Company's Initial Offering and the 1999
Offering, the proceeds of which were used by the Company to fund approximately
38% of its funding commitment to Hotel Investors.
Hotel Investors, the LLC and the Company, as lessors, have entered into
long-term, triple-net leases with operators of Hotel Chains, as described below
in "Liquidity Requirements."
In November 1999, the Company acquired an 89% interest in CNL Philadelphia
Annex, LLC (formerly known as Courtyard Annex, L.L.C.) for approximately $58
million. The sole purpose of the LLC is to own and lease the Courtyard by
Marriott hotel Property located in Philadelphia, Pennsylvania. This historic
Property was recently renovated and converted into a hotel which commenced
operations in late November 1999. The LLC is included with the accounts of the
Company except for the 11% interest which is reflected as minority interest in
the accompanying consolidated financial statements.
Additionally, in late 1999, the Company acquired a newly constructed Property
located in Mira Mesa, California for approximately $15.5 million. The Property
is being operated by a subsidiary of Marriott International, Inc. as a Residence
Inn by Marriott.
On June 1, 2000, the Company acquired two Wyndham hotel Properties located in
Billerica, Massachusetts and Denver, Colorado for approximately $43.5 million.
These Properties are being operated by Wyndham International, Inc. as Wyndham
Hotels.
On June 16, 2000, the Company acquired two Properties located in Palm Desert,
California for approximately $30.3 million. These Properties are being operated
by the tenant as a Residence Inn by Marriott and a Courtyard by Marriott.
On July 28, 2000, the Company acquired two Properties located in Gaithersburg,
Maryland and Merrifield, Virginia for approximately $34 million. These
Properties are being operated by a subsidiary of Marriott International, Inc. as
a SpringHill Suites by Marriott and a Residence Inn by Marriott.
On August 22, 2000, the Company acquired five Properties located in Mt. Laurel,
New Jersey; Scarborough, Maine; Tewksbury, Massachusetts; Alpharetta, Georgia
and Salt Lake City, Utah for approximately $52 million. These Properties are
being operated by a subsidiary of Marriott International, Inc. as three
TownePlace Suites by Marriott, a Courtyard by Marriott and a Residence Inn by
Marriott.
On November 3, 2000, the Company acquired a Property located in Newark,
California for approximately $13.6 million. This Property is being operated by a
subsidiary of Marriott International, Inc. as a TownePlace Suites by Marriott.
In October 2000, Five Arrows, the Company and Hotel Investors entered into an
agreement with the following terms:
o Hotel Investors agreed to redeem 2,104 shares of both Class A Preferred
Stock and common stock of Hotel Investors held by Five Arrows for
$2,104,000;
o Hotel Investors agreed to redeem 1,653 shares of both Class B Preferred
Stock and common stock of Hotel Investors held by the Company for
$1,653,000;
o The Company purchased 7,563 shares of both the Class A Preferred Stock and
common stock of Hotel Investors from Five Arrows for $11,395,000;
o The Company rescinded 65,285 shares of the Company's common stock owned by
Five Arrows for $620,207;
o The remaining Class A Preferred Stock owned by Five Arrows (38,670 shares)
and the Company (7,563 shares) were exchanged for an equivalent number of
shares of Class E Preferred Stock par value $0.01 ("Class E Preferred
Stock") of Hotel Investors;
o Five Arrows granted the following options (1) on or before January 31,
2001, the Company has the option to purchase 7,250 shares of both Class E
Preferred Stock and an equal number of shares of common stock of Hotel
Investors held by Five Arrows for $1,000 per pair of Class E Preferred
Stock and common stock of Hotel Investors, and (2) provided that the
Company purchased all of the shares under the first option, the Company
will have the option, until June 30, 2001, to purchase 7,251 shares of both
Class E Preferred Stock and an equal number of shares of common stock of
Hotel Investors for $1,000 for each pair. If the Company elects not to
purchase the remaining shares under the first and/or second options, Five
Arrows will have the right, at certain defined dates, to exchange its
shares in Hotel Investors for common stock of the Company at an exchange
rate of 157.000609 shares of the Company's common stock for each share of
Class E Preferred Stock, subject to adjustment in the event of stock
dividends, stock splits and certain other corporate actions by the Company;
o The Company has agreed to pay Five Arrows a fee for agreeing to defer the
conversion of its Class A Preferred Stock (prior to its conversion to Class
E Preferred Stock) to common stock of the Company. These payments are
equivalent to the difference between any distributions received by Five
Arrows from Hotel Investors and the distributions that Five Arrows would
have received from the Company if Five Arrows had converted its Class A
Preferred Stock into the Company's common stock on June 30, 2000;
o Five Arrows has agreed to forfeit its priority cash distributions from
Hotel Investors;
o Cash available for distributions of Hotel Investors is distributed to 100
CNL Holdings, Inc. and affiliates' associates who each own one share of
Class C Preferred Stock in Hotel Investors, to provide a quarterly,
cumulative, compounded 8% return. All remaining cash available for
distributions is distributed pro rata with respect to the interest in the
common shares of Hotel Investors.
Upon consummation of this transaction, the Company owns an interest of
approximately 53% and Five Arrows owns approximately 47% of Hotel Investors.
Commitments
As of November 3, 2000, the Company had initial commitments to acquire seven
additional hotel Properties for an anticipated aggregate purchase price of
approximately $148 million and to invest approximately $25 million in one
Property through a joint venture. 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 advances on the line of credit. In
connection with three of these agreements, the Company has a deposit, in the
form of a letter of credit, collateralized by a certificate of deposit,
amounting to $5 million. 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. The Company is presently negotiating
to acquire additional Properties, but as of November 3, 2000, the Company had
not acquired any such Properties or entered into any Mortgage Loans. In
addition, as of November 3, 2000, the Company had not entered into any other
arrangements creating a reasonable probability a Mortgage Loan or Secured
Equipment Lease would be funded.
Cash and Cash Equivalents
Until Properties are acquired, or Mortgage Loans are entered into, net offering
proceeds are held in short-term (defined as investments with a maturity of three
months or less), highly liquid investments, such as demand deposit accounts at
commercial banks, certificates of deposit and money market accounts. 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, 2000, the
Company had $76,838,139 invested in such short-term investments as compared to
$101,972,441 at December 31, 1999. The decrease in the amount invested in
short-term investments was primarily attributable to acquisition of 11
properties during the nine months ended September 30, 2000. These funds will be
used to purchase additional Properties, to make Mortgage Loans, to pay offering
and acquisition expenses, to pay distributions to stockholders and other Company
expenses and, in management's discretion, to create cash reserves.
Liquidity Requirements
The Company expects to meet its short-term liquidity requirements, other than
for offering expenses and the acquisition and development of Properties and
investment in Mortgage Loans and Secured Equipment Leases, through cash flow
provided by operating activities. The Company believes that cash flow provided
by operating activities will be sufficient to fund normal recurring operating
expenses, regular debt service requirements and distributions to stockholders.
To the extent that the Company's cash flow provided by operating activities is
not sufficient to meet such short-term liquidity requirements as a result, for
example, of unforeseen expenses due to tenants defaulting under the terms of
their lease agreements, the Company will use borrowings under its line of
credit.
Due to the fact that the Company leases its Properties on a triple-net basis,
meaning that tenants are generally required to pay all repairs and maintenance,
property taxes, insurance and utilities, management does not believe that
working capital reserves are necessary at this time. Management believes that
the Properties are adequately covered by insurance. In addition, the Advisor has
obtained contingent liability and property 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 Company expects to meet its other short-term
liquidity requirements, including payment of offering expenses, Property
acquisitions and development and investment in Mortgage Loans and Secured
Equipment Leases, with additional advances under its line of credit and proceeds
from its offering. The Company expects to meet its long-term liquidity
requirements through short- or long-term, unsecured or secured debt financing or
equity financing.
Distributions
During the nine months ended September 30, 2000 and 1999, the Company generated
cash from operations of $26,133,477 and $4,642,118, respectively. Based on cash
from operations and dividends due to the Company from Hotel Investors at
September 30, 2000 (and received in October 2000), the Company declared
distributions to its stockholders of $19,469,870 and $6,331,072 during the nine
months ended September 30, 2000 and 1999, respectively. In addition, on October
1 and November 1, 2000, the Company declared distributions to stockholders of
record on October 1, and November 1, 2000 totaling $2,766,393 and $2,877,134
($0.0625 per share), respectively, payable in December 2000.
During the nine months ended September 30, 2000 and 1999, approximately 54
percent and 73 percent, respectively, of the distributions received by
stockholders were considered to be ordinary income and approximately 46 percent
and 27 percent, respectively, were considered a return of capital for federal
income tax purposes. No amounts distributed to the stockholders for the nine
months ended September 30, 2000 and 1999 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.
Due to Related Parties
During the quarters and nine months ended September 30, 2000 and 1999,
affiliates of the Company incurred on behalf of the Company $3,258,476 and
$2,387,955, respectively ($416,577 and $848,740 of which was incurred during the
quarters ended September 30, 2000 and 1999, respectively), for certain
organizational and offering expenses, $554,019 and $530,233, respectively
($185,982 and $111,880 of which was incurred during the quarters ended September
30, 2000 and 1999, respectively), for certain acquisition expenses, and $530,944
and $285,847, respectively ($92,493 and $116,627 of which was incurred during
the quarters ended September 30, 2000 and 1999, respectively), for certain
operating expenses. As of September 30, 2000 and 1999, the Company owed the
Advisor and other related parties $1,281,404 and $307,977, respectively, for
expenditures incurred on behalf of the Company and for acquisition and other
fees. The Advisor has agreed to pay or reimburse to the Company all offering
expenses (excluding commissions and marketing support and due diligence expense
reimbursement fees) in excess of three percent of gross offering proceeds from
the Company's equity offerings.
During 1999, the Company opened three bank accounts in a bank in which certain
officers and directors of the Company serve as directors, and in which an
affiliate of the Advisor is a stockholder. The amount deposited with this
affiliate was $16,437,410 and $15,275,629 at September 30, 2000 and December 31,
1999, respectively.
Other
As of September 30, 2000 and 1999, the tenants of the Properties have
established 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 have been paid, granted and assigned to the
Company. For the nine months ended September 30, 2000 and 1999, revenues
relating to the FF&E Reserve of the Properties directly owned by the Company
totaled $901,771 and $194,301, respectively ($421,658 and $68,268 of which was
earned during the quarters ended September 30, 2000 and 1999, respectively), of
which $192,993 was classified as a receivable at September 30, 2000. For the
nine months ended September 30, 2000, revenues relating to the FF&E Reserve of
the Properties indirectly owned through Hotel Investors totaled $693,224
($264,916 of which was earned during the quarters ended September 30, 2000), of
which $84,748 was classified as a receivable as of September 30, 2000. Due to
the fact that the Properties are leased on a long-term, triple-net basis,
management does not believe that other working capital reserves are necessary at
this time. 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.
Results of Operations
Comparison of Quarter and Nine Months Ended September 30, 2000 to Quarter and
Nine Months Ended September 30, 1999
As of September 30, 2000, the Company owned 22 Properties, either directly or
indirectly, consisting of land, buildings and equipment and had entered into
long-term, triple-net lease agreements relating to each of these Properties. The
Property leases provide for minimum base annual rental payments ranging from
approximately $716,000 to $6,500,000, which are payable in monthly installments.
In addition, certain of the leases also provide that, commencing in the second
lease year, the annual base rent required under the terms of the leases will
increase. In addition to annual base rent, the tenants pay contingent rent
computed as a percentage of gross sales of the Properties. The Company's leases
also require the establishment of the FF&E Reserves. The FF&E Reserves
established for the Properties, directly or indirectly owned by the Company,
have been reported as additional rent for the quarters and nine months ended
September 30, 2000 and 1999.
During the nine months ended September 30, 2000 and 1999, the Company earned
rental income from operating leases and FF&E Reserve income of $12,718,572 and
$2,450,269, respectively ($6,261,656 and $837,710 of which was earned during the
quarters ended September 30, 2000 and 1999, respectively). No contingent rental
income was earned for the quarters and nine months ended September 30, 2000 and
1999. The increase in rental income and FF&E Reserve income was due to the fact
that the Company owned 15 Properties directly during the quarter and nine months
ended September 30, 2000, as compared to two Properties during the quarter and
nine months ended September 30, 1999. Because the Company has not yet acquired
all of its Properties, revenues for the nine months ended September 30, 2000,
represent only a portion of revenues which the Company is expected to earn in
future periods.
During 1999, the Company acquired and leased seven Properties indirectly through
its investment in Hotel Investors, as described above in "Liquidity and Capital
Resources - Property Acquisitions and Investments." In connection with its
investment, during the nine months ended September 30, 2000 and 1999 the Company
recorded $2,780,566 and $1,826,818, respectively, in dividend income and
$386,627 and $557,733, respectively, in equity in loss after deduction of
preferred stock dividends, resulting in net earnings of $2,393,939 and
$1,269,085, respectively ($800,641 and $759,404 represented net earnings from
this investment for the quarters ended September 30, 2000 and 1999,
respectively).
During the nine months ended September 30, 2000 and 1999, the Company also
earned $5,312,997 and $2,125,043, respectively, in interest income from
investments in money market accounts and other short-term, highly liquid
investments and other income ($1,351,809 and $1,217,304 of which was earned
during the quarters ended September 30, 2000 and 1999, respectively). The
increase in interest income was primarily attributable to increased offering
proceeds in the current year being temporarily invested in money market accounts
or other short-term, highly liquid investments pending investment in Properties
or Mortgage Loans. As net offering proceeds from the Company's offerings 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.
Crestline Capital Corp. and City Center Annex Tenant Corporation each
contributed more than ten percent of the Company's total rental for the quarter
and nine months ended September 30, 2000. In addition, a significant portion of
the Company's rental income was earned from Properties operating as Marriott(R)
brand chains. Although the Company intends to acquire additional Properties
located in various states and regions and to carefully screen its tenants in
order to reduce risks of default, failure of these lessees or the Marriott
chains 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 lessees. It is expected that the percentage of total rental income
contributed by these lessees will decrease as additional Properties are acquired
and leased during 2000 and subsequent years.
Operating expenses, including interest expense and depreciation and amortization
expense, were $6,182,433 and $1,530,352 for the nine months ended September 30,
2000 and 1999, respectively ($3,025,265 and $392,902 of which was incurred
during the quarters ended September 30, 2000 and 1999, respectively). The
increase in the dollar amount of operating expenses during the quarter and nine
months ended September 30, 2000, as compared to the same periods for 1999, was
primarily as a result of the Company owning two Properties directly during the
quarter and nine months ended September 30, 1999 compared to 15 properties
during the quarter and nine months ended September 30, 2000. This resulted in an
increase in asset management fees of $621,426 and $916,270, respectively, and an
increase in depreciation and amortization expense of $1,713,176 and $3,219,905,
respectively, for the quarter and nine months ended September 30, 2000, as
compared to the same periods for 1999. Additionally, general operating and
administrative expenses increased as a result of Company growth, while interest
expense, including loan cost amortization, decreased from $239,922 for the nine
months ended September 30, 1999 to $26,155 for the nine months ended September
30, 2000 ($9,933 and $6,592 of which was incurred during the quarters ended
September 30, 2000 and 1999, respectively). The decrease in interest expense was
a result of the Company not having any amounts outstanding on its line of credit
during the nine months ended September 30, 2000.
The dollar amount of operating expenses is expected to increase as the Company
acquires additional Properties and invests in Mortgage Loans. However, general
operating and administrative expenses as a percentage of total revenues is
expected to decrease as the Company acquires additional Properties and invests
in Mortgage Loans.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
See Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations Market Risk for information related to
quantitative and qualitative disclosure about market risk.
<PAGE>
PART II
Item 1. Legal Proceedings. Inapplicable.
Item 2. Changes in Securities and Use of Proceeds. Inapplicable.
Item 3. Defaults upon Senior Securities. Inapplicable.
Item 4. Submission of Matters to a Vote of Security Holders.
Inapplicable.
Item 5. Other Information. Inapplicable.
Item 6. Exhibits and Reports on Form 8-K.
(a) The following documents are filed as part of this report.
1. Exhibits
3.1 CNL American Realty Fund, Inc. Amended and Restated Articles of
Incorporation (Included as Exhibit 3.2 to the Registration Statement on Form
S-11 (Registration No. 333-9943) (the "1996 Form S-11") and incorporated herein
by reference).
3.2 CNL American Realty Fund, Inc. Bylaws (Included as Exhibit 3.3 to the 1996
Form S-11 and incorpo- rated herein by reference).
3.3 CNL American Realty Fund, Inc. Articles of Amend- ment to the Amended and
Restated Articles of Incorporation dated June 3, 1998 (Included as Exhibit 3.4
to the 1996 Form S-11 and incorporated herein by reference).
3.4 Articles of Amendment to the Amended and Restated Articles of Incorporation
of CNL Hospitality Properties, Inc. dated May 26, 1999 (Included as Exhibit 3.5
to the Registration Statement on Form S-11 (Registration No. 333-67787) (the
"1998 Form S-11") and incorporated herein by reference).
3.5 Articles of Amendment to the Amended and Restated Articles of Incorporation
of CNL Hospitality Properties, Inc. dated June 27, 2000 (Included as Exhibit 3.6
to the Registration Statement on Form S-11 (Registration No.333-89691) (the
"1999 Form S-11") and incorporated herein by reference).
3.6 Amendment No. 1 to the Bylaws of CNL Hospitality Properties, Inc. (Included
as Exhibit 3.7 to the 1999 Form S-11 and incorporated herein by reference).
4.1 Reinvestment Plan (Included as Exhibit 4.4 to the 1996 Form S-11 and
incorporated herein by reference).
4.2 CNL American Realty Fund, Inc. Amended and Restated Articles of
Incorporation (Included as Exhibit 3.2 to the 1996 Form S-11 and incor- porated
herein by reference).
4.3 CNL American Realty Fund, Inc. Bylaws (Included as Exhibit 3.3 to the 1996
Form S-11 and incorpo- rated herein by reference).
4.4 Articles of Amendment to the Amended and Restated Articles of Incorporation
of CNL American Realty Fund, Inc. dated June 3, 1998 (Included as Exhibit 3.4 to
the 1996 Form S-11 and incorporated herein by reference).
4.5 Articles of Amendment to the Amended and Restated Articles of Incorporation
of CNL Hospitality Properties, Inc. dated May 26, 1999 (Included as Exhibit 3.5
to the 1998 Form S-11 and incorporated herein by reference).
4.6 Articles of Amendment to the Amended and Restated Articles of Incorporation
of CNL Hospitality Prop- erties, Inc. dated June 27, 1999 (Included as Exhibit
3.6 to the 1999 Form S-11 and incorporated herein by reference).
4.7 Amendment No. 1 to the Bylaws of CNL Hospitality Properties, Inc. (Included
as Exhibit 3.7 to the 1999 Form S-11 and incorporated herein by reference).
10.1 Advisory Agreement dated as of June 17, 2000 between CNL Hospitality
Properties, Inc. and CNL Hospitality Corp. (Included as Exhibit 10.2 to the 1999
Form S-11 and incorporated herein by ref- erence).
10.2 Indemnification Agreement between CNL Hospitality Properties, Inc. and
Lawrence A. Dustin dated February 24, 1999. Each of the following directors and
/ or officers has signed a substantially similar agreement as follows: James M.
Seneff, Jr., Robert A. Bourne, G. Richard Hostetter, J. Joseph Kruse, Richard C.
Huseman, Charles A. Muller, Jeanne A. Wall and Lynn E.Rose, dated July 9, 1997,
C. Brian Strickland dated October 31, 1998, John A. Griswold dated January 7,
1999, Charles E. Adams and Craig M. McAllaster, dated February 10, 1999, Matthew
W. Kaplan dated February 24, 1999 and Thomas J. Hutchison III dated May 16, 2000
(Included as Exhibit 10.2 to the March 31, 1999 Form 10-Q and incorporated
herein by reference).
10.3 Agreement of Limited Partnership of CNL Hospitality Partners, LP (Included
as Exhibit 10.10 to the 1996 Form S-11 and incorporated herein by reference).
10.4 Hotel Purchase and Sale Contract between CNL Real Estate Advisors, Inc. and
Gwinnett Residence Associates, LLC, relating to the Residence Inn (R) - Gwinnett
Place (Included as Exhibit 10.11 to the 1996 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 (R) - Gwinnett
Place (Included as Exhibit 10.12 to the 1996 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 (R) - Buckhead
(Lenox Park) (Included as Exhibit 10.13 to the 1996 Form S-11 and incorporated
here- in by reference).
10.7 Assignment and Assumption Agreement between CNL Real Estate Advisors,
Inc.and CNL Hospitality Partners, LP, relating to the Residence Inn (R) -
Buckhead (Lenox Park) (Included as Exhibit 10.14 to the 1996 Form S-11 and
incorporated here- in by reference).
10.8 Lease Agreement between CNL Hospitality Partners, LP and STC Leasing
Associates, LLC, dated August 1, 1998, relating to the Residence Inn(R) -
Gwinnett Place (Included as Exhibit 10.15 to the 1996 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(R) -
Buckhead (Lenox Park) (Included as Exhibit 10.16 to the 1996 Form S-11 and
incorpo- rated herein by reference).
10.10 Master Revolving Line of Credit Loan Agreement with CNL Hospitality
Properties, Inc., CNL Hospitality Partners, LP and Colonial Bank, dated July 31,
1998 (Included as Exhibit 10.17 to the 1996 Form S-11 and incorporated herein by
reference).
10.11 Master Loan Agreement by and between CNL Hotel Investors, Inc. and
Jefferson-Pilot Life Insurance Company, dated February 24, 1999 (Included as
Exhibit 10.18 to the 1996 Form S-11 and incorporated herein by refe- rence).
10.12 Securities Purchase Agreement between CNL Hospitality Properties, Inc. and
Five Arrows Realty Securities II L.L.C., dated February 24, 1999 (Included as
Exhibit 10.19 to the 1996 Form S-11 and incorporated herein by reference).
10.13 Subscription and Stockholders' Agreement among CNL Hotel Investors, Inc.,
Five Arrows Realty Securities II L.L.C., CNL Hospitality Partners, LP and CNL
Hospitality Properties, Inc., dated February 24, 1999 (Included as Exhibit 10.20
to the 1996 Form S-11 and incorporated herein by reference).
10.14 Registration Rights Agreement by and between CNL Hospitality Properties,
Inc. and Five Arrows Realty Securities II L.L.C., dated February 24, 1999
(Included as Exhibit 10.21 to the 1996 Form S-11 and incorporated herein by
reference).
10.15 First Amendment to Lease Agreement between CNL Hospitality Partners, LP
and STC Leasing Associates, LLC, dated August 1, 1998, related to the Residence
Inn - Gwinnett Place, (amends Exhibit 10.8 above) and the First Amendment to
Agreement of Guaranty, dated August 1, 1998 (amends Agreement of Guaranty
attached as Exhibit I to 10.8 above)(Included as Exhibit 10.15 to the September
30, 1999 Form 10-Q and incorporated herein by reference).
10.16 First Amendment to Lease Agreement between CNL Hospitality Partners, LP
and STC Leasing Associates, LLC, dated August 1, 1998, related to the Residence
Inn - Buckhead (Lenox Park) (amends Exhibit 10.9 above) and the First Amendment
to Agreement of Guaranty, dated August 1, 1998 (amends Agreement of Guaranty
attached as Exhibit I to 10.9 above) (Included as Exhibit 10.16 to the September
30, 1999 Form 10-Q and incorporated herein by reference).
10.17 Lease Agreement between Courtyard Annex, L.L.C. and City Center Annex
Tenant Corporation, dated November 15, 1999, relating to the relating to
theCourtyard - Philadelphia (Included as Exhibit 10.22 to the 1998 Form S-11 and
incorporated herein by reference).
10.18 First Amended and Restated Limited Liability Company Agreement of
Courtyard Annex, L.L.C., relating to the Courtyard - Philadelphia (Incl uded as
Exhibit 10.23 to the 1998 Form S-11 and incorporated herein by reference).
10.19 Purchase and Sale Agreement between Marriott International, Inc., CBM
Annex, Inc., Courtyard Annex, Inc., as Sellers, and CNL Hospitality Partners,
LP, as Purchaser, dated November 15, 1999, relating to the Courtyard -
Philadelphia (Included as Exhibit 10.24 to the 1998 Form S-11 and incorporated
herein by reference).
10.20 Lease Agreement between CNL Hospitality Partners, LP, and RST4 Tenant LLC,
dated December 10, 1999, relating to the Residence Inn - Mira Mesa (Included as
Exhibit 10.25 to the 1998 Form S-11 and incorporated herein by reference).
10.21 Purchase and Sale Agreement between Marriott International, Inc.,
Towneplace Management Corporation, and Residence Inn by Marriott, Inc., as
Sellers, and CNL Hospitality Partners, L.P., as Purchaser, dated November 24,
1999, relating to the Residence Inn - Mira Mesa (Included as Exhibit 10.26 to
the 1998 Form S-11 and incorporated herein by reference).
10.22 Lease Agreement between CNL Hospitality Partners, LP and WYN Orlando
Lessee, LLC, dated May 31, 2000, relating to the Wyndham Denver Tech Center
(Included as Exhibit 10.29 to the 1998 Form S-11 and incorporated herein by
reference).
10.23 Lease Agreement between CNL Hospitality Partners, LP and WYN Orlando
Lessee, LLC, dated May 31, 2000, relating to the Wyndham Billerica (Included as
Exhibit 10.30 to the 1998 Form S-11 and incorporated herein by reference).
10.24 Purchase and Sale Agreement between CNL Hospitality Corp., as Buyer, and
WII Denver Tech, LLC and PAH Billerica Realty Company, LLC, as Sellers, and
Wyndham International, Inc., relating to the Wyndham Denver Tech Center and the
Wyndham Billerica (Included as Exhibit 10.31 to the 1998 Form S-11 and
incorporated herein by reference).
10.25 Lease Agreement between CNL Hospitality Partners, LP and RST4 Tenant LLC,
dated June 17, 2000, relating to the Courtyard - Palm Desert and the Residence
Inn - Palm Desert (Included as Exhibit 10.32 to the 1999 Form S-11 and
incorporated by reference).
10.26 Purchase and Sale Agreement between PDH Associates LLC, as Seller, and CNL
Hospitality Corp., as Buyer, dated January 19, 2000, relating to the Courtyard -
Palm Desert and the Residence Inn - Palm Desert (Included as Exhibit 10.33 to
the 1999 Form S-11 and incorporated by reference).
10.27 Amendment to Purchase and Sale Agreement between PDH Associates LLC and
CNL Hospitality Corp., dated January 19, 2000, relating to Courtyard - Palm
Desert and the Residence Inn - Palm Desert (amends Exhibit 10.26 above)
(Included as Exhibit 10.34 to the 1999 Form S-11 and incorporated by reference).
10.28 Assignment Agreement between CNL Hospitality Corp. and CNL Hospitality
Partners, LP, relating to the Courtyard - Palm Desert and the Residence Inn -
Palm Desert (Included as Exhibit 10.35 to the 1999 Form S-11 and incorporated by
reference).
10.29 Lease Agreement between CNL Hospitality Partners, LP and RST4 Tenant LLC,
dated July 28, 2000, relating to the SpringHill Suites - Gaithersburg (Included
as Exhibit 10.36 to the 1999 Form S-11 and incorporated by reference).
10.30 Purchase and Sale Agreement between SpringHill SMC Corporation, as Seller,
and CNL Hospitality Partners, LP, as Purchaser, and joined in by Marriott
International, Inc., dated June 30, 2000, relating to the SpringHill Suites -
Gaithersburg (Included as Exhibit 10.37 to the 1999 Form S-11 and incorporated
by reference).
10.31 Lease Agreement between CNL Hospitality Partners, LP and RST4 Tenant LLC,
dated July 28, 2000, relating to the Residence Inn - Merrifield (Included as
Exhibit 10.38 to the 1999 Form S-11 and incorporated by reference).
10.32 Purchase and Sale Agreement between TownePlace Management Corporation and
Residence Inn by Marriott, Inc., as Sellers, and CNL Hospitality Partners, LP,
as Purchaser, and joined in by Marriott International, Inc., dated November 24,
1999, relating to the Residence Inn - Merrifield (Included as Exhibit 10.39 to
the 1999 Form S-11 and incorporated by reference).
10.33 First Amendment to Purchase and Sale Agreement between TownePlace
Management Corporation and Residence Inn by Marriott, as Sellers, and CNL
Hospitality Partners, LP, as Purchaser, and joined in by Marriott International,
Inc., dated November 24, 1999, relating to the Residence Inn -Mira Mesa and the
Residence Inn - Merrifield (amends Exhibits 10.21 and 10.32 above) (Included as
Exhibit 10.40 to the 1999 Form S-11 and incorporated by reference).
10.34 Lease Agreement between CNL Hospitality Partners, LP and CCCL Leasing LLC,
dated August 18, 2000, relating to the Courtyard - Alpharetta (Included as
Exhibit 10.41 to the 1999 Form S-11 and incorporated by reference).
10.35 Lease Agreement between CNL Hospitality Partners, LP and CCCL Leasing LLC,
dated August 18, 2000, relating to the Residence Inn - Cottonwood (Included as
Exhibit 10.42 to the 1999 Form S-11 and incorporated by reference).
10.36 Lease Agreement between CNL Hospitality Partners, LP and CCCL Leasing LLC,
dated August 18, 2000, relating to the TownePlace Suites - Mt. Laurel (Included
as Exhibit 10.43 to the 1999 Form S-11 and incorporated by reference).
10.37 Lease Agreement between CNL Hospitality Partners, LP and CCCL Leasing LLC,
dated August 18, 2000, relating to the TownePlace Suites - Scarborough (Included
as Exhibit 10.44 to the 1999 Form S-11 and incorporated by reference).
10.38 Lease Agreement between CNL Hospitality Partners, LP and CCCL Leasing LLC,
dated August 18, 2000, relating to the TownePlace Suites - Tewksbury (Included
as Exhibit 10.45 to the 1999 Form S-11 and incorporated by reference).
10.39 Purchase and Sale Agreement between Residence Inn by Marriott, Inc.,
Courtyard Management Corporation, SpringHill SMC Corporation and TownePlace
Management Corporation, as Sellers, CNL Hospitality Partners, LP, as Purchaser,
CCCL Leasing LLC, as Tenant, Crestline Capital Corporation, Marriott
International, Inc., and joined in by CNL Hospitality Properties, Inc., dated
August 18, 2000, relating to the Residence Inn - Cottonwood, Courtyard -
Alpharetta, and TownePlace Suites - Mt. Laurel, Scarborough and Tewksbury
(Included as Exhibit 10.46 to the 1999 Form S-11 and incorporated by reference).
10.40 First Amendment to Purchase and Sale Agreement between Residence Inn by
Marriott, Inc., Courtyard Management Corporation, SpringHill SMC Corporation and
TownePlace Management Corporation, as Sellers, CNL Hospitality Partners, LP, as
Purchaser, CCCL Leasing LLC, as tenant, Crestline Capital Corporation, and
Marriott International, Inc., dated August 18, 2000, relating to the Residence
Inn - Cottonwood, Courtyard - Alpharetta, and TownePlace Suites - Mt. Laurel,
Scarborough and Tewksbury (Included as Exhibit 10.47 to the 1999 Form S-11 and
incorporated by reference).
27. Financial Data Schedule (Filed herewith).
(b) The Company filed two reports on Forms 8-K, on August 7, 2000 and September
6, 200000 in connection with the acquisition of Properties.
<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 10th day of November, 2000.
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
Senior Vice President, Finance and Administration
(Principal Financial and Accounting Officer)
