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CNL HOSPITALITY PROPERTIES, INC.
Supplement No. 3, dated December 12, 2000
to Prospectus, dated May 23, 2000
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This Supplement is part of, and should be read in conjunction with, the
Prospectus dated May 23, 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 November 21, 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 November 21, 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 November 3, 2000, the Company acquired a TownePlace Suites(R) by
Marriott(R) located in Newark, California. The Newark Property, which opened in
September 2000, includes 127 guest suites, an outdoor swimming pool , an
exercise room and guest laundry facilities. The Property is located in Alameda
County, adjacent to Santa Clara County, which is considered to be the heart of
Silicon Valley.
On November 21, 2000, the Company acquired a Courtyard(R) by
Marriott(R) and a Fairfield Inn(R) by Marriott(R) both located in Orlando,
Florida, in the community of Little Lake Bryan. The Courtyard Little Lake Bryan
Property, which opened in October 2000, includes 312 guest rooms, 3,500 square
feet of meeting space, four executive board rooms, a poolside bar and grill, a
breakfast cafe, a fitness center, an indoor/outdoor whirlpool and a beach entry
indoor/outdoor swimming pool. The Fairfield Inn Little Lake Bryan Property,
which also opened in October 2000, includes 388 guest rooms, a poolside bar and
grill, a fitness center, a whirlpool and an outdoor swimming pool . The
Properties are located at the entrance to Lake Buena Vista and close to
Orlando's entertainment attractions. Central Florida is home to eight theme
parks and the Orange County Convention Center is one of the largest convention
centers in the country.
As of November 21, 2000, the Company owned interests in 25 Properties
and had commitments to acquire an additional five properties directly and an
interest in one property through a joint venture. 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 October 1, November 1 and December 1, 2000, the Board of Directors
declared a distribution of $0.0625 per Share to stockholders of record on
October 1, November 1 and December 1, 2000, respectively, representing an
annualized distribution rate of 7.50%.
<PAGE>
PROSPECTUS SUMMARY
OUR BUSINESS
The following paragraph is inserted after the second paragraph under
the heading " -- Our Business" on page 5 of the Prospectus.
We will borrow money to acquire properties, make mortgage loans and
secured equipment leases, and pay related fees and intend to encumber properties
in connection with the borrowing. We plan to obtain one or more revolving lines
of credit in an aggregate amount up to $200,000,000, and may also obtain
permanent financing. The Board of Directors anticipates that the aggregate
amounts of any lines of credit will be up to $200,000,000; however, the Board of
Directors may increase the amount we can borrow under lines of credit. We do not
anticipate that the aggregate amount of the permanent financing will exceed 30%
of our total assets. However, our Articles of Incorporation limit the maximum
amount of borrowing in relation to our net assets, in the absence of a
satisfactory showing that a higher level of borrowing is appropriate, to 300% of
our net assets. In order to borrow an amount in excess of 300% of our net
assets, a majority of our independent directors must approve the borrowing, and
the borrowing will be disclosed and explained to stockholders in our first
quarterly report after such approval occurs.
OUR INVESTMENT OBJECTIVES
The following sentence is inserted after the first paragraph on page 8
under the heading " -- Our Investment Objectives" of the Prospectus.
We depreciate buildings and equipment on the straight-line method over
their estimated useful lives of 40 and 7 years, respectively.
THE OFFERINGS
GENERAL
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 the 1999 Offering of up to 27,500,000 Shares. On September 14,
2000, the 1999 Offering closed upon receipt of subscriptions totalling
approximately $275,000,000. Following completion of the 1999 Offering on
September 14, 2000, the Company commenced this offering of up to 45,000,000
Shares. As of November 21, 2000, the Company had received aggregate
subscriptions for 47,174,442 Shares totalling $471,744,422 in gross proceeds,
including 136,974 Shares ($1,369,740) issued pursuant to the Reinvestment Plan
from its Initial Offering, the 1999 Offering and this offering. As of November
21, 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 $418,400,000. The
Company has used the net offering proceeds to invest, directly or indirectly,
approximately $345,500,000 in 25 hotel Properties, to pay $1,769,000 as a
deposit on one additional hotel Property, to redeem 140,450 Shares of Common
Stock for $1,292,142 and to pay approximately $24,200,000 in Acquisition Fees
and certain Acquisition Expenses, leaving approximately $45,700,000 available to
invest in Properties and Mortgage Loans. See "Business -- Pending Investments"
for information on the five properties the Company has entered into commitments
to acquire directly and the interest in one property through a joint venture.
The following information updates and replaces the last paragraph on
page 123 of the Prospectus.
A maximum of 45,000,000 Shares ($450,000,000) are being offered at a
purchase price of $10.00 per Share. Included in the 45,000,000 Shares offered,
the Company has registered 5,000,000 Shares ($50,000,000) available only to
stockholders purchasing Shares in this offering who receive a copy of this
Prospectus or to stockholders who purchased Shares in one of the Prior Offerings
and who received a copy of the related prospectus and who elect to participate
in the Reinvestment Plan. Prior to the conclusion of this offering, if any of
the 5,000,000 Shares remain after meeting anticipated obligations under the
Reinvestment Plan, the Company may decide to sell a portion of these Shares in
this offering. Any participation in such plan by a person who becomes a
stockholder otherwise than by participating in this offering will require
solicitation under a separate prospectus. See "Summary of Reinvestment Plan."
The Board of Directors may determine to engage in future offerings of Common
Stock of up to the number of unissued authorized shares of Common Stock
available following termination of this offering.
MANAGEMENT COMPENSATION
For information concerning compensation and fees paid to the Advisor
and its Affiliates since the date of inception of the Company, see "Certain
Transactions."
CONFLICTS OF INTEREST
The following sentence replaces the first sentence in item 3 under the
heading " -- Certain Conflict Resolution Procedures" on page 35 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
GENERAL
The following information updates and replaces the second paragraph on
page 42 and the last paragraph on page 43 of the Prospectus.
Revenue per available room increased by 3.2% from $49.86 in 1998 to
$51.44 in 1999. In 1999, growth in room supply exceeded growth in room demand
and resulted in a decrease in occupancy. In 1999, total occupancy fell 0.8% from
63.8% in 1998 to 63.3%. Growth in room demand exceeded the growth in new room
supply for each year from 1992 through 1996 and industry-wide occupancy
increased from a 20 year low of 61.8% in 1991 to 65% in 1996. Demand in the
hospitality industry has increased in 11 of the past 12 years, with an average
compounded growth rate of 2.2% between 1987 and 1999.
As of November 21, 2000, the Company had acquired, directly or
indirectly, 25 hotel Properties consisting of land, building and equipment and
had initial commitments to acquire five additional Properties directly and an
interest in one property through a joint venture. However, as of November 21,
2000, the Company had not entered into any arrangements that create a reasonable
probability that the Company will enter into any Mortgage Loan or Secured
Equipment Lease.
PROPERTY ACQUISITIONS
Western International Portfolio.
The following information updates and replaces the fifth and sixth
paragraph on page 46 of the Prospectus.
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 ("Class B Preferred Stock"). In October 2000, Five Arrows, the Company and
Hotel Investors entered into an agreement under which Hotel Investors agreed to
redeem 2,104 shares of Class A Preferred Stock and an equivalent number of
shares of common stock of Hotel Investors held by Five Arrows for $2,104,000. In
addition, the Company purchased 7,563 shares of both Class A Preferred Stock and
common stock of Hotel Investors from Five Arrows for $11,395,000. Hotel
Investors agreed to redeem 1,653 shares of Class B Preferred Stock and an
aggregate of 10,115 shares of common stock of Hotel Investors held by the
Company for $1,653,000. Five Arrows' remaining 38,670 shares of Class A
Preferred Stock and the Company's 7,563 shares of Class A Preferred Stock were
exchanged for an equivalent number of shares of Class E Preferred Stock, par
value $0.01 ("Class E Preferred Stock"), of Hotel Investors. Upon the
consummation of this transaction, the Company owns an interest of approximately
53% and Five Arrows owns an interest of approximately 47%, in the common stock
of Hotel Investors. Pursuant to this agreement, the Company repurchased 65,285
Shares held by Five Arrows for an aggregate price of $620,207. Additionally,
Five Arrows granted the Company the following options: (1) on or before January
31, 2001, the Company has the option to purchase 7,250 shares of 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 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.
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. Five Arrows has agreed to forfeit its
priority cash distributions from Hotel Investors. 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.
Wyndham Portfolio. On June 1, 2000, the Company acquired two hotel
Properties. The Properties are a WyndhamSM Hotel located in Billerica,
Massachusetts, a suburb of Boston (the "Wyndham BillericaSM Property"), and a
Wyndham Hotel located in Denver, Colorado, in the Denver Tech Center (the
"Wyndham Denver Tech CenterSM Property").
The Company acquired the Wyndham Billerica Property for $25,092,000
from PAH Billerica Realty Company, LLC and the Wyndham Denver Tech Center
Property for $18,353,000 from WII Denver Tech, LLC. In connection with the
purchase of the two Properties, the Company, as lessor, entered into two
separate, long-term lease agreements. The leases on both Properties are
cross-defaulted. The general terms of the lease agreements are described in the
section of the Prospectus entitled "Business -- Description of Property Leases."
The principal features of the leases are as follows:
o The initial term of each lease is approximately 15 years.
o At the end of the initial lease term, the tenant will have three
consecutive renewal options of five years each.
o The leases require minimum rent payments to the Company of $2,509,200
per year for the Wyndham Billerica Property and $1,835,300 per year for
the Wyndham Denver Tech Center Property.
o Minimum rent payments will increase to $2,571,930 per year for the
Wyndham Billerica Property and $1,881,183 per year for the Wyndham
Denver Tech Center Property after the first lease year.
o In addition to minimum rent, for each calendar year, the leases require
percentage rent equal to 10% of the aggregate amount of all revenues
combined, for the Wyndham Billerica and the Wyndham Denver Tech Center
Properties, in excess of $13,683,000.
o A security deposit equal to $1,254,600 for the Wyndham Billerica
Property and $917,650 for the Wyndham Denver Tech Center Property has
been retained by the Company as security for the tenant's obligations
under the leases.
o Management fees payable to Wyndham International, Inc. for operation of
the Wyndham Billerica and Wyndham Denver Tech Center Properties are
subordinated to minimum rents due to the Company.
o The tenant of the Wyndham Billerica and Wyndham Denver Tech Center
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.
In connection with the acquisition of these two Properties, the Company
may be required to make an additional payment (the "Earnout Amount") of up to
$2,471,500 if certain earnout provisions are achieved by June 1, 2003. After
June 1, 2003, 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 the earnout factor (7.33), and the initial purchase price. Rental income will
be adjusted upward in accordance with the lease agreements for any such amount
paid.
The federal income tax basis of the depreciable portion of the Wyndham
Billerica Property and the Wyndham Denver Tech Center Property is approximately
$22.7 million and $15.5 million, respectively.
The Wyndham Billerica Property, which opened in May 1999, is a Wyndham
Hotel with a new prototype design located in Billerica, Massachusetts, a suburb
of Boston. The Wyndham Billerica Property has 210 guest rooms, including 14
suites, 4,346 square feet of meeting space, a 64-seat restaurant, a 33-seat
lounge, a library, an indoor pool and a fitness center and spa. Other lodging
facilities located in proximity to the Wyndham Billerica Property include a
Courtyard by Marriott, a Doubletree Hotel, a Homewood Suites, a Marriott, a
Renaissance(R) Hotel and a Wyndham Garden(R) Hotel.
The Wyndham Denver Tech Center Properties, which opened in November
1999, is a Wyndham Hotel with a new prototype design located in Denver,
Colorado. The Wyndham Denver Tech Center Property has 180 guest rooms, including
18 suites, 4,040 square feet of meeting space, a 64-seat restaurant, a 33-seat
lounge, a library, an indoor pool and a fitness center and spa. Other lodging
facilities located in proximity to the Wyndham Denver Tech Center Property
include a Hyatt Regency, a Marriott, an Embassy Suites, a Sheraton Hotel, a
Hilton and a Summerfield Suites by WyndhamSM. 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>
Wyndham Billerica Property Wyndham Denver Tech Center 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 60.25% $109.38 $65.89 31.17% $76.40 $23.76
**2000 77.40% 119.86 92.77 66.60% 90.90 60.54
</TABLE>
* Data for the Wyndham Billerica Property represents the period May 15,
1999 through December 31, 1999 and data for the Wyndham Denver Tech
Center Property represents the period November 15, 1999 through
December 31, 1999.
** Data for 2000 represents the period January 1, 2000 through October 31,
2000.
The Company believes that the results achieved by the Properties, as
shown in the table above, may or may not be indicative of their long-term
operating potential, as the Properties had only been open since May and November
1999, respectively.
Wyndham Brands. The brand, Wyndham Hotels & Resorts(R), is part of
Wyndham International, Inc.'s portfolio of lodging brands. According to
Wyndham's company overview, Wyndham International, Inc. is one of the world's
largest hospitality and lodging companies serving business and leisure travelers
with hotels and resorts located in major metropolitan business centers and
leading vacation markets in the United States, Canada, the Caribbean, Mexico and
Europe.
Palm Desert Portfolio. On June 16, 2000, the Company acquired two hotel
Properties. The Properties are a Courtyard by Marriott and a Residence Inn(R)
by Marriott(R), 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 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 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 an 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 was $3,025,000. Upon acquisition of the Newark Property
on November 3, 2000, the maximum amount of the guarantee increased to
$6,405,400 and the guarantee covers minimum rent payments for the
Gaithersburg , Merrifield and Newark 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"). 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, the leases for the Courtyard Little Lake Bryan and
Fairfield Inn Little Lake Bryan Properties (collectively, the "Little
Lake Bryan Properties"), described below in "Little Lake Bryan
Properties," contain cross-default terms with respect to the leases for
the Pooled Properties, meaning that if the tenant to either of the
Little Lake Bryan Properties or the Pooled Properties defaults on its
obligations under its leases, the Company will have the ability to
pursue its remedies under the leases with respect to 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 $12.9 million and $15.6 million, 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 75.90% 109.88 83.45 69.70% 109.27 76.18
</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 October 17,
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 SuitesTM by Marriott(R) 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. See the seventh bullet point under
the heading "- Palm Desert Portfolio" above.
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 $13.6 million.
<PAGE>
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.
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. See the seventh bullet point under
the heading " - Palm Desert Portfolio" above.
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 $17.5 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.
<TABLE>
<CAPTION>
<S> <C>
Gaithersburg Property Merrifield Property
--------------------------------------------------- ---------------------------------------------------
Average Average Revenue Average Average Revenue
Occupancy Daily Room per Available Occupancy Daily Room per Available
Year Rate Rate Room Rate Rate Room
------------ ------------- --------------- ---------------- ------------- --------------- ---------------
*2000 62.70% $95.47 $59.91 68.20% $135.70 $92.57
</TABLE>
* Data for the Gaithersburg Property represents the period June 30, 2000
through November 3, 2000 and data for the Merrifield Property
represents the period June 24, 2000 through November 3, 2000.
Courtyard by Marriott located in Alpharetta, Georgia, Residence Inn by
Marriott located in Salt Lake City, Utah and three TownePlace Suites by Marriott
located in Mt. Laurel, New Jersey, Scarborough, Maine and Tewksbury,
Massachusetts. On August 22, 2000, the Company purchased five Properties for an
aggregate purchase price of approximately $52 million. The Properties are a
Courtyard by Marriott located in Alpharetta, Georgia (the "Alpharetta
Property"), a Residence Inn by Marriott located in Salt Lake City, Utah, in the
community of Cottonwood (the "Cottonwood Property") and three TownePlace Suites
Properties located in each of Mt. Laurel, New Jersey (the "Mt. Laurel
Property"), Scarborough, Maine (the "Scarborough Property") and Tewksbury,
Massachusetts (the "Tewksbury Property").
The Company acquired the Alpharetta Property for $13,877,000 from
Courtyard Management Corporation, the Cottonwood Property for $14,573,000 from
Residence Inn by Marriott, Inc. and the Mt. Laurel, Scarborough and Tewksbury
Properties for $7,711,000, $7,160,000 and $9,050,000, respectively, from
TownePlace Management Corporation. In connection with the purchase of the five
Properties, the Company, as lessor, entered into five separate, long-term lease
agreements. The tenant of the Properties is the same unaffiliated lessee. The
leases for the five Properties are cross-defaulted. The general terms of the
lease agreements are described in the section of the Prospectus entitled
"Business -- Description of Property Leases." The principal features of the
leases are as follows:
o The initial term of each 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.
o The leases require minimum rent payments as follows:
Minimum
Property Location Annual Rent
----------------------- ---------------------- ---------------
Alpharetta Property Alpharetta, GA $1,387,700
Cottonwood Property Salt Lake City, UT 1,457,300
Mt. Laurel Property Mt. Laurel, NJ 771,100
Scarborough Property Scarborough, ME 716,000
Tewksbury Property Tewksbury, MA 905,000
o A security deposit for each of the Properties has been retained by the
Company as security for the tenant's obligations under the leases as
follows:
Alpharetta Property $693,850
Cottonwood Property 728,650
Mt. Laurel Property 385,550
Scarborough Property 358,000
Tewksbury Property 452,500
o The tenant of the five Properties has established an FF&E Reserve for
each Property which will be used for the replacement and renewal of
furniture, fixtures and equipment relating to the hotel Properties.
Deposits to the FF&E Reserve are made once every four weeks as follows:
(i) for the Alpharetta Property, 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, (ii) for the Cottonwood
Property, 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 and (iii) for the Mt. Laurel, Scarborough and
Tewksbury Properties, 4% of gross receipts for the first lease year; 5%
of gross receipts for the second lease year; and 6% 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 entered into an agreement with the
tenant in which Marriott International, Inc. has agreed to advance and
loan to the tenant any amounts needed to pay minimum rent under the
leases (the "Liquidity Facility Agreement"). The Liquidity Facility
Agreement terminates on the earlier of the end of the fourth lease year
or at such time as the net operating income from the Properties exceeds
minimum rent due under the leases by 25% for any trailing 12-month
period. The maximum amount of the liquidity facility is $5,237,100.
Upon acquisition of the Courtyard Overland Park Property and the three
SpringHill Suites by Marriott Properties located in Centreville,
Virginia, and Charlotte and Raleigh, North Carolina, as described in
"-- Pending Investments," the maximum amount of the liquidity facility
will increase to $10,017,000 and the agreement will cover minimum rent
payments for the pending investments listed above, in addition to these
five Properties. From such time, net operating income from all nine
properties will be pooled in determining whether the properties'
aggregate net operating income exceeds the aggregate minimum rent due
under the lease by 25%. The tenant has assigned its rights to receive
advances under the Liquidity Facility Agreement to the lessor.
The estimated federal income tax basis of the depreciable portion of
the five Properties is as follows:
Alpharetta Property $12,300,000
Cottonwood Property 13,100,000
Mt. Laurel Property 7,000,000
Scarborough Property 6,700,000
Tewksbury Property 8,600,000
The Alpharetta Property, which opened in January 2000, is a Courtyard
by Marriott located in Alpharetta, Georgia. The Alpharetta Property includes 153
guest rooms, two meeting rooms with approximately 1,100 square feet, an indoor
pool and spa, an exercise room and a restaurant and lounge. The property is
located approximately 26 miles north of downtown Atlanta. Other lodging
facilities located in proximity to the Alpharetta Property include an
AmeriSuites, a Hampton Inn & Suites, a Residence Inn by Marriott, a SpringHill
Suites by Marriott and a Sumner Suites.
The Cottonwood Property, which opened in August 1999, is a Residence
Inn by Marriott located in Salt Lake City, Utah, in the community of Cottonwood.
The Cottonwood Property includes 144 guest rooms, a 690 square foot meeting
room, an outdoor pool and spa, a SportCourt and an exercise room. Other lodging
facilities located in proximity to the Cottonwood Property include a Candlewood
Suites, a Homewood Suites and a Residence Inn by Marriott.
The Mt. Laurel Property, which opened in November 1999, is a TownePlace
Suites by Marriott located in Mt. Laurel, New Jersey. The Mt. Laurel Property
includes 95 guest rooms, an outdoor swimming pool and an exercise room. The
property is located within 15 miles of downtown Philadelphia, Pennsylvania.
Other lodging facilities located in proximity to the Mt. Laurel Property include
a Courtyard by Marriott and a Fairfield Inn by Marriott.
The Scarborough Property, which opened in June 1999, is a TownePlace
Suites by Marriott located in Scarborough, Maine, which is a suburb of Portland.
The Scarborough Property includes 95 guest rooms, an outdoor swimming pool and
an exercise room. Other lodging facilities located in proximity to the
Scarborough Property include an AmeriSuites, a Comfort Inn, a Fairfield Inn by
Marriott, a Hampton Inn, a Residence Inn by Marriott and another TownePlace
Suites by Marriott.
The Tewksbury Property, which opened in July 1999, is a TownePlace
Suites by Marriott located in Tewksbury, Massachusetts. The Tewksbury Property
includes 95 guest rooms, an outdoor swimming pool and an exercise room. The
property is located approximately 25 miles northwest of downtown Boston. Other
lodging facilities located in proximity to the Tewksbury Property include a
Hawthorn Suites, a Homewood Suites, a Residence Inn by Marriott and another
TownePlace Suites by Marriott.
<PAGE>
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>
Revenue
Average Average per
Occupancy Daily Available
Property Location Year Rate Room Rate Room
---------------------------- -------------------- ---------- ------------- ------------- ----------
Alpharetta Property Alpharetta, GA **2000 53.60% $97.10 $52.06
Cottonwood Property Salt Lake City, UT *1999 29.20% $85.10 $27.00
**2000 68.50% 89.59 61.37
Mt. Laurel Property Mt. Laurel, NJ *1999 26.10% $55.65 $15.04
**2000 70.30% 67.87 47.70
Scarborough Property Scarborough, ME *1999 65.70% $70.38 $47.44
**2000 71.80% 65.35 46.94
Tewksbury Property Tewksbury, MA *1999 72.60% $83.16 $62.60
**2000 85.20% 90.87 77.39
</TABLE>
* Data for the Cottonwood Property represents the period August 11, 1999
through December 31, 1999, data for the Mt. Laurel Property represents
the period November 22, 1999 through December 31, 1999, data for the
Scarborough Property represents the period June 25, 1999 through
December 31, 1999 and data for the Tewksbury Property represents the
period July 15, 1999 through December 31, 1999.
** Data for the Alpharetta Property represents the period January 7, 2000
through November 3, 2000 and data for the Cottonwood, Mt. Laurel,
Scarborough and Tewksbury Properties represents the period January 1,
2000 through November 3, 2000.
The Company believes that the results achieved by the Properties, as
shown in the table above, may or may not be indicative of their long-term
operating potential, as the Properties opened between June 1999 and January
2000.
TownePlace Suites by Marriott located in Newark, California. On
November 3, 2000, the Company acquired a TownePlace Suites located in Newark,
California (the "Newark Property") for $13,600,000 from TownePlace Management
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 $1,360,000 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 $418,462 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: 4% of gross receipts for
the first lease year; 5% of gross receipts for the second lease year;
and 6% 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. See the seventh bullet point under
the heading " - Palm Desert Portfolio" above.
o The Newark Property is one of the Pooled Properties described in the
Prospectus Supplement dated October 23, 2000, under the heading " --
Palm Desert Portfolio."
The estimated federal income tax basis of the depreciable portion of
the Newark Property is approximately $11.4 million.
The Newark Property, which opened in September 2000, is a TownePlace
Suites by Marriott located in Newark, California. The Newark Property includes
127 guest suites, an outdoor swimming pool, an exercise room and guest laundry
facilities. The Property is located in Alameda County, adjacent to Santa Clara
County, which is considered to be the heart of the Silicon Valley. Other lodging
facilities located in proximity to the Newark Property include an Extended Stay
America, a Homestead Village, two Residence Inn by Marriott hotels and a
Woodfin Suites. The average occupancy rate, the average daily room rate and the
revenue per available room for the period the hotel has been operational is as
follows:
Newark Property
-----------------------------------------------------
Average Average Revenue
Occupancy Daily Room Rate per Available
Year Rate Room
------------ ------------ ---------------- ----------------
*2000 92.10% $88.27 $81.27
* Data for the Newark Property represents the period September 1, 2000
through November 3, 2000.
The Company believes that the results achieved by the Property, as
shown in the table above, may or may not be indicative of its long-term
operating potential, as the Property opened in September 2000.
Little Lake Bryan Properties. On November 21, 2000, the Company
acquired two hotel Properties. The Properties are a Courtyard by Marriott and a
Fairfield Inn by Marriott, both located in Orlando, Florida, in the community of
Little Lake Bryan (the "Courtyard Little Lake Bryan Property" and the "Fairfield
Inn Little Lake Bryan Property").
The Company acquired the Little Lake Bryan Properties for an aggregate
purchase price of $66,877,680 from Marriott International, Inc. In connection
with the purchase of the two Properties, the Company, as lessor, entered into
two separate, long-term lease agreements with the same unaffiliated lessee. The
general terms of the lease agreements are described in the section of the
Prospectus entitled " -- Description of Property Leases." The principal features
of the lease are as follows:
o The initial term of each lease is approximately 15 years.
o At the end of the initial term of each lease, the tenant will have two
consecutive renewal options of ten years each.
o The leases require minimum rent payments of $3,766,360 per year for the
Courtyard Little Lake Bryan Property and $3,255,795 per year for the
Fairfield Inn Little Lake Bryan Property.
o In addition to minimum rent, for each lease year after the second lease
year, each 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 $1,103,695 for the Courtyard Little Lake
Bryan Property and $954,079 for the Fairfield Inn Little Lake Bryan
Property has been retained by the Company as security for the tenant's
obligations under the leases.
o The tenant of the Courtyard Little Lake Bryan and Fairfield Inn Little
Lake Bryan Properties has established an FF&E Reserve. Deposits to the
FF&E Reserve for the Courtyard Little Lake Bryan Property are made
every four weeks 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. Deposits to the FF&E Reserve for
the Fairfield Inn Little Lake Bryan Property 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 each 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 applicable property exceeds minimum rent due
under the lease by 25% for any trailing 12-month period. The aggregate
maximum amount of the guarantee is $6,755,700. Upon acquisition of the
SpringHill Suites by Marriott in Orlando, Florida (the "SpringHill
Suites Little Lake Bryan Property"), as described in "-- Pending
Investments," the maximum amount of the guarantee will increase to
$10,433,632 and the guarantee will also cover minimum rent payments for
the SpringHill Suites Little Lake Bryan Property. From such time, net
operating income from the Little Lake Bryan Properties will be pooled
with the SpringHill Suites Little Lake Bryan Property in determining
whether the three Properties' aggregate net operating income exceeds
the aggregate minimum rent due under the leases by 25%.
o In addition, the leases for the Little Lake Bryan Properties contain
cross-default terms with respect to the leases for the Pooled
Properties, meaning that if the tenant to either 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 the Little Lake Bryan
Properties and the Pooled Properties, regardless of whether the tenant
of any such Property is in default under its lease.
The federal income tax basis of the depreciable portion of the
Courtyard Little Lake Bryan Property and the Fairfield Inn Little Lake Bryan
Property is approximately $30.5 million and $26.4 million, respectively.
The Courtyard Little Lake Bryan Property, which opened in October 2000,
has 312 guest rooms, 3,500 square feet of meeting space, four executive board
rooms, a poolside bar and grill, a breakfast cafe, a fitness center, an
indoor/outdoor whirlpool and a beach entry indoor/outdoor swimming pool. The
Fairfield Inn Little Lake Bryan Property, which also opened in October 2000, has
388 guest rooms, a poolside bar and grill, a fitness center, a whirlpool and an
outdoor swimming pool. The hotel Properties are located close to SeaWorld(R)
Orlando. Central Florida is home to eight theme parks and the Orange County
Convention Center is one of the largest convention centers in the country. Other
lodging facilities located in proximity to the Courtyard Little Lake Bryan and
Fairfield Little Lake Bryan Properties include a DoubleTree Guest Suites, a
Holiday Inn, a Homewood Suites and a Sheraton World Resort. 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 Little Lake Bryan Property Fairfield Inn Little Lake Bryan Property
-------------------------------------------------- --------------------------------------------------
Average Average Revenue Average Average Revenue
Occupancy Daily Room per Available Occupancy Daily Room per Available
Year Rate Rate Room Rate Rate Room
------------ ------------- --------------- ---------------- ------------- --------------- ---------------
*2000 69.00% $91.07 $62.81 59.30% $70.41 $41.75
</TABLE>
* Data for 2000 represents the period October 16, 2000 through November
24, 2000.
The Company believes that the results achieved by the Properties, as
shown in the table above, may or may not be indicative of their long-term
operating potential, as the Properties opened in October 2000.
<PAGE>
PENDING INVESTMENTS
The following information updates and replaces the last two paragraphs
on page 53, the table beginning on page 54 and the chart on page 60 of the
Prospectus.
As of November 21, 2000, the Company had initial commitments to acquire
five additional hotel properties directly. The five properties are a Courtyard
by Marriott (in Overland Park, Kansas) and four SpringHill Suites by Marriott
hotels (one in each of Centreville, Virginia; Charlotte, North Carolina;
Orlando, Florida and Raleigh/Durham, North Carolina) . 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 five 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 Minimum Annual
Property Price Renewal Options Rent Percentage Rent
-------- ----- --------------- ---- ---------------
SpringHill Suites by Marriott $36,779,320 15 years; two ten- 10% of the Company's total for each lease year after the
Orlando, FL year renewal options cost to purchase the property second lease year, 7% of
(the "SpringHill Suites Little revenues in excess of revenues
Lake Bryan Property") for the second lease year
Hotel under construction
Courtyard by Marriott $15,790,000 15 years; two ten- 10% of the Company's total for each lease year after the
Overland Park, KS (1) year renewal options cost to purchase the property second lease year, 7% of
(the "Courtyard Overland revenues in excess of revenues
Park Property") for the second lease year
Hotel under construction
SpringHill Suites by Marriott $11,414,000 15 years; two ten- 10% of the Company's total for each lease year after the
Centreville, VA (1) year renewal options cost to purchase the property second lease year, 7% of
(the "SpringHill Suites revenues in excess of revenues
Centreville Property") for the second lease year
Hotel under construction
SpringHill Suites by Marriott $11,773,000 15 years; two ten- 10% of the Company's total for each lease year after the
Charlotte, NC (1) year renewal options cost to purchase the property second lease year, 7% of
(the "SpringHill Suites revenues in excess of revenues
Charlotte Property") for the second lease year
Hotel under construction
SpringHill Suites by Marriott $8,822,000 15 years; two ten- 10% of the Company's total for each lease year after the
Raleigh/Durham, NC (1) year renewal options cost to purchase the property second lease year, 7% of
(the "SpringHill Suites revenues in excess of revenues
for the second lease year
</TABLE>
------------------------------
FOOTNOTES:
(1) The leases for the Courtyard Overland Park, the SpringHill Suites
Centreville, the SpringHill Suites Charlotte and the SpringHill Suites
Raleigh/Durham Properties are expected to be with the same unaffiliated
lessee.
<PAGE>
In addition to the above commitments, on August 28, 2000 the Company
entered into an agreement in principle to invest in a property in Phoenix,
Arizona (the "Desert Ridge Property"). The Desert Ridge Property is expected to
be owned by a Joint Venture (the "Desert Ridge Joint Venture") between the
Company, Marriott International, Inc. or an affiliate thereof, and a partnership
of which an Affiliate of the Advisor will be the general partner. The Company is
anticipated to have a 44% equity interest in the Desert Ridge Joint Venture, and
an equivalent interest in the Desert Ridge Joint Venture's profits and losses.
The overall cost of the Property (including acquisition of land, development and
construction) is estimated to be approximately $293,000,000. The Company expects
that the Desert Ridge Joint Venture will obtain permanent financing from a third
party lender for approximately 60% of this amount, with such financing to be
secured by a mortgage on the Desert Ridge Property. In addition, Marriott
International, Inc. or an affiliate thereof is expected to provide financing for
an additional 20% of the costs to the Desert Ridge Joint Venture, secured by
pledges of the co-venturers' equity interests in the Desert Ridge Joint Venture.
The remaining 20% of the costs are expected to be financed by the co-venturers'
equity contributions to the Desert Ridge Joint Venture. In connection with the
development of the Desert Ridge Property, the Company anticipates that the
Desert Ridge Joint Venture will pay Development Fees to a wholly owned
subsidiary of the Advisor that will act, along with an affiliate of Marriott
International, Inc., as co-developer of the Property. The Desert Ridge Property
will be leased to a subsidiary of the Desert Ridge Joint Venture (which will
also be an indirect subsidiary of the Company and will make an election after
January 1, 2001 to be treated as a taxable REIT subsidiary under the Code) and
will be managed by Marriott International, Inc.
The Desert Ridge Property will be constructed on a 400 acre site as
part of a 5,700 acre master-planned development in the north Phoenix/Scottsdale,
Arizona area. The Property will be operated as a Marriott Resort & Spa and will
include 950 guest rooms (including 85 suites), approximately 77,000 square feet
of meeting and banquet facilities, a full service health spa, eating and
beverage facilities that seat 947 people, two 18-hole golf courses and 8 tennis
courts. The Desert Ridge Property is currently anticipated to open to the public
in January 2003.
Marriott and Wyndham Brands. The following chart provides additional
information on occupancy levels for Marriott systemwide lodging brands and
Wyndham Hotels:
Total Occupancy Rate for 1999
Marriott Brand and Wyndham Hotels as Compared to
U.S. Lodging Industry
Occupancy Rate
U.S. Lodging Industry 63.3%
Fairfield Inn by Marriott 68.7%
Wyndham Hotels 69.3%
Courtyard by Marriott 73.2%
Marriott Hotels, Resorts and Suites 73.8%
Residence Inn by Marriott 79.0%
Source: Smith Travel Research (U.S. Lodging Industry only), Marriott
International, Inc. 1999 Form 10-K and Wyndham International, Inc. 1999
Form 10-K
BORROWING
The following information should be read in conjunction with the
"Business -- Borrowing" section beginning on page 71 of the Prospectus.
On November 8, 2000, the Company through the LLC obtained a loan from a
bank to be used by the Company to refinance a portion of the purchase of the
Philadelphia Downtown Property. The loan provides that the Company will be able
to borrow up to $32,500,000 which will be secured by the Property. Borrowings
under the loan will bear interest at a fixed rate of 8.29% per annum. Interest
expense shall be payable monthly for the first year, and thereafter, interest
expense and principal shall be payable monthly for the remaining six years. In
connection with the loan, the Company incurred loan fees of approximately
$165,000.
<PAGE>
The Company has entered into a loan commitment with a bank to be used
by the Company to finance the acquisition of three hotel Properties. The loan
commitment provides that the Company will be able to borrow up to $50,000,000
which will be secured by the three applicable Properties. Borrowings under the
loan will bear interest at a fixed rate of 8.335% per annum. Interest expense
shall be payable monthly, with all unpaid interest and principal due no later
than seven years from the date of the loan. In connection with the loan, the
Company is expected to incur loan fees of $300,000. As of November 21, 2000, the
closing for the $50,000,000 loan had not occurred.
The following information updates and replaces the third full paragraph
under the heading "Business -- Borrowing" on page 72 of the Prospectus.
The Company may also borrow funds for the purpose of preserving its
status as a REIT. For example, the Company may borrow to the extent necessary to
permit the Company to make Distributions required in order to enable the Company
to qualify as a REIT for federal income tax purposes; however, the Company will
not borrow for the purpose of returning Invested Capital to the stockholders
unless necessary to eliminate corporate-level tax to the Company. The aggregate
borrowing of the Company, secured and unsecured, shall be reasonable in relation
to Net Assets of the Company and shall be reviewed by the Board of Directors at
least quarterly. The Board of Directors anticipates that the aggregate amounts
of any Lines of Credit will be up to $200,000,000; however, the Line of Credit
may be increased at the discretion of the Board of Directors. In addition, the
Board of Directors anticipates that the aggregate amount of the Permanent
Financing will not exceed 30% of the Company's total assets. However, in
accordance with the Company's Articles of Incorporation, the maximum amount of
borrowing in relation to Net Assets, in the absence of a satisfactory showing
that a higher level of borrowing is appropriate, shall not exceed 300% of Net
Assets. Any excess in borrowing over such 300% level shall occur only with
approval by a majority of the Independent Directors and will be disclosed and
explained to stockholders in the first quarterly report of the Company prepared
after such approval occurs.
<PAGE>
SELECTED FINANCIAL DATA
The following table sets forth certain financial information for the
Company, and should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the Financial
Statements included in Appendix B.
<TABLE>
<CAPTION>
<S> <C>
Nine Months Ended
September September Year Ended December 31,
30, 30,
2000 1999
(Unaudited) (Unaudited) 1999 1998 1997 (1) 1996(1)(2)
--------------- --------------- --------------- ------------- ------------ -----------
Revenues $20,812,135 $6,402,130 $10,677,505 $1,955,461 $ 46,071 $ --
Net earnings 13,839,648 4,314,045 7,515,988 958,939 22,852 --
Cash distributions
declared (3) 19,469,870 6,331,072 10,765,881 1,168,145 29,776 --
Funds from operations (4) 19,610,141 6,129,945 10,478,103 1,343,105 22,852 --
Earnings per Share
Basic 0.38 0.34 0.47 0.40 0.03 --
Diluted 0.37 0.33 0.45 0.40 0.03 --
Cash distributions declared
per Share 0.55 0.54 0.72 0.47 0.05 --
Weighted average number
of Shares outstanding (5)
Basic 36,178,713 12,652,059 15,890,212 2,402,344 686,063 --
Diluted 43,767,651 17,509,791 21,437,859 2,402,344 686,063 --
September September
30, 30,
2000 1999 December 31,
(Unaudited) (Unaudited) 1999 1998 1997 1996
--------------- --------------- --------------- ------------- ------------ ----------
Total assets $408,485,158 $198,384,857 $266,968,274 $48,856,690 $9,443,476 $598,190
Total stockholders' equity 378,919,272 196,460,350 253,054,839 37,116,491 9,233,917 200,000
</TABLE>
(1) No operations commenced until the Company received minimum offering
proceeds and funds were released from escrow on October 15, 1997.
(2) Selected financial data for 1996 represents the period June 12, 1996
(date of inception) through December 31, 1996.
(3) Cash distributions are declared by the Board of Directors and generally
are based on various factors, including cash available from operations.
Approximately 29%, 32%, 30%, 18% and 23% of cash distributions for the
nine months ended September 30, 2000 and 1999, and the years ended
December 31, 1999, 1998 and 1997, respectively, represent a return of
capital in accordance with generally accepted accounting principles
("GAAP"). Cash distributions treated as a return of capital on a GAAP
basis represent the amount of cash distributions in excess of
accumulated net earnings on a GAAP basis, including deductions for
depreciation expense. The Company has not treated such amount as a
return of capital for purposes of calculating Invested Capital and the
Stockholders' 8% Return.
(4) Funds from operations ("FFO"), based on the revised definition adopted
by the Board of Governors of the National Association of Real Estate
Investment Trusts ("NAREIT") and as used herein, means net earnings
determined in accordance with GAAP, 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. (Net earnings determined in accordance
with GAAP include the noncash effect of straight-lining rent increases
throughout the lease terms. This straight-lining is a GAAP convention
requiring real estate companies to report rental revenue based on the
average rent per year over the life of the leases. During the nine
months ended September 30, 2000 and 1999, and the years ended December
31, 1999 and 1998, net earnings included $70,244, $36,363, $35,239 and
$44,160, respectively, of these amounts. No such amounts were earned
during 1997.) FFO was developed by NAREIT as a relative measure of
performance and liquidity of an equity REIT in order to recognize that
income-producing real estate historically has not depreciated on the
basis determined under GAAP. However, FFO (i) does not represent cash
generated from operating activities determined in accordance with GAAP
(which, unlike FFO, generally reflects all cash effects of transactions
and other events that enter into the determination of net earnings),
(ii) is not necessarily indicative of cash flow available to fund cash
needs and (iii) should not be considered as an alternative to net
earnings determined in accordance with GAAP as an indication of the
Company's operating performance, or to cash flow from operating
activities determined in accordance with GAAP as a measure of either
liquidity or the Company's ability to make distributions. Accordingly,
the Company believes that in order to facilitate a clear understanding
of the consolidated historical operating results of the Company, FFO
should be considered in conjunction with the Company's net earnings and
cash flows as reported in the accompanying financial statements and
notes thereto. See Appendix B -- Financial Information.
(5) The weighted average number of Shares outstanding is based upon the
period the Company was operational.
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 Exchange 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, the availability of capital from borrowings under the Company's Line
of Credit, 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
The Company is a Maryland corporation that was organized 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. In this
section, 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 Company was formed to acquire 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 Loans and 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 from the Advisor of $200,000 for 20,000 Shares of Common
Stock. On July 9, 1997, the Company commenced its Initial Offering of Shares of
Common Stock. Upon completion of the 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 $72,637 (7,264 Shares) through the
Company's Reinvestment Plan. Following the completion of its Initial Offering,
the Company commenced the 1999 Offering of up to 27,500,000 Shares of Common
Stock ($275,000,000). Upon completion of the 1999 Offering on September 14,
2000, the Company had received subscriptions for approximately 27,500,000 Shares
totalling approximately $275,000,000 in Gross Proceeds, including $965,194
(96,520 Shares) through the Company's Reinvestment Plan. Following the
completion of the 1999 Offering, the Company commenced this offering of up to
45,000,000 Shares of Common Stock ($450,000,000). Of the 45,000,000 Shares
offered, up to 5,000,000 are available to stockholders purchasing Shares through
the Reinvestment Plan. As of September 30, 2000, the Company had received
subscriptions for 1,792,977 Shares totalling $17,929,765 in Gross Proceeds from
this offering, including $331,909 (33,191 Shares) through the Company's
Reinvestment Plan.
As of September 30, 2000 and December 31, 1999, 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 $390,000,000 and $257,000,000, respectively. As of September 30,
2000, the Company had 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 certain Acquisition Expenses, leaving approximately
$63,000,000 available for investment in Properties and Mortgage Loans.
During the period October 1, 2000 through November 21, 2000, the
Company received additional net offering proceeds from this offering of
approximately $28,700,000 and as of November 21, 2000, had approximately
$45,700,000 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 in this offering to purchase additional
Properties and, to a lesser extent, invest in Mortgage Loans. See "Investment
Objectives and Policies." In addition, the Company intends to borrow money to
acquire Assets 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, proceeds from the sale of
assets, 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 and the year ended December 31, 1999, 127,565
and 12,885 Shares, respectively, were redeemed at $9.20 per Share for a total of
$1,173,600 and $118,542, respectively. These Shares were retired from Shares
outstanding of Common Stock. No Shares were redeemed in 1998.
Indebtedness
On July 31, 1998, the Company entered into an initial Line of Credit
and security agreement with a bank to be used by the Company to acquire hotel
Properties. The initial Line of Credit provides that the Company will be able to
receive advances of up to $30,000,000 until July 30, 2003, with an annual review
to be performed by the bank to indicate that there has been no substantial
deterioration, as determined by the bank in its reasonable discretion, of the
credit quality. Interest expense on each advance shall be payable monthly, with
all unpaid interest and principal due no later than five years from the date of
the advance. Advances under the Line of Credit will bear interest at either (i)
a rate per annum equal to 318 basis points above the London Interbank Offered
Rate (LIBOR) or (ii) a rate per annum equal to 30 basis points above the bank's
base rate, whichever the Company selects at the time advances are made. In
addition, a fee of 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 addition, the Line of Credit provides
that the Company will not be able to further encumber the applicable hotel
Property during the term of the advance without the bank's consent. The Company
will be required, at each closing, to pay all costs, fees and expenses arising
in connection with the Line of Credit. The Company must also pay the bank's
attorney's fees, subject to a maximum cap, incurred in connection with the Line
of Credit and each advance. In connection with the Line of Credit, the Company
incurred a commitment fee, legal fees and closing costs of approximately
$138,000. Proceeds from the Line of Credit were used in connection with the
purchase of two hotel Properties and the commitment to acquire three additional
Properties during 1998. As of September 30, 2000 and December 31, 1999, the
Company had no amounts outstanding under the Line of Credit.
<PAGE>
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 November 8, 2000, the Company through the LLC obtained a loan from a
bank to be used by the Company to refinance a portion of the purchase of the
Philadelphia Downtown Property. The loan provides that the Company will be able
to borrow up to $32,500,000 which will be secured by the Property. Borrowings
under the loan will bear interest at a fixed rate of 8.29% per annum. Interest
expense shall be payable monthly for the first year, and thereafter, interest
expense and principal shall be payable monthly for the remaining six years. In
connection with the loan, the Company incurred loan fees of approximately
$165,000.
In addition, the Company has entered into a loan commitment with a bank
to be used by the Company to finance the acquisition of three hotel Properties.
The loan commitment provides that the Company will be able to borrow up to
$50,000,000 which will be secured by the three applicable Properties. Borrowings
under the loan will bear interest at a fixed rate of 8.335% per annum. Interest
expense shall be payable monthly, with all unpaid interest and principal due no
later than seven years from the date of the loan. In connection with the loan,
the Company is expected to incur loan fees of $300,000. As of November 21, 2000,
the closing for the $50,000,000 loan had not occurred.
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 its 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 which were each being operated by Crestline Capital Corp.
as Residence Inn by Marriott. In February 1999, the Company executed a series of
agreements with Five Arrows pursuant to which the Company and Five Arrows formed
a jointly owned real estate investment trust, Hotel Investors, for the purpose
of acquiring up to eight Properties. At the time the agreement was entered into,
the eight Properties were either newly constructed or in various stages of
completion.
In February 1999 and June 1999, Hotel Investors purchased seven of the
eight Properties for an aggregate purchase price of approximately $167 million
and paid $3 million as a deposit on the one remaining Property. For a
description of the Properties acquired, see "Business -- Property Acquisitions
-- Western International Portfolio." The $3 million deposit relating to the
eighth Property was refunded to Hotel Investors by the seller in January 2000 as
a result of Hotel Investors exercising its option to terminate its obligation to
purchase the Property under the purchase and sale agreement.
In order to fund these purchases, 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 the Hotel Investors Loan. 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 Class A Preferred Stock and the
Company received 37,979 shares of Class B Preferred Stock.
In October 2000, Five Arrows, the Company and Hotel Investors entered
into an agreement under which Hotel Investors agreed to redeem 2,104 shares of
Class A Preferred Stock and an equivalent number of shares of common stock of
Hotel Investors held by Five Arrows for $2,104,000. In addition, the Company
purchased 7,563 shares of both Class A Preferred Stock and common stock of Hotel
Investors from Five Arrows for $11,395,000. Hotel Investors agreed to redeem
1,653 shares of Class B Preferred Stock and an aggregate of 10,115 shares of
common stock of Hotel Investors held by the Company for $1,653,000. Five Arrows'
remaining 38,670 shares of Class A Preferred Stock and the Company's 7,563
shares of Class A Preferred Stock were exchanged for an equivalent number of
shares of Class E Preferred Stock, par value $0.01 ("Class E Preferred Stock"),
of Hotel Investors. Upon the consummation of this transaction, the Company owns
an interest of approximately 53% and Five Arrows owns an interest of
approximately 47%, in the common stock of Hotel Investors. Pursuant to this
agreement, the Company repurchased 65,285 Shares held by Five Arrows for an
aggregate price of $620,207. Additionally, Five Arrows granted the Company the
following options: (1) on or before January 31, 2001, the Company has the option
to purchase 7,250 shares of 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 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.
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. Five Arrows has agreed to forfeit its
priority cash distributions from Hotel Investors. 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.
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. During 1999,
approximately $3.7 million of this amount was initially treated as a loan due to
the stock ownership limitations specified in the Company's Articles of
Incorporation at the time of investment. Subsequently, this loan was converted
to Common Stock.
In addition to the above investments, Five Arrows purchased a 10%
interest in the Advisor. In connection with Five Arrow's investment in the
Company, the Advisor and Hotel Investors, certain Affiliates agreed to waive
certain fees otherwise payable to them by the Company. The Advisor is also the
advisor to Hotel Investors pursuant to a separate advisory agreement. The
Company will not pay the Advisor fees, including the Company's pro rata portion
of Hotel Investors' advisory fees, in excess of amounts payable under its
Advisory Agreement.
On November 16, 1999, the Company acquired an 89% interest in the LLC
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.
In addition, on December 10, 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
Alpharetta, Georgia; Salt Lake City, Utah; Mt. Laurel, New Jersey; Scarborough,
Maine and Tewksbury, Massachusetts for approximately $52 million. These
Properties are being operated by a subsidiary of Marriott International, Inc. as
a Courtyard by Marriott, a Residence Inn by Marriott and three TownePlace Suites
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.
On November 21, 2000, the Company acquired two Properties located in
Orlando, Florida for approximately $66.9 million. These Properties are being
operated by a subsidiary of Marriott International, Inc. as a Courtyard by
Marriott and a Fairfield Inn by Marriott.
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."
Commitments
As of November 21, 2000, the Company had initial commitments to acquire
five additional hotel Properties directly for an anticipated aggregate purchase
price of approximately $85 million and an interest in one property through a
joint venture for approximately $25 million. The acquisition of each of these
Properties is subject to the fulfillment of certain conditions. In order to
acquire all of 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 one of these agreements, the Company has a
deposit, in the form of a letter of credit, collateralized by a certificate of
deposit, amounting to $1,769,000. 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.
As of November 21, 2000, the Company had not entered into any
arrangements creating a reasonable probability a particular Mortgage Loan or
Secured Equipment Lease would be funded. The Company is presently negotiating to
acquire additional Properties, but as of November 21, 2000, the Company had not
acquired any such Properties or entered into any Mortgage Loans.
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,
which management believes to have appropriate safety of principal. This
investment strategy provides high liquidity in order to facilitate the Company's
use of these funds to acquire Properties at such time as Properties suitable for
acquisition are located or to fund Mortgage Loans. At September 30, 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 the 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
Expenses 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.
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 this 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, and the years
ended December 31, 1999, 1998 and 1997, the Company generated cash from
operations (which includes cash received from tenants, and dividend, interest
and other income received, less cash paid for operating expenses) of
$26,133,477, $4,642,118, $12,890,161, $2,776,965 and $22,469, respectively.
Based on cash from operations and dividends due to the Company from Hotel
Investors, the Company declared Distributions to its stockholders of
$19,469,870, $6,331,072, $10,765,881, $1,168,145 and $29,776 during the nine
months ended September 30, 2000 and 1999, and the years ended December 31, 1999,
1998 and 1997, respectively. In addition, on October 1, November 1 and December
1, 2000, the Company declared Distributions to stockholders of record on October
1, November 1 and December 1, 2000, totalling $2,766,393, $2,877,134 and
$2,972,521, respectively (each representing $0.0625 per Share), payable in
December 2000. For 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. For the years ended December 31, 1999, 1998 and
1997, approximately 75 percent, 76 percent and 100 percent, respectively, of the
Distributions received by stockholders were considered to be ordinary income and
approximately 25 percent and 24 percent were considered a return of capital for
federal income tax purposes for the years ended December 31, 1999 and 1998,
respectively. No amounts distributed to the stockholders for the nine months
ended September 30, 2000 and 1999, and the years ended December 31, 1999, 1998
and 1997, are required to be or have been treated by the Company as a return of
capital for purposes of calculating the Stockholders' 8% Return on Invested
Capital.
Related Party Transactions
During the nine months ended September 30, 2000 and 1999, and the years
ended December 31, 1999, 1998 and 1997, Affiliates of the Company incurred on
behalf of the Company $3,258,476, $2,387,955, $3,257,822, $459,250 and $638,274,
respectively, for certain Organizational and Offering Expenses, $554,019,
$530,233, $653,231, $392,863 and $26,149, respectively, for certain Acquisition
Expenses, and $530,944, $285,847, $325,622, $98,212 and $11,003, 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 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.
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 at September 30, 2000 and December 31, 1999, was $16,437,410 and
$15,275,629, respectively.
Other
The tenants of the Properties have established FF&E Reserve funds which
will be used for the replacement and renewal of furniture, fixtures and
equipment relating to the hotel Properties. Funds in the FF&E Reserve have been
paid, granted and assigned to the Company, or in the case of the seven
Properties owned indirectly, to Hotel Investors. For the nine months ended
September 30, 2000 and 1999, and the years ended December 31, 1999 and 1998,
revenues relating to the FF&E Reserve of the Properties directly owned by the
Company totalled $901,771, $194,301, $320,356 and $98,099, respectively, of
which $192,993, $56,745 and $15,962 was classified as a receivable at September
30, 2000 and December 31, 1999 and 1998, respectively. For the nine months ended
September 30, 2000 and the year ended December 31, 1999, revenues relating to
the FF&E Reserve of the Properties indirectly owned through Hotel Investors
totalled $693,224 and $343,264, respectively, of which $84,748 and $59,646,
respectively, was classified as a receivable. No such amounts were outstanding
or earned during 1997. 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.
Management is not aware of any material trends, favorable or
unfavorable, in either capital resources or the outlook for long-term cash
generation, nor does management expect any material changes in the availability
and relative cost of such capital resources, other than as referred to in this
Prospectus.
Management expects that the cash to be generated from operations will
be adequate to pay Operating Expenses and to make Distributions to stockholders.
Results of Operations
As of September 30, 2000 and December 31, 1999, the Company had
acquired 22 and 11 Properties, respectively, either directly or indirectly,
consisting of land, buildings and equipment, and had entered into a long-term,
triple-net lease agreement 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 tenant pays contingent rent
computed as a percentage of gross sales of the Property. 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, and the years ended December 31, 1999 and 1998.
Comparison of quarter and nine months ended September 30, 2000 to quarter and
nine months ended September 30, 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 and the LLC owned 15 Properties
directly during the quarter and nine months ended September 30, 2000, as
compared to two Properties directly 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 owned 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
and Mortgage Loans. As net offering proceeds from the 1999 Offering and this
offering 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.
During the nine months ended September 30, 2000, Crestline Capital
Corp. and City Center Annex Tenant Corporation each contributed more than ten
percent of the Company's total rental income. In addition, a significant portion
of the Company's rental income was earned from Properties operating as Marriott
brand chains during the nine months ended September 30, 2000. 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 and the LLC 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,
and an increase in depreciation and amortization expense of $1,713,176 and
$3,219,905, for the quarter and nine months ended September 30, 2000,
respectively, 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.
Comparison of year ended December 31, 1999 to year ended December 31, 1998
During the years ended December 31, 1999 and 1998, the Company earned
rental income from operating leases, contingent rental income and FF&E Reserve
income of $4,230,995 and $1,316,599, respectively. The 221% increase in rental
income, contingent rental income and FF&E Reserve income was due to the fact
that the Company owned two Properties for the full year ended December 31, 1999,
as compared to two Properties for approximately six months during the year ended
December 31, 1998. In addition, the Company invested in two additional
Properties during 1999. Because the Company had not yet acquired all of its
Properties, revenues for the year ended December 31, 1999, represent only a
portion of revenues which the Company is expected to earn in future periods.
During the year ended December 31, 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, the Company recognized
$2,753,506 in dividend income and $778,466 in equity in loss of unconsolidated
subsidiary after deduction of preferred stock dividends, resulting in net
earnings attributable to this investment of $1,975,040.
During the years ended December 31, 1999 and 1998, the Company also
earned $3,693,004 and $638,862, respectively, in interest income from
investments in money market accounts and other short-term, highly liquid
investments and other income. The 478% increase in interest income was primarily
attributable to increased offering proceeds received during 1999 being
temporarily invested in money market accounts or other short-term, highly liquid
investments pending investment in Properties and Mortgage Loans. As net offering
proceeds are invested in Properties and used to make Mortgage Loans, the
percentage of the Company's total revenues from interest income from investments
in money market accounts or other short-term, highly liquid investments is
expected to decrease.
<PAGE>
During the year ended December 31, 1999, two lessees, Crestline Capital
Corp. (formerly STC Leasing Associates, LLC) (which operates and leases two
Properties) and WI Hotel Leasing, LLC (which leases the seven Properties in
which the Company owns an interest through Hotel Investors), each contributed
more than ten percent of the Company's total rental income (including the
Company's share of total rental income from Hotel Investors). In addition, all
of the Company's rental income (including the Company's share of total rental
income from Hotel Investors) was earned from Properties operating as Marriott
brand chains.
Operating expenses, including interest expense and depreciation and
amortization expense, were $2,318,717 and $996,522 for the years ended December
31, 1999 and 1998, respectively (21.7% and 51%, respectively, of total
revenues). The increase in operating expenses during the year ended December 31,
1999, as compared to 1998, was primarily as a result of the Company owning two
Properties for approximately six months during 1998 compared to a full year
during 1999. Additionally, general operating and administrative expenses
increased as a result of Company growth, while interest expense decreased from
$350,322 for the year ended December 31, 1998 to $248,094 for the year ended
December 31, 1999. The decrease in interest expense of 29.2% was the result of
the Line of Credit being outstanding for two months in 1999 as compared to the
majority of 1998.
For the year ended December 31, 1999, the Company's Operating Expenses
did not exceed the Expense Cap. For the year ended December 31, 1998, the
Company's Operating Expenses exceeded the Expense Cap by $92,733; therefore, the
Advisor reimbursed the Company such amount in accordance with the Advisory
Agreement.
Comparison of year ended December 31, 1998 to year ended December 31, 1997
Operations of the Company commenced on October 15, 1997, when the
Company received the minimum offering proceeds of $2,500,000. As of December 31,
1998, the Company had acquired two Properties, each consisting of land, building
and equipment, and had entered into a long-term, triple-net lease agreement
relating to each of the Properties. The Company earned $1,316,599 in rental
income from operating leases and FF&E Reserve income from the two Properties
during the year ended December 31, 1998.
During the years ended December 31, 1998 and 1997, the Company earned
$638,862 and $46,071, respectively, in interest income from investments in money
market accounts and other short-term, highly liquid investments. The increase
was attributable to offering proceeds being temporarily invested in money market
accounts or other short-term, highly liquid investments.
Operating expenses, including interest expense and depreciation and
amortization expense, were $996,522 and $23,219 for the years ended December 31,
1998 and 1997, respectively. Operating expenses increased during the year ended
December 31, 1998 as compared to the year ended December 31, 1997, primarily as
a result of the fact that the Company did not commence operations until October
15, 1997, and due to the fact that the Company acquired Properties and received
advances under the Line of Credit during 1998. As discussed above, for the year
ended December 31, 1998, the Company's Operating Expenses exceeded the Expense
Cap by $92,733; therefore, the Advisor reimbursed the Company such amount in
accordance with the Advisory Agreement. For the year ended December 31, 1997,
the Expense Cap was not applicable.
Other
The Company has elected, pursuant to Internal Revenue Code Section
856(c)(1), to be taxed as a REIT under Sections 856 through 860 of the Internal
Revenue Code of 1986, as amended, and related regulations. As a REIT, for
federal income tax purposes, the Company generally will not be subject to
federal income tax on income that it distributes to its stockholders. If the
Company fails to qualify as a REIT in any taxable year, it will be subject to
federal income tax on its taxable income at regular corporate rates and will not
be permitted to qualify for treatment as a REIT for federal income tax purposes
for four years following the year during which qualification is lost. Such an
event could materially affect the Company's net earnings. However, the Company
believes that it is organized and operates in such a manner as to qualify for
treatment as a REIT for the years ended December 31, 1999, 1998 and 1997. In
addition, the Company intends to continue to operate the Company so as to remain
qualified as a REIT for federal income tax purposes.
The Company anticipates that its leases will be triple-net leases and
will contain provisions that management believes will mitigate the effect of
inflation. Such provisions will include clauses requiring the payment of
contingent rent based on certain gross sales above a specified level and/or
automatic increases in base rent at specified times during the term of the
lease. Management expects that increases in gross sales volumes due to inflation
and real sales growth should result in an increase in rental income over time.
Continued inflation also may cause capital appreciation of the Company's
Properties. Inflation and changing prices, however, also may have an adverse
impact on the sales of the Properties and on potential capital appreciation of
the Properties.
Management of the Company currently knows of no trends that will have a
material adverse effect on liquidity, capital resources or results of
operations.
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following information updates and replaces the "Directors and
Executive Officers" section beginning on page 84 of the Prospectus.
The Directors and executive officers of the Company are listed below:
Name Age Position with the Company
---- --- -------------------------
James M. Seneff, Jr. 54 Director, Chairman of the Board, and
Chief Executive Officer
Robert A. Bourne 53 Director, Vice Chairman of the Board,
and President
Matthew W. Kaplan 37 Director
Charles E. Adams 38 Independent Director
Lawrence A. Dustin 55 Independent Director
John A. Griswold 51 Independent Director
Craig M. McAllaster 49 Independent Director
Charles A. Muller 42 Chief Operating Officer and Executive
Vice President
C. Brian Strickland 38 Senior Vice President of Finance and
Administration
Thomas J. Hutchison III 59 Executive Vice President
Lynn E. Rose 51 Secretary and Treasurer
James M. Seneff, Jr. Director, Chairman of the Board and Chief
Executive Officer. Mr. Seneff is a director, Chairman of the Board and Chief
Executive Officer of CNL Hospitality Corp., the Advisor to the Company, and CNL
Hotel Investors, Inc., a real estate investment trust in which the Company owns
an interest. Mr. Seneff is a principal stockholder of CNL Holdings, Inc., the
parent company of CNL Financial Group, Inc. (formerly CNL Group, Inc.), a
diversified real estate company, and has served as a director, Chairman of the
Board and Chief Executive Officer of CNL Financial Group, Inc. and its
subsidiaries since CNL's formation in 1973. CNL Financial Group, Inc. is the
parent company, either directly or indirectly through subsidiaries, of CNL Real
Estate Services, Inc., CNL Hospitality Corp., CNL Capital Markets, Inc., CNL
Investment Company and CNL Securities Corp., the Managing Dealer in this
offering. CNL and the entities it has established have more than $4 billion in
assets, representing interests in more than 2,000 properties and 900 mortgage
loans in 48 states. Mr. Seneff also serves as a director, Chairman of the Board
and Chief Executive Officer of CNL Retirement Properties, Inc. (formerly CNL
Health Care Properties, Inc.), a public, unlisted real estate investment trust,
as well as CNL Retirement Corp. (formerly CNL Health Care Corp.), its advisor.
Since 1992, Mr. Seneff has served as a director, Chairman of the Board and Chief
Executive Officer of Commercial Net Lease Realty, Inc., a public real estate
investment trust that is listed on the New York Stock Exchange. In addition, he
has served as a director and Chairman of the Board since inception in 1994, and
served as Chief Executive Officer from 1994 through August 1999, of CNL American
Properties Fund, Inc., a public, unlisted real estate investment trust. He also
served as a director, Chairman of the Board and Chief Executive Officer of CNL
Fund Advisors, Inc., the advisor to CNL American Properties Fund, Inc., until it
merged with such company in September 1999. Mr. Seneff has also served as a
director, Chairman of the Board and Chief Executive Officer of CNL Securities
Corp., since 1979; CNL Investment Company, since 1990; and CNL Institutional
Advisors, a registered investment advisor for pension plans, since 1990. Mr.
Seneff formerly served as a director of First Union National Bank of Florida,
N.A., and currently serves as the Chairman of the Board of CNLBank. Mr. Seneff
served on the Florida State Commission on Ethics and is a former member and past
chairman of the State of Florida Investment Advisory Council, which recommends
to the Florida Board of Administration investments for various Florida employee
retirement funds.
<PAGE>
The Florida Board of Administration is Florida's principal investment advisory
and money management agency and oversees the investment of more than $60 billion
of retirement funds. Mr. Seneff received his degree in Business Administration
from Florida State University in 1968.
Robert A. Bourne. Director, Vice Chairman of the Board and President.
Mr. Bourne serves as a director, Vice Chairman of the Board and President of CNL
Hospitality Corp., the Advisor to the Company, and director and President of CNL
Hotel Investors, Inc., a real estate investment trust in which the Company owns
an interest. Mr. Bourne is also the President and Treasurer of CNL Financial
Group, Inc.; a director and President of CNL Retirement Properties, Inc., a
public, unlisted real estate investment trust; as well as, a director and
President of CNL Retirement Corp., its advisor. Mr. Bourne also serves as a
director of CNLBank. He has served as a director since 1992, Vice Chairman of
the Board since February 1996, Secretary and Treasurer from February 1996
through 1997, and President from July 1992 through February 1996, of Commercial
Net Lease Realty Inc., a public real estate investment trust listed on the New
York Stock Exchange. Mr. Bourne has served as director since inception in 1994,
President from 1994 through February 1999, Treasurer from February 1999 through
August 1999, and Vice Chairman of the Board since February 1999 of CNL American
Properties Fund, Inc., a public, unlisted real estate investment trust. He also
served as a director and held various executive positions for CNL Fund Advisors,
Inc., the advisor to CNL American Properties Fund, Inc. prior to its merger with
such company, from 1994 through August 1999. Mr. Bourne also serves as a
director, President and Treasurer for various affiliates of CNL Financial Group,
Inc., including CNL Investment Company, CNL Securities Corp., the Managing
Dealer for this offering, and CNL Institutional Advisors, Inc., a registered
investment advisor for pension plans. Since joining CNL Securities Corp. in
1979, Mr. Bourne has overseen CNL's real estate and capital markets activities
including the investment of nearly $2 billion in equity and the financing,
acquisition, construction and leasing of restaurants, office buildings,
apartment complexes, hotels and other real estate. Mr. Bourne began his career
as a certified public accountant employed by Coopers & Lybrand, Certified Public
Accountants, from 1971 through 1978, where he attained the position of tax
manager in 1975. Mr. Bourne graduated from Florida State University in 1970
where he received a B.A. in Accounting, with honors.
Matthew W. Kaplan. Director. Mr. Kaplan serves as a director of the
Advisor and Hotel Investors. Mr. Kaplan is a managing director of Rothschild
Realty Inc. where he has served since 1992, and where he is responsible for
securities investment activities including acting as portfolio manager of Five
Arrows Realty Securities LLC, a $900 million private investment fund. Mr. Kaplan
has been a director of WNY Group, Inc., a private corporation, since 1999. From
1990 to 1992, Mr. Kaplan served in the corporate finance department of
Rothschild, Inc., an affiliate of Rothschild Realty, Inc. Mr. Kaplan served as a
director of Ambassador Apartments Inc. from August 1996 through May 1998 and is
a member of the Urban Land Institute. Mr. Kaplan received a B.A. with honors
from Washington University in 1984 and an M.B.A. from the Wharton School of
Finance and Commerce at the University of Pennsylvania in 1988.
Charles E. Adams. Independent Director. Mr. Adams is the president and
a founding principal with Celebration Associates, Inc., a real estate advisory
and development firm with offices in Celebration, Florida and Charlotte, North
Carolina. Celebration Associates specializes in large-scale master-planned
communities, seniors' housing and specialty commercial developments. Mr. Adams
joined The Walt Disney Company in 1990 and from 1996 until May 1997 served as
vice president of community business development for The Celebration Company and
Walt Disney Imagineering. He was responsible for Celebration Education,
Celebration Network, Celebration Health, and Celebration Foundation, as well as
new business development, strategic alliances, retail sales and leasing,
commercial sales and leasing, the development of Little Lake Bryan and
Celebration. Previously, Mr. Adams was responsible for the initial residential,
amenity, sales and marketing, consumer research and master planning efforts for
Celebration. Additionally, Mr. Adams participated in the planning for
residential development at EuroDisney in Paris, France. He was a founding member
of the Celebration School Board of Trustees and served as president and founding
member of the Celebration Foundation Board of Directors. Mr. Adams is a founding
member of the Health Magic Steering Committee and council member on the
Recreation Development Council for the Urban Land Institute. Before joining The
Walt Disney Company in 1990, Mr. Adams worked with Trammell Crow Residential
developing luxury apartment communities in the Orlando and Jacksonville, Florida
areas. Mr. Adams received a B.A. from Northeast Louisiana University in 1984 and
an M.B.A. from Harvard Graduate School of Business in 1989.
Lawrence A Dustin. Independent Director. Mr. Dustin is president of the
lodging division of Travel Services International, Inc., a specialized
distributor of leisure travel products and services. Mr. Dustin was a principal
of BBT, an advisory company specializing in hotel operations, marketing and
development, from September 1998 to August 1999. Mr. Dustin has over 30 years of
experience in the hospitality industry. From 1994 to September 1998, Mr. Dustin
served as senior vice president of lodging of Universal Studios Recreation
Group, where he was responsible for matters related to hotel development,
marketing, operations and management. Mr. Dustin supervised the overall process
of developing the five highly themed hotels and related recreational amenities
within Universal Studios Escape and provided guidance for hotel projects in
Universal City, California, Japan, and Singapore. From 1989 to 1994, Mr. Dustin
served as a shareholder, chief executive officer, and director of AspenCrest
Hospitality, Inc., a professional services firm which helped hotel owners
enhance both the operating performance and asset value of their properties. From
1969 to 1989, Mr. Dustin held various positions in the hotel industry, including
14 years in management with Westin Hotel & Resorts. Mr. Dustin received a B.A.
from Michigan State University in 1968.
John A. Griswold. Independent Director. Mr. Griswold serves as
president of Tishman Hotel Corporation, an operating unit of Tishman Realty &
Construction Co., Inc., founded in 1898. Tishman Hotel Corporation is a hotel
developer, owner and operator, and has provided such services for more than 85
hotels, totalling more than 30,000 rooms. Mr. Griswold joined Tishman Hotel
Corporation in 1985. From 1981 to 1985, Mr. Griswold served as general manager
of the Buena Vista Palace Hotel in The Walt Disney World Village. From 1978 to
1981, he served as vice president and general manager of the Homestead Resort, a
luxury condominium resort in Glen Arbor, Michigan. Mr. Griswold served as an
operations manager for The Walt Disney Company from 1971 to 1978. He was
responsible for operational, financial and future planning for multi-unit dining
facilities in Walt Disney World Village and Lake Buena Vista Country Club. He is
a member of the board of directors of the Florida Hotel & Motel Association,
Orlando/Orange County Convention & Visitors Bureau, Inc. and the First Orlando
Foundation. Mr. Griswold received a B.S. from the School of Hotel Administration
at Cornell University in Ithaca, New York.
Craig M. McAllaster. Independent Director. Dr. McAllaster is the dean
of the Roy E. Crummer Graduate School of Business at Rollins College since 1994.
Besides his duties as director, he is on the management faculty and serves as
executive director of the international consulting practicum programs at the
Crummer School. Prior to Rollins College, Dr. McAllaster was on the faculty at
the School of Industrial and Labor Relations and the Johnson Graduate School of
Management, both at Cornell University, and the University of Central Florida.
Dr. McAllaster spent over ten years in the consumer services and electronics
industry in management, organizational and executive development positions. He
is a consultant to many domestic and international companies in the areas of
strategy and leadership. Dr. McAllaster received a B.S. from the University of
Arizona in 1973, an M.S. from Alfred University in 1981 and an M.A. and
Doctorate from Columbia University in 1987.
Charles A. Muller. Chief Operating Officer and Executive Vice
President. Mr. Muller joined CNL Hospitality Corp. in October 1996 and is
responsible for the planning and implementation of CNL's interest in hotel
industry investments, including acquisitions, development, project analysis and
due diligence. He currently serves as the Chief Operating Officer and Executive
Vice President of CNL Hospitality Corp., the Advisor, and CNL Hotel Investors,
Inc., a real estate investment trust in which the Company owns an interest. Mr.
Muller also serves as Executive Vice President of CNL Hotel Development Company.
Mr. Muller joined CNL following more than 15 years of broad-based hotel industry
experience with firms such as Tishman Hotel Corporation, Wyndham Hotels &
Resorts, PKF Consulting and AIRCOA Hospitality Services. Mr. Muller's background
includes responsibility for market review and valuation efforts, property
acquisitions and development, capital improvement planning, hotel operations and
project management for renovations and new construction. Mr. Muller served on
the former Market, Finance and Investment Analysis Committee of the American
Hotel & Motel Association and is a founding member of the Lodging Industry
Investment Council. He holds a bachelor's degree in Hotel Administration from
Cornell University.
C. Brian Strickland. Senior Vice President of Finance and
Administration. Mr. Strickland currently serves as Senior Vice President of
Finance and Administration of CNL Hospitality Corp., and CNL Hotel Development
Company. Mr. Strickland supervises the companies' financial reporting, financial
control and accounting functions as well as forecasting, budgeting and cash
management activities. He is also responsible for regulatory compliance, equity
and debt financing activities and insurance for the companies. Mr. Strickland
joined CNL Hospitality Corp. in April 1998 with an extensive accounting
background. Prior to joining CNL, he served as vice president of taxation with
Patriot American Hospitality, Inc., where he was responsible for implementation
of tax planning strategies on corporate mergers and acquisitions and where he
performed or assisted in strategic processes in the REIT industry. From 1989 to
1997, Mr. Strickland served as a director of tax and asset management for
Wyndham Hotels & Resorts where he was integrally involved in structuring
acquisitive transactions, including the consolidation and initial public
offering of Wyndham Hotel Corporation and its subsequent merger with Patriot
American Hospitality, Inc. In his capacity as director of asset management, he
was instrumental in the development and opening of a hotel and casino in San
Juan, Puerto Rico. Prior to 1989, Mr. Strickland was senior tax accountant for
Trammell Crow Company where he provided tax consulting services to regional
developmental offices. From 1986 to 1988, Mr. Strickland was tax accountant for
Ernst & Whinney where he was a member of the real estate practice group. Mr.
Strickland is a certified public accountant and holds a bachelor's degree in
accounting.
Thomas J. Hutchison III. Executive Vice President. Mr. Hutchison serves
as an Executive Vice President of CNL Hospitality Corp., the Advisor of the
Company, and Hotel Investors. Mr. Hutchison serves as President and Chief
Operating Officer of CNL Real Estate Services, Inc., which is the parent company
of CNL Hospitality Corp. and CNL Retirement Corp. He also serves as the Chief
Operating Officer of CNL Community Development Corp. In addition, Mr. Hutchison
serves as an Executive Vice President of CNL Retirement Properties, Inc. Mr.
Hutchison joined CNL Financial Group, Inc. in January 2000 with more than 30
years of senior management and consulting experience in the real estate
development and services industries. He currently serves on the board of
directors of Restore Orlando, a nonprofit community volunteer organization.
Prior to joining CNL, Mr. Hutchison was president and owner of numerous real
estate services and development companies. From 1995 to 2000, he was chairman
and chief executive officer of Atlantic Realty Services, Inc. and TJH
Development Corporation. Since 1990, he has fulfilled a number of long-term
consulting assignments for large corporations, including managing a number of
large international joint ventures. From 1990 to 1991, Mr. Hutchison was the
court-appointed president and chief executive officer of General Development
Corporation, a real estate community development company, where he assumed the
day-to-day management of the $2.6 billion NYSE-listed company entering
re-organization. From 1986 to 1990, he was the chairman and chief executive
officer of a number of real estate-related companies engaged in the master
planning and land acquisition of forty residential, industrial and office
development projects. From 1978 to 1986, Mr. Hutchison was the president and
chief executive officer of Murdock Development Corporation and Murdock
Investment Corporation, as well as Murdock's nine service divisions. In this
capacity, he managed an average of $350 million of new development per year for
over nine years. Additionally, he expanded the commercial real estate activities
to a national basis, and established both a new extended care division and a
hotel division that grew to 14 properties. Mr. Hutchison was educated at Purdue
University and the University of Maryland Business School.
Lynn E. Rose. Secretary and Treasurer. Ms. Rose also serves as
Secretary, Treasurer and a director of CNL Hospitality Corp., the Advisor to the
Company, and as Secretary of the subsidiaries of the Company. Ms. Rose is
Secretary and Treasurer of CNL Retirement Properties, Inc., a public, unlisted
real estate investment trust, and serves as Secretary of its subsidiaries. In
addition, she serves as Secretary, Treasurer and a director of CNL Retirement
Corp., its advisor. Ms. Rose served as Secretary of CNL American Properties
Fund, Inc., a public, unlisted real estate investment trust, from 1994 through
August 1999, and served as Treasurer from 1994 through February 1999. She also
served as Treasurer of CNL Fund Advisors, Inc., from 1994 through July 1998, and
served as Secretary and a director from 1994 through August 1999, at which time
it merged with CNL American Properties Fund, Inc. Ms. Rose served as Secretary
and Treasurer of Commercial Net Lease Realty, Inc., a public real estate
investment trust listed on the New York Stock Exchange, from 1992 through
February 1996, and as Secretary and a director of CNL Realty Advisors, Inc., its
advisor, from its inception in 1991 through 1997. She also served as Treasurer
of CNL Realty Advisors, Inc. from 1991 through February 1996. Ms. Rose, a
certified public accountant, has served as Secretary of CNL Financial Group,
Inc. since 1987, served as Controller from 1987 to 1993 and has served as Chief
Financial Officer since 1993. She also serves as Secretary of the subsidiaries
of CNL Financial Group, Inc. and holds various other offices in the
subsidiaries. In addition, she serves as Secretary for approximately 75
additional corporations affiliated with CNL Financial Group, Inc. and its
subsidiaries. Ms. Rose has served as Chief Financial Officer and Secretary of
CNL Securities Corp. since July 1994. Ms Rose oversees the tax and legal
compliance for over 375 corporations, partnerships and joint ventures, and the
accounting and financial reporting for over 200 entities. Prior to joining CNL,
Ms. Rose was a partner with Robert A. Bourne in the accounting firm of Bourne &
Rose, P.A., Certified Public Accountants. Ms. Rose holds a B.A. in Sociology
from the University of Central Florida. She was licensed as a certified public
accountant in 1979.
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
The following information updates and replaces the first paragraph on
page 89 of the Prospectus.
Each Director is entitled to receive $6,000 annually for serving on the
Board of Directors, as well as fees of $750 per meeting attended ($375 for each
telephonic meeting in which the Director participates), including committee
meetings. In addition to the above compensation, the Director serving as
Chairman of the Audit Committee is entitled to receive fees of $750 per meeting
attended with the Company's independent accountants ($375 for each telephonic
meeting in which the Chairman participates) as a representative of the Audit
Committee. No executive officer or Director of the Company has received a bonus
from the Company. The Company will not pay any compensation to the officers and
Directors of the Company who also serve as officers and directors of the
Advisor.
THE ADVISOR AND THE ADVISORY AGREEMENT
THE ADVISOR
The following information updates and replaces "The Advisor" section
beginning on page 89 of the Prospectus.
CNL Hospitality Corp. (formerly CNL Hospitality Advisors, Inc.) is a
Florida corporation organized in January 1997 to provide management, advisory
and administrative services. The Company originally entered into the Advisory
Agreement with the Advisor effective July 9, 1997. CNL Hospitality Corp., as
Advisor, has a fiduciary responsibility to the Company and the stockholders.
The directors and executive officers of the Advisor are as follows:
James M. Seneff, Jr. ......... Chairman of the Board, Chief Executive
Officer, and Director
Robert A. Bourne.............. Vice Chairman of the Board, President,
and Director
Matthew W. Kaplan............. Director
Charles A. Muller............. Chief Operating Officer and Executive
Vice President
C. Brian Strickland........... Senior Vice President of Finance and
Administration
Thomas J. Hutchison III....... Executive Vice President
Lynn E. Rose.................. Secretary, Treasurer and Director
The backgrounds of these individuals are described above under
"Management-- Directors and Executive Officers." In addition to the directors
and executive officers listed above, the following individuals are involved in
the acquisition, development and management of the Company's Properties:
Gregory A. Denton, age 36, joined CNL Hospitality Corp. in July 1999 as
Director of Portfolio Management. Mr. Denton is responsible for overseeing the
Company's portfolio performance and acquisition due diligence processes. Mr.
Denton has twelve years of experience in the appraisal, financial analysis and
asset management of hotel properties. Prior to joining the Advisor, he served as
vice president of asset management for White Lodging Services Corp., in
Merrillville, Indiana. In this capacity, he provided operational oversight,
strategic planning, and construction monitoring services on a portfolio of 58
hotels in eight states. Mr. Denton served as associate director of the Miami
office of HVS International from 1994 to 1996, where he managed hotel appraisal
and consulting assignments, trained new associates and supervised
hospitality-related research throughout the southeastern United States, Latin
America, and the Caribbean. Mr. Denton previously served as senior
associate/director of research for HVS International's Mineola, New York office.
He received his B.S. and M.S. from the Cornell School of Hotel Administration.
Brian Guernier, age 38, joined CNL Hospitality Corp. in August 1999 as
Director of Acquisitions and Development and in August 2000, became Vice
President of Acquisitions and Development. In this capacity, Mr. Guernier is
responsible for hotel acquisitions, site acquisition/selection for development,
identifying and assessing tenants and maintaining professional relationships
with current and potential project partners. Prior to joining the Advisor, Mr.
Guernier worked at Marriott International starting in 1995, most recently as
director in Feasibility and Development Planning at Marriott Vacation Club's
headquarters in Orlando, Florida. His responsibilities included internal project
planning for development of several timeshare resorts from the early feasibility
stage through site acquisition. He also focused on hotel/timeshare joint
projects and the negotiation of use agreements between timeshare operators and
hotel owner/operators for shared use of campus facilities. Prior to joining
Marriott's timeshare division, Mr. Guernier worked as director in Market
Planning & Feasibility for Marriott International's Lodging Division in
Bethesda, Maryland, where his responsibilities included pro forma development,
brand recommendations to development, preparation of feasibility and market
planning reports, presentation of projects to Hotel Development Committee, and
reviewing outside appraisals for Marriott's Treasury Department in conjunction
with credit enhancements. Before joining Marriott, Mr. Guernier was a senior
consultant with Arthur Andersen's
<PAGE>
Real Estate Services Group focusing on property tax appeals for hospitality
clients. Mr. Guernier holds an M.P.S. from the Hotel School at Cornell
University and a B.S. from the College of Agriculture and Life Sciences at
Cornell University.
Tammie A. Quinlan, age 37, joined CNL Hospitality Corp. in August 1999
as Director of Financial Reporting and Analysis and in August 2000, became Vice
President of Corporate Finance and Accounting. In this capacity, Ms. Quinlan is
responsible for all accounting and financial reporting requirements, and
corporate finance functions. Prior to joining the Advisor, Ms. Quinlan, was
employed by KPMG LLP from 1987 to 1999, most recently as a senior manager,
performing services for a variety of clients in the real estate, hospitality,
and financial services industries. During her tenure at KPMG LLP, Ms. Quinlan
assisted several clients through their initial public offerings, secondary
offerings, securitizations and complex business and accounting issues. Ms.
Quinlan is a certified public accountant and holds a B.S. in accounting and
finance from the University of Central Florida.
Management anticipates that any transaction by which the Company would
become self-advised would be submitted to the stockholders for approval.
The Advisor currently owns 20,000 Shares of Common Stock. The Advisor
may not sell these Shares while the Advisory Agreement is in effect, although
the Advisor may transfer such shares to Affiliates. Neither the Advisor, a
Director, or any Affiliate may vote or consent on matters submitted to the
stockholders regarding removal of the Advisor, Directors, or any of their
Affiliates, or any transaction between the Company and any of them. In
determining the requisite percentage in interest of shares of Common Stock
necessary to approve a matter on which the Advisor, Directors, and any Affiliate
may not vote or consent, any shares of Common Stock owned by any of them will
not be included.
CERTAIN TRANSACTIONS
The following information updates and replaces the first, second,
fourth, fifth and seventh paragraphs under the heading "Certain Transactions"
beginning on page 92 of the Prospectus.
The Managing Dealer is entitled to receive Selling Commissions
amounting to 7.5% of the total amount raised from the sale of Shares of Common
Stock for services in connection with the offering of Shares, a substantial
portion of which may be paid as commissions to other broker-dealers. For the
years ended December 31, 1998 and 1997, the Company incurred $2,377,026 and
$849,405, respectively, of such fees in connection with the Initial Offering, of
which $2,200,516 and $792,832, respectively, was paid by the Managing Dealer as
commissions to other broker-dealers. In addition, during the period January 1,
1999 through June 17, 1999, the Company incurred $6,904,047 of such fees in
connection with the Initial Offering, during the period June 18, 1999 through
September 14, 2000, the Company incurred $20,624,924 of such fees in connection
with the 1999 Offering, and during the period September 15, 2000 through
November 21, 2000, the Company incurred $3,500,460 of such fees in connection
with this offering, the majority of which has been or will be paid by CNL
Securities Corp. as commissions to other broker-dealers.
In addition, the Managing Dealer 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. For the years ended December 31, 1998 and 1997, the
Company incurred $158,468 and $56,627, respectively, of such fees in connection
with the Initial Offering, the majority of which were reallowed to other
broker-dealers and from which all bona fide due diligence expenses were paid. In
addition, during the period January 1, 1999 through June 17, 1999, the Company
incurred $460,270 of such fees in connection with the Initial Offering, during
the period June 18, 1999 through September 14, 2000, the Company incurred
$1,374,995 of such fees in connection with the 1999 Offering and during the
period September 15, 2000 through November 21, 2000, the Company incurred
$233,364 of such fees in connection with this offering, the majority of which
has been or will be reallowed to other broker-dealers and from which all bona
fide due diligence expenses were paid.
The Advisor is entitled to receive Acquisition Fees for services in
identifying the Properties and structuring the terms of the acquisition and
leases of the Properties and structuring the terms of the Mortgage Loans equal
to 4.5% of the total amount raised from the sale of Shares, and loan proceeds
from Permanent Financing and the Line of Credit that are used to acquire
Properties, but excluding that portion of the Permanent Financing used to
finance Secured Equipment Leases. For the years ended December 31, 1998 and
1997, the Company incurred $1,426,216 and $509,643, respectively, of such fees
in connection with the Initial Offering. In addition, during the period January
1, 1999 through June 17, 1999, the Company incurred $4,712,413 of such fees in
connection with the Initial Offering, during the period June 18, 1999 through
September 14, 2000, the Company incurred $12,374,954 of such fees in connection
with the 1999 Offering and during the period September 15, 2000 through November
21, 2000, the Company incurred $2,100,276 of such fees in connection with this
offering. Additionally, during the nine months ended September 30, 2000, the
Company incurred Acquisition Fees totalling $1,935,794 as the result of
permanent financing used to acquire certain Properties.
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 Asset 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 Asset 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 the years ended December 31, 1999 and 1998, the Company
incurred $1,003,416, $106,788 and $68,114, respectively, of such fees.
Additionally, the Company's unconsolidated subsidiary, Hotel Investors, incurred
asset management fees and subordinated incentive fees to the Advisor, of which
the Company's pro rata share totalled $61,806 and $114,133, respectively, and
$166,935 and $164,428, respectively, during the nine months ended September 30,
2000 and the year ended December 31, 1999.
The Advisor and its Affiliates provide accounting and administrative
services to the Company (including accounting and administrative services in
connection with the offering of Shares) on a day-to-day basis. For the nine
months ended September 30, 2000, and the years ended December 31, 1999, 1998 and
1997, the Company incurred a total of $3,491,013, $4,206,709, $644,189 and
$192,224, respectively, for these services, $3,156,163, $3,854,739, $494,729 and
$185,335, respectively, of such costs representing stock issuance costs, $0,
$124, $9,084 and $0, respectively, representing acquisition related costs and
$334,850, $351,846, $140,376 and $6,889, respectively, representing general
operating and administrative expenses, including costs related to preparing and
distributing reports required by the Securities and Exchange Commission.
PRIOR PERFORMANCE INFORMATION
The information presented in this section represents the historical
experience of certain real estate programs organized by certain officers and
directors of the Advisor. Prior public programs have not invested in hotel
properties. Investors in the Company should not assume that they will experience
returns, if any, comparable to those experienced by investors in such prior
public real estate programs. Investors who purchase Shares in the Company will
not thereby acquire any ownership interest in any partnerships or corporations
to which the following information relates.
Two Directors of the Company, Robert A. Bourne and James M. Seneff,
Jr., individually or with others have served as general partners of 88 and 89
real estate limited partnerships, respectively, including 18 publicly offered
CNL Income Fund partnerships, and as directors and/or officers of two unlisted
public REITs. None of these limited partnerships or the unlisted REITs have been
audited by the IRS. Of course, there is no guarantee that the Company will not
be audited. Based on an analysis of the operating results of the prior programs,
Messrs. Bourne and Seneff believe that each of such programs has met or is
meeting its principal investment objectives in a timely manner.
CNL Realty Corporation, which was organized as a Florida corporation in
November 1985 and whose sole stockholders are Messrs. Bourne and Seneff,
currently serves as the corporate general partner with Messrs. Bourne and Seneff
as individual general partners of 18 CNL Income Fund limited partnerships, all
of which were organized to invest in fast-food, family-style and in the case of
two of the partnerships, casual-dining restaurant properties. In addition,
Messrs. Bourne and Seneff currently serve as directors of CNL American
Properties Fund, Inc., an unlisted public REIT organized to invest in fast-food,
family-style and casual-dining restaurant properties, mortgage loans and secured
equipment leases; and as directors and officers of CNL Retirement Properties,
Inc., an unlisted public REIT organized to invest in health care and seniors'
housing facilities. Both of the unlisted public REITs have investment objectives
similar to those of the Company. As of June 30, 2000, the 18 partnerships and
the two unlisted REITs had raised a total of approximately $1.5 billion from a
total of approximately 81,000 investors, and
<PAGE>
owned approximately 1,500 fast-food, family-style and casual-dining restaurant
properties, and one health care property. Certain additional information
relating to the offerings and investment history of the 18 public partnerships
and the two unlisted public REITs is set forth below.
<TABLE>
<CAPTION>
<S> <C>
Number of Date 90% of Net
Limited Proceeds Fully
Maximum Partnership Invested or
Name of Offering Units or Committed to
Entity Amount (1) Date Closed Shares Sold Investment (2)
------ ---------- ----------- ----------- --------------
CNL Income $15,000,000 December 31, 1986 30,000 December 1986
Fund, Ltd. (30,000 units)
CNL Income $25,000,000 August 21, 1987 50,000 November 1987
Fund II, Ltd. (50,000 units)
CNL Income $25,000,000 April 29, 1988 50,000 June 1988
Fund III, Ltd. (50,000 units)
CNL Income $30,000,000 December 6, 1988 60,000 February 1989
Fund IV, Ltd. (60,000 units)
CNL Income $25,000,000 June 7, 1989 50,000 December 1989
Fund V, Ltd. (50,000 units)
CNL Income $35,000,000 January 19, 1990 70,000 May 1990
Fund VI, Ltd. (70,000 units)
CNL Income $30,000,000 August 1, 1990 30,000,000 January 1991
Fund VII, Ltd. (30,000,000 units)
CNL Income $35,000,000 March 7, 1991 35,000,000 September 1991
Fund VIII, Ltd. (35,000,000 units)
CNL Income $35,000,000 September 6, 1991 3,500,000 November 1991
Fund IX, Ltd. (3,500,000 units)
CNL Income $40,000,000 April 22, 1992 4,000,000 June 1992
Fund X, Ltd. (4,000,000 units)
CNL Income $40,000,000 October 8, 1992 4,000,000 September 1992
Fund XI, Ltd. (4,000,000 units)
CNL Income $45,000,000 April 15, 1993 4,500,000 July 1993
Fund XII, Ltd. (4,500,000 units)
CNL Income $40,000,000 September 13, 1993 4,000,000 August 1993
Fund XIII, Ltd. (4,000,000 units)
CNL Income $45,000,000 March 23, 1994 4,500,000 May 1994
Fund XIV, Ltd. (4,500,000 units)
CNL Income $40,000,000 September 22, 1994 4,000,000 December 1994
Fund XV, Ltd. (4,000,000 units)
CNL Income $45,000,000 July 18, 1995 4,500,000 August 1995
Fund XVI, Ltd. (4,500,000 units)
<PAGE>
Number of Date 90% of Net
Limited Proceeds Fully
Maximum Partnership Invested or
Name of Offering Units or Committed to
Entity Amount (1) Date Closed Shares Sold Investment (2)
------ ---------- ----------- ----------- --------------
CNL Income $30,000,000 October 10, 1996 3,000,000 December 1996
Fund XVII, Ltd. (3,000,000 units)
CNL Income $35,000,000 February 6, 1998 3,500,000 December 1997
Fund XVIII, Ltd. (3,500,000 units)
CNL American $747,464,413 January 20, 1999 (3) 37,373,221 (3) February 1999 (3)
Properties Fund, Inc. (37,373,221 shares)
CNL Retirement $164,718,974 September 18, 2000 (4) 971,898 (4) April 2000 (4)
Properties, Inc. (16,471,898 shares)
</TABLE>
(1) The amount stated includes the exercise by the general partners of each
partnership of their option to increase by $5,000,000 the maximum size
of the offering of CNL Income Fund, Ltd., CNL Income Fund II, Ltd., CNL
Income Fund III, Ltd., CNL Income Fund IV, Ltd., CNL Income Fund VI,
Ltd., CNL Income Fund VIII, Ltd., CNL Income Fund X, Ltd., CNL Income
Fund XII, Ltd., CNL Income Fund XIV, Ltd., CNL Income Fund XVI, Ltd.
and CNL Income Fund XVIII, Ltd. The number of shares of common stock
for CNL American Properties Fund, Inc. ("APF") reflects a one-for-two
reverse stock split, which was effective on June 3, 1999.
(2) For a description of the property acquisitions by these programs, see
the table set forth on the following page.
(3) In April 1995, APF commenced an offering of a maximum of 16,500,000
shares of common stock ($165,000,000). On February 6, 1997, the initial
offering closed upon receipt of subscriptions totalling $150,591,765
(15,059,177 shares), including $591,765 (59,177 shares) through the
reinvestment plan. Following completion of the initial offering on
February 6, 1997, APF commenced a subsequent offering (the "1997
Offering ") of up to 27,500,000 shares ($275,000,000) of common stock.
On March 2, 1998, the 1997 Offering closed upon receipt of
subscriptions totalling $251,872,648 (25,187,265 shares), including
$1,872,648 (187,265 shares) through the reinvestment plan. Following
completion of the 1997 Offering on March 2, 1998, APF commenced a
subsequent offering (the "1998 Offering ") of up to 34,500,000 shares
($345,000,000) of common stock. As of December 31, 1998, APF had
received subscriptions totalling $345,000,000 (34,500,000 shares),
including $3,107,848 (310,785 shares) through the reinvestment plan,
from the 1998 Offering. The 1998 Offering closed in January 1999, upon
receipt of the proceeds from the last subscriptions. As of March 31,
1999, net proceeds to APF from its three offerings totalled
$670,151,200 and all of such amount had been invested or committed for
investment in properties and mortgage loans.
(4) Effective September 18, 1998, CNL Retirement Properties, Inc. (the
"Retirement Properties REIT") commenced an offering of up to 15,500,000
shares ($155,000,000) of common stock. On September 18, 2000, the
initial offering closed upon receipt of subscriptions totalling
$9,718,974 (971,898 shares), including $50,463 (5,046 shares) through
the reinvestment plan. Following completion of the initial offering on
September 18, 2000, the Retirement Properties REIT commenced a
subsequent offering (the "2000 Offering") of up to 15,500,000 shares
($155,000,000) of common stock. The Retirement Properties REIT acquired
its first property on April 20, 2000.
As of June 30, 2000, Mr. Seneff and Mr. Bourne, directly or through
affiliated entities, also had served as joint general partners of 69 nonpublic
real estate limited partnerships. The offerings of all of these 69 nonpublic
limited partnerships had terminated as of June 30, 2000. These 69 partnerships
raised a total of $185,927,353 from approximately 4,600 investors, and
purchased, directly or through participation in a joint venture or limited
partnership, interests in a total of 216 projects as of June 30, 2000. These 216
projects consist of 19 apartment projects (comprising 10% of the total amount
raised by all 69 partnerships), 11 office buildings (comprising 4% of the total
amount raised by all 69 partnerships), 169 fast-food, family-style, or
casual-dining restaurant properties and business investments (comprising 69% of
the total amount raised by all 69 partnerships), one condominium development
(comprising 0.5% of the total amount raised by all 69 partnerships), four
hotels/motels (comprising 5% of the total amount raised by all 69 partnerships),
ten commercial/retail properties (comprising 11% of the total amount raised by
all 69 partnerships), and two tracts of undeveloped land (comprising 0.5% of the
total amount raised by all 69 partnerships).
Mr. Bourne also has served, without Mr. Seneff, as a general partner of
one additional nonpublic real estate limited partnership program which raised a
total of $600,000 from 37 investors and purchased, through participation in a
limited partnership, one apartment building located in Georgia with a purchase
price of $1,712,000.
Mr. Seneff also has served, without Mr. Bourne, as a general partner of
two additional nonpublic real estate limited partnerships which raised a total
of $240,000 from 12 investors and purchased two office buildings with an
aggregate purchase price of $928,390. Both of the office buildings are located
in Florida.
Of the 90 real estate limited partnerships whose offerings had closed
as of June 30, 2000 (including 18 CNL Income Fund limited partnerships) in which
Mr. Seneff and/or Mr. Bourne serve or have served as general partners in the
past, 39 invested in restaurant properties leased on a "triple-net" basis,
including eight which also invested in franchised restaurant businesses
(accounting for approximately 93% of the total amount raised by all 90 real
estate limited partnerships).
The following table sets forth summary information, as of June 30,
2000, regarding property acquisitions by the 18 limited partnerships and the two
unlisted REITs.
<TABLE>
<CAPTION>
<S> <C>
Name of Type of Method of Type of
Entity Property Location Financing Program
------ -------- -------- --------- -------
CNL Income 22 fast-food or AL, AZ, CA, FL, GA, All cash Public
Fund, Ltd. family-style LA, MD, OK, PA, TX,
restaurants VA, WA
CNL Income 50 fast-food or AL, AZ, CO, FL, GA, All cash Public
Fund II, Ltd. family-style IL, IN, KS, LA, MI,
restaurants MN, MO, NC, NM, OH,
TN, TX, WA, WY
CNL Income 40 fast-food or AL, AZ, CA, CO, FL, All cash Public
Fund III, Ltd. family-style GA, IA, IL, IN, KS,
restaurants KY, MD, MI, MN, MO,
NC, NE, OK, TX
CNL Income 47 fast-food or AL, DC, FL, GA, IL, All cash Public
Fund IV, Ltd. family-style IN, KS, MA, MD, MI,
restaurants MS, NC, OH, PA, TN,
TX, VA
CNL Income 36 fast-food or AZ, FL, GA, IL, IN, All cash Public
Fund V, Ltd. family-style MI, NH, NY, OH, SC,
restaurants TN, TX, UT, WA
CNL Income 60 fast-food or AR, AZ, CA, FL, GA, All cash Public
Fund VI, Ltd. family-style IL, IN, KS, MA, MI,
restaurants MN, NC, NE, NM, NY,
OH, OK, PA, TN, TX,
VA, WA, WY
<PAGE>
Name of Type of Method of Type of
Entity Property Location Financing Program
------ -------- -------- --------- -------
CNL Income 52 fast-food or AL, AZ, CO, FL, GA, All cash Public
Fund VII, Ltd. family-style IN, LA, MI, MN, NC,
restaurants OH, PA, SC, TN, TX,
UT, WA
CNL Income 43 fast-food or AZ, FL, IN, LA, MI, All cash Public
Fund VIII, Ltd. family-style MN, NC, NY, OH, TN,
restaurants TX, VA
CNL Income 46 fast-food or AL, CA, CO, FL, GA, All cash Public
Fund IX, Ltd. family-style IL, IN, LA, MI, MN,
restaurants MS, NC, NH, NY, OH,
SC, TN, TX
CNL Income 55 fast-food or AL, AZ, CA, CO, FL, All cash Public
Fund X, Ltd. family-style ID, IL, LA, MI, MO,
restaurants MT, NC, NE, NH, NM,
NY, OH, PA, SC, TN,
TX, WA
CNL Income 44 fast-food or AL, AZ, CA, CO, CT, All cash Public
Fund XI, Ltd. family-style FL, KS, LA, MA, MI,
restaurants MS, NC, NH, NM, OH,
OK, PA, SC, TX, VA,
WA
CNL Income 52 fast-food or AL, AZ, CA, FL, GA, All cash Public
Fund XII, Ltd. family-style LA, MO, MS, NC, NM,
restaurants OH, SC, TN, TX, WA
CNL Income 50 fast-food or AL, AR, AZ, CA, CO, All cash Public
Fund XIII, Ltd. family-style FL, GA, IN, KS, LA,
restaurants MD, NC, OH, PA, SC,
TN, TX, VA
CNL Income 68 fast-food or AL, AZ, CO, FL, GA, All cash Public
Fund XIV, Ltd. family-style IL, KS, LA, MN, MO,
restaurants MS, NC, NJ, NV, OH,
SC, TN, TX, VA
CNL Income 57 fast-food or AL, CA, FL, GA, KS, All cash Public
Fund XV, Ltd. family-style KY, MN, MO, MS, NC,
restaurants NJ, NM, OH, OK, PA,
SC, TN, TX, VA
<PAGE>
Name of Type of Method of Type of
Entity Property Location Financing Program
------ -------- -------- --------- -------
CNL Income 49 fast-food or AZ, CA, CO, DC, FL, All cash Public
Fund XVI, Ltd. family-style GA, ID, IN, KS, MN,
restaurants MO, NC, NM, NV, OH,
PA, TN, TX, UT, WI
CNL Income 32 fast-food, CA, FL, GA, IL, IN, All cash Public
Fund XVII, Ltd. family-style or MI, NC, NV, OH, SC,
casual-dining TN, TX, WA
restaurants
CNL Income 26 fast-food, AZ, CA, FL, GA, IL, All cash Public
Fund XVIII, Ltd. family-style or KY, MD, MN, NC, NV,
casual-dining NY, OH, PA, TN, TX,
restaurants VA
CNL American 703 fast-food, AL, AZ, CA, CO, CT, (1) Public REIT
Properties Fund, Inc. family-style or DE, FL, GA, IA, ID,
casual-dining IL, IN, KS, KY, LA,
restaurants MD, MI, MN, MO, MS,
NC, NE, NH, NJ, NM,
NV, NY, OH, OK, OR,
PA, RI, SC, TN, TX,
UT, VA, WA, WI, WV
CNL Retirement 1 assisted (2) Public REIT
Properties, Inc. living facility IL
</TABLE>
--------------------------------
(1) As of March 31, 1999, all of APF's net offering proceeds had been
invested or committed for investment in properties and mortgage loans.
Since April 1, 1999, APF has used proceeds from its line of credit and
other borrowing to acquire and develop properties and to fund mortgage
loans and secured equipment leases.
(2) As of June 30, 2000, the Retirement Properties REIT had invested
approximately $13,900,000 in one assisted living property, which
includes $8,100,000 in advances relating to the line of credit.
A more detailed description of the acquisitions by real estate limited
partnerships and the two unlisted REITs sponsored by Messrs. Bourne and Seneff
is set forth in prior performance Table VI, included in Part II of the
registration statement filed with the Securities and Exchange Commission for
this offering. A copy of Table VI is available to stockholders from the Company
upon request, free of charge. In addition, upon request to the Company, the
Company will provide, without charge, a copy of the most recent Annual Report on
Form 10-K filed with the Securities and Exchange Commission for CNL Income Fund,
Ltd., CNL Income Fund II, Ltd., CNL Income Fund III, Ltd., CNL Income Fund IV,
Ltd., CNL Income Fund V, Ltd., CNL Income Fund VI, Ltd., CNL Income Fund VII,
Ltd., CNL Income Fund VIII, Ltd., CNL Income Fund IX, Ltd., CNL Income Fund X,
Ltd., CNL Income Fund XI, Ltd., CNL Income Fund XII, Ltd., CNL Income Fund XIII,
Ltd., CNL Income Fund XIV, Ltd., CNL Income Fund XV, Ltd., CNL Income Fund XVI,
Ltd., CNL Income Fund XVII, Ltd., CNL Income Fund XVIII, Ltd., CNL American
Properties Fund, Inc. and CNL Retirement Properties, Inc. as well as a copy, for
a reasonable fee, of the exhibits filed with such reports.
In order to provide potential purchasers of Shares in the Company with
information to enable them to evaluate the prior experience of the Messrs.
Seneff and Bourne as general partners of real estate limited partnerships and as
directors and officers of the two unlisted REITs, including those set forth in
the foregoing table, certain financial and other information concerning those
limited partnerships and the two unlisted REITs, with investment objectives
similar to one or more of the Company's investment objectives, is provided in
the Prior Performance Tables included as Appendix C. Information about the
previous public partnerships, the offerings of which became fully subscribed
between July 1995 and June 2000, is included therein. Potential stockholders are
encouraged to examine the Prior Performance Tables attached as Appendix C (in
Table III), which include information as to the operating results of these prior
programs, for more detailed information concerning the experience of Messrs.
Seneff and Bourne.
INVESTMENT OBJECTIVES AND POLICIES
The following sentence replaces item 16 under the heading " -- Certain
Investment Limitations" on page 102 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).
DISTRIBUTION POLICY
DISTRIBUTIONS
The following information updates and replaces the table and footnotes
under the heading " -- Distributions" on page 103 of the Prospectus.
The following table presents total Distributions and Distributions per
Share:
<TABLE>
<CAPTION>
<S> <C>
2000 Quarter First Second Third Fourth Year
====
----------------------------- ------------ ------------ ------------ ------------- --------------
Total Distributions declared $5,522,124 $6,414,210 $7,529,787 $8,616,048 $28,082,169
Distributions per Share 0.181 0.181 0.188 0.188 0.738
1999 Quarter First Second Third Fourth Year
----------------------------- ------------ ------------ ------------ ------------- --------------
Total Distributions declared $998,652 $2,053,964 $3,278,456 $4,434,809 $10,765,881
Distributions per Share 0.175 0.181 0.181 0.181 0.718
1998 Quarter First Second Third Fourth Year
----------------------------- ------------ ------------ ------------ ------------- --------------
Total Distributions declared $101,356 $155,730 $362,045 $549,014 $1,168,145
Distributions per Share 0.075 0.075 0.142 0.175 0.467
</TABLE>
(1) For the nine months ended September 30, 2000, the years ended December
31, 1999 and 1998, and the period October 15, 1997 (the date operations
of the Company commenced) through December 31, 1997, approximately 54%,
75%, 76% and 100%, respectively, of the Distributions declared and paid
were considered to be ordinary income and for the nine months ended
September 30, 2000 and the years ended December 31, 1999 and 1998,
approximately 46%, 25% and 24%, respectively, were considered a return
of capital for federal income tax purposes. No amounts distributed to
stockholders for the periods presented are required to be or have been
treated by the Company as return of capital for purposes of calculating
the Stockholders' 8% Return on Invested Capital. Due to the fact that
the Company had not yet acquired all of its Properties and was still in
the offering stage as of September 30, 2000, the characterization of
Distributions for federal income tax purposes is not necessarily
considered by management to be representative of the characterization
of Distributions in future periods. In addition, the characterization
for tax purposes of distributions declared for the nine months ended
September 30, 2000 may not be indicative of the results that may be
expected for the year ending December 31, 2000.
(2) Distributions declared for the years ended December 31, 2000, 1999 and
1998, represent distribution rates of 7.38%, 7.18% and 4.67%,
respectively, of Invested Capital.
SUMMARY OF THE
ARTICLES OF INCORPORATION AND BYLAWS
DESCRIPTION OF CAPITAL STOCK
The following sentences replace the first and third sentences of the
first paragraph under the heading " -- Description of Capital Stock" on page 104
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.
As of October 9, 2000, the Company had 44,727,232 Shares of Common Stock
outstanding (including 20,000 Shares issued to the Advisor prior to the
commencement of the Initial Offering and 136,974 Shares issued pursuant to the
Reinvestment Plan) and no Preferred Stock or Excess Shares outstanding.
The second paragraph under the heading " -- Description of Capital
Stock" on page 105 of the Prospectus is deleted in its entirety.
The following information updates and replaces the third paragraph
under the heading " -- Description of Capital Stock" on page 105 of the
Prospectus.
The Company will not issue share certificates except to stockholders
who make a written request to the Company. Each stockholder's investment will be
recorded on the books of the Company, and information concerning the
restrictions and rights attributable to Shares (whether in connection with an
initial issuance or a transfer) will be sent to the stockholder receiving Shares
in connection with an issuance or transfer. A stockholder wishing to transfer
his or her Shares will be required to send only an executed form to the Company,
and the Company will provide the required form upon a stockholder's request. The
executed form and any other required documentation must be received by the
Company on or before the 15th of the month for the transfer to be effective the
following month. Subject to restrictions in the Articles of Incorporation,
transfers of Shares shall be effective, and the transferee of the Shares will be
recognized as the holder of such Shares as of the first day of the following
month on which the Company receives properly executed documentation.
Stockholders who are residents of New York may not transfer fewer than 250
shares at any time.
THE OFFERING
PLAN OF DISTRIBUTION
The following information updates and replaces the second full
paragraph on page 125 and the fourth paragraph on page 126 under the heading "
-- Plan of Distribution" of the Prospectus.
Selling Commissions for purchases of 500,001 Shares or more will, in
the sole discretion of the Managing Dealer, be reduced to $0.20 per Share ($0.15
of which may be reallowed to a Soliciting Dealer) or less but in no event will
the proceeds to the Company be less than $9.25 per Share.
Stockholders may agree with their participating Soliciting Dealer and
the Managing Dealer to have Selling Commissions relating to their Shares paid
over a seven-year period pursuant to a deferred commission arrangement (the
"Deferred Commission Option"). The volume discount described in the section of
the Prospectus entitled " -- Plan of Distribution" will not be applicable to
purchases with regard to which stockholders elect the Deferred Commission
Option. Stockholders electing the Deferred Commission Option will be required to
pay a total of $9.40 per Share purchased upon subscription, rather than $10.00
per Share, with respect to which $0.15 per Share will be payable as Selling
Commissions due upon subscription, $0.10 of which may be reallowed to the
Soliciting Dealer by the Managing Dealer. For each of the six years following
such subscription (or for such six year period commencing at a later date agreed
upon by the Managing Dealer and the Soliciting Dealer) on a date to be
determined by the Managing Dealer, $0.10 per Share will be paid by the Company
as deferred Selling Commissions with respect to Shares sold pursuant to the
Deferred Commission Option, which amounts will be deducted from and paid out of
distributions otherwise payable to such stockholders holding such Shares and may
be reallowed to the Soliciting Dealer by the Managing Dealer. The net proceeds
to the Company will not be affected by the election of the Deferred Commission
Option. Under this arrangement, a stockholder electing the Deferred Commission
Option will pay a 1% Selling Commission per year thereafter for six years which
will be deducted from and paid by the Company out of distributions otherwise
payable to such stockholder. At such time, if any, as Listing occurs, the
Company shall have the right to require the acceleration of all outstanding
payment obligations under the Deferred Commission Option. All such Selling
Commissions will be paid to the Managing Dealer, whereby a total of up to 7% of
such Selling Commissions may be reallowed to the Soliciting Dealer.
<PAGE>
ADDENDUM TO
APPENDIX B
FINANCIAL INFORMATION
-------------------------------------------------------
THE UPDATED PRO FORMA FINANCIAL STATEMENTS AND
THE UNAUDITED FINANCIAL STATEMENTS OF CNL HOSPITALITY
PROPERTIES, INC. CONTAINED IN THIS ADDENDUM SHOULD BE
READ IN CONJUNCTION WITH APPENDIX B TO THE ATTACHED
PROSPECTUS, DATED MAY 23, 2000.
-------------------------------------------------------
<PAGE>
INDEX TO FINANCIAL STATEMENTS
CNL HOSPITALITY PROPERTIES, INC.
AND SUBSIDIARIES
<TABLE>
<CAPTION>
<S> <C>
Page
Pro Forma Consolidated Financial Information (unaudited):
Pro Forma Consolidated Balance Sheet as of September 30, 2000 B-2
Pro Forma Consolidated Statement of Earnings for the nine months ended September 30, 2000 B-3
Pro Forma Consolidated Statement of Earnings for the year ended December 31, 1999 B-4
Notes to Pro Forma Consolidated Financial Statements for the nine months ended
September 30, 2000 and the year ended December 31, 1999 B-5
Updated Unaudited Condensed Consolidated Financial Statements as recently filed
in CNL Hospitality Properties, Inc.'s September 30, 2000 Form 10-Q:
Condensed Consolidated Balance Sheets as of September 30, 2000 and December 31, 1999 B-8
Condensed Consolidated Statements of Earnings for the quarters and nine months ended
September 30, 2000 and 1999 B-9
Condensed Consolidated Statements of Stockholders' Equity for the nine months ended
September 30, 2000 and year ended December 31, 1999 B-10
Condensed Consolidated Statements of Cash Flows for the nine months ended
September 30, 2000 and 1999 B-11
Notes to Condensed Consolidated Financial Statements for the quarters and nine months
ended September 30, 2000 and 1999 B-13
</TABLE>
<PAGE>
PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
The following Unaudited Pro Forma Consolidated Balance Sheet of CNL
Hospitality Properties, Inc. and subsidiaries (the "Company") gives effect to
(i) the receipt of an initial capital contribution of $200,000 from the Advisor,
$443,001,390 in gross offering proceeds from the sale of 44,300,139 shares of
common stock for the period from inception through September 30, 2000, and the
application of such funds to purchase 14 properties, to acquire an 89 percent
interest in a limited liability company which owns one property, to invest in an
unconsolidated subsidiary which owned seven properties as of September 30, 2000,
to place deposits on one additional property, to redeem 140,450 shares of common
stock pursuant to the Company's redemption plan, and to pay offering expenses,
acquisition fees and miscellaneous acquisition expenses, (ii) the receipt of
$28,743,032 in gross offering proceeds from the sale of 2,874,303 additional
shares for the period October 1, 2000 through November 21, 2000, (iii) the
application of such funds to (a) pay offering expenses, acquisition fees and
miscellaneous acquisition expenses, all as reflected in the pro forma
adjustments described in the related notes, (b) to acquire certain shares of 8%
Class A Cumulative Preferred Stock and common stock of CNL Hotel Investors, Inc.
and (c) the purchase of three additional properties, as reflected in the pro
forma adjustments described in the related notes. The Unaudited Pro Forma
Consolidated Balance Sheet as of September 30, 2000, includes the transactions
described in (i) above, from its historical balance sheet, adjusted to give
effect to the transactions in (ii) and (iii) above as if they had occurred on
September 30, 2000.
The Unaudited Pro Forma Consolidated Statements of Earnings for the
nine months ended September 30, 2000 and for the year ended December 31, 1999,
includes the historical operating results of the properties described in (i) and
(iii) above from the date of their acquisitions plus operating results from (A)
the later of (1) the date the property became operational or (2) January 1,
1999, to (B) the earlier of (1) the date the property was acquired by the
Company or (2) the end of the pro forma period presented.
This pro forma consolidated financial information is presented for
informational purposes only and does not purport to be indicative of the
Company's financial results or condition if the various events and transactions
reflected therein had occurred on the dates, or been in effect during the
periods, indicated. This pro forma consolidated financial information should not
be viewed as indicative of the Company's financial results or conditions in the
future.
<PAGE>
CNL HOSPITALITY PROPERTIES, INC.
AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 2000
<TABLE>
<CAPTION>
<S> <C>
CNL Hospitality CNL Hotel
Properties, Inc. Investors, Inc.
and Subsidiaries Historical Pro Forma
ASSETS Historical (c) Adjustments Pro Forma
----------------- ---------------- --------------- -------------
Land, buildings and equipment on operating leases $ 278,813,679 $ 161,600,822 $92,768,704 (b)(c) $533,183,205
Investment in unconsolidated subsidiary 37,202,729 -- (37,202,729)(c) --
Cash and cash equivalents
76,838,139 7,566,423 (67,154,933)(a)(b)(c) 17,249,629
Restricted cash 1,062,752 878,814 -- 1,941,566
Certificate of deposit 5,000,000 -- -- 5,000,000
Dividend receivable 1,150,602 -- (1,150,602)(c) --
Receivables 482,452 84,748 -- 567,200
Prepaid expenses 691,500 38,390 -- 729,890
Loan costs 124,527 663,188 -- 787,715
Accrued rental income 149,643 400,553 -- 550,196
Other assets 6,969,135 -- (2,609,160)(a)(b) 4,359,975
------------------ ----------------- ----------------- -------------
$ 408,485,158 $ 171,232,938 $ (15,348,720) $564,369,376
================== ================= ================= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Note payable 9,684,609 87,224,210 -- 96,908,819
Accounts payable and accrued expenses 1,006,098 684,356 -- 1,690,454
Distribution payable 5,372,782 2,364,472 (1,150,602)(c) 6,586,652
Due to related parties 1,281,404 356,860 -- 1,638,264
Security deposits 11,810,719 -- 2,476,236 (b) 14,286,955
Rents paid in advance 410,274 450,034 -- 860,308
----------------- ---------------- ---------------- --------------
Total liabilities 29,565,886 91,079,932 1,325,634 121,971,452
Minority Interest -- -- 37,035,063 37,035,063
----------------- ---------------- ---------------- --------------
Redeemable Preferred Stock:
Class A 8%: 50,886 share authorized; 48,337
issued and outstanding -- 47,802,692 (47,802,692 )(c) --
Class B 9.76%: 39,982 share authorized;
37,979 issued and outstanding -- 37,559,172 (37,559,172 )(c) --
----------------- ---------------- ---------------- --------------
-- 85,361,864 (85,361,864 ) --
----------------- ---------------- ---------------- --------------
Stockholders' equity:
Preferred stock, without par value.
Authorized and unissued 3,000,000 shares -- 1 (1 )(c) --
Excess shares, $.01 par value per share.
Authorized and unissued 63,000,000 shares -- -- -- --
Common stock, $.01 par value per share.
150,000,000 authorized shares; issued and
outstanding 47,053,547 shares, as adjusted 441,792 948 27,795 (a)(c) 470,535
Capital in excess of par value 390,263,511 99,999 26,314,847 (a)(c) 416,678,357
Accumulated distributions in excess of
net earnings (9,096,245 ) (5,309,806 ) 5,309,806 (a)(c) (9,096,245)
Minority interest distributions in excess of
contributions and accumulated earnings (2,689,786 ) -- -- (2,689,786)
----------------- ---------------- ---------------- --------------
Total stockholders' equity 378,919,272 (5,208,858 ) 31,652,447 405,362,861
----------------- ---------------- ---------------- --------------
$ 408,485,158 $ 171,232,938 $ (15,348,720 ) $564,369,376
================= ================ ================ ==============
</TABLE>
See accompanying notes to unaudited pro forma
consolidated financial statements.
<PAGE>
CNL HOSPITALITY PROPERTIES, INC.
AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF EARNINGS
NINE MONTHS ENDED SEPTEMBER 30, 2000
<TABLE>
<CAPTION>
<S> <C>
CNL Hospitality CNL Hotel
Properties, Investors,
Inc. and Inc.
Subsidiaries Historical Pro Forma
Historical (c) Adjustments Pro Forma
---------------- -------------- --------------- -------------
Revenues:
Rental income from operating leases $ 11,816,801 $13,231,100 $ 6,946,972 (1) $ 31,994,873
FF&E reserve income 901,771 693,224 559,857 (2) 2,154,852
Dividend income 2,780,566 0 (2,780,566 )(7) 0
Interest and other income 5,312,997 432,574 (2,409,478 )(3) 3,336,093
--------------- ---------------- ---------------- --------------
20,812,135 14,356,898 2,316,785 37,485,818
--------------- ---------------- ---------------- --------------
Expenses:
Interest and loan cost amortization 26,155 5,017,193 -- 5,043,348
General operating and administrative 1,079,101 628,085 -- 1,707,186
Professional services 117,263 -- -- 117,263
Asset management fees to
related party 1,003,416 126,134 420,986 (4) 1,550,536
Depreciation and amortization 3,956,498 3,648,654 2,397,626 (5)(7) 10,002,778
--------------- ---------------- ---------------- --------------
6,182,433 9,420,066 2,818,612 18,421,111
--------------- ---------------- ---------------- --------------
Earnings Before Equity in Loss of
Unconsolidated Subsidiary After
Deduction of Preferred Stock
Dividends and Minority Interest 14,629,702 4,936,832 (501,827 ) 19,064,707
Equity in Loss of Unconsolidated
Subsidiary After Deduction of
Preferred Stock Dividends (386,627 ) -- 386,627 (7) --
Minority Interest (403,427 ) -- (2,312,412 )(7) (2,715,839 )
--------------- ---------------- ---------------- --------------
Net Earnings $ 13,839,648 $ 4,936,832 $ (2,427,612 ) $ 16,348,868
=============== ================ ================ ==============
Earnings Per Share of Common Stock (6):
Basic $ 0.38 $ 0.42
=============== ==============
Diluted $ 0.37 $ 0.42
=============== ==============
Weighted Average Number of Shares of
Common Stock Outstanding (6):
Basic 36,178,713 38,809,195
=============== ==============
Diluted 43,767,651 38,809,195
=============== ==============
</TABLE>
See accompanying notes to unaudited pro forma
consolidated financial statements.
<PAGE>
CNL HOSPITALITY PROPERTIES, INC.
AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF EARNINGS
YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
<S> <C>
CNL
Hospitality CNL Hotel
Properties, Investors,
Inc. and Inc.
subsidiaries Historical Pro Forma
Historical (c) Adjustments Pro Forma
-------------- -------------- ---------------- --------------
Revenues:
Rental income from
operating leases $3,910,639 $ 12,452,195 $ 5,313,646 (1) $ 21,676,480
FF&E reserve income 320,356 343,264 430,181 (2) 1,093,801
Dividend income 2,753,506 -- (2,753,506 )(7) 0
Interest and other income 3,693,004 230,519 (1,929,878 )(3) 1,993,645
-------------- ---------------- ---------------- --------------
10,677,505 13,025,978 1,060,443 24,763,926
-------------- ---------------- ---------------- --------------
Expenses:
Interest and loan cost amortization 248,094 4,785,818 -- 5,033,912
General operating and
administrative 626,649 563,826 -- 1,190,475
Professional services 69,318 -- -- 69,318
Asset management fees to
related party 106,788 113,757 322,007 (4) 542,552
Depreciation and amortization 1,267,868 3,457,641 1,802,747 (5)(7) 6,528,256
-------------- ---------------- ---------------- --------------
2,318,717 8,921,042 2,124,754 13,364,513
-------------- ---------------- ---------------- --------------
Earnings Before Equity in Loss of
Unconsolidated Subsidiary After
Deduction of Preferred Stock
Dividends and Minority Interest 8,358,788 4,104,936 (1,064,311 ) 11,399,413
Equity in Loss of Unconsolidated
Subsidiary After Deduction of
Preferred Stock Dividends (778,466 ) -- 778,466 (7) --
Minority Interest (64,334 ) -- (1,922,752 )(7) (1,987,086 )
-------------- ---------------- ---------------- --------------
Net Earnings $7,515,988 $ 4,104,936 $ (2,208,597 ) $ 9,412,327
============== ================ ================ ==============
Earnings Per Share of Common Stock (6):
Basic $ 0.47 $ 0.59
============== ==============
Diluted $ 0.45 $ 0.59
============== ==============
Weighted Average Number of Shares of
Common Stock Outstanding (6):
Basic 15,890,212 15,890,212
============== ==============
Diluted 21,437,859 15,890,212
============== ==============
</TABLE>
See accompanying notes to unaudited pro forma
consolidated financial statements.
<PAGE>
CNL HOSPITALITY PROPERTIES, INC.
AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND
THE YEAR ENDED DECEMBER 31, 1999
Unaudited Pro Forma Consolidated Balance Sheet:
(a) Represents gross proceeds of $28,743,032 from the sale of 2,874,303
shares during the period October 1, 2000 through November 21, 2000,
used (i) to pay acquisition fees and costs of $1,293,436 ($96,112 of
which was accrued at September 30, 2000), and to pay selling
commissions and offering expenses of $2,200,443 which have been netted
against stockholders' equity (a total of $1,084,661 of which was
accrued as of September 30, 2000), leaving $25,249,153 for investments.
(b) Represents the use of $78,806,085 of cash and cash equivalents to
purchase seven properties for $85,185,054 (which includes closing costs
of $804,777 and acquisition fees and costs of $3,902,597, which had
been recorded as other assets as of September 30, 2000), net of
$2,476,236 received from the lessees for security deposits.
<TABLE>
<CAPTION>
<S> <C>
Acquisition
Fees and Costs
And Closing
Asset Value or Costs Allocated
Purchase Price To Investment Total
--------------------- ------------------ --------------
TownePlace Suites in Newark, CA $ 13,600,000 $ 227,928 $ 13,827,928
Courtyard Little Lake Bryan, FL 35,870,100 2,394,351 38,264,451
Fairfield Inn Little Lake Bryan, FL 31,007,580 2,085,095 33,092,675
-------------------- ----------------- ---------------
$ 80,477,680 $ 4,707,374 $85,185,054
==================== ================= ===============
</TABLE>
(c) 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 Class B
Preferred Stock and an aggregate of 10,115 shares of 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 repurchased 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;
<PAGE>
CNL HOSPITALITY PROPERTIES, INC.
AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND
THE YEAR ENDED DECEMBER 31, 1999
Unaudited Pro Forma Consolidated Balance Sheet - Continued:
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; and
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 owned an
interest of approximately 53% and Five Arrows owns approximately
47% of Hotel Investors.
As of December 31, 1999, Hotel Investors owned the following
properties:
Date Placed
in Service
by the Company
-----------------
Residence Inn in Las Vegas, NV February 25, 1999
Residence Inn in Plano, TX February 25, 1999
Marriott Suites in Dallas, TX February 25, 1999
Courtyard in Plano, TX February 25, 1999
Residence Inn in Phoenix, AZ June 16, 1999
Courtyard in Scottsdale, AZ June 16, 1999
Courtyard in Seattle, WA June 16, 1999
Unaudited Pro Forma Consolidated Statements of Earnings:
(1) Represents adjustment to rental income from operating leases for the
properties acquired by the Company as of November 21, 2000 (the "Pro
Forma Properties") for the period commencing (A) the later of (i) the
date the Pro Forma Property became operational by the previous owner or
(ii) January 1, 1999, to (B) the earlier of (i) the date the Pro Forma
Property was acquired by the Company or (ii) the end of the pro forma
period presented. The following presents the actual date the Pro Forma
Properties were acquired or placed in service by the Company as
compared to the date the Pro Forma Properties were treated as becoming
operational as a rental property for purposes of the Pro Forma
Consolidated Statements of Earnings.
<TABLE>
<CAPTION>
<S> <C>
Date Pro Forma
Date Placed Property became
in Service Operational as
by the Company Rental Property
----------------- -----------------
Residence Inn in Mira Mesa, CA December 10, 1999 September 20, 1999
Courtyard in Philadelphia, PA November 20, 1999 November 20, 1999
Wyndham in Billerica, MA June 1, 2000 May 15, 1999
Wyndham in Denver, CO June 1, 2000 November 15, 1999
Residence Inn in Palm Desert, CA June 16, 2000 February 19, 1999
Courtyard in Palm Desert, CA June 16, 2000 September 1, 1999
Residence Inn in Merrifield ,VA July 28, 2000 June 24, 2000
SpringHill Suites in Gaithersburg, MD July 28, 2000 June 30, 2000
Courtyard in Alpharetta, GA August 22, 2000 January 7, 2000
</TABLE>
<PAGE>
CNL HOSPITALITY PROPERTIES, INC.
AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND
THE YEAR ENDED DECEMBER 31, 1999
Unaudited Pro Forma Consolidated Statements of Earnings - Continued:
<TABLE>
<CAPTION>
<S> <C>
Date Pro Forma
Date Placed Property became
in Service Operational as
by the Company Rental Property
----------------- -----------------
Residence Inn in Salt Lake City, UT August 22, 2000 August 11, 1999
TownePlace Suites in Tewksbury, MA August 22, 2000 July 15, 1999
TownePlace Suites in Mt. Laurel, NJ August 22, 2000 November 22, 1999
TownePlace Suites in Scarborough, ME August 22, 2000 June 25, 1999
TownePlace Suites in Newark, CA November 3, 2000 September 1, 2000
Courtyard in Orlando, FL November 21, 2000 October 16, 2000
Fairfield Inn in Orlando, FL November 21, 2000 October 16, 2000
</TABLE>
Generally, the leases provide for the payment of percentage rent in
addition to base rental income. However, due to the fact that no
percentage rent was due under the leases for the Pro Forma Properties
during 1999 and the nine months ended September 30, 2000 that the
Company held the properties, no pro forma adjustment was made for
percentage rental income for the year ended December 31, 1999 and the
nine months ended September 30, 2000.
(2) Represents reserve funds which will be used for the replacement and
renewal of furniture, fixtures and equipment relating to the Pro Forma
Properties (the "FF&E Reserve"). The funds in the FF&E Reserve and all
property purchased with funds from the FF&E Reserve will be paid,
granted and assigned to the Company as additional rent. In connection
therewith, FF&E reserve income was earned at approximately three
percent of estimated annual gross revenues per Pro Forma Property.
(3) Represents adjustment to interest income due to the decrease in the
amount of cash available for investment in interest bearing accounts
during the periods commencing (A) the later of (i) the dates the Pro
Forma Properties became operational by the previous owners or (ii)
January 1, 1999, through (B) the earlier of (i) the actual date the Pro
Forma Properties were acquired or (ii) the end of the pro forma period
presented, as described in Note (1) above. The estimated pro forma
adjustment is based upon the fact that interest income from interest
bearing accounts was earned at a rate of approximately four percent per
annum by the Company during the year ended December 31, 1999 and the
nine months ended September 30, 2000.
(4) Represents increase in asset management fees relating to the Pro Forma
Properties for the period commencing (A) the later of (i) the date the
Pro Forma Properties became operational by the previous owners or (ii)
January 1, 1999, through (B) the earlier of (i) the date the Pro Forma
Properties were acquired or (ii) the end of the pro forma period
presented, as described in Notes (1) above. Asset management fees are
equal to 0.60% per year of the Company's Real Estate Asset Value, as
defined in the Company's prospectus.
(5) Represents incremental increase in depreciation expense of the building
and the furniture, fixture and equipment ("FF&E") portions of the Pro
Forma Properties accounted for as operating leases using the
straight-line method. The buildings and FF&E are depreciated over
useful lives of 40 and seven years, respectively.
(6) Historical earnings per share were calculated based upon the weighted
average number of shares of common stock outstanding during the year
ended December 31, 1999 and the nine months ended September 30, 2000.
(7) Represents certain elimination adjustments and pro forma adjustments
due to the consolidation of CNL Hotel Investors, Inc., consistent with
Note (c) above.
<PAGE>
CNL HOSPITALITY PROPERTIES, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
<S> <C>
September 30, 2000 December 31, 1999
--------------------- ------------------
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 (2,689,786 ) --
and accumulated earnings
---------------- ------------------
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>
<S> <C>
Quarters Ended Nine Months Ended
September 30, September 30,
2000 1999 2000 1999
-------------- --------------- ------------- ------------
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>
<CAPTION>
<S> <C>
Minority interest
distributions in
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
-------------- ------------ -------------- ----------------- -------------- -------------
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>
<S> <C>
Nine Months Ended September 30,
2000 1999
------------- -------------
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>
<S> <C>
Nine Months Ended
September 30,
2000 1999
---------------- --------------
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.
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
<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 - Continued:
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).
The following presents condensed financial information for Hotel
Investors as of and for the nine months ended and year ended:
<TABLE>
<CAPTION>
<S> <C>
September 30, December 31,
2000 1999
----------------- ----------------
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).
<PAGE>
CNL HOSPITALITY PROPERTIES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Quarters and Nine Months Ended September 30, 2000 and 1999
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.
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.
<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:
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.
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
<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:
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.
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>
<S> <C>
2000 1999
------------------ ----------------
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.
<PAGE>
CNL HOSPITALITY PROPERTIES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Quarters and Nine Months Ended September 30, 2000 and 1999
10. Concentration of Credit Risk - Continued:
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.
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>
<S> <C>
Quarters Ended Nine Months Ended
2000 1999 2000 1999
-------------- ---------------- ---------------- ------------------
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.
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 Class B
Preferred Stock and an aggregate of 10,115 shares of 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 repurchased 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;
<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:
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>
ADDENDUM TO
APPENDIX C
PRIOR PERFORMANCE TABLES
-----------------------------------------
The following information updates and
replaces the corresponding information
in Appendix C to the attached prospectus,
dated May 23, 2000
-----------------------------------------
<PAGE>
APPENDIX C
PRIOR PERFORMANCE TABLES
The information in this Appendix C contains certain relevant summary
information concerning certain prior public programs sponsored by two of the
Company's principals (who also serve as the Chairman of the Board and President
of the Company) and their Affiliates (the "Prior Public Programs") which were
formed to invest in restaurant properties leased on a triple-net basis to
operators of national and regional fast-food and family-style restaurant chains,
or in the case of CNL Retirement Properties, Inc. (formerly CNL Health Care
Properties, Inc.), to invest in health care properties. No Prior Public Programs
sponsored by the Company's Affiliates have invested in hotel properties leased
on a triple-net basis to operators of national and regional limited-service,
extended-stay and full-service hotel chains.
A more detailed description of the acquisitions by the Prior Public
Programs is set forth in Part II of the registration statement filed with the
Securities and Exchange Commission for this Offering and is available from the
Company upon request, without charge. In addition, upon request to the Company,
the Company will provide, without charge, a copy of the most recent Annual
Report on Form 10-K filed with the Securities and Exchange Commission for CNL
Income Fund, Ltd., CNL Income Fund II, Ltd., CNL Income Fund III, Ltd., CNL
Income Fund IV, Ltd., CNL Income Fund V, Ltd., CNL Income Fund VI, Ltd., CNL
Income Fund VII, Ltd., CNL Income Fund VIII, Ltd., CNL Income Fund IX, Ltd., CNL
Income Fund X, Ltd., CNL Income Fund XI, Ltd., CNL Income Fund XII, Ltd., CNL
Income Fund XIII, Ltd., CNL Income Fund XIV, Ltd., CNL Income Fund XV, Ltd., CNL
Income Fund XVI, Ltd., CNL Income Fund XVII, Ltd., CNL Income Fund XVIII, Ltd.,
CNL American Properties Fund, Inc., and CNL Retirement Properties, Inc. as well
as a copy, for a reasonable fee, of the exhibits filed with such reports.
The investment objectives of the Prior Public Programs generally
include preservation and protection of capital, the potential for increased
income and protection against inflation, and potential for capital appreciation,
all through investment in properties. In addition, the investment objectives of
the Prior Public Programs included making partially tax-sheltered distributions.
Stockholders should not construe inclusion of the following tables as
implying that the Company will have results comparable to those reflected in
such tables. Distributable cash flow, federal income tax deductions, or other
factors could be substantially different. Stockholders should note that, by
acquiring shares in the Company, they will not be acquiring any interest in any
prior public programs.
Description of Tables
The following Tables are included herein:
Table I - Experience in Raising and Investing Funds
Table II - Compensation to Sponsor
Table III - Operating Results of Prior Programs
Table V - Sales or Disposal of Properties
Unless otherwise indicated in the Tables, all information contained in
the Tables is as of June 30, 2000. The following is a brief description of the
Tables:
Table I - Experience in Raising and Investing Funds
Table I presents information on a percentage basis showing the
experience of two of the principals of the Company and their Affiliates in
raising and investing funds for the Prior Public Programs, the offerings of
which became fully subscribed between July 1995 and June 2000.
The Table sets forth information on the offering expenses incurred and
amounts available for investment expressed as a percentage of total dollars
raised. The Table also shows the percentage of property acquisition cost
leveraged, the date the offering commenced, and the time required to raise funds
for investment.
Table II - Compensation to Sponsor
Table II provides information, on a total dollar basis, regarding
amounts and types of compensation paid to two of the Company's principals and
their Affiliates which sponsored the Prior Public Programs.
The Table indicates the total offering proceeds and the portion of such
offering proceeds paid or to be paid to two of the principals of the Company and
their Affiliates in connection with the Prior Public Programs, the offerings of
which became fully subscribed between July 1995 and June 2000. The Table also
shows the amounts paid to two of the principals of the Company and their
Affiliates from cash generated from operations and from cash generated from
sales or refinancing by each of the Prior Public Programs on a cumulative basis
commencing with inception and ending June 30, 2000.
Table III - Operating Results of Prior Programs
Table III presents a summary of operating results for the period from
inception through June 30, 2000, of the Prior Public Programs, the offerings of
which became fully subscribed between July 1995 and June 2000.
The Table includes a summary of income or loss of the Prior Public
Programs, which are presented on the basis of generally accepted accounting
principles ("GAAP"). The Table also shows cash generated from operations, which
represents the cash generated from operations of the properties of the Prior
Public Programs, as distinguished from cash generated from other sources
(special items). The section of the Table entitled "Special Items" provides
information relating to cash generated from or used by items which are not
directly related to the operations of the properties of the Prior Public
Programs, but rather are related to items of an investing or financing nature.
These items include proceeds from capital contributions of investors and
disbursements made from these sources of funds, such as syndication (or stock
issuance) and organizational costs, acquisition of the properties and other
costs which are related more to the organization of the entity and the
acquisition of properties than to the actual operations of the entities.
The Table also presents information pertaining to investment income,
returns of capital on a GAAP basis, cash distributions from operations, sales
and refinancing proceeds expressed in total dollar amounts as well as
distributions and tax results on a per $1,000 investment basis.
Table IV - Results of Completed Programs
Table IV is omitted from this Appendix C because none of the Prior
Public Programs have completed operations (meaning they no longer hold
properties).
Table V - Sales or Disposal of Properties
Table V provides information regarding the sale or disposal of
properties owned by the Prior Public Programs between July 1995 and June 2000.
The Table includes the selling price of the property, the cost of the
property, the date acquired and the date of sale.
<PAGE>
TABLE I
EXPERIENCE IN RAISING AND INVESTING FUNDS
<TABLE>
<CAPTION>
<S> <C>
CNL American CNL Income CNL Income CNL Retirement
Properties Fund, Fund XVII, Fund XVIII, Properties,
Inc. Ltd. Ltd. Inc.
----------------- -------------- -------------- ------------------
(Note 1) (Note 2)
Dollar amount offered $747,464,420 $30,000,000 $35,000,000
================= ============== ==============
Dollar amount raised 100.0 % 100.0 % 100.0 %
----------------- -------------- --------------
Less offering expenses:
Selling commissions and discounts (7.5 ) (8.5 ) (8.5 )
Organizational expenses (2.2 ) (3.0 ) (3.0 )
Marketing support and due diligence
expense reimbursement fees
(includes amounts reallowed to
unaffiliated entities) (0.5 ) (0.5 ) (0.5 )
----------------- -------------- --------------
(10.2 ) (12.0 ) (12.0 )
----------------- -------------- --------------
Reserve for operations -- -- --
----------------- -------------- --------------
Percent available for investment 89.8 % 88.0 % 88.0 %
================= ============== ==============
Acquisition costs:
Cash down payment 85.3 % 83.5 % 83.5%
Acquisition fees paid to affiliates 4.5 4.5 4.5%
Loan costs -- -- --
----------------- -------------- --------------
Total acquisition costs 89.8 % 88.0 % 88.0 %
================= ============== ==============
Percent leveraged (mortgage financing
divided by total acquisition costs) -- -- --
Date offering began 4/19/95, 2/06/97 9/02/95 9/20/96
and 3/02/98
Length of offering (in months) 22, 13 and 9, 12 17
respectively
Months to invest 90% of amount
available for investment measured
from date of offering 23, 16 and 11, 15 17
respectively
</TABLE>
Note 1: Pursuant to a Registration Statement on Form S-11 under the
Securities Act of 1933, as amended, effective March 29, 1995, CNL
American Properties Fund, Inc. ("APF") registered for sale
$165,000,000 of shares of common stock (the "Initial Offering"),
including $15,000,000 available only to stockholders participating in
the company's reinvestment plan. The Initial Offering of APF commenced
April 19, 1995, and upon completion of the Initial Offering on
February 6, 1997, had received subscription proceeds of $150,591,765
(7,529,588 shares), including $591,765 (29,588 shares) issued pursuant
to the reinvestment plan. Pursuant to a Registration Statement on Form
S-11 under the Securities Act of 1933, as amended, effective January
31, 1997, APF registered for sale $275,000,000 of shares of common
stock (the "1997 Offering"), including $25,000,000 available only to
stockholders participating in the company's reinvestment plan. The
1997 Offering of APF commenced following the completion of the Initial
Offering on February 6, 1997, and upon completion of the 1997 Offering
on March 2, 1998, had received subscription proceeds of $251,872,648
(12,593,633 shares), including $1,872,648 (93,632 shares) issued
pursuant to the reinvestment plan. Pursuant to a Registration
Statement on Form S-11 under the Securities Act of 1933, as amended,
effective May 12, 1998, APF registered for sale $345,000,000 of shares
of common stock (the "1998 Offering"). The 1998 Offering of APF
commenced following the completion of the 1997 Offering on March 2,
1998. As of January 31, 1999, APF had received subscriptions totalling
approximately $345,000,000 (17,250,000 shares), from the 1998
Offering, including $3,107,848 (155,393 shares) issued pursuant to the
company's reinvestment plan. The 1998 Offering became fully subscribed
in December 1998 and proceeds from the last subscriptions were
received in January 1999.
Note 2: Pursuant to a Registration Statement on Form S-11 under the
Securities Act of 1933, as amended, effective September 18, 1998, CNL
Retirement Properties, Inc. ("CRP") registered for sale up to
$155,000,000 of shares of common stock (the "Initial Offering"),
including up to $5,000,000 available to stockholders participating in
the company's reinvestment plan. The Initial Offering of CRP commenced
September 18, 1998. As of June 30, 2000, CRP had received subscription
proceeds of $8,521,527 (852,153 shares) from the Initial Offering,
including $50,427 (5,043 shares) through the reinvestment plan. Upon
termination of the Initial Offering on September 18, 2000, CRP
commenced an offering of up to $155,000,000 (the "2000 Offering"),
including up to $5,000,000 available to stockholders participating in
the company's reinvestment plan.
<PAGE>
TABLE II
COMPENSATION TO SPONSOR
<TABLE>
<CAPTION>
<S> <C>
CNL American CNL Income CNL Income CNL Retirement
Properties Fund, Fund XVII, Fund XVIII, Properties,
Inc. Ltd. Ltd. Inc.
------------------ --------------- ---------------- -----------------
(Notes 1, 2 and (Note 4)
6)
Date offering commenced 4/19/95, 2/06/97 9/02/95 9/20/96
and 3/02/98
Dollar amount raised $747,464,420 $30,000,000 $35,000,000
================== =============== ================
Amount paid to sponsor from proceeds of offering:
Selling commissions and discounts 56,059,832 2,550,000 2,975,000
Real estate commissions -- -- --
Acquisition fees (Notes 5 and 6) 33,604,618 1,350,000 1,575,000
Marketing support and due diligence
expense reimbursement fees
(includes amounts reallowed to
unaffiliated entities) 3,737,322 150,000 175,000
------------------ --------------- ----------------
Total amount paid to sponsor 93,401,772 4,050,000 4,725,000
================== =============== ================
Dollar amount of cash generated from (used in)
operations before deducting payments
to sponsor:
2000 (6 months) (Note 7) (46,945,156 ) 1,051,688 1,342,621
1999 (Note 7) 311,630,414 2,567,164 2,921,071
1998 42,216,874 2,638,733 2,964,628
1997 18,514,122 2,611,191 1,471,805
1996 6,096,045 1,340,159 30,126
1995 594,425 11,671 --
1994 -- -- --
1993 -- -- --
Amount paid to sponsor from operations
(administrative, accounting and
management fees) (Note 6):
2000 (6 months) 956,233 66,591 72,061
1999 4,369,200 117,146 124,031
1998 3,100,599 117,814 132,890
1997 1,437,908 116,077 110,049
1996 613,505 107,211 2,980
1995 95,966 2,659 --
1994 -- -- --
1993 -- -- --
Dollar amount of property sales and
refinancing before deducting payments to
sponsor:
Cash (Note 3) 25,163,154 1,675,385 688,997
Notes -- -- --
Amount paid to sponsors from property sales
and refinancing:
Real estate commissions -- -- --
Incentive fees -- -- --
Other -- -- --
</TABLE>
Note 1: Pursuant to a Registration Statement on Form S-11 under the
Securities Act of 1933, as amended, effective March 29, 1995, CNL
American Properties Fund, Inc. ("APF") registered for sale
$165,000,000 of shares of common stock (the "Initial Offering"),
including $15,000,000 available only to stockholders participating in
the company's reinvestment plan. The Initial Offering of APF commenced
April 19, 1995, and upon completion of the Initial Offering on
February 6, 1997, had received subscription proceeds of $150,591,765
(7,529,588 shares), including $591,765 (29,588 shares) issued pursuant
to the reinvestment plan. Pursuant to a Registration Statement on Form
S-11 under the Securities Act of 1933, as amended, effective January
31, 1997, APF registered for sale $275,000,000 of shares of common
stock (the "1997 Offering"), including $25,000,000 available only to
stockholders participating in the company's reinvestment plan. The
1997 Offering of APF commenced following the completion of the Initial
Offering on February 6, 1997, and upon completion of the 1997 Offering
on March 2, 1998, had received subscription proceeds of $251,872,648
(12,593,633 shares), including $1,872,648 (93,632 shares) issued
pursuant to the reinvestment plan. Pursuant to a Registration
Statement on Form S-11 under the Securities Act of 1933, as amended,
effective May 12, 1998, APF registered for sale $345,000,000 of shares
of common stock (the "1998 Offering"). The 1998 Offering of APF
commenced following the completion of the 1997 Offering on March 2,
1998. As of January 31, 1999, APF had received subscriptions totalling
approximately $345,000,000 (17,250,000 shares), from the 1998
Offering, including $3,107,848 (155,393 shares) issued pursuant to the
company's reinvestment plan. The 1998 Offering became fully subscribed
in December 1998 and proceeds from the last subscriptions were
received in January 1999. The amounts shown represent the combined
results of the Initial Offering, the 1997 Offering and the 1998
Offering as of January 31, 1999, including shares issued pursuant to
the company's reinvestment plan.
<PAGE>
TABLE II - COMPENSATION TO SPONSOR - CONTINUED
Note 2: For negotiating secured equipment leases and supervising the
secured equipment lease program, APF was required to pay its external
advisor a one-time secured equipment lease servicing fee of two
percent of the purchase price of the equipment that is the subject of
a secured equipment lease (see Note 6). During the years ended
December 31, 1999, 1998, 1997 and 1996, APF incurred $77,317, $54,998,
$87,665 and $70,070, respectively, in secured equipment lease
servicing fees.
Note 3: Excludes properties sold and substituted with replacement
properties, as permitted under the terms of the lease agreements.
Note 4: Pursuant to a Registration Statement on Form S-11 under the
Securities Act of 1933, as amended, effective September 18, 1998, CNL
Retirement Properties, Inc. ("CRP") registered for sale up to
$155,000,000 of shares of common stock (the "Initial Offering"),
including up to $5,000,000 available to stockholders participating in
the company's reinvestment plan. The offering of shares of CRP
commenced September 18, 1998. As of June 30, 2000, CRP had received
subscription proceeds of $8,521,527 (852,153 shares) from the Initial
Offering, including $50,427 (5,043 shares) through the reinvestment
plan. From the commencement of the Initial Offering through June 30,
2000, total selling commissions and discounts were $639,115, marketing
support and due diligence expense reimbursement fees were $42,608, and
acquisition fees were $383,469, for a total due to the sponsor of
$1,065,192. CRP had cash generated from operations for the period July
13, 1999 (the date funds were originally released from escrow) through
June 30, 2000 of $670,519. CRP made payments of $287,902 to the
sponsor from operations for this period.
Note 5: In addition to acquisition fees paid on gross proceeds from the
offerings, prior to becoming self advised on September 1, 1999, APF
also incurred acquisition fees relating to proceeds from its line of
credit to the extent the proceeds were used to acquire properties.
Such fees were paid using proceeds from the line of credit, and as of
December 31, 1999, APF had incurred $6,175,521 of such fees (see Note
6).
Note 6: On September 1, 1999, APF issued 6,150,000 shares of common stock
(with an exchange value of $20 per share) to affiliates of APF to
acquire its external advisor and two companies which make and service
mortgage loans and securitize portions of such loans. As a result of
the acquisition, APF ceased payment of acquisition fees,
administrative, accounting, management and secured equipment lease
servicing fees. APF continues to outsource several functions to
affiliates such as investor services, public relations, corporate
communications, knowledge and technology management, and tax and legal
compliance.
Note 7: In September 1999, APF acquired two companies which make and
service mortgage loans and securitize portions of loans. Effective
with these acquisitions, APF classifies its investments in mortgage
loans, proceeds from sale of mortgage loans, collections of mortgage
loans, proceeds from securitization transactions and purchases of
other investments as operating activities in its financial statements.
Prior to these acquisitions, these types of transactions were
classified as investing activities in its financial statements.
<PAGE>
TABLE III Operating
Results of Prior Programs
CNL AMERICAN PROPERTIES FUND, INC.
<TABLE>
<CAPTION>
<S> <C>
1994 1997
(Note 1) 1995 1996 (Note 2)
------------ ------------ ------------- -------------
Gross revenue $ 0 $ 539,776 $4,363,456 $ 15,516,102
Equity in earnings of joint venture 0 0 0 0
Gain (loss) on sale of assets (Notes 7, 15 and 18) 0 0 0 0
Provision for losses on assets (Notes 12, 14 and 17) 0 0 0 0
Interest income 0 119,355 1,843,228 3,941,831
Less: Operating expenses 0 (186,145 ) (908,924 ) (2,066,962 )
Transaction costs 0 0 0 0
Interest expense 0 0 0 0
Depreciation and amortization 0 (104,131 ) (521,871 ) (1,795,062 )
Advisor acquisition expense (Note 16) 0 0 0 0
Minority interest in income of consolidated
joint ventures 0 (76 ) (29,927 ) (31,453 )
------------ ------------ ------------- -------------
Net income (loss) - GAAP basis 0 368,779 4,745,962 15,564,456
============ ============ ============= =============
Taxable income
- from operations (Note 8) 0 379,935 4,894,262 15,727,311
============ ============ ============= =============
- from gain (loss) on sale (Notes 7, 15 and 18) 0 0 0 (41,115 )
============ ============ ============= =============
Cash generated from (used in) operations (Notes 4, 5 0 498,459 5,482,540 17,076,214
and 19)
Cash generated from sales (Notes 7, 15, 18 and 20) 0 0 0 6,289,236
Cash generated from refinancing 0 0 0 0
------------ ------------ ------------- -------------
Cash generated from (used in) operations, sales and 0 498,459 5,482,540 23,365,450
refinancing
Less: Cash distributions to investors (Note 9)
- from operating cash flow (Note 4) 0 (498,459 ) (5,439,404 ) (16,854,297 )
- from sale of properties 0 0 0 0
- from cash flow from prior period 0 0 0 0
- from return of capital (Note 10) 0 (136,827 ) 0 0
------------ ------------ ------------- -------------
Cash generated (deficiency) after cash distributions 0 (136,827 ) 43,136 6,511,153
Special items (not including sales of real estate and
refinancing):
Subscriptions received from stockholders 0 38,454,158 100,792,991 222,482,560
Sale of common stock to CNL Fund
Advisors, Inc. 200,000 0 0 0
Retirement of shares of common stock
(Note 13) 0 0 0 0
Contributions from minority interest 0 200,000 97,419 0
Distributions to holder of minority interest 0 0 (39,121 ) (34,020 )
Stock issuance costs (19 ) (3,680,704 ) (8,486,188 ) (19,542,862 )
Acquisition of land and buildings 0 (18,835,969 ) (36,104,148 ) (143,542,667 )
Investment in direct financing leases 0 (1,364,960 ) (13,372,621 ) (39,155,974 )
Proceeds from sales of equipment direct
financing leases 0 0 0 962,274
Investment in joint venture 0 0 0 0
Increase in restricted cash 0 0 0 0
Purchase of other investments (Note 19) 0 0 0 0
Investment in mortgage notes receivable (Note 19) 0 0 (13,547,264 ) (4,401,982 )
Collections on mortgage notes receivable (Note19) 0 0 133,850 250,732
Investment in equipment and other notes
receivable 0 0 0 (12,521,401 )
Collections on equipment and other notes
receivable 0 0 0 0
Investment in (redemption of) certificates of
deposit 0 0 0 (2,000,000 )
Proceeds of borrowing on line of credit and
note payables 0 0 3,666,896 19,721,804
Payment on line of credit 0 0 (145,080 ) (20,784,577 )
Reimbursement of organization, acquisition, and
deferred offering and stock issuance costs paid
on behalf of CNL American Properties Fund,
Inc. by related parties (199,036 ) (2,500,056 ) (939,798 ) (2,857,352 )
Increase in intangibles and other assets 0 (628,142 ) (1,103,896 ) 0
Proceeds from borrowings on mortgage
warehouse facility 0 0 0 0
Payments on mortgage warehouse facility 0 0 0 0
Payments of loan costs 0 0 0 0
Other 0 0 (54,533 ) 49,001
------------ ------------ ------------- -------------
Cash generated (deficiency) after cash distributions
and special items 945 11,507,500 30,941,643 5,136,689
============ ============ ============= =============
<PAGE>
6 months
1998 1999 2000
(Note 3) (Note 3) (Note 3)
--------------- --------------- --------------
$33,202,491 $ 62,165,451 $ 42,275,405
16,018 97,307 48,665
0 (1,851,838 ) 198,682
(611,534 ) (7,779,195 ) (174,641 )
8,984,546 13,335,146 10,110,235
(5,354,859 ) (12,078,868 ) (11,481,633 )
0 (6,798,803 ) (6,702,955 )
0 (10,205,197 ) (18,288,098 )
(4,054,098 ) (10,346,143 ) (7,742,567 )
0 (76,333,516 ) 0
(30,156 ) (41,678 ) (208,663 )
--------------- --------------- --------------
32,152,408 (49,837,334 ) 8,034,430
=============== =============== ==============
33,553,390 58,152,473 7,777,866
=============== =============== ==============
(149,948 ) (789,861 ) (482,056 )
=============== =============== ==============
39,116,275 307,261,214 (47,901,389 )
2,385,941 5,302,433 6,486,944
0 0 0
--------------- --------------- --------------
41,502,216 312,563,647 (41,414,445 )
(39,116,275 ) (60,078,825 ) 0
0 0 0
(265,053 ) 0 (33,164,804 )
(67,821 ) 0 0
--------------- --------------- --------------
2,053,067 252,484,822 (74,579,249 )
385,523,966 210,736 0
0 0 0
(639,528 ) (50,891 ) 0
0 740,621 0
(34,073 ) (66,763 ) (52,585 )
(34,579,650 ) (737,190 ) 0
(200,101,667 ) (286,411,210 ) (27,279,430 )
(47,115,435 ) (63,663,720 ) (23,301,254 )
0 2,252,766 483,669
(974,696 ) (187,452 ) 0
0 0 (3,467,086 )
(16,083,055 ) 0 0
(2,886,648 ) (4,041,427 ) 0
291,990 393,468 0
(7,837,750 ) (26,963,918 ) (4,152,100 )
1,263,633 3,500,599 1,712,462
0 2,000,000 0
7,692,040 439,941,245 333,401,000
(8,039 ) (61,580,289 ) (278,000,000 )
(4,574,925 ) (1,492,310 ) (1,422,056 )
(6,281,069 ) (1,862,036 ) (1,776,564 )
0 27,101,067 71,481,448
0 (352,808,966 ) (549,093 )
0 (5,947,397 ) (3,209,908 )
(95,101 ) 0 0
--------------- --------------- --------------
75,613,060 (77,188,245 ) (10,710,746 )
=============== =============== ==============
<PAGE>
TABLE III - CNL AMERICAN PROPERTIES FUND, INC. (continued)
1994 1997
(Note 1) 1995 1996 (Note 2)
-------------- ------------- -------------- -------------
TAX AND DISTRIBUTION DATA PER
$1,000 INVESTED (Note 6)
Federal income tax results:
Ordinary income (loss) (Notes 9 and 11)
- from operations (Note 8) 0 20 61 67
============== ============= ============== =============
- from recapture 0 0 0 0
============== ============= ============== =============
Capital gain (loss) (Notes 7, 15 and 18) 0 0 0 0
============== ============= ============== =============
Cash distributions to investors
Source (on GAAP basis)
- from investment income 0 19 59 66
- from capital gain 0 0 0 0
- from investment income from prior
period 0 0 0 0
- from return of capital (Note 10) 0 14 8 6
-------------- ------------- -------------- -------------
Total distributions on GAAP basis (Note 11) 0 33 67 72
============== ============= ============== =============
Source (on cash basis)
- from sales 0 0 0 0
- from refinancing 0 0 0 0
- from operations (Note 4) 0 26 67 72
- from cash flow from prior period 0 0 0 0
- from return of capital (Note 10) 0 7 0 0
-------------- ------------- -------------- -------------
Total distributions on cash basis (Note 11) 0 33 67 72
============== ============= ============== =============
Total cash distributions as a percentage of
original $1,000 investment (Notes 6 and 0.00 % 5.34 % 7.06 % 7.45 %
21)
Total cumulative cash distributions per
$1,000 investment from inception 0 33 100 172
Amount (in percentage terms) remaining
invested in program properties at the
end
of each year (period) presented
(original
total acquisition cost of properties
retained, divided by original total N/A 100 % 100 % 100 %
acquisition cost of all properties in
program) (Notes 7, 15 and 18)
</TABLE>
Note 1: Pursuant to a Registration Statement on Form S-11 under the
Securities Act of 1933, as amended, effective March 29, 1995, CNL
American Properties Fund, Inc. ("APF") registered for sale
$165,000,000 of shares of common stock (the "Initial Offering"),
including $15,000,000 available only to stockholders participating in
the company's reinvestment plan. The Initial Offering of APF commenced
April 19, 1995, and upon completion of the Initial Offering on
February 6, 1997, had received subscription proceeds of $150,591,765
(7,529,588 shares), including $591,765 (29,588 shares) issued pursuant
to the reinvestment plan. Pursuant to a Registration Statement on Form
S-11 under the Securities Act of 1933, as amended, effective January
31, 1997, APF registered for sale $275,000,000 of shares of common
stock (the "1997 Offering"), including $25,000,000 available only to
stockholders participating in the company's reinvestment plan. The
1997 Offering of APF commenced following the completion of the Initial
Offering on February 6, 1997, and upon completion of the 1997 Offering
on March 2, 1998, had received subscription proceeds of $251,872,648
(12,593,633 shares), including $1,872,648 (93,632 shares) issued
pursuant to the reinvestment plan. Pursuant to a Registration
Statement on Form S-11 under the Securities Act of 1933, as amended,
effective May 12, 1998, APF registered for sale $345,000,000 of shares
of common stock (the "1998 Offering"). The 1998 Offering of APF
commenced following the completion of the 1997 Offering on March 2,
1998. As of January 31, 1999, APF had received subscriptions totalling
approximately $345,000,000 (17,250,000 shares), from the 1998
Offering, including $3,107,848 (155,393 shares) issued pursuant to the
company's reinvestment plan. The 1998 Offering became fully subscribed
in December 1998 and proceeds from the last subscriptions were
received in January 1999. Activities through June 1, 1995, were
devoted to organization of APF and operations had not begun.
Note 2: The amounts shown represent the combined results of the Initial
Offering and the 1997 Offering.
Note 3: The amounts shown represent the combined results of the Initial
Offering, 1997 Offering and 1998 Offering.
Note 4: Cash generated from operations from inception through September
1999 included cash received from tenants, less cash paid for expenses,
plus interest received. In September 1999, APF acquired two companies
which make and service mortgage loans and securitize portions of
loans. Effective with these acquisitions, APF classifies its
investments in mortgage loans, proceeds from sale of mortgage loans,
collections of mortgage loans, proceeds from securitization
transactions and
<PAGE>
6 months
1998 1999 2000
(Note 3) (Note 3) (Note 3)
------------------ --------------- ---------------
63 74 9
================== =============== ===============
0 0 0
================== =============== ===============
0 (1 ) (1 )
================== =============== ===============
60 0 9
0 0 0
0 0 0
14 76 29
------------------ --------------- ---------------
74 76 38
================== =============== ===============
0 0 0
0 0 0
73 76 0
1 0 38
0 0 0
------------------ --------------- ---------------
74 76 38
================== =============== ===============
7.625 % 7.625 % 7.625 %
246 322 360
100 % 100 % 100 %
Note 4
(Continued): purchases of other investments as operating activities in its
financial statements. Prior to these acquisitions, these types of
transactions were classified as investing activities in its financial
statements.
Note 5: Cash generated from operations per this table agrees to cash
generated from operations per the statement of cash flows included in
the financial statements of APF.
Note 6: Total cash distributions as a percentage of original $1,000
investment are calculated based on actual distributions declared for
the period.
Note 7: In May 1997 and July 1997, APF sold four properties and one
property, respectively, to a tenant for $5,254,083 and $1,035,153,
respectively, which was equal to the carrying value of the properties
at the time of sale. In May and July 1998, APF sold two and one
properties, respectively, to third parties for $1,605,154 and
$1,152,262, respectively (and received net sales proceeds of
approximately $1,233,700 and $629,435, respectively, after deduction
of construction costs incurred but not paid by APF as of the date of
the sale), which approximated the carrying value of the properties at
the time of sale. As a result, no gain or loss was recognized for
financial reporting purposes.
Note 8: Taxable income presented is before the dividends paid deduction.
Note 9: For the six months ended June 30, 2000 and the years ended December
31, 1999, 1998, 1997, 1996 and 1995, 67%, 97%, 84.87%, 93.33%, 90.25%
and 59.82%, respectively, of the distributions received by
stockholders were considered to be ordinary income and 33%, 15%,
15.13%, 6.67%, 9.75% and 40.18%, respectively, were considered a
return of capital for federal income tax purposes. No amounts
distributed to stockholders for the six months ended June 30, 2000 and
the years ended December 31, 1999, 1998, 1997, 1996 and 1995 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.
<PAGE>
TABLE III - CNL AMERICAN PROPERTIES FUND, INC. (continued)
Note 10: Cash distributions presented above as a return of capital on a
GAAP basis represent the amount of cash distributions in excess of
accumulated net income on a GAAP basis. Accumulated net income (loss)
includes deductions for depreciation and amortization expense and
income from certain non-cash items. This amount is not required to be
presented as a return of capital except for purposes of this table,
and APF has not treated this amount as a return of capital for any
other purpose. During the year ended December 31, 1999, accumulated
net loss included a non-cash deduction for the advisor acquisition
expense of $76,333,516 (see Note 16).
Note 11: Tax and distribution data and total distributions on GAAP basis
were computed based on the weighted average dollars outstanding during
each period presented.
Note 12: During the year ended December 31, 1998, APF recorded provisions
for losses on land and buildings in the amount of $611,534 for
financial reporting purposes relating to two Shoney's properties and
two Boston Market properties. The tenants of these properties
experienced financial difficulties and ceased payment of rents under
the terms of their lease agreements. The allowances represent the
difference between the carrying value of the properties at December
31, 1998 and the estimated net realizable value for these properties.
Note 13: In October 1998, the Board of Directors of APF elected to
implement APF's redemption plan. Under the redemption plan, APF
elected to redeem shares, subject to certain conditions and
limitations. During the year ended December 31, 1998, 69,514 shares
were redeemed at $9.20 per share ($639,528) and retired from shares
outstanding of common stock. During 1999, as a result of the
stockholders approving a one-for-two reverse stock split of common
stock, the Company agreed to redeem fractional shares (2,545 shares).
Note 14: During the year ended December 31, 1999, APF recorded provisions
for losses on buildings in the amount of $7,779,495 for financial
reporting purposes relating to several properties. The tenants of
these properties experienced financial difficulties and ceased payment
of rents under the terms of their lease agreements. The allowances
represent the difference between the carrying value of the properties
at December 31, 1999 and the estimated net realizable value for these
properties.
Note 15: During the year ended December 31, 1999, APF sold six properties
and received aggregate net sales proceeds of $5,302,433, which
resulted in a total aggregate loss of $781,192 for financial reporting
purposes. APF reinvested the proceeds from the sale of properties in
additional properties. In addition, APF recorded a loss on
securitization of $1,070,646 for financial reporting purposes.
Note 16: On September 1, 1999, APF issued 6,150,000 shares of common stock
to affiliates of APF to acquire its external advisor and two companies
which make and service mortgage loans and securitize portions of
loans. APF recorded an advisor acquisition expense of $76,333,516
relating to the acquisition of the external advisor, which represented
the excess purchase price over the net assets acquired.
Note 17: During the six months ended June 30, 2000, APF recorded provision
for losses on buildings in the amount of $174,641 for financial
reporting purposes relating to several properties. The tenants of
these properties experienced financial difficulties and ceased payment
of rents under the terms of their lease agreements. The allowances
represent the difference between the carrying value of the properties
at June 30, 2000 and the estimated net realizable value for these
properties.
Note 18: During the six months ended June 30, 2000, APF sold nine
properties for aggregate net sales proceeds of $9,262,269 (after
deduction of construction costs incurred but not paid by APF as of the
date of the sale). As of June 30, 2000, APF had collected $6,486,944
of these net sales proceeds and in July 2000, collected the remaining
$2,775,325 in net sales proceeds.
Note 19: In September 1999, APF acquired two companies which make and
service mortgage loans and securitize portions of loans. Effective
with these acquisitions, APF classifies its investments in mortgage
loans, proceeds from sale of mortgage loans, collections of mortgage
loans, proceeds from securitization transactions and purchases of
other investments as operating activities in its financial statements.
Prior to these acquisitions, these types of transactions were
classified as investing activities in its financial statements.
Note 20: Cash generated from sales during the six months ended June 30,
2000 does not include net sales proceeds totaling $2,775,325 relating
to the June 30, 2000 sales of the properties in Nanuet, New York,
Jefferson City, Missouri and Alton, Illinois. The net sales proceeds
were recorded as accounts receivable for financial reporting purposes
at June 30, 2000 due to receiving the net sales proceeds in July 2000.
Note 21: Certain data for columns representing less than 12 months have been
annualized.
<PAGE>
TABLE III
Operating Results of Prior Programs CNL
INCOME FUND XVII, LTD.
<TABLE>
<CAPTION>
<S> <C>
1995
(Note 1) 1996 1997 1998
-------------- -------------- ------------- --------------
Gross revenue $ 0 $ 1,195,263 $ 2,643,871 $ 2,816,845
Equity in earnings of unconsolidated joint 0 4,834 100,918 140,595
ventures
Loss on dissolution of consolidated joint
venture (Note 7) 0 0 0 0
Provision for loss on land and buildings (Note 8) 0 0 0 0
Interest income 12,153 244,406 69,779 51,240
Less: Operating expenses (3,493 ) (169,536 ) (181,865 ) (168,542 )
Transaction costs 0 0 0 (14,139 )
Interest expense 0 0 0 0
Depreciation and amortization (309 ) (179,208 ) (387,292 ) (369,209 )
Minority interest in income of
consolidated joint venture (Note 7) 0 0 (41,854 ) (62,632 )
-------------- -------------- ------------- --------------
Net income - GAAP basis 8,351 1,095,759 2,203,557 2,394,158
============== ============== ============= ==============
Taxable income
- from operations 12,153 1,114,964 2,058,601 2,114,039
============== ============== ============= ==============
- from gain (loss) on sale (Note 7) 0 0 0 0
============== ============== ============= ==============
Cash generated from operations (Notes
2 and 3) 9,012 1,232,948 2,495,114 2,520,919
Cash generated from sales (Note7) 0 0 0 0
Cash generated from refinancing 0 0 0 0
-------------- -------------- ------------- --------------
Cash generated from operations, sales and
refinancing 9,012 1,232,948 2,495,114 2,520,919
Less: Cash distributions to investors (Note 4)
- from operating cash flow (1,199 ) (703,681 ) (2,177,584 ) (2,400,000 )
- from prior period 0 0 0 0
-------------- -------------- ------------- --------------
Cash generated (deficiency) after cash
distributions 7,813 529,267 317,530 120,919
Special items (not including sales and
refinancing):
Limited partners' capital contributions 5,696,921 24,303,079 0 0
General partners' capital contributions 1,000 0 0 0
Contributions from minority interest 0 140,676 278,170 0
Distribution to holder of minority interest 0 0 (41,507 ) (49,023 )
Distribution to holder of minority
interest from
dissolution of consolidated joint 0 0 0 0
venture
Syndication costs (604,348 ) (2,407,317 ) 0 0
Acquisition of land and buildings (332,928 ) (19,735,346 ) (1,740,491 ) 0
Investment in direct financing leases 0 (1,784,925 ) (1,130,497 ) 0
Investment in joint ventures 0 (201,501 ) (1,135,681 ) (124,452 )
Reimbursement of organization, syndication
and acquisition costs paid on behalf of
CNL Income Fund XVII, Ltd. by related
parties (347,907 ) (326,483 ) (25,444 ) 0
Increase in other assets (221,282 ) 0 0 0
Reimbursement from developer of
construction costs 0 0 0 306,100
Other (410 ) 410 0 0
-------------- -------------- ------------- --------------
Cash generated (deficiency) after cash
distributions and special items 4,198,859 517,860 (3,477,920 ) 253,544
============== ============== ============= ==============
TAX AND DISTRIBUTION DATA PER
$1,000 INVESTED
Federal income tax results:
Ordinary income (loss)
- from operations 36 37 69 70
============== ============== ============= ==============
- from recapture 0 0 0 0
============== ============== ============= ==============
Capital gain (loss) (Note 7) 0 0 0 0
============== ============== ============= ==============
<PAGE>
6 months
1999 2000
----------------- --------------
$ 2,403,040 $ 1,042,922
182,132 90,427
(82,914 ) 0
0 (353,622 )
44,184 14,771
(219,361 ) (157,897 )
(71,366 ) (23,382 )
0 0
(384,985 ) (199,123 )
(31,461 ) 0
----------------- --------------
1,839,269 414,096
================= ==============
2,003,243 898,708
================= ==============
(23,150 ) 0
================= ==============
2,450,018 985,097
2,094,231 0
0 0
----------------- --------------
4,544,249 985,097
(2,400,000 ) (985,097 )
0 (214,903 )
----------------- --------------
2,144,249 (214,903 )
0 0
0 0
0 0
(46,567 ) 0
(417,696 ) 0
0 0
0 (1,630,164 )
0 0
(527,864 ) (12 )
0 0
0 0
0 0
0 0
----------------- --------------
1,152,122 (1,845,079 )
================= ==============
66 30
================= ==============
0 0
================= ==============
(1 ) 0
================= ==============
<PAGE>
TABLE III - CNL INCOME FUND XVII, LTD. (continued)
1995
(Note 1) 1996 1997 1998
-------------- ------------- ------------- -------------
Cash distributions to investors
Source (on GAAP basis)
- from investment income 4 23 73 79
- from capital gain 0 0 0 0
- from investment income from prior
period 0 0 0 1
- from return of capital 0 0 0 0
-------------- ------------- ------------- -------------
Total distributions on GAAP basis (Note 4) 4 23 73 80
============== ============= ============= =============
Source (on cash basis)
- from sales 0 0 0 0
- from prior period 0 0 0 0
- from operations 4 23 73 80
-------------- ------------- ------------- -------------
Total distributions on cash basis (Note 4) 4 23 73 80
============== ============= ============= =============
Total cash distributions as a percentage of
original $1,000 investment (Notes 5 and 9) 5.00 % 5.50 % 7.625 % 8.00 %
Total cumulative cash distributions per
$1,000 investment from inception 4 27 100 180
Amount (in percentage terms) remaining
invested in program properties at the end
of each year (period) presented (original
total acquisition cost of properties
retained, divided by original total
acquisition cost of all properties in
program) (Notes 6 and 7) N/A 100 % 100 % 100 %
</TABLE>
Note 1: Pursuant to a registration statement on Form S-11 under the
Securities Act of 1933, as amended, effective August 11, 1995, CNL
Income Fund XVII, Ltd. ("CNL XVII") and CNL Income Fund XVIII, Ltd.
each registered for sale $30,000,000 units of limited partnership
interests ("Units"). The offering of Units of CNL Income Fund XVII,
Ltd. commenced September 2, 1995. Pursuant to the registration
statement, CNL XVIII could not commence until the offering of Units of
CNL Income Fund XVII, Ltd. was terminated. CNL Income Fund XVII, Ltd.
terminated its offering of Units on September 19, 1996, at which time
subscriptions for the maximum offering proceeds of $30,000,000 had
been received. Upon the termination of the offering of Units of CNL
Income Fund XVII, Ltd., CNL XVIII commenced its offering of Units.
Activities through November 3, 1995, were devoted to organization of
the partnership and operations had not begun.
Note 2: Cash generated from operations includes cash received from tenants,
plus distributions from joint ventures, less cash paid for expenses,
plus interest received.
Note 3: Cash generated from operations per this table agrees to cash
generated from operations per the statement of cash flows included in
the financial statements of CNL XVII.
Note 4: Distributions declared for the quarters ended December 31, 1995,
1996, 1997, 1998 and 1999 are reflected in the 1996, 1997, 1998, 1999
and 2000 columns, respectively, due to the payment of such
distributions in January 1996, 1997, 1998, 1999 and 2000,
respectively. As a result of distributions being presented on a cash
basis, distributions declared and unpaid as of December 31, 1995,
1996, 1997, 1998 and 1999, and June 30, 2000, are not included in the
1995, 1996, 1997, 1998, 1999 and 2000 totals, respectively.
Note 5: Total cash distributions as a percentage of original $1,000
investment are calculated based on actual distributions declared for
the period. (See Note 4 above)
Note 6: During 1998, CNL XVII received approximately $306,100 in
reimbursements from the developer upon final reconciliation of total
construction costs relating to the properties in Aiken, South Carolina
and Weatherford, Texas, in accordance with the related development
agreements. During 1999, CNL XVII had reinvested these amounts, plus
additional funds, in a property as tenants-in-common with an affiliate
of the general partners and in Ocean Shores Joint Venture, with an
affiliate of CNL XVII which has the same general partners.
Note 7: During 1999, CNL/El Cajon Joint Venture, CNL XVII's consolidated
joint venture in which CNL XVII owned an 80% interest, sold its
property to the 20% joint venture partner and dissolved the joint
venture. CNL XVII did not recognize any gain or loss from the sale of
the property for financial reporting purposes. As a result of the
dissolution, CNL XVII recognized a loss on dissolution of $82,914 for
financial reporting purposes. In January 2000, CNL XVII
reinvested approximately $1,630,200 of the net sales proceeds received
from the 1999 sale of this property in a Baker's Square property in
Wilmette, Illinois.
<PAGE>
TABLE III - CNL INCOME FUND XVII, LTD. (continued)
6 months
1999 2000
------------------ ----------------
61 14
0 0
19 0
0 26
------------------ ----------------
80 40
================== ================
0 0
0 7
80 33
------------------ ----------------
80 40
================== ================
8.00 % 8.00 %
260 300
94 % 100 %
Note 8: During the six months ended June 2000, CNL XVII recorded a provision
for loss on land and building in the amount of $353,622 for financial
reporting purposes relating to the Boston Market property in Long
Beach, California. The tenant of this property filed for
bankruptcy in October 1998 and ceased payment of rents under the terms
of its lease agreement. The allowance represents the difference
between the carrying value of the property at June 30, 2000 and the
estimated net realizable value for this property.
Note 9: Certain data for columns representing less than 12 months have been
annualized.
<PAGE>
TABLE III
Operating Results of Prior Programs CNL
INCOME FUND XVIII, LTD.
<TABLE>
<CAPTION>
<S> <C>
1995
(Note 1) 1996 1997 1998
-------------- -------------- ------------- --------------
Gross revenue $ 0 $ 1,373 $ 1,291,416 $ 2,956,349
Equity in earnings of joint venture 0 0 0 0
Gain on sale of properties (Note 7) 0 0 0 0
Provision for loss on land (Note 5) 0 0 0 (197,466 )
Lease termination refund to tenant (Note 8) 0 0 0 0
Interest income 0 30,241 161,826 141,408
Less: Operating expenses 0 (3,992 ) (156,403 ) (207,974 )
Transaction costs 0 0 0 (15,522 )
Interest expense 0 0 0 0
Depreciation and amortization 0 (712 ) (142,079 ) (374,473 )
-------------- -------------- ------------- --------------
Net income - GAAP basis 0 26,910 1,154,760 2,302,322
============== ============== ============= ==============
Taxable income
- from operations 0 30,223 1,318,750 2,324,746
============== ============== ============= ==============
- from gain on sale (Note 7) 0 0 0 0
============== ============== ============= ==============
Cash generated from operations (Notes
2 and 3) 0 27,146 1,361,756 2,831,738
Cash generated from sales (Note 7) 0 0 0 0
Cash generated from refinancing 0 0 0 0
-------------- -------------- ------------- --------------
Cash generated from operations, sales and
refinancing 0 27,146 1,361,756 2,831,738
Less: Cash distributions to investors (Note 4)
- from operating cash flow 0 (2,138 ) (855,957 ) (2,468,400 )
- from prior period 0 0 0 0
-------------- -------------- ------------- --------------
Cash generated (deficiency) after cash
distributions 0 25,008 505,799 363,338
Special items (not including sales and
refinancing):
Limited partners' capital contributions 0 8,498,815 25,723,944 854,241
General partners' capital contributions 1,000 0 0 0
Contributions from minority interest 0 0 0 0
Syndication costs 0 (845,657 ) (2,450,214 ) (161,142 )
Acquisition of land and buildings 0 (1,533,446 ) (18,581,999 ) (3,134,046 )
Investment in direct financing leases 0 0 (5,962,087 ) (12,945 )
Investment in joint venture 0 0 0 (166,025 )
Decrease (increase) in restricted cash 0 0 0 0
Reimbursement of organization, syndication
and acquisition costs paid on behalf of CNL
Income Fund XVIII, Ltd. by related parties 0 (497,420 ) (396,548 ) (37,135 )
Increase in other assets 0 (276,848 ) 0 0
Other (20 ) (107 ) (66,893 ) (10,000 )
-------------- -------------- ------------- --------------
Cash generated (deficiency) after cash
distributions and special items 980 5,370,345 (1,227,998 ) (2,303,714 )
============== ============== ============= ==============
TAX AND DISTRIBUTION DATA PER
$1,000 INVESTED
Federal income tax results:
Ordinary income (loss)
- from operations 0 6 57 66
============== ============== ============= ==============
- from recapture 0 0 0 0
============== ============== ============= ==============
Capital gain (loss) (Note 7) 0 0 0 0
============== ============== ============= ==============
<PAGE>
6 months
1999 2000
--------------- -------------
$ 3,075,379 $ 1,366,920
61,656 32,475
46,300 0
0 0
0 (84,873 )
55,336 33,111
(256,060 ) (130,979 )
(74,734 ) (22,874 )
0 0
(392,521 ) (193,400 )
--------------- -------------
2,515,356 1,000,380
=============== =============
2,341,350 1,066,303
=============== =============
80,170 0
=============== =============
2,797,040 1,270,560
688,997 0
0 0
--------------- -------------
3,486,037 1,270,560
(2,797,040 ) (1,270,560 )
(2,958 ) (129,440 )
--------------- -------------
686,039 (129,440 )
0 0
0 0
0 0
0 0
(25,792 ) 0
0 0
(526,138 ) (1,001,592 )
(688,997 ) 688,997
(2,495 ) 0
0 0
(117 ) 0
--------------- -------------
(557,500 ) (442,035 )
=============== =============
66 30
=============== =============
0 0
=============== =============
2 0
=============== =============
<PAGE>
TABLE III - CNL INCOME FUND XVIII, LTD. (continued)
1995
(Note 1) 1996 1997 1998
-------------- ------------- -------------- -------------
Cash distributions to investors
Source (on GAAP basis)
- from investment income 0 0 38 65
- from capital gain 0 0 0 0
- from return of capital 0 0 0 0
- from investment income from prior
period 0 0 0 6
-------------- ------------- -------------- -------------
Total distributions on GAAP basis (Note 4) 0 0 38 71
============== ============= ============== =============
Source (on cash basis)
- from sales (Note 7) 0 0 0 0
- from prior period 0 0 0 0
- from operations 0 0 38 71
-------------- ------------- -------------- -------------
Total distributions on cash basis (Note 4) 0 0 38 71
============== ============= ============== =============
Total cash distributions as a percentage of
original $1,000 investment from
inception (Note 9) 0.00 % 5.00 % 5.75 % 7.63 %
Total cumulative cash distributions per
$1,000 investment (Note 6) 0 0 38 109
Amount (in percentage terms) remaining
invested in program properties at the
end
of each year (period) presented
(original
total acquisition cost of properties
retained, divided by original total N/A 100 % 100 % 100 %
acquisition cost of all properties in
program) (Note 7)
</TABLE>
Note 1: Pursuant to a registration statement on Form S-11 under the
Securities Act of 1933, as amended, effective August 11, 1995, CNL
Income Fund XVIII, Ltd ("CNL XVIII") and CNL Income Fund XVII, Ltd.
each registered for sale $30,000,000 units of limited partnership
interest ("Units"). The offering of Units of CNL Income Fund XVII,
Ltd. commenced September 2, 1995. Pursuant to the registration
statement, CNL XVIII could not commence until the offering of Units of
CNL Income Fund XVII, Ltd. was terminated. CNL Income Fund XVII, Ltd.
terminated its offering of Units on September 19, 1996, at which time
the maximum offering proceeds of $30,000,000 had been received. Upon
the termination of the offering of Units of CNL Income Fund XVII,
Ltd., CNL XVIII commenced its offering of Units. Activities through
October 11, 1996, were devoted to organization of the partnership and
operations had not begun.
Note 2: Cash generated from operations includes cash received from tenants,
less cash paid for expenses, plus interest received.
Note 3: Cash generated from operations per this table agrees to cash
generated from operations per the statement of cash flows included in
the financial statements of CNL XVIII.
Note 4: Distributions declared for the quarters ended December 1996, 1997,
1998 and 1999 are reflected in the 1997, 1998, 1999 and 2000 columns,
respectively, due to the payment of such distributions in January
1997, 1998, 1999 and 2000, respectively. As a result of distributions
being presented on a cash basis, distributions declared and unpaid as
of December 31, 1996, 1997, 1998 and 1999, and June 30, 2000, are not
included in the 1996, 1997, 1998, 1999 and 2000 totals, respectively.
Note 5: During the year ended December 31, 1998, CNL XVIII established an
allowance for loss on land of $197,466 for financial reporting
purposes relating to the property in Minnetonka, Minnesota. The tenant
of this Boston Market property declared bankruptcy and rejected the
lease relating to this property. The loss represents the difference
between the Property's carrying value at December 31, 1998 and the
estimated net realizable value.
Note 6: Total cash distributions as a percentage of original $1,000
investment are calculated based on actual distributions declared for
the period. (See Note 4 above)
Note 7: In December 1999, CNL XVIII sold one of its properties and received
net sales proceeds of $688,997, resulting in a gain of $46,300 for
financial reporting purposes. In June 2000, the Partnership used the
net sales proceeds from this sale to enter into a joint venture
arrangement with CNL Income Fund VII, Ltd., CNL Income Fund XV, Ltd.
and CNL Income Fund XVI, Ltd., each a Florida limited partnership and
an affiliate of the general partners, to hold one restaurant property.
Note 8: The lease termination refund to tenant of $84,873 during the six
months ended June 30, 2000 is due to lease termination negotiations
during the six months ended June 30, 2000 related to the 1999 sale of
the Partnership's Property in Atlanta, Georgia. CNL XVIII does
not anticipate incurring any additional costs related to the sale of
this property.
Note 9: Certain data for columns representing less than 12 months have been
annualized.
<PAGE>
6 months
1999 2000
---------------- -------------
71 28
1 0
0 9
8 3
---------------- -------------
80 40
================ =============
0 0
0 4
80 36
---------------- -------------
80 40
================ =============
8.00 % 8.00 %
189 229
98 % 100 %
<PAGE>
TABLE V
SALES OR DISPOSALS OF PROPERTIES
<TABLE>
<CAPTION>
<S> <C>
Selling Price, Net of
Closing Costs and GAAP Adjustments
------------------------------------------------------------
Purchase
money Adjustments
Cash Mortgage mortgage resulting
received net balance taken from
Date Date of of closing at time back by application
Property Acquired Sale costs of sale program of GAAP Total
============================ ============= =========== ============= ========== ========== =========== ============
CNL Income Fund, Ltd.:
Burger King -
San Dimas, CA (14) 02/05/87 06/12/92 $1,169,021 0 0 0 $1,169,021
Wendy's -
Fairfield, CA (14) 07/01/87 10/03/94 1,018,490 0 0 0 1,018,490
Wendy's -
Casa Grande, AZ 12/10/86 08/19/97 795,700 0 0 0 795,700
Wendy's -
North Miami, FL (9) 02/18/86 08/21/97 473,713 0 0 0 473,713
Popeye's -
Kissimmee, FL (14) 12/31/86 04/30/98 661,300 0 0 0 661,300
Golden Corral -
Kent Island, MD (21) 11/20/86 10/15/99 870,457 0 0 0 870,457
CNL Income Fund II, Ltd.:
Golden Corral -
Salisbury, NC 05/29/87 07/21/93 746,800 0 0 0 746,800
Pizza Hut -
Graham, TX 08/24/87 07/28/94 261,628 0 0 0 261,628
Golden Corral -
Medina, OH (11) 11/18/87 11/30/94 825,000 0 0 0 825,000
Denny's -
Show Low, AZ (8) 05/22/87 01/31/97 620,800 0 0 0 620,800
KFC -
Eagan, MN 06/01/87 06/02/97 623,882 0 42,000 0 665,882
KFC -
Jacksonville, FL 09/01/87 09/09/97 639,363 0 0 0 639,363
Wendy's -
Farmington Hills, MI (12) 05/18/87 10/09/97 833,031 0 0 0 833,031
Wendy's -
Farmington Hills, MI 05/18/87 10/09/97 1,085,259 0 0 0 1,085,259
(13) (14)
Denny's -
Plant City, FL 11/23/87 10/24/97 910,061 0 0 0 910,061
Pizza Hut -
Mathis, TX 12/17/87 12/04/97 297,938 0 0 0 297,938
KFC -
Avon Park, FL (14) 09/02/87 12/10/97 501,975 0 0 0 501,975
Golden Corral -
Columbia, MO 11/17/87 03/23/99 678,888 0 0 0 678,888
Little House -
Littleton, CO 10/07/87 11/05/99 150,000 0 0 0 150,000
KFC -
Jacksonville, FL (14) 09/01/87 06/15/00 601,400 0 0 0 601,400
CNL Income Fund III, Ltd.:
Wendy's -
Chicago, IL (14) 06/02/88 01/10/97 496,418 0 0 0 496,418
Perkins -
Bradenton, FL 06/30/88 03/14/97 1,310,001 0 0 0 1,310,001
Cost of Properties
Including Closing and
Soft Costs
-------------------------------------
Total Excess
acquisition (deficiency)
cost, capital of property
improvements operating cash
Original closing and receipts over
mortgage soft costs cash
Property financing (1) Total expenditures
============================ ========== ============= ============ ==============
CNL Income Fund, Ltd.:
Burger King -
San Dimas, CA (14) 0 $955,000 $955,000 $214,021
Wendy's -
Fairfield, CA (14) 0 861,500 861,500 156,990
Wendy's -
Casa Grande, AZ 0 667,255 667,255 128,445
Wendy's -
North Miami, FL (9) 0 385,000 385,000 88,713
Popeye's -
Kissimmee, FL (14) 0 475,360 475,360 185,940
Golden Corral -
Kent Island, MD (21) 0 726,600 726,600 143,857
CNL Income Fund II, Ltd.:
Golden Corral -
Salisbury, NC 0 642,800 642,800 104,000
Pizza Hut -
Graham, TX 0 205,500 205,500 56,128
Golden Corral -
Medina, OH (11) 0 743,000 743,000 82,000
Denny's -
Show Low, AZ (8) 0 484,185 484,185 136,615
KFC -
Eagan, MN 0 601,100 601,100 64,782
KFC -
Jacksonville, FL 0 405,000 405,000 234,363
Wendy's -
Farmington Hills, MI (12 0 679,000 679,000 154,031
Wendy's -
Farmington Hills, MI 0 887,000 887,000 198,259
(13) (14)
Denny's -
Plant City, FL 0 820,717 820,717 89,344
Pizza Hut -
Mathis, TX 0 202,100 202,100 95,838
KFC -
Avon Park, FL (14) 0 345,000 345,000 156,975
Golden Corral -
Columbia, MO 0 511,200 511,200 167,688
Little House -
Littleton, CO 0 330,456 330,456 (180,456 )
KFC -
Jacksonville, FL (14) 0 441,000 441,000 160,400
CNL Income Fund III, Ltd.:
Wendy's -
Chicago, IL (14) 0 591,362 591,362 (94,944 )
Perkins -
Bradenton, FL 0 1,080,500 1,080,500 229,501
<PAGE>
TABLE V
SALES OR DISPOSALS OF PROPERTIES
Selling Price, Net of
Closing Costs and GAAP Adjustments
------------------------------------------------------------
Purchase
money Adjustments
Cash Mortgage mortgage resulting
received net balance taken from
Date Date of of closing at time back by application
Property Acquired Sale costs of sale program of GAAP Total
============================ ============= =========== ============= ========== ========== =========== ============
CNL Income Fund III, Ltd.
(Continued):
Pizza Hut -
Kissimmee, FL 02/23/88 04/08/97 673,159 0 0 0 673,159
Burger King -
Roswell, GA 06/08/88 06/20/97 257,981 0 685,000 0 942,981
Wendy's -
Mason City, IA 02/29/88 10/24/97 217,040 0 0 0 217,040
Taco Bell -
Fernandina Beach, FL (14) 04/09/88 01/15/98 721,655 0 0 0 721,655
Denny's -
Daytona Beach, FL (14) 07/12/88 01/23/98 1,008,976 0 0 0 1,008,976
Wendy's -
Punta Gorda, FL 02/03/88 02/20/98 665,973 0 0 0 665,973
Po Folks -
Hagerstown, MD 06/21/88 06/10/98 788,884 0 0 0 788,884
Denny's-
Hazard, KY 02/01/88 12/23/98 432,625 0 0 0 432,625
Perkins -
Flagstaff, AZ 09/30/88 04/30/99 1,091,193 0 0 0 1,091,193
Denny's -
Hagerstown, MD 08/14/88 06/09/99 700,977 0 0 0 700,977
CNL Income Fund IV, Ltd.:
Taco Bell -
York, PA 03/22/89 04/27/94 712,000 0 0 0 712,000
Burger King -
Hastings, MI 08/12/88 12/15/95 518,650 0 0 0 518,650
Wendy's -
Tampa, FL 12/30/88 09/20/96 1,049,550 0 0 0 1,049,550
Checkers -
Douglasville, GA 12/08/94 11/07/97 380,695 0 0 0 380,695
Taco Bell -
Fort Myers, FL (14) 12/22/88 03/02/98 794,690 0 0 0 794,690
Denny's -
Union Township, OH (14) 11/01/88 03/31/98 674,135 0 0 0 674,135
Perkins -
Leesburg, FL 01/11/89 07/09/98 529,288 0 0 0 529,288
Taco Bell -
Naples, FL 12/22/88 09/03/98 533,127 0 0 0 533,127
Wendy's
Detroit, MI (14) 10/21/88 06/29/00 1,056,475 0 0 0 1,056,475
CNL Income Fund V, Ltd.:
Perkins -
Myrtle Beach, SC (2) 02/28/90 08/25/95 0 0 1,040,000 0 1,040,000
Ponderosa -
St. Cloud, FL (14) (24) 06/01/89 10/24/96 73,713 0 1,057,299 0 1,131,012
Franklin National Bank -
Franklin, TN 06/26/89 01/07/97 960,741 0 0 0 960,741
Cost of Properties
Including Closing and
Soft Costs
-------------------------------------
Total Excess
acquisition (deficiency)
cost, capital of property
improvements operating cash
Original closing and receipts over
mortgage soft costs cash
Property financing (1) Total expenditures
============================ ========== ============= ============ ==============
CNL Income Fund III, Ltd.
(Continued):
Pizza Hut - 0 474,755 474,755 198,404
Kissimmee, FL
Burger King - 0 775,226 775,226 167,755
Roswell, GA
Wendy's - 0 190,252 190,252 26,788
Mason City, IA
Taco Bell - 0 559,570 559,570 162,085
Fernandina Beach, FL (14)
Denny's - 0 918,777 918,777 90,799
Daytona Beach, FL (14)
Wendy's - 0 684,342 684,342 (18,369 )
Punta Gorda, FL
Po Folks - 0 1,188,315 1,188,315 (399,431 )
Hagerstown, MD
Denny's- 0 647,622 647,622 (214,997 )
Hazard, KY
Perkins - 0 993,508 993,508 97,685
Flagstaff, AZ
Denny's - 0 861,454 861,454 (160,477 )
Hagerstown, MD
CNL Income Fund IV, Ltd.:
Taco Bell - 0 616,501 616,501 95,499
York, PA
Burger King - 0 419,936 419,936 98,714
Hastings, MI
Wendy's - 0 828,350 828,350 221,200
Tampa, FL
Checkers - 0 363,768 363,768 16,927
Douglasville, GA
Taco Bell - 0 597,998 597,998 196,692
Fort Myers, FL (14)
Denny's - 0 872,850 872,850 (198,715 )
Union Township, OH (14)
Perkins - 0 737,260 737,260 (207,972 )
Leesburg, FL
Taco Bell - 0 410,546 410,546 122,581
Naples, FL
Wendy's 0 614,500 614,500 441,975
Detroit, MI (14)
CNL Income Fund V, Ltd.:
Perkins - 0 986,418 986,418 53,582
Myrtle Beach, SC (2)
Ponderosa - 0 996,769 996,769 134,243
St. Cloud, FL (14) (24)
Franklin National Bank - 0 1,138,164 1,138,164 (177,423 )
Franklin, TN
<PAGE>
TABLE V
SALES OR DISPOSALS OF PROPERTIES
Selling Price, Net of
Closing Costs and GAAP Adjustments
------------------------------------------------------------
Purchase
money Adjustments
Cash Mortgage mortgage resulting
received net balance taken from
Date Date of of closing at time back by application
Property Acquired Sale costs of sale program of GAAP Total
============================ ============= =========== ============= ========== ========== =========== ============
CNL Income Fund V, Ltd.
(Continued):
Shoney's -
Smyrna, TN 03/22/89 05/13/97 636,788 0 0 0 636,788
KFC -
Salem, NH 05/31/89 09/22/97 1,272,137 0 0 0 1,272,137
Perkins -
Port St. Lucie, FL 11/14/89 09/23/97 1,216,750 0 0 0 1,216,750
Hardee's -
Richmond, IN 02/17/89 11/07/97 397,785 0 0 0 397,785
Wendy's -
Tampa, FL (14) 02/16/89 12/29/97 805,175 0 0 0 805,175
Denny's -
Port Orange, FL (14) 07/10/89 01/23/98 1,283,096 0 0 0 1,283,096
Shoney's
Tyler, TX 03/20/89 02/17/98 844,229 0 0 0 894,229
Wendy's -
Ithaca, NY 12/07/89 03/29/99 471,248 0 0 0 471,248
Wendy's -
Endicott, NY 12/07/89 03/29/99 642,511 0 0 0 642,511
Burger King -
Halls, TN (20) 01/05/90 06/03/99 433,366 0 0 0 433,366
Hardee's -
Belding, MI 03/08/89 03/03/00 124,346 0 0 0 124,346
CNL Income Fund VI, Ltd.:
Hardee's -
Batesville, AR 11/02/89 05/24/94 791,211 0 0 0 791,211
Hardee's -
Heber Springs, AR 02/13/90 05/24/94 638,270 0 0 0 638,270
Hardee's -
Little Canada, MN 11/28/89 06/29/95 899,503 0 0 0 899,503
Jack in the Box -
Dallas, TX 06/28/94 12/09/96 982,980 0 0 0 982,980
Denny's -
Show Low, AZ (8) 05/22/87 01/31/97 349,200 0 0 0 349,200
KFC -
Whitehall Township, MI 02/26/90 07/09/97 629,888 0 0 0 629,888
Perkins -
Naples, FL 12/26/89 07/09/97 1,487,725 0 0 0 1,487,725
Burger King -
Plattsmouth, NE 01/19/90 07/18/97 699,400 0 0 0 699,400
Shoney's -
Venice, FL 08/03/89 09/17/97 1,206,696 0 0 0 1,206,696
Jack in the Box -
Yuma, AZ (10) 07/14/94 10/31/97 510,653 0 0 0 510,653
Denny's
Deland, FL 03/22/90 01/23/98 1,236,971 0 0 0 1,236,971
Wendy's -
Liverpool, NY 12/08/89 02/09/98 145,221 0 0 0 145,221
Cost of Properties
Including Closing and
Soft Costs
-------------------------------------
Total Excess
acquisition (deficiency)
cost, capital of property
improvements operating cash
Original closing and receipts over
mortgage soft costs cash
Property financing (1) Total expenditures
============================ ========== ============= ============ ==============
CNL Income Fund V, Ltd.
(Continued):
Shoney's -
Smyrna, TN 0 554,200 554,200 82,588
KFC -
Salem, NH 0 1,079,310 1,079,310 192,827
Perkins -
Port St. Lucie, FL 0 1,203,207 1,203,207 13,543
Hardee's -
Richmond, IN 0 695,464 695,464 (297,679 )
Wendy's -
Tampa, FL (14) 0 657,800 657,800 147,375
Denny's -
Port Orange, FL (14) 0 1,021,000 1,021,000 262,096
Shoney's
Tyler, TX 0 770,300 770,300 73,929
Wendy's -
Ithaca, NY 0 471,297 471,297 (49 )
Wendy's -
Endicott, NY 0 471,255 471,255 171,256
Burger King -
Halls, TN (20) 0 329,231 329,231 104,135
Hardee's -
Belding, MI 0 630,432 630,432 (506,086 )
CNL Income Fund VI, Ltd.:
Hardee's -
Batesville, AR 0 605,500 605,500 185,711
Hardee's -
Heber Springs, AR 0 532,893 532,893 105,377
Hardee's -
Little Canada, MN 0 821,692 821,692 77,811
Jack in the Box -
Dallas, TX 0 964,437 964,437 18,543
Denny's -
Show Low, AZ (8) 0 272,354 272,354 76,846
KFC -
Whitehall Township, MI 0 725,604 725,604 (95,716 )
Perkins -
Naples, FL 0 1,083,869 1,083,869 403,856
Burger King -
Plattsmouth, NE 0 561,000 561,000 138,400
Shoney's -
Venice, FL 0 1,032,435 1,032,435 174,261
Jack in the Box -
Yuma, AZ (10) 0 448,082 448,082 62,571
Denny's
Deland, FL 0 1,000,000 1,000,000 236,971
Wendy's -
Liverpool, NY 0 341,440 341,440 (196,219 )
<PAGE>
TABLE V
SALES OR DISPOSALS OF PROPERTIES
Selling Price, Net of
Closing Costs and GAAP Adjustments
------------------------------------------------------------
Purchase
money Adjustments
Cash Mortgage mortgage resulting
received net balance taken from
Date Date of of closing at time back by application
Property Acquired Sale costs of sale program of GAAP Total
============================ =========== =========== ============= ========== ========== =========== ============
CNL Income Fund VI, Ltd.
(Continued):
Perkin's -
Melbourne, FL 02/03/90 02/12/98 552,910 0 0 0 552,910
Hardee's -
Bellevue, NE 05/03/90 06/05/98 900,000 0 0 0 900,000
Burger King -
Greeneville, TN 01/05/90 06/03/99 1,059,373 0 0 0 1,059,373
Burger King -
Broadway, TN 01/05/90 06/03/99 1,059,200 0 0 0 1,059,200
Burger King -
Sevierville, TN 01/05/90 06/03/99 1,168,298 0 0 0 1,168,298
Burger King -
Walker Springs, TN 01/10/90 06/03/99 1,031,274 0 0 0 1,031,274
CNL Income Fund VII, Ltd.:
Taco Bell -
Kearns, UT 06/14/90 05/19/92 700,000 0 0 0 700,000
Hardee's -
St. Paul, MN 08/09/90 05/24/94 869,036 0 0 0 869,036
Perkins -
Florence, SC (3) 08/28/90 08/25/95 0 0 1,160,000 0 1,160,000
Church's Fried Chicken -
Jacksonville, FL (14) 04/30/90 12/01/95 0 0 240,000 0 240,000
(25)
Shoney's -
Colorado Springs, CO 07/03/90 07/24/96 1,044,909 0 0 0 1,044,909
Hardee's -
Hartland, MI 07/10/90 10/23/96 617,035 0 0 0 617,035
Hardee's -
Columbus, IN 09/04/90 05/30/97 223,590 0 0 0 223,590
KFC -
Dunnellon, FL 08/02/90 10/07/97 757,800 0 0 0 757,800
Jack in the Box -
Yuma, AZ (10) 07/14/94 10/31/97 471,372 0 0 0 471,372
Burger King -
Maryville, TN 05/04/90 06/03/99 1,059,954 0 0 0 1,059,954
Burger King -
Halls, TN (20) 01/05/90 06/03/99 451,054 0 0 0 451,054
Shoney's
Pueblo, CO 08/21/90 06/20/00 1,005,000 0 0 0 1,005,000
CNL Income Fund VIII, Ltd.:
Denny's -
Ocoee, FL 03/16/91 07/31/95 1,184,865 0 0 0 1,184,865
Church's Fried Chicken -
Jacksonville, FL (4) (14) 09/28/90 12/01/95 0 0 240,000 0 240,000
Church's Fried Chicken -
Jacksonville, FL (5) (14) 09/28/90 12/01/95 0 0 220,000 0 220,000
Ponderosa -
Orlando, FL (6) (14) 12/17/90 10/24/96 0 0 1,353,775 0 1,353,775
Cost of Properties
Including Closing and
Soft Costs
-------------------------------------
Total Excess
acquisition (deficiency)
cost, capital of property
improvements operating cash
Original closing and receipts over
mortgage soft costs cash
Property financing (1) Total expenditures
============================ ========== ============= ============ ==============
CNL Income Fund VI, Ltd.
(Continued):
Perkin's -
Melbourne, FL 0 692,850 692,850 (139,940 )
Hardee's -
Bellevue, NE 0 899,512 899,512 488
Burger King -
Greeneville, TN 0 890,240 890,240 169,133
Burger King -
Broadway, TN 0 890,036 890,036 169,164
Burger King -
Sevierville, TN 0 890,696 890,696 277,602
Burger King -
Walker Springs, TN 0 864,777 864,777 166,497
CNL Income Fund VII, Ltd.:
Taco Bell -
Kearns, UT 0 560,202 560,202 139,798
Hardee's -
St. Paul, MN 0 742,333 742,333 126,703
Perkins -
Florence, SC (3) 0 1,084,905 1,084,905 75,095
Church's Fried Chicken -
Jacksonville, FL (14) 0 233,728 233,728 6,272
(25)
Shoney's -
Colorado Springs, CO 0 893,739 893,739 151,170
Hardee's -
Hartland, MI 0 841,642 841,642 (224,607 )
Hardee's -
Columbus, IN 0 219,676 219,676 3,914
KFC -
Dunnellon, FL 0 546,333 546,333 211,467
Jack in the Box -
Yuma, AZ (10) 0 413,614 413,614 57,758
Burger King -
Maryville, TN 0 890,668 890,668 169,286
Burger King -
Halls, TN (20) 0 342,669 342,669 108,385
Shoney's
Pueblo, CO 0 961,582 961,582 43,418
CNL Income Fund VIII, Ltd.:
Denny's -
Ocoee, FL 0 949,199 949,199 235,666
Church's Fried Chicken -
Jacksonville, FL (4) (14) 0 238,153 238,153 1,847
Church's Fried Chicken -
Jacksonville, FL (5) (14) 0 215,845 215,845 4,155
Ponderosa -
Orlando, FL (6) (14) 0 1,179,210 1,179,210 174,565
<PAGE>
TABLE V
SALES OR DISPOSALS OF PROPERTIES
Selling Price, Net of
Closing Costs and GAAP Adjustments
------------------------------------------------------------
Purchase
money Adjustments
Cash Mortgage mortgage resulting
received net balance taken from
Date Date of of closing at time back by application
Property Acquired Sale costs of sale program of GAAP Total
============================ =========== =========== ============= ========== ========== =========== ============
CNL Income Fund IX, Ltd.:
Burger King -
Woodmere, OH (15) 05/31/91 12/12/96 918,445 0 0 0 918,445
Burger King -
Alpharetta, GA 09/20/91 06/30/97 1,053,571 0 0 0 1,053,571
Shoney's -
Corpus Christi, TX 10/28/91 02/12/99 1,350,000 0 0 0 1,350,000
Perkins -
Rochester, NY 12/20/91 03/03/99 1,050,000 0 0 0 1,050,000
Perkins -
Williamsville, NY 12/20/91 05/15/00 693,350 0 0 0 693,350
CNL Income Fund X, Ltd.:
Shoney's -
Denver, CO 03/04/92 08/11/95 1,050,186 0 0 0 1,050,186
Jack in the Box -
Freemont, CA 03/26/92 09/23/97 1,366,550 0 0 0 1,366,550
Jack in the Box -
Sacramento, CA 12/19/91 01/20/98 1,234,175 0 0 0 1,234,175
Pizza Hut -
Billings, MT 04/16/92 10/07/98 359,990 0 0 0 359,990
Perkins -
Amherst, NY 02/26/92 03/03/99 1,150,000 0 0 0 1,150,000
Shoney's -
Fort Myers Beach, FL 09/08/95 08/26/99 931,725 0 0 0 931,725
CNL Income Fund XI, Ltd.:
Burger King -
Philadelphia, PA 09/29/92 11/07/96 1,044,750 0 0 0 1,044,750
Burger King -
Columbus, OH (19) 06/29/92 09/30/98 795,264 0 0 0 795,264
Burger King -
Nashua, NH 06/29/92 10/07/98 1,630,296 0 0 0 1,630,296
CNL Income Fund XII, Ltd.:
Golden Corral -
Houston, TX 12/28/92 04/10/96 1,640,000 0 0 0 1,640,000
Long John Silver's -
Monroe, NC 06/30/93 12/31/98 483,550 0 0 0 483,550
Long John Silver's -
Morganton, NC (23) 07/02/93 05/17/99 467,300 0 55,000 0 522,300
Denny's -
Cleveland, TN 12/23/92 03/03/00 797,227 0 0 0 797,227
CNL Income Fund XIII, Ltd.:
Checkers -
Houston, TX 03/31/94 04/24/95 286,411 0 0 0 286,411
Checkers -
Richmond, VA 03/31/94 11/21/96 550,000 0 0 0 550,000
Cost of Properties
Including Closing and
Soft Costs
-------------------------------------
Total Excess
acquisition (deficiency)
cost, capital of property
improvements operating cash
Original closing and receipts over
mortgage soft costs cash
Property financing (1) Total expenditures
============================ ========== ============= ============ ==============
CNL Income Fund IX, Ltd.:
Burger King -
Woodmere, OH (15) 0 918,445 918,445 0
Burger King -
Alpharetta, GA 0 713,866 713,866 339,705
Shoney's -
Corpus Christi, TX 0 1,224,020 1,224,020 125,980
Perkins -
Rochester, NY 0 1,064,815 1,064,815 (14,815 )
Perkins -
Williamsville, NY 0 981,482 981,482 (288,132 )
CNL Income Fund X, Ltd.:
Shoney's -
Denver, CO 0 987,679 987,679 62,507
Jack in the Box -
Freemont, CA 0 1,102,766 1,102,766 263,784
Jack in the Box -
Sacramento, CA 0 969,423 969,423 264,752
Pizza Hut -
Billings, MT 0 302,000 302,000 57,990
Perkins -
Amherst, NY 0 1,141,444 1,141,444 8,556
Shoney's -
Fort Myers Beach, FL 0 931,725 931,725 0
CNL Income Fund XI, Ltd.:
Burger King -
Philadelphia, PA 0 818,850 818,850 225,900
Burger King -
Columbus, OH (19) 0 795,264 795,264 0
Burger King -
Nashua, NH 0 1,217,015 1,217,015 413,281
CNL Income Fund XII, Ltd.:
Golden Corral -
Houston, TX 0 1,636,643 1,636,643 3,357
Long John Silver's -
Monroe, NC 0 239,788 239,788 243,762
Long John Silver's -
Morganton, NC (23) 0 304,002 304,002 218,298
Denny's -
Cleveland, TN 0 622,863 622,863 174,364
CNL Income Fund XIII, Ltd.:
Checkers -
Houston, TX 0 286,411 286,411 0
Checkers -
Richmond, VA 0 413,288 413,288 136,712
<PAGE>
TABLE V
SALES OR DISPOSALS OF PROPERTIES
Selling Price, Net of
Closing Costs and GAAP Adjustments
------------------------------------------------------------
Purchase
money Adjustments
Cash Mortgage mortgage resulting
received net balance taken from
Date Date of of closing at time back by application
Property Acquired Sale costs of sale program of GAAP Total
============================ =========== =========== ============= ========== ========== =========== ============
CNL Income Fund XIII, Ltd.
(Continued):
Denny's -
Orlando, FL 09/01/93 10/24/97 932,849 0 0 0 932,849
Jack in the Box -
Houston, TX 07/27/93 07/16/99 1,063,318 0 0 0 1,063,318
CNL Income Fund XIV, Ltd.:
Checkers -
Knoxville, TN 03/31/94 03/01/95 339,031 0 0 0 339,031
Checkers -
Dallas, TX 03/31/94 03/01/95 356,981 0 0 0 356,981
TGI Friday's -
Woodridge, NJ (7) 01/01/95 09/27/96 1,753,533 0 0 0 1,753,533
Wendy's -
Woodridge, NJ (7) 11/28/94 09/27/96 747,058 0 0 0 747,058
Hardee's -
Madison, AL 12/14/93 01/08/98 700,950 0 0 0 700,950
Checkers -
Richmond, VA (#548) 03/31/94 01/29/98 512,462 0 0 0 512,462
Checkers -
Riviera Beach, FL 03/31/94 04/14/98 360,000 0 0 0 360,000
Checkers -
Richmond, VA (#486) 03/31/94 07/27/98 397,985 0 0 0 397,985
Long John Silver's -
Stockbridge, GA 03/31/94 05/25/99 696,300 0 0 0 696,300
Long John Silver's -
Shelby, NC 06/22/94 11/12/99 494,178 0 0 0 494,178
Checker's -
Kansas City, MO 03/31/94 12/10/99 268,450 0 0 0 268,450
Checker's -
Houston, TX 03/31/94 12/15/99 385,673 0 0 0 385,673
CNL Income Fund XV, Ltd.:
Checkers -
Knoxville, TN 05/27/94 03/01/95 263,221 0 0 0 263,221
Checkers -
Leavenworth, KS 06/22/94 03/01/95 259,600 0 0 0 259,600
Checkers -
Knoxville, TN 07/08/94 03/01/95 288,885 0 0 0 288,885
TGI Friday's -
Woodridge, NJ (7) 01/01/95 09/27/96 1,753,533 0 0 0 1,753,533
Wendy's -
Woodridge, NJ (7) 11/28/94 09/27/96 747,058 0 0 0 747,058
Long John Silver's -
Gastonia, NC 07/15/94 11/12/99 631,304 0 0 0 631,304
Long John Silver's
Lexington, NC 10/22/94 01/12/00 562,130 0 0 0 562,130
Cost of Properties
Including Closing and
Soft Costs
-------------------------------------
Total Excess
acquisition (deficiency)
cost, capital of property
improvements operating cash
Original closing and receipts over
mortgage soft costs cash
Property financing (1) Total expenditures
============================ ========== ============= ============ ==============
CNL Income Fund XIII, Ltd.
(Continued):
Denny's -
Orlando, FL 0 934,120 934,120 (1,271 )
Jack in the Box -
Houston, TX 0 861,321 861,321 201,997
CNL Income Fund XIV, Ltd.:
Checkers -
Knoxville, TN 0 339,031 339,031 0
Checkers -
Dallas, TX 0 356,981 356,981 0
TGI Friday's -
Woodridge, NJ (7) 0 1,510,245 1,510,245 243,288
Wendy's -
Woodridge, NJ (7) 0 672,746 672,746 74,312
Hardee's -
Madison, AL 0 658,977 658,977 41,973
Checkers -
Richmond, VA (#548) 0 382,435 382,435 130,027
Checkers -
Riviera Beach, FL 0 276,409 276,409 83,591
Checkers -
Richmond, VA (#486) 0 352,034 352,034 45,951
Long John Silver's -
Stockbridge, GA 0 738,340 738,340 (42,040 )
Long John Silver's -
Shelby, NC 0 608,611 608,611 (114,433 )
Checker's -
Kansas City, MO 0 209,329 209,329 59,121
Checker's -
Houston, TX 0 311,823 311,823 73,850
CNL Income Fund XV, Ltd.:
Checkers -
Knoxville, TN 0 263,221 263,221 0
Checkers -
Leavenworth, KS 0 259,600 259,600 0
Checkers -
Knoxville, TN 0 288,885 288,885 0
TGI Friday's -
Woodridge, NJ (7) 0 1,510,245 1,510,245 243,288
Wendy's -
Woodridge, NJ (7) 0 672,746 672,746 74,312
Long John Silver's -
Gastonia, NC 0 776,248 776,248 (144,944 )
Long John Silver's
Lexington, NC 0 646,203 646,203 (84,073 )
<PAGE>
TABLE V
SALES OR DISPOSALS OF PROPERTIES
Selling Price, Net of
Closing Costs and GAAP Adjustments
------------------------------------------------------------
Purchase
money Adjustments
Cash Mortgage mortgage resulting
received net balance taken from
Date Date of of closing at time back by application
Property Acquired Sale costs of sale program of GAAP Total
============================ =========== =========== ============= ========== ========== =========== ============
CNL Income Fund XVI, Ltd.:
Long John Silver's -
Appleton, WI 06/24/95 04/24/96 775,000 0 0 0 775,000
Checker's -
Oviedo, FL 11/14/94 02/28/97 610,384 0 0 0 610,384
Boston Market -
Madison, TN (16) 05/05/95 05/08/98 774,851 0 0 0 774,851
Boston Market -
Chattanooga, TN (17) 05/05/95 06/16/98 713,386 0 0 0 713,386
Boston Market -
Lawrence, KS 05/08/98 11/23/99 667,311 0 0 0 667,311
CNL Income Fund XVII, Ltd.:
Boston Market -
Troy, OH (18) 07/24/96 06/16/98 857,487 0 0 0 857,487
Golden Corral -
El Cajon, CA (22) 04/29/97 12/02/99 1,675,385 0 0 0 1,675,385
CNL Income Fund XVIII, Ltd.:
Black Eyed Pea -
Atlanta, GA 03/26/97 12/06/99 688,997 0 0 0 688,997
CNL American Properties
Fund, Inc.:
TGI Friday's -
Orange, CT 10/30/95 05/08/97 1,312,799 0 0 0 1,312,799
TGI Friday's -
Hazlet, NJ 07/15/96 05/08/97 1,324,109 0 0 0 1,324,109
TGI Friday's -
Marlboro, NJ 08/01/96 05/08/97 1,372,075 0 0 0 1,372,075
TGI Friday's -
Hamden, CT 08/26/96 05/08/97 1,245,100 0 0 0 1,245,100
Boston Market -
Southlake, TX 07/02/97 07/21/97 1,035,153 0 0 0 1,035,135
Boston Market -
Franklin, TN (26) 08/18/95 04/14/98 950,361 0 0 0 950,361
Boston Market -
Grand Island, NE (27) 09/19/95 04/14/98 837,656 0 0 0 837,656
Burger King -
Indian Head Park, IL 04/03/96 05/05/98 674,320 0 0 0 674,320
Boston Market -
Dubuque, IA (28) 10/04/95 05/08/98 969,159 0 0 0 969,159
Boston Market -
Merced, CA (29) 10/06/96 05/08/98 930,834 0 0 0 930,834
Boston Market -
Arvada, CO (30) 07/21/97 07/28/98 1,152,262 0 0 0 1,152,262
Boston Market -
Ellisville, MO 09/03/96 04/28/99 822,824 0 0 0 822,824
Cost of Properties
Including Closing and
Soft Costs
-------------------------------------
Total Excess
acquisition (deficiency)
cost, capital of property
improvements operating cash
Original closing and receipts over
mortgage soft costs cash
Property financing (1) Total expenditures
============================ ========== ============= ============ ==============
CNL Income Fund XVI, Ltd.:
Long John Silver's -
Appleton, WI 0 613,838 613,838 161,162
Checker's -
Oviedo, FL 0 506,311 506,311 104,073
Boston Market -
Madison, TN (16) 0 774,851 774,851 0
Boston Market -
Chattanooga, TN (17) 0 713,386 713,386 0
Boston Market -
Lawrence, KS 0 774,851 774,851 (107,540 )
CNL Income Fund XVII, Ltd.:
Boston Market -
Troy, OH (18) 0 857,487 857,487 0
Golden Corral -
El Cajon, CA (22) 0 1,692,994 1,692,994 (17,609 )
CNL Income Fund XVIII, Ltd.:
Black Eyed Pea -
Atlanta, GA 0 617,610 617,610 71,387
CNL American Properties
Fund, Inc.:
TGI Friday's -
Orange, CT 0 1,310,980 1,310,980 1,819
TGI Friday's -
Hazlet, NJ 0 1,294,237 1,294,237 29,872
TGI Friday's -
Marlboro, NJ 0 1,324,288 1,324,288 47,787
TGI Friday's -
Hamden, CT 0 1,203,136 1,203,136 41,964
Boston Market -
Southlake, TX 0 1,035,135 1,035,135 0
Boston Market -
Franklin, TN (26) 0 950,361 950,361 0
Boston Market -
Grand Island, NE (27) 0 837,656 837,656 0
Burger King -
Indian Head Park, IL 0 670,867 670,867 3,453
Boston Market -
Dubuque, IA (28) 0 969,159 969,159 0
Boston Market -
Merced, CA (29) 0 930,834 930,834 0
Boston Market -
Arvada, CO (30) 0 1,152,262 1,152,262 0
Boston Market -
Ellisville, MO 0 1,026,746 1,026,746 (203,922 )
<PAGE>
TABLE V
SALES OR DISPOSALS OF PROPERTIES
Selling Price, Net of
Closing Costs and GAAP Adjustments
------------------------------------------------------------
Purchase
money Adjustments
Cash Mortgage mortgage resulting
received net balance taken from
Date Date of of closing at time back by application
Property Acquired Sale costs of sale program of GAAP Total
============================ =========== =========== ============= ========== ========== =========== ============
CNL American Properties
Fund, Inc.
(Continued):
Golden Corral -
Brooklyn, OH 08/23/96 05/18/99 974,560 0 0 0 974,560
Boston Market -
Edgewater, CO 08/19/97 08/11/99 634,122 0 0 0 634,122
Black Eyed Pea -
Houston, TX (31) 10/01/97 08/24/99 648,598 0 0 0 648,598
Big Boy -
Topeka, KS (32) 02/26/99 09/22/99 939,445 0 0 0 939,445
Boston Market -
LaQuinta, CA 12/16/96 10/13/99 833,140 0 0 0 833,140
Sonny's -
Jonesboro, GA 06/02/98 12/22/99 1,098,342 0 0 0 1,098,342
Golden Corral -
Waldorf, MD (32) (33) 04/05/99 01/03/00 2,501,175 0 0 0 2,501,175
Jack in the Box -
Los Angeles, CA 06/30/95 02/18/00 1,516,800 0 0 0 1,516,800
Golden Corral
Dublin, GA 08/07/98 05/01/00 1,323,205 0 0 0 1,323,205
Boston Market -
San Antonio, TX 04/30/97 05/02/00 517,495 0 0 0 517,495
Boston Market -
Corvallis, OR 07/09/96 06/20/00 717,019 0 0 0 717,019
Big Boy -
St. Louis, MO 01/19/99 06/28/00 1,463,050 0 0 0 1,463,050
Ground Round -
Nanuet, NY 12/02/97 06/30/00 964,825 0 0 0 964,825
Big Boy -
Jefferson City, MO 01/19/99 06/30/00 905,250 0 0 0 905,250
Big Boy -
Alton, IL 01/19/99 06/30/00 905,250 0 0 0 905,250
Cost of Properties
Including Closing and
Soft Costs
-------------------------------------
Total Excess
acquisition (deficiency)
cost, capital of property
improvements operating cash
Original closing and receipts over
mortgage soft costs cash
Property financing (1) Total expenditures
============================ ========== ============= ============ ==============
CNL American Properties
Fund, Inc.
(Continued):
Golden Corral -
Brooklyn, OH 0 997,296 997,296 (22,736 )
Boston Market -
Edgewater, CO 0 904,691 904,691 (270,569 )
Black Eyed Pea -
Houston, TX (31) 0 648,598 648,598 0
Big Boy -
Topeka, KS (32) 0 1,062,633 1,062,633 (123,188 )
Boston Market -
LaQuinta, CA 0 987,034 987,034 (153,894 )
Sonny's -
Jonesboro, GA 0 1,098,342 1,098,342 0
Golden Corral -
Waldorf, MD (32) (33) 0 2,430,686 2,430,686 70,489
Jack in the Box -
Los Angeles, CA 0 1,119,567 1,119,567 397,233
Golden Corral
Dublin, GA 0 1,272,765 1,272,765 50,440
Boston Market -
San Antonio, TX 0 757,069 757,069 (239,574 )
Boston Market -
Corvallis, OR 0 925,427 925,427 (208,408 )
Big Boy -
St. Louis, MO 0 1,345,100 1,345,100 117,950
Ground Round -
Nanuet, NY 0 927,273 927,273 37,552
Big Boy -
Jefferson City, MO 0 1,113,383 1,113,383 (208,133 )
Big Boy -
Alton, IL 0 1,012,254 1,012,254 (107,004 )
</TABLE>
(1) Amounts shown do not include pro rata share of original offering costs
or acquisition fees.
(2) Amount shown is face value and does not represent discounted current
value. The mortgage note bears interest at a rate of 10.25% per annum
and provides for a balloon payment of $991,331 in July 2000.
(3) Amount shown is face value and does not represent discounted current
value. The mortgage note bears interest at a rate of 10.25% per annum
and provides for a balloon payment of $1,105,715 in July 2000.
(4) Amount shown is face value and does not represent discounted current
value. The mortgage note bears interest at a rate of 10.00% per annum
and provides for a balloon payment of $218,252 in December 2005.
(5) Amount shown is face value and does not represent discounted current
value. The mortgage note bears interest at a rate of 10.00% per annum
and provides for a balloon payment of $200,063 in December 2005.
(6) Amount shown is face value and does not represent discounted current
value. The mortgage note bears interest at a rate of 10.75% per annum
and provides for 12 monthly payments of interest only and thereafter, 24
equal monthly payments of principal and interest until November 1999,
when the remaining 144 equal monthly payments of principal and interest
will be reduced due to a lump sum payment received in March 1999 in
advance from the borrower.
(7) CNL Income Fund XIV, Ltd. and CNL Income Fund XV, Ltd. each owned a 50
percent interest in Wood-Ridge Real Estate Joint Venture, which owned
two properties. The amounts presented for CNL Income Fund XIV, Ltd. and
CNL Income Fund XV, Ltd. represent each partnership's 50 percent
interest in the properties owned by Wood-Ridge Real Estate Joint
Venture.
(8) CNL Income Fund II, Ltd. owns a 64 percent interest and CNL Income Fund
VI, Ltd. owns a 36 percent interest in this joint venture. The amounts
presented for CNL Income Fund II, Ltd. and CNL Income Fund VI, Ltd.
represent each partnership's percent interest in the property owned by
Show Low Joint Venture.
(9) CNL Income Fund, Ltd. owned a 50 percent interest in this joint venture.
The amounts presented represent the partnerships percent interest in the
property owned by Seventh Avenue Joint Venture. A third party owns the
remaining 50 percent interest in this joint venture.
(10) CNL Income Fund VI, Ltd. and CNL Income Fund VII, Ltd. own a 52 percent
and 48 percent interest, respectively, in the property in Yuma, Arizona.
The amounts presented for CNL Income Fund VI, Ltd. and CNL Income Fund
VII, Ltd. represent each partnership's respective interest in the
property.
(11) Cash received net of closing costs includes $198,000 received as a lease
termination fee.
(12) Cash received net of closing costs includes $93,885 received as a lease
termination fee.
(13) Cash received net of closing costs includes $120,115 received as a lease
termination fee.
(14) Closing costs deducted from net sales proceeds do not include deferred,
subordinated real estate disposition fees payable to CNL Fund Advisors,
Inc. or its affiliates.
(15) The Burger King property in Woodmere, Ohio was exchanged on December 12,
1996 for a Burger King property in Carrboro, NC at the option of the
tenant as permitted under the terms of the lease agreement. Due to the
exchange, the Burger King property in Carrboro, NC is being leased under
the same lease as the Burger King property in Woodmere, OH.
(16) The Boston Market property in Madison, TN was exchanged on May 8, 1998
for a Boston Market property in Lawrence, KS at the option of the tenant
as permitted under the terms of the lease agreement. Due to the
exchange, the Boston Market property in Lawrence, KS is being leased
under the same lease as the Boston Market property in Madison, TN.
(17) The Boston Market property in Chattanooga, TN was exchanged on June 16,
1998 for a Boston Market property in Indianapolis, IN at the option of
the tenant as permitted under the terms of the lease agreement. Due to
the exchange, the Boston Market property in Indianapolis, IN is being
leased under the same lease as the Boston Market property in
Chattanooga, TN.
(18) The Boston Market property in Troy, OH was exchanged on June 16, 1998
for a Boston Market property in Inglewood, CA at the option of the
tenant as permitted under the terms of the lease agreement. Due to the
exchange, the Boston Market property in Inglewood, CA is being leased
under the same lease as the Boston Market property in Troy, OH.
(19) The Burger King property in Columbus, OH was exchanged on September 30,
1998 for a Burger King property in Danbury, CT at the option of the
tenant as permitted under the terms of the lease agreement. Due to the
exchange, the Burger King property in Danbury, CT is being leased under
the same lease as the Burger King property in Columbus, OH.
(20) CNL Income Fund V, Ltd. owns a 49 percent interest and CNL Income Fund
VII, Ltd. owns a 51 percent interest in this joint venture. The amounts
presented for CNL Income Fund V, Ltd. and CNL Income Fund VII, Ltd.
represent each partnership's percent interest in the property owned by
Halls Joint Venture.
(21) Cash received net of closing costs includes $50,000 received as a lease
termination fee.
(22) CNL Income Fund XVII, Ltd. owned an 80 percent interest in this joint
venture. The amounts presented represent the partnership's percent
interest in the property owned by El Cajon Joint Venture. A third party
owned the remaining 20 percent interest in this joint venture.
(23) Amount shown is face value and does not represent discounted current
value. The mortgage note bears interest at a rate of 10.25% per annum
and provides for 60 equal monthly payments of principal and interest.
(24) Amount shown is face value and does not represent discounted current
value. The mortgage note bore an interest rate of 10.75% per annum and
provided for 12 monthly payments of interest only and thereafter, 168
equal monthly payments of principal and interest. The borrower prepaid
the mortgage note in full in April 1999.
(25) Amount shown is face value and does not represent discounted current
value. The mortgage note bore an interest rate of 10.00% per annum and
was paid in full in July 1999.
(26) The Boston Market property in Franklin, TN was exchanged on April 14,
1998 for a Boston Market property in Glendale, AZ at the option of the
tenant as permitted under the terms of the lease agreement. Due to the
exchange, the Boston Market property in Glendale, AZ is being leased
under the same lease as the Boston Market property in Franklin, TN.
(27) The Boston Market property in Grand Island, NE was exchanged on April
14, 1998 for a Boston Market property in Warwick, RI at the option of
the tenant as permitted under the terms of the lease agreement. Due to
the exchange, the Boston Market property in Warwick, RI is being leased
under the same lease as the Boston Market property in Grand Island, NE.
(28) The Boston Market property in Dubuque, IA was exchanged on May 8, 1998
for a Boston Market property in Columbus, OH at the option of the tenant
as permitted under the terms of the lease agreement. Due to the
exchange, the Boston Market property in Columbus, OH is being leased
under the same lease as the Boston Market property in Dubuque, IA.
(29) Cash received net of closing costs includes $362,949 in construction
costs incurred but not paid by CNL American Properties Fund, Inc. as of
the closing date, which were deducted from the actual net sales proceeds
received by CNL American Properties Fund, Inc.
(30) Cash received net of closing costs includes $522,827 in construction
costs incurred but not paid by CNL American Properties Fund, Inc. as of
the closing date, which were deducted from the actual net sales proceeds
received by CNL American Properties Fund, Inc.
(31) The Black Eyed Pea property in Houston, TX was exchanged on August 24,
1999 for a Black Eyed Pea property in Dallas, TX at the option of the
tenant as permitted under the terms of the lease agreement. Due to the
exchange, the Black Eyed Pea property in Dallas, TX is being leased
under the same lease as the Black Eyed Pea property in Houston, TX.
(32) This property was being constructed and was sold prior to completion of
construction.
(33) Cash received net of closing costs includes $1,551,800 in construction
costs incurred but not paid by CNL American Properties Fund, Inc. as of
the closing date, which were deducted from the actual net sales proceeds
received by CNL American Properties Fund, Inc.
<PAGE>
ADDENDUM TO
APPENDIX E
STATEMENT OF ESTIMATED
TAXABLE OPERATING RESULTS
BEFORE DIVIDENDS PAID DEDUCTION
-------------------------------------------------------
THE STATEMENT OF ESTIMATED TAXABLE OPERATING RESULTS
BEFORE DIVIDENDS PAID DEDUCTION IN THIS ADDENDUM UPDATES
AND REPLACES APPENDIX E TO THE ATTACHED PROSPECTUS,
DATED MAY 23, 2000.
-------------------------------------------------------
<PAGE>
CNL HOSPITALITY PROPERTIES, INC.
STATEMENT OF ESTIMATED TAXABLE OPERATING RESULTS
BEFORE DIVIDENDS PAID DEDUCTION
PROPERTIES ACQUIRED FROM INCEPTION
THROUGH NOVEMBER 21, 2000
For the Year Ended December 31, 1999 (Unaudited)
The following schedule presents unaudited estimated taxable operating
results before dividends paid deduction of each Property acquired, directly or
indirectly, by the Company from inception through November 21, 2000. The
statement presents unaudited estimated taxable operating results for each
Property that was operational as if the Property (i) had been acquired the
earlier of (a) the actual date acquired by the Company or (b) January 1, 1999,
and (ii) had been operational during the period January 1, 1999 through December
31, 1999. The schedule should be read in light of the accompanying footnotes.
These estimates do not purport to present actual or expected operations
of the Company for any period in the future. The estimates were prepared on the
basis described in the accompanying notes which should be read in conjunction
herewith.
<TABLE>
<CAPTION>
<S> <C>
Residence Inn by Marriott Residence Inn by Marriott Residence Inn by Marriott Suites
Buckhead (Lenox Park) (1) Gwinnett Place (1) Marriott Mira Mesa (2) Market Center (3)
--------------------------- ------------------------- --------------------- -------------------
Estimated Taxable Operating
Results Before Dividends
Paid Deduction:
Rental Income (9) $1,668,185 $1,220,977 $1,542,300 $1,807,078
FF&E Reserve Income (10) 166,584 127,865 32,000 62,225
Asset Management Fees (11) (94,388 ) (69,085 ) (93,232 ) (105,172 )
Interest Expense (12) -- -- -- (711,278 )
General and Administrative
Expenses (13) (132,144 ) (96,719 ) (123,384 ) (144,567 )
------------- --------------- --------------- ---------------
Estimated Cash Available from
Operations 1,608,237 1,183,038 1,357,684 908,286
Depreciation and Amortization
Expense (14) (15) (569,033 ) (425,414 ) (409,488 ) (570,141 )
------------- --------------- --------------- ---------------
Estimated Taxable Operating
Results Before Dividends
Paid Deduction $1,039,204 $ 757,624 $ 948,196 $ 338,145
============= =============== =============== ===============
</TABLE>
See Footnotes
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Residence Inn by Marriott Residence Inn by Courtyard by Marriott Courtyard by Marriott
Hughes Center (3) Marriott Dallas Plano(3) Scottsdale Downtown (3) Lake Union (3)
--------------------------- -------------------- ------------------------ ------------------
Estimated Taxable Operating
Results Before Dividends
Paid Deduction:
Rental Income (9) $1,813,855 $640,305 $1,074,940 $1,962,054
FF&E Reserve Income (10) 64,075 20,281 15,063 56,341
Asset Management Fees (11) (105,566 ) (37,265 ) (62,562 ) (114,192 )
Interest Expense (12) (702,854 ) (233,572 ) (437,834 ) (767,372 )
General and Administrative
Expenses (13) (145,108 ) (51,225 ) (85,996 ) (156,964 )
---------------- --------------- -------------- -------------
Estimated Cash Available from
Operations 924,402 338,524 503,611 979,867
Depreciation and Amortization
Expense (14) (15) (512,475 ) (199,805 ) (245,727 ) (588,284 )
---------------- --------------- -------------- -------------
Estimated Taxable Operating
Results Before Dividends
Paid Deduction $ 411,927 $ 138,719 $257,884 $ 391,583
================ =============== ============== =============
</TABLE>
See Footnotes
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Residence Inn by Marriott Courtyard by Marriott Courtyard by Marriott Wyndham
Phoenix Airport (3) Legacy Park (3) Philadelphia Downtown (4) Billerica (5)
----------------------------- ---------------------- ---------------------------- ------------------
Estimated Taxable Operating
Results Before Dividends
Paid Deduction:
Rental Income (9) $1,170,161 $695,691 $ 5,785,000 $2,509,200
FF&E Reserve Income (10) 16,650 19,607 161,674 64,190
Asset Management Fees (11) (68,103 ) (40,489 ) (309,060 ) (150,552 )
Interest Expense (12) (430,112 ) (268,351 ) (2,694,250 ) --
General and Administrative
Expenses (13) (93,614 ) (55,655 ) (462,800 ) (513,520 )
--------------- -------------- -------------- --------------
Estimated Cash Available from
Operations 594,982 350,803 2,480,564 1,909,318
Depreciation and Amortization
Expense (14) (15) (366,949 ) (218,342 ) (1,804,256 ) (787,694 )
--------------- -------------- -------------- --------------
Estimated Taxable Operating
Results Before Dividends
Paid Deduction $ 228,033 $132,461 $ 676,308 $1,121,624
=============== ============== ============== ==============
</TABLE>
See Footnotes
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
SpringHill Suites
Wyndham Residence Inn by Marriott Courtyard by Marriott by Marriott
Denver Tech Center (5) Palm Desert (6) Palm Desert (6) Gaithersburg (2)
------------------------- --------------------------- -------------------------- ------------------
Estimated Taxable Operating
Results Before Dividends
Paid Deduction:
Rental Income (9) $1,835,300 $1,674,000 $1,351,000 $1,521,460
FF&E Reserve Income (10) 41,540 144,660 142,470 40,150
Asset Management Fees (11) (110,118 ) (100,440 ) (81,060 ) (91,288 )
Interest Expense (12) -- -- -- --
General and Administrative
Expenses (13) (146,824 ) (133,920 ) (108,080 ) (121,717 )
---------------- -------------- ------------- ---------------
Estimated Cash Available from
Operations 1,619,898 1,584,300 1,304,330 1,348,605
Depreciation and Amortization
Expense (14) (15) (600,411 ) (528,205 ) (486,897 ) (674,838 )
---------------- -------------- ------------- ---------------
Estimated Taxable Operating
Results Before Dividends
Paid Deduction $1,019,487 $1,056,095 $817,433 $673,767
================ ============== ============= ===============
</TABLE>
See Footnotes
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
TownePlace Suites
Residence Inn by Marriott Courtyard by Marriott by Marriott Residence Inn by Marriott
Merrifield (2) Alpharetta (7) Tewksbury (7) Cottonwood (7)
---------------------------- ---------------------- --------------------- -------------------------
Estimated Taxable Operating
Results Before Dividends
Paid Deduction:
Rental Income (9) $1,830,000 $1,387,700 $905,000 $1,457,300
FF&E Reserve Income (10) 46,210 41,520 22,010 37,870
Asset Management Fees (11) (109,800 ) (83,262 ) (54,300 ) (87,438 )
Interest Expense (12) -- -- -- --
General and Administrative
Expenses (13) (146,400 ) (111,016 ) (72,400 ) (116,584 )
-------------- ------------- ---------------- ---------------
Estimated Cash Available from
Operations 1,620,010 1,234,942 800,310 1,291,148
Depreciation and Amortization
Expense (14) (15) (538,707 ) (471,691 ) (283,944 ) (502,722 )
-------------- ------------- ---------------- ---------------
Estimated Taxable Operating
Results Before Dividends
Paid Deduction $1,081,303 $ 763,251 $516,366 $ 788,426
============== ============= ================ ===============
</TABLE>
See Footnotes
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
TownePlace Suites TownePlace Suites TownePlace Suites
by Marriott by Marriott by Marriott Courtyard by Marriott
Mt. Laurel (7) Scarborough (7) Newark (2) Little Lake Bryan (8)
---------------------- ------------------- --------------------- -------------------------
Estimated Taxable Operating
Results Before Dividends
Paid Deduction:
Rental Income (9) $771,100 $716,000 $1,360,000 $3,631,950
FF&E Reserve Income (10) 19,350 18,120 32,150 330,650
Asset Management Fees (11) (46,266 ) (42,960 ) (81,600 ) (217,917 )
Interest Expense (12) -- -- -- (1,442,372 )
General and Administrative
Expenses (13) (61,688 ) (57,280 ) (108,800 ) (290,556 )
--------------- ------------- --------------- ---------------
Estimated Cash Available from
Operations 682,496 633,880 1,201,750 2,011,755
Depreciation and Amortization
Expense (14) (15) (248,671 ) (240,198 ) (435,590 ) (1,183,895 )
--------------- ------------- --------------- ---------------
Estimated Taxable Operating
Results Before Dividends
Paid Deduction $433,825 $393,682 $ 766,160 $ 827,860
=============== ============= =============== ===============
</TABLE>
See Footnotes
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Fairfield Inn by Marriott
Little Lake Bryan (8) Total
---------------------------- --------------
Estimated Taxable Operating
Results Before Dividends
Paid Deduction:
Rental Income (9) $3,123,750 $43,454,306
FF&E Reserve Income (10) 315,250 2,038,505
Asset Management Fees (11) (187,425 ) (2,543,540 )
Interest Expense (12) (1,246,499 ) (8,934,494 )
General and Administrative
Expenses (13) (249,900 ) (3,786,861 )
--------------- ----------------
Estimated Cash Available from
Operations 1,755,176 30,227,916
Depreciation and Amortization
Expense (14) (15) (1,023,407 ) (13,916,784 )
--------------- ----------------
Estimated Taxable Operating
Results Before Dividends
Paid Deduction $731,769 $16,311,132
=============== ================
See Footnotes
</TABLE>
<PAGE>
FOOTNOTES:
(1) The lessee of the Buckhead (Lenox Park) and Gwinett Place Properties is
the same unaffiliated lessee.
(2) The lessee of the Mira Mesa, Gaithersburg, Merrifield and Newark
Properties is the same unaffiliated lessee.
(3) In February 1999, the Company formed a jointly owned real estate
investment trust, CNL Hotel Investors, Inc. ("CHI") with Five Arrows
Realty Securities II, L.L.C. to acquire seven hotel Properties. The
Company had a 49% ownership interest in CHI. However, in October 2000,
the Company entered into an agreement whereby the Company's ownership
interest in CHI increased to 53%. The seven hotel Properties are the
Legacy Park, Market Center, Hughes Center, Dallas Plano, Scottsdale
Downtown, Lake Union and Phoenix Airport Properties. The lessee of
these seven hotel Properties is the same unaffiliated lessee. For
purposes of this table, the balances presented represent the 53%
interest owned by the Company.
(4) In November 1999, the Company acquired an 89% interest in CNL
Philadelphia Annex, LLC (formerly known as Courtyard Annex, L.L.C.) to
own and lease one hotel Property. The hotel Property is the
Philadelphia Downtown Property. For purposes of this table, the
balances presented represent the 89% interest owned by the Company.
(5) The lessee of the Wyndham Billerica and the Wyndham Denver Tech Center
Properties is the same unaffiliated lessee.
(6) The lessee of the Residence Inn Palm Desert and the Courtyard Palm
Desert Properties is the same unaffiliated lessee.
(7) The lessee of the Alpharetta, Tewksbury, Cottonwood, Mt. Laurel and
Scarborough Properties are the same unaffiliated lessee.
(8) The lessee of the Courtyard Little Lake Bryan and the Fairfield Inn
Little Lake Bryan Properties are the same unaffiliated lessee.
(9) Rental income does not include percentage rents, which will become due
if specified levels of gross receipts are achieved.
(10) Reserve funds will be used for the replacement and renewal of
furniture, fixtures and equipment related to the Properties ("FF&E
Reserve"). The funds in the FF&E Reserve and all property purchased
with the funds from the FF&E Reserve will be paid, granted and assigned
to the Company as additional rent. FF&E Reserve income earned is
estimated at three percent of projected hotel gross receipts. In
connection therewith, FF&E Reserve income will be earned at 1% of gross
revenues for the lease years one through four and has been estimated
based on projected gross revenues.
(11) The Properties are managed pursuant to an advisory agreement between
the Company and CNL Hospitality Corp. (the "Advisor"), pursuant to
which the Advisor receives monthly asset management fees in an amount
equal to one-twelfth of .60% of the Company's Real Estate Asset Value
as of the end of the preceding month as defined in such agreement. See
"Management Compensation."
(12) Estimated at 7.625% per annum based on the bank's base rate as of
February 24, 1999 and June 21, 1999, assuming $88 million was borrowed
to acquire the Legacy Park, Market Center, Hughes Center, Dallas Plano,
Scottsdale Downtown, Lake Union and Phoenix Airport Properties. For
purposes of this table, the amounts presented represent the 53%
interest owned by the Company. Estimated at 8.29% per annum based on
the bank's rate as of November 9, 2000, assuming $32.5 million was
borrowed against the Philadelphia Downtown Property. Estimated at
8.335% per annum based on the bank's rate as of November 17, 2000,
assuming $32.3 million was borrowed to acquire the Courtyard Little
Lake Bryan and the Fairfield Inn Little Lake Bryan Properties.
<PAGE>
(13) Estimated at 8% of gross rental income, based on the previous
experience of Affiliates of the Advisor with another public REIT.
Amount does not include soliciting dealer servicing fee due to the fact
that the Company did not incur such fee for the year ended December 31,
1999.
(14) The estimated federal tax basis of the depreciable portion of the
Properties and the number of years the assets have been depreciated on
the straight-line method is as follows (the balances are presented at
the Company's 53% interest in CHI and the 89% interest in CNL
Philadelphia Annex, LLC):
<TABLE>
<CAPTION>
<S> <C>
Furniture and
Buildings Fixtures
(5-15 years) (39 years)
-------------- -----------------
Buckhead (Lenox Park) Property $13,459,000 $1,235,000
Gwinett Place Property 10,017,000 1,114,000
Legacy Park Property 5,414,000 508,000
Market Center Property 14,885,000 1,273,000
Hughes Center Property 14,839,000 882,000
Dallas Plano Property 5,087,000 438,000
Scottsdale Downtown Property 8,399,000 584,000
Lake Union Property 14,601,000 916,000
Phoenix Airport Property 9,546,000 685,000
Philadelphia Downtown Property 47,237,000 4,367,000
Mira Mesa Property 12,924,000 1,701,000
Wyndham Billerica Property 20,471,000 2,255,000
Wyndham Denver Tech Center Property 13,436,000 2,094,000
Residence Inn Palm Desert Property 14,212,000 1,375,000
Courtyard Palm Desert Property 11,269,000 1,599,000
Gaithersburg Property 11,931,000 1,683,000
Merrifield Property 15,499,000 2,011,000
Alpharetta Property 10,916,000 1,392,000
Tewksbury Property 7,982,000 591,000
Cottonwood Property 11,659,000 1,480,000
Mt. Laurel Property 6,395,000 623,000
Scarborough Property 6,109,000 612,000
Newark Property 10,166,000 1,270,000
Courtyard Little Lake Bryan Property 27,001,000 3,562,000
Fairfield Inn Little Lake Bryan Property 23,341,000 3,079,000
</TABLE>
(15) A loan origination fee of $758,000 from the issuance of promissory
notes, to facilitate the acquisition of the seven CHI hotel Properties,
is being amortized under the effective interest method over the term of
the loans. For purposes of this table, the amounts presented represent
the 53% interest owned by the Company.
