Rule 424(b)(3)
No. 333-67787
CNL HOSPITALITY PROPERTIES, INC.
This Supplement is part of, and should be read in conjunction with, the
Prospectus dated March 30, 2000 and the Prospectus Supplement dated June 9,
2000. Capitalized terms used in this Supplement have the same meaning as in the
Prospectus unless otherwise stated herein.
Information as to proposed properties for which the Company has
received initial commitments and as to the number and types of Properties
acquired by the Company is presented as of July 28, 2000, and all references to
commitments or Property acquisitions should be read in that context. Proposed
properties for which the Company receives initial commitments, as well as
property acquisitions that occur after July 28, 2000, will be reported in a
subsequent Supplement.
At the annual meeting of stockholders of the Company, held on May 23,
2000, the stockholders of the Company approved amendments to the Articles of
Incorporation proposed by the Board of Directors to increase the number of
authorized shares of Common Stock and to expand the range of borrowers to which
the Company may make loans. These amendments became effective upon filing with
the Maryland State Department of Assessments and Taxation on June 27, 2000.
RECENT DEVELOPMENTS
On June 16, 2000, the Company acquired a Courtyard(R) by Marriott(R)
and a Residence Inn(R) by Marriott(R) both located in Palm Desert, California.
The Courtyard Palm Desert Property, which opened in September 1999, has 151
guest rooms. The Residence Inn Palm Desert Property, which opened in February
1999, has 130 guest suites. The Courtyard Palm Desert and the Residence Inn Palm
Desert 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.
On July 28, 2000, the Company acquired a SpringHill Suites(TM) by
Marriott(R) located in Gaithersburg, Maryland and a Residence Inn by Marriott
located in Merrifield, Virginia. The Gaithersburg and the Merrifield Properties
both opened in June 2000. The Gaithersburg Property includes 162 guest suites
and approximately 500 square feet of meeting space and the Merrifield Property
includes 159 guest suites, approximately 500 square feet of meeting space and an
exercise room and SportCourt(R). According to Hospitality Valuation Services
(HVS) data, the Merrifield Property is located in one of the fastest growing
areas in the Washington, D.C. area.
As of July 28, 2000, the Company owned interests in 17 Properties and
had commitments to acquire an additional 13 properties. The Company's interests
in the Properties are focused on real estate only, not hotel operations. All of
the Properties owned by the Company are leased on a long-term, triple-net basis
and the hotels are all operated as national hotel chains.
On July 1 and August 1, 2000, the Board of Directors declared a
distribution of $0.0625 per Share to stockholders of record on July 1 and August
1, 2000, respectively, representing an annualized distribution rate of 7.50%.
THE OFFERINGS
Upon completion of its Initial Offering on June 17, 1999, the Company
had received aggregate subscriptions for 15,007,264 Shares totalling
$150,072,637 in Gross Proceeds, including 7,264 Shares ($72,637) issued pursuant
to the Reinvestment Plan. Following the completion of the Initial Offering, the
Company commenced this offering of up to 27,500,000 Shares. As of July 28, 2000,
the Company had received aggregate
August 2, 2000 Prospectus Dated March 30, 2000
<PAGE>
subscriptions for 40,141,141 Shares totalling $401,411,412 in Gross Proceeds,
including 103,782 Shares ($1,037,819) issued pursuant to the Reinvestment Plan
from its Initial Offering and this offering. As of July 28, 2000, net proceeds
to the Company from its offerings of Shares and capital contributions from the
Advisor, after deduction of Selling Commissions, marketing support and due
diligence expense reimbursement fees and Organizational and Offering Expenses,
totalled approximately $355,400,000. The Company has used Net Offering Proceeds
to invest, directly or indirectly, approximately $244,200,000 in 17 hotel
Properties, to pay $5,680,000 as deposits on four additional hotel Properties,
to redeem 75,761 Shares of Common Stock for $696,997 and to pay approximately
$23,100,000 in Acquisition Fees and certain Acquisition Expenses, leaving
approximately $81,700,000 available to invest in Properties and Mortgage Loans.
CONFLICTS OF INTEREST
The following sentence replaces the first sentence in item 3 under the
heading " -- Certain Conflict Resolution Procedures" on page 34 of the
Prospectus.
The Company will not make loans to Affiliates, except (A) to wholly
owned subsidiaries of the Company, or (B) Mortgage Loans to Joint Ventures (and
joint ventures of wholly owned subsidiaries of the Company) in which no
co-venturer is the Sponsor, the Advisor, the Directors or any Affiliate of those
persons or of the Company (other than a wholly owned subsidiary of the Company)
subject to the restrictions governing Mortgage Loans in the Articles of
Incorporation (including the requirement to obtain an appraisal from an
independent expert).
BUSINESS
PROPERTY ACQUISITIONS
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 $3,025,000
per year allocated as follows: $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 $416,000 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 lease.
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 Newark Property,
as described in "-- 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 investment listed above, the
Gaithersburg and Merrifield Properties described below and the Mira
Mesa Property described in the Prospectus under the heading "Business
-- Property Acquisitions," 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 " -- 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.
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. 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:
<TABLE>
<CAPTION>
<S> <C>
Courtyard Palm Desert Property Residence Inn Palm Desert Property
------------------------------------------------------ -----------------------------------------------------
Average Average Revenue Average Average Revenue
Occupancy Daily Room per Available Occupancy Daily Room per Available
Year Rate Rate Room Rate Rate Room
-------------- -------------- -------------- ---------------- -------------- -------------- ----------------
*1999 50.50% $ 92.33 $46.62 50.50% $122.25 $61.74
**2000 68.20% 110.38 75.28 63.60% 149.33 94.97
</TABLE>
* 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 July 26, 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.
SpringHill Suites by Marriott located in Gaithersburg, Maryland. On
July 28, 2000, the Company acquired a SpringHill Suites located in Gaithersburg,
Maryland (the "Gaithersburg Property") for $15,214,600 from SpringHill SMC
Corporation. The Company, as lessor, has entered into a long-term lease
agreement relating to this Property. The general terms of the lease agreement
are described in the Prospectus under the heading " -- Description of Property
Leases." The principal features of the lease are as follows:
o The initial term of the lease expires in 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 of $1,521,460 per year.
o In addition to minimum rent, for each lease year after the second lease
year, the lease requires 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 $468,142 has been retained by the Company
as security for the tenant's obligations under the lease.
o The tenant has established an FF&E Reserve. Deposits to the FF&E
Reserve are made every four weeks as follows: 4% of gross receipts for
the first 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 hotel exceeds minimum rent due under the
lease by 25% for any trailing 12-month period. The maximum amount of
the guarantee is $1,521,460.
o The Gaithersburg Property is one of the Pooled Properties described
above in "Palm Desert Portfolio."
The estimated federal income tax basis of the depreciable portion of
the Gaithersburg Property is approximately $12.8 million.
The Gaithersburg Property, which opened in June 2000, is a SpringHill
Suites by Marriott located in Gaithersburg, Maryland. The Gaithersburg Property
includes 162 guest suites and approximately 500 square feet of meeting space.
The property is located approximately 15 miles northwest of the nation's
capital. Other lodging facilities located in proximity to the Gaithersburg
Property include two Courtyard by Marriott properties and a Quality Suites.
Residence Inn by Marriott located in Merrifield, Virginia. On July 28,
2000, the Company acquired a Residence Inn located in Merrifield, Virginia (the
"Merrifield Property") for $18,816,000 from Residence Inn by Marriott, Inc. The
Company, as lessor, has entered into a long-term lease agreement relating to
this Property. The general terms of the lease agreement are described in the
Prospectus under the heading " -- Description of Property Leases." The principal
features of the lease are as follows:
o The initial term of the lease expires in 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 of $1,881,600 per year.
o In addition to minimum rent, for each lease year after the second lease
year, the lease requires 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 $578,954 has been retained by the Company
as security for the tenant's obligations under the lease.
<PAGE>
o The tenant has established an FF&E Reserve. Deposits to the FF&E
Reserve are made every four weeks as follows: 2% 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 hotel exceeds minimum rent due under the
lease by 25% for any trailing 12-month period. The maximum amount of
the guarantee is $1,881,600.
o The Merrifield Property is one of the Pooled Properties described above
in "Palm Desert Portfolio."
The estimated federal income tax basis of the depreciable portion of
the Merrifield Property is approximately $16.4 million.
The Merrifield Property, which opened in June 2000, is a Residence Inn
by Marriott located in Merrifield, Virginia. The Merrifield Property includes
159 guest suites, approximately 500 square feet of meeting space, an exercise
room and SportCourt(R). The property is located in Fairfax County, which
according to Hospitality Valuation Services (HVS) data, is one of the
fastest-growing areas in the Washington, D.C. area. Located approximately 12
miles west/southwest of the nation's capital, the hotel is within driving
distance of the legislative, judicial and executive branches of the United
States government. Other lodging facilities located in proximity to the
Merrifield Property include a Residence Inn by Marriott, a Homewood Suites and a
Homestead Village.
PENDING INVESTMENTS
As of July 28, 2000, the Company had initial commitments to acquire 13
additional hotel properties. These Properties are three Courtyard by Marriott
properties (one in each of Alpharetta, Georgia; Orlando, Florida and Overland
Park, Kansas), one Fairfield Inn(R) by Marriott(R) (in Orlando, Florida), four
SpringHill Suites(TM) by Marriott(R) (one in each of Centreville, Virginia;
Charlotte, North Carolina; Orlando, Florida and Raleigh/Durham, North Carolina),
one Residence Inn by Marriott (in Cottonwood, Utah) and four TownePlace
Suites(R) by Marriott(R) (one in each of Tewksbury, Massachusetts; Mt. Laurel,
New Jersey; Newark, California and Scarborough, Maine). The acquisition of each
of these properties is subject to the fulfillment of certain conditions. There
can be no assurance that any or all of the conditions will be satisfied or, if
satisfied, that one or more of these properties will be acquired by the Company.
If acquired, the leases of these properties are expected to be entered into on
substantially the same terms described in the section of the Prospectus entitled
"Business -- Description of Property Leases." In order to acquire all of these
properties, the Company must obtain additional funds through the receipt of
additional offering proceeds and/or debt financing.
Leases. Set forth below are summarized terms expected to apply to the
leases for each of the properties. More detailed information relating to a
property and its related lease will be provided at such time, if any, as the
property is acquired.
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Estimated Purchase Lease Term and
Property Price Renewal Options
-------- ----- ---------------
Courtyard by Marriott (2) 15 years; two ten-year
Orlando, FL (1) renewal options
(the "Courtyard Little Lake Bryan
Property")
Hotel under construction
Fairfield Inn by Marriott (2) 15 years; two ten-year
Orlando, FL (1) renewal options
(the "Fairfield Inn Little Lake Bryan
Property")
Hotel under construction
SpringHill Suites by Marriott (2) 15 years; two ten-year
Orlando, FL (1) renewal options
(the "SpringHill Suites Little Lake
Bryan Property")
Hotel under construction
TownePlace Suites $13,600,000 15 years; two ten-year
Newark, CA (3) renewal options
(the "TownePlace Suites Newark Property")
Hotel under construction
Courtyard by Marriott $13,877,000 15 years; two ten-year
Alpharetta, GA (4) renewal options
(the "Courtyard Alpharetta
Property")
Existing hotel
Courtyard by Marriott $15,790,000 15 years; two ten-year
Overland Park, KS (4) renewal options
(the "Courtyard Overland
Park Property")
Hotel under construction
Residence Inn by Marriott $14,573,000 15 years; two ten-year
Cottonwood, UT (4) renewal options
(the "Residence Inn
Cottonwood Property")
Existing hotel
SpringHill Suites by Marriott $11,414,000 15 years; two ten-year
Centreville, VA (4) renewal options
(the "SpringHill Suites
Centreville Property")
Hotel under construction
SpringHill Suites by Marriott $11,773,000 15 years; two ten-year
Charlotte, NC (4) renewal options
(the "SpringHill Suites
Charlotte Property")
Hotel under construction
SpringHill Suites by Marriott $8,822,000 15 years; two ten-year
Raleigh/Durham, NC (4) renewal options
(the "SpringHill Suites
Raleigh/Durham Property")
Hotel under construction
TownePlace Suites by Marriott $9,050,000 15 years; two ten-year
Tewksbury, MA (4) renewal options
(the "TownePlace Suites
Tewksbury Property")
Existing hotel
TownePlace Suites by Marriott $7,711,000 15 years; two ten-year
Mt. Laurel, NJ (4) renewal options
(the "TownePlace Suites
Mt. Laurel Property")
Existing hotel
TownePlace Suites by Marriott $7,160,000 15 years; two ten-year
Scarborough, ME (4) renewal options
(the "TownePlace Suites
Scarborough Property")
Existing hotel
</TABLE>
<PAGE>
Minimum Annual
Rent Percentage Rent
---- ---------------
10% of the Company's total cost for each lease year after the
to purchase the property second lease year, 7% of revenues
in excess of revenues for the
second lease year
10% of the Company's total cost for each lease year after the
to purchase the property second lease year, 7% of revenues
in excess of revenues for the
second lease year
10% of the Company's total cost for each lease year after the
to purchase the property second lease year, 7% of revenues
in excess of revenues for the
second lease year
10% of the Company's total cost for each lease year after the
to purchase the property second lease year, 7% of revenues
in excess of revenues for the
second lease year
10% of the Company's total cost for each lease year after the
to purchase the property second lease year, 7% of revenues
in excess of revenues for the
second lease year
10% of the Company's total cost for each lease year after the
to purchase the property second lease year, 7% of revenues
in excess of revenues for the
second lease year
10% of the Company's total cost for each lease year after the
to purchase the property second lease year, 7% of revenues
in excess of revenues for the
second lease year
10% of the Company's total cost for each lease year after the
to purchase the property second lease year, 7% of revenues
in excess of revenues for the
second lease year
10% of the Company's total cost for each lease year after the
to purchase the property second lease year, 7% of revenues
in excess of revenues for the
second lease year
10% of the Company's total cost for each lease year after the
to purchase the property second lease year, 7% of revenues
in excess of revenues for the
second lease year
10% of the Company's total cost for each lease year after the
to purchase the property first lease year, 7% of revenues
in excess of proforma revenues for
the second lease year, and 7% of
revenues in excess of actual
revenues for the third lease year
and each lease year thereafter
10% of the Company's total cost for each lease year after the
to purchase the property first lease year, 7% of revenues
in excess of proforma revenues for
the second lease year, and 7% of
revenues in excess of actual
revenues for the third lease year
and each lease year thereafter
10% of the Company's total cost for each lease year after the
to purchase the property first lease year, 7% of revenues
in excess of proforma revenues for
the second lease year, and 7% of
revenues in excess of actual
revenues for the third lease year
and each lease year thereafter
<PAGE>
--------------------------------
FOOTNOTES:
(1) The leases for the Courtyard Little Lake Bryan, the Fairfield Inn
Little Lake Bryan and the SpringHill Suites Little Lake Bryan
Properties are expected to be with the same unaffiliated lessee.
(2) The anticipated aggregate purchase price for the Courtyard Little Lake
Bryan, Fairfield Inn Little Lake Bryan and SpringHill Suites Little
Lake Bryan Properties is approximately $100 million.
(3) The Company may be obligated to fund up to an additional $1 million in
construction costs relating to this Property.
(4) The leases for the Courtyard Alpharetta, the Courtyard Overland Park,
the Residence Inn Cottonwood, the SpringHill Suites Centreville, the
SpringHill Suites Charlotte, the SpringHill Suites Raleigh/Durham, the
TownePlace Suites Tewksbury, the TownePlace Suites Mt. Laurel and the
TownePlace Suites Scarborough Properties are expected to be with the
same unaffiliated lessee.
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
In addition, the following sentence replaces item 16 under the heading
" -- Certain Investment Limitations" on page 97 of the Prospectus.
The Company will not make loans to the Advisor or its Affiliates,
except (A) to wholly owned subsidiaries of the Company, or (B) Mortgage Loans to
Joint Ventures (and joint ventures of wholly owned subsidiaries of the Company)
in which no co-venturer is the Sponsor, the Advisor, the Directors or any
Affiliate of those persons or of the Company (other than a wholly owned
subsidiary of the Company) to the restrictions governing Mortgage Loans in the
Articles of Incorporation (including the requirement to obtain an appraisal from
an independent expert).
SUMMARY OF THE
ARTICLES OF INCORPORATION AND BYLAWS
The following sentence replaces the first sentence of the first
paragraph under the heading " -- Description of Capital Stock" on page 100 of
the Prospectus.
The Company has authorized a total of 216,000,000 shares of capital
stock, consisting of 150,000,000 shares of Common Stock, $0.01 par value per
share, 3,000,000 shares of Preferred Stock ("Preferred Stock"), and 63,000,000
additional shares of excess stock ("Excess Shares"), $0.01 par value per share.
The fourth and fifth sentences in the second paragraph under the
heading "Prospectus Summary -- CNL Hospitality Properties, Inc. -- Our Business"
on page 5 of the Prospectus and the second paragraph under the heading "Summary
of the Articles of Incorporation and Bylaws -- Description of Capital Stock" on
page 100 of the Prospectus are deleted in their entirety.
