SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
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Date of Report (Date of earliest event reported): June 16, 2000
CNL HOSPITALITY PROPERTIES, INC.
(Exact Name of Registrant as Specified in Charter)
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Florida 333-67787 59-3396369
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
450 South Orange Avenue 32801
Orlando, Florida (Zip Code)
(Address of principal executive offices)
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Registrant's telephone number, including area code: (407) 650-1000
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Item 2. Acquisition or Disposition of Assets.
Palm Desert Portfolio. On June 16, 2000, the Company acquired two hotel
Properties. The Properties are a Courtyard by Marriott and a Residence Inn by
Marriott, both located in Palm Desert, California (the "Courtyard Palm Desert
Property" and the "Residence Inn Palm Desert Property").
The Company acquired the Palm Desert Properties for an aggregate
purchase price of $30,250,000 from PDH Associates LLC. In connection with the
purchase of the two Properties, the Company, as lessor, entered into a long-term
lease agreement. Both hotels are managed by Marriott International, Inc. The
general terms of the lease agreement are described in the section of the
Prospectus entitled "Business -- Description of Property Leases." The principal
features of the lease are as follows:
o The initial term of the lease is approximately 15 years.
o At the end of the initial lease term, the tenant will have two
consecutive renewal options of ten years each.
o The lease requires minimum rent payments to the Company of $1,351,000
per year for the Courtyard Palm Desert Property and $1,674,000 per year
for the Residence Inn Palm Desert Property.
o In addition to minimum rent, for each lease year after the second lease
year, the lease will require percentage rent equal to seven percent of
room revenues, in excess of room revenues for the second lease year.
o A security deposit equal to approximately $419,000 for the Courtyard
Palm Desert Property and approximately $519,000 for the Residence Inn
Palm Desert Property has been retained by the Company as security for
the tenant's obligations under the leases.
o The tenant of the Courtyard Palm Desert and Residence Inn Palm Desert
Properties has established a reserve fund which will be used for the
replacement and renewal of furniture, fixtures and equipment relating
to the hotel Properties (the "FF&E Reserve"). Deposits to the FF&E
Reserve are made monthly as follows: 3% of gross receipts for the first
lease year; 4% of gross receipts for the second lease year; and 5% of
gross receipts every lease year thereafter. Funds in the FF&E Reserve
and all property purchased with funds from the FF&E Reserve shall be
paid, granted and assigned to the Company as additional rent.
o Marriott International, Inc. has guaranteed the tenant's obligation to
pay minimum rent under the lease. The guarantee terminates on the
earlier of the end of the third lease year or at such time as the net
operating income from the Property exceeds minimum rent due under the
lease by 25% for any trailing 12-month period. The maximum amount of
the guarantee is $3,025,000. Upon acquisition of the Gaithersburg
Property, the Merrifield Property and the Newark Property, as described
in the Prospectus under the heading "Business-- Pending Investments,"
the maximum amount of the guarantee will increase to $6,405,400 and the
guarantee will cover minimum rent payments for the pending investments
listed above and the Mira Mesa Property, in addition to the Palm Desert
Properties (collectively, the "Pooled Properties"). From this time, net
operating income from all of the Pooled Properties will be pooled in
determining whether the Pooled Properties' aggregate net operating
income exceeds the aggregate minimum rent due under the leases by 25%.
o In addition, upon the acquisition of the Little Lake Bryan Properties,
as described in the Prospectus under the heading "Business -- Pending
Investments," the leases for the Little Lake Bryan Properties will
contain cross-default terms with respect to the leases for the Pooled
Properties, meaning that if the tenant to any of the Little Lake Bryan
Properties or the Pooled Properties defaults on its obligations under
its lease, the Company will have the ability to pursue its remedies
under the leases with respect to all of the Little Lake Bryan
Properties and the Pooled Properties, regardless of whether the tenant
of any such Property is under default under its lease.
The federal income tax basis of the depreciable portion of the
Courtyard Palm Desert Property and the Residence Inn Palm Desert Property is
approximately $12,109,000 and $14,680,000, respectively.
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The Courtyard Palm Desert Property, which opened in September 1999, has
151 guest rooms, three meeting rooms, a 60-seat dining room and lounge/bar area,
tennis courts, exercise room, pool and putting green. The Residence Inn Palm
Desert Property, which opened in February 1999, has seven two-story buildings
with 130 guest suites and a separate building with a lobby, hearth room, three
meeting rooms and a ballroom. Additional amenities include a swimming pool,
whirlpool, two tennis courts and a putting green. The hotel Properties are
located in the Coachella Valley, which according to Hospitality Real Estate
Counselors, Inc. (HREC) is one of the fastest growing areas in California. The
Residence Inn and Courtyard Properties are the first new hotels to be
constructed in Palm Desert in ten years. Approximately 110 miles east of Los
Angeles, the Coachella Valley is a tourist destination noted for its warm
climate, recreational activities and the San Jacinto, Santa Rosa and Chocolate
mountain ranges that border the area. Leisure and residential development define
the immediate surroundings of the two hotels. Both of the Properties are
adjacent to the Desert Willow Golf Resort and within close proximity to the
Desert Springs Marriott Resort and Spa. Guests of the hotels have convenient
access to four golf courses, all within one mile of the hotels. The Properties
are accessible by Interstate 10, the major highway in the area. Airport access
to the area includes Palm Springs Regional Airport, Ontario International
Airport and Los Angeles International Airport. Other lodging facilities located
in proximity to the Courtyard Palm Desert and Residence Inn Palm Desert
Properties include the Marriott Desert Springs, an Embassy Suites, the Shadow
Mountain Resort, the Indian Wells Resort, the Miramonte Resort and the
Renaissance Esmeralda. The average occupancy rate, the average daily room rate
and the revenue per available room for the periods the hotels have been
operational are as follows:
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Courtyard Palm Desert Property Residence Inn Palm Desert Property
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Average Average Revenue Average Average Revenue
Occupancy Daily Room per Available Occupancy Daily Room per Available
Year Rate Rate Room Rate Rate Room
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*1999 50.50% $ 92.33 $46.62 50.50% $122.25 $ 61.74
**2000 82.60% 114.39 94.53 74.80% 166.55 124.54
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* Data for the Courtyard Palm Desert Property represents the period
September 1, 1999 through December 31, 1999 and data for the Residence
Inn Palm Desert Property represents the period February 19, 1999
through December 31, 1999.
** Data for 2000 represents the period January 1, 2000 through April 30,
2000.
The Company believes that the results achieved by the Properties for
1999, as shown in the table above, are not indicative of their long-term
operating potential, as the Properties had only been open since September and
February 1999, respectively.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be filed on its behalf by
the undersigned thereunto duly authorized.
CNL HOSPITALITY PROPERTIES, INC.
Dated: June 26, 2000 By: /s/ Robert A. Bourne
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ROBERT A. BOURNE, President
