FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
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For the six month period ended June 30, 2000
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OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
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For the transition period from to
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Commission file number
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0-24097
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CNL Hospitality Properties, Inc.
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(Exact name of registrant as specified in its charter)
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Maryland 59-3396369
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(State of other jurisdiction (I.R.S. Employer
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450 South Orange Avenue
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(Address of principal executive offices) (Zip Code)
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Registrant's telephone number
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Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date.
40,656,887 shares of common stock, $.01 par value, outstanding as of August 7,
2000.
<PAGE>
CONTENTS
Part I Page
Item 1. Financial Statements:
Condensed Consolidated Balance Sheets 1
Condensed Consolidated Statements of Earnings 2
Condensed Consolidated Statements of Stockholders' Equity 3
Condensed Consolidated Statements of Cash Flows 4 - 5
Notes to Condensed Consolidated Financial Statements 6-14
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations 15-21
Item 3. Quantitative and Qualitative Disclosures about Market Risk 21
Part II
Other Information 22-27
<PAGE>
CNL HOSPITALITY PROPERTIES, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION> June 30, 2000 December 31, 1999
<S><C>
ASSETS
Land, buildings and equipment on operating leases, less
accumulated depreciation of $3,532,719 and $1,603,334
respectively $188,691,001 $112,227,771
Investment in unconsolidated subsidiary 37,526,856 38,364,157
Cash and cash equivalents 105,926,387 101,972,441
Restricted cash 720,985 275,630
Certificate of deposit 5,000,000 5,000,000
Dividends receivable 1,191,431 1,215,993
Receivables 411,521 112,184
Prepaid expenses 254,470 41,165
Loan costs, less accumulated amortization of $102,847 and
$86,627, respectively 50,749 51,969
Accrued rental income 95,555 79,399
Other assets 10,471,824 7,627,565
------------- -------------
$350,340,779 $266,968,274
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Note payable $ 10,000,000 $ --
Accounts payable and accrued expenses 758,481 405,855
Distributions payable 175,594 89,843
Due to related parties 948,585 995,500
Security deposits 8,404,002 5,042,054
Rents paid in advance 172,573 255,568
------------- -------------
Total liabilities 20,459,235 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 -- --
Common stock, $.01 par value per share. 150,000,000
and 60,000,000 authorized shares, respectively;
issued and outstanding 38,452,693 and 28,902,914
shares, respectively 384,527 289,029
Capital in excess of par value 339,270,298 256,231,833
Accumulated distributions in excess of net earnings (6,814,333) (3,466,023)
Minority interest distributions in excess of contributions
and accumulated earnings (2,958,948) --
------------- -------------
Total stockholders' equity 329,881,544 253,054,839
------------- -------------
$350,340,779 $ 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> Quarter Ended Six Months Ended
June 30, June 30,
2000 1999 2000 1999
------------- ------------- ------------- ------------
<S><C>
Revenues:
Rental income from operating leases $3,250,909 $748,908 $5,976,803 $1,486,526
FF&E Reserve income 320,876 65,006 480,113 126,033
Dividend income 926,918 658,288 1,853,735 900,131
Interest and other income 2,191,979 614,875 3,961,188 907,739
------------- ------------- ------------- -------------
6,690,682 2,087,077 12,271,839 3,420,429
------------- ------------- ------------- -------------
Interest and loan cost amortization 8,112 32,757 16,222 233,330
General operating and administrative 401,815 120,566 696,885 313,997
Professional services 36,300 8,066 81,637 29,272
Asset management fees to related
parties 235,858 17,871 362,280 67,436
Depreciation and amortization 1,083,503 239,657 2,000,144 493,415
------------- ------------- ------------- -------------
1,765,588 418,917 3,157,168 1,137,450
------------- ------------- ------------- -------------
Earnings Before Equity in Loss of
Unconsolidated Subsidiary 4,925,094 1,668,160 9,114,671 2,282,979
Equity in Loss of Unconsolidated
Subsidiary After Deduction of
Preferred Stock Dividends (140,634) (205,911) (260,437) (390,450)
Minority Interest (141,520) -- (266,210) --
------------- ------------- ------------- -------------
Net Earnings $ 4,642,940 $1,462,249 $8,588,024 $1,892,529
============== ============== ============== ==============
Earnings Per Share of Common Stock:
Basic $ 0.13 $ 0.12 $ 0.25 $ 0.20
============== ============== ============== ==============
Diluted $ 0.13 $ 0.12 $ 0.25 $ 0.20
============== ============== ============== ==============
Weighted Average Number of Shares
of Common Stock Outstanding:
Basic 36,163,184 12,330,853 33,693,585 9,391,870
============== ============== ============== ==============
Diluted 36,163,184 12,330,853 33,693,585 9,391,870
============== ============== ============== ==============
</TABLE>
See accompanying notes to condensed consolidated financial statements
<PAGE>
CNL HOSPITALITY PROPERTIES, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Six Months Ended June 30, 2000 and Year Ended December 31, 1999
<TABLE>
Minority interest
distributions in
<CAPTION> Common stock Accumulated excess of
--------------------------- Capital in distributions contributions
Number of Par excess of in excess of net and accumulated
of Shares value par value earnings earnings Total
------------- ------------- ------------- ------------- ------------- -------------
<S><C>
Balance at December 31, 1998 4,321,908 $ 43,219 $37,289,402 $ (216,130) -- $37,116,491
Subscriptions received for
common stock through public
offerings and distriubtion
reinvestment plan 24,593,891 245,939 245,692,968 -- -- 245,938,907
Retirement of common stock (12,885) (129) (118,413) -- -- (118,542)
Stock issuance costs -- -- (26,632,124) -- -- (26,632,124)
Net earnings -- -- -- 7,515,988 -- 7,515,988
Distributions declared and paid
($.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
reinvestement plan 9,612,655 96,127 96,030,423 -- -- 96,126,550
Retirement of common stock (62,876) (629) (577,826) -- -- (578,455)
Stock issuance costs -- -- (12,414,132) -- -- (12,414,132)
Net earnings -- -- -- 8,588,024 -- 8,588,024
Minority interest distributions in
excess of contributions and
accumulated earnings -- -- -- -- (2,958,948) (2,958,948)
Distributions declared and paid
($.36 per share) -- -- -- (11,936,334) -- (11,936,334)
------------- ------------- ------------- ------------- ------------- -------------
Balance at June 30, 2000 38,452,693 $384,527 $ 339,270,298 $(6,814,333) $(2,958,948) $329,881,544
============== ============== ============== ============== ============== ==============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>
<TABLE>
CNL HOSPITALITY PROPERTIES, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION> Six Months Ended June 30,
2000 1999
<S><C> ------------- -------------
Cash flows from operating activities:
Net earnings $8,588,024 $1,892,529
Adjustments to reconcile net earnings to net
provided by operating activities:
Depreciation 1,958,763 461,459
Amortization 41,381 90,839
Distributions received from investment in
unconsolidated subsidiary, net
of equity in loss 812,142 393,670
Minority interest 266,210 --
Changes in operating assets and
liabilities:
Dividends receivable 24,562 (707,373)
Receivables (299,337) (5,402)
Prepaid expenses (213,305) 3,810
Accrued rental income (16,156) (31,810)
Accounts payable and accrued 352,626 (51,689)
Due to related parties - operating expenses (46,915) (8,787)
Security deposits 3,361,948 --
Rents paid in advance (82,995) (3,489)
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Net cash provided by operating 14,746,948 2,033,757
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Cash flows from investing activities:
Additions to land, buildings and equipment on
operating leases (78,421,993) --
Investment in unconsolidated subsidiary -- (37,172,643)
Increase in restricted cash (445,355) (121,725)
Additions to other assets (2,844,259) (4,509,931)
------------- -------------
Net cash used in investing activities (81,711,607) (41,804,299)
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See accompanying notes to condensed consolidated financial statements.
</TABLE>
<PAGE>
CNL HOSPITALITY PROPERTIES, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
<TABLE>
<CAPTION> Six Months Ended June 30,
2000 1999
<S><C> ------------- -------------
Cash flows from financing activities:
Proceeds from note payable 10,000,000 --
Repayment of borrowings on line of credit -- (9,600,000)
Subscriptions received from stockholders 96,126,550 114,711,315
Distributions to stockholders (11,936,334) (3,052,616)
Distributions to minority interest (10,264,022) --
Retirement of common stock (578,455) (4,600)
Payment of stock issuance costs (12,414,132) (11,833,363)
Other (15,002) (9,863)
------------- -------------
Net cash provided by financing activities 70,918,605 90,210,873
------------- -------------
Net increase in cash and cash equivalents 3,953,946 50,440,331
Cash and cash equivalents at beginning of period 101,972,441 13,228,923
------------- -------------
Cash and cash equivalents at end of period $105,926,387 $63,669,254
============== ==============
Supplemental schedule of non-cash financing activities:
Distributions declared but not paid to minority
interest $175,594 --
============== ==============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>
CNL HOSPITALITY PROPERTIES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Quarters and Six Months Ended June 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 six months ended June 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 reclassi-
fied to conform with the 2000 presentation, including a change in the presenta-
tion of the cash flow from the direct to the indirect method. These reclassi-
fications had no effect on stockholders' equity or net earnings.
In December 1999, the Securities and Exchange Commission released Staff Account-
ing Bulletin No. 101 ("SAB 101") which provides the staff's views in
applying generally accepted accounting principles to selected revenue
recognition issues. SAB 101 is not expected to have a material impact on the
Company's results of operations. SAB 101 requires the Company to defer
recognition of certain percentage rental income until certain thresholds are
met. We have adopted SAB 101 beginning January 1, 2000 without restatement of
prior periods.
<PAGE>
CNL HOSPITALITY PROPERTIES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Quarters and Six Months Ended June 30, 2000 and 1999
2. Public Offerings:
On June 17, 1999, the Company completed its offering of 16,500,000 shares of
common stock ($165,000,000) (the "Initial Offering"), which included 1,500,000
shares ($15,000,000) 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"). The price per share
and other terms of the 1999 Offering, including the percentage of gross proceeds
payable (i) to the managing dealer for selling commissions and expenses in
connection with the offering and (ii) to CNL Hospitality Corp. (the "Advisor")
for acquisition fees, are substantially the same as the Company's Initial
Offering. As of June 30, 2000, the Company received total subscription proceeds
from the Initial Offering, the 1999 Offering and the sale of warrants of
$385,084,634 (38,508,463 shares), including $1,037,782 (103,778 shares) through
the reinvestment plan.
On October 26, 1999, the Company filed a registration statement on Form S-11
with the Securities and Exchange Commission in connection with the proposed sale
by the Company of up to 45,000,000 additional shares of common stock
($450,000,000) (the "2000 Offering") in an offering expected to commence
immediately following the completion of the Company's current offering of up to
27,500,000 shares of common stock ("the 1999 Offering"). Of the 45,000,000
shares of common stock to be offered, up to 5,000,000 will be available to
stockholders purchasing shares through the reinvestment plan. The price per
share and other terms of the 2000 Offering, including the percentage of gross
proceeds payable (i) to the managing dealer for selling commissions and expenses
in connection with the offering and (ii) to the Advisor for acquisition fees,
are substantially the same as the Company's 1999 Offering. 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.
<PAGE>
CNL HOSPITALITY PROPERTIES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Quarters and Six Months Ended June 30, 2000 and 1999
3. Investment in Unconsolidated Subsidiary - Continued:
The following presents condensed financial information for Hotel
Investors as of and for the six months ended and year ended:
<TABLE>
<CAPTION> June 30, December 31,
2000 1999
<S><C> ------------- -------------
Land, buildings and equipment on operating leases, net $162,776,797 $165,088,059
Cash and cash equivalents (including restricted cash) 8,353,443 5,172,658
Loan costs, net 678,232 708,006
Accrued rental income 407,599 283,914
Prepaid expenses, receivables and other assets 172,765 3,422,806
Liabilities 91,600,018 92,229,193
Redeemable preferred stock - Class A and Class B 85,361,864 85,361,864
Stockholders' deficit (4,573,046) (2,915,614)
Revenues 9,566,890 13,025,978
Net earnings 3,285,740 4,104,936
Preferred stock dividends (3,817,244) 5,693,642
Loss applicable to common stockholders (531,504) (1,588,706)
</TABLE>
During the six months ended June 30, 2000 and 1999, the Company recorded
$1,853,735 and $900,131, respectively, in dividend income and $260,437 and
$390,450, respectively, in equity in loss after deduction of preferred stock
dividends resulting in net earnings of $1,593,298 and $509,681, respectively
attributable to this investment ($786,284 and $452,377 which represented net
earnings from this investment for the quarters ended June 30, 2000 and 1999,
respectively).
4. Other Assets:
Other assets consist of acquisition fees and miscellaneous acquisition expenses
that will be allocated to future Properties and deposits.
5. Redemption of Shares:
The Company has a redemption plan under which the Company may elect to redeem
shares, subject to certain conditions and limitations. During the quarter and
six months ended June 30, 2000, 48,271 and 62,876 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 .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 June 30, 2000 and
December 31, 1999, the Company had no amounts outstanding under the line of
credit.
<PAGE>
CNL HOSPITALITY PROPERTIES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Quarters and Six Months Ended June 30, 2000 and 1999
6. Indebtedness - Continued:
In March 2000, the Company through the LLC entered into a Tax Increment
Financing Agreement with the Philadelphia Authority for Industrial Development
("TIF Note") for $10 million which is collateralized by the LLC's hotel
Property. The principal and interest on the TIF Note is expected to be fully
paid by the LLC's hotel Property's incremental property taxes over a period of
twenty 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. CNL
Hospitality Corp. ("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 six months ended June 30, 2000 and 1999, the Company incurred
$12,414,132 and $12,057,440, respectively, in stock issuance costs, including
$7,690,132 and $7,976,937, 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 six months ended June 30, 2000 and 1999, approximately 51 percent and 64
percent, respectively, of the distributions paid to stockholders were considered
ordinary income, and approximately 49 percent and 36 percent, respectively, were
considered a return of capital to stockholders for federal income tax purposes.
No amounts distributed to the stockholders for the six months ended June 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 six months ended June 30, 2000 may not be indicative of the
characterization of distributions that may be expected for the year ended
December 31, 2000.
9. Related Party Transactions:
Certain directors and officers of the Company hold similar positions with the
Advisor and the managing dealer, CNL Securities Corp. These affiliates are
entitled to receive fees and compensation in connection with the offerings, and
the acquisition, management and sale of the assets of the Company.
During the six months ended June 30, 2000 and 1999, the Company incurred
$7,209,499 and $7,478,378, respectively, in selling commissions due to CNL
Securities Corp. for services in connection with its offerings. A substantial
portion of these amounts ($7,151,903 and $6,978,557, 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 six months ended June 30, 2000 and 1999, the Company
incurred $480,633 and $498,559, respectively, of such fees, the majority of
which were reallowed to other broker-dealers and from which all bona fide due
diligence expenses were paid.
<PAGE>
CNL HOSPITALITY PROPERTIES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Quarters and Six Months Ended June 30, 2000 and 1999
9. Related Party Transactions - Continued:
CNL Securities Corp. will also receive, in connection with the Company's initial
offering of up to 16,500,000 shares of common stock (the "Initial Offering"), a
soliciting dealer servicing fee payable annually by the Company beginning on
December 31, 2000 in the amount of 0.20% of "invested capital", as defined in
the Company's prospectus, from the Initial Offering. CNL Securities Corp. in
turn may reallow all or a portion of such fee to soliciting dealers whose
clients hold shares on such date. As of June 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 current offering began. No Soliciting Dealer Warrants,
however, will be exercisable until one year from the date of issuance. During
the six months ended June 30, 2000, the Company issued approximately 650,550
Soliciting Dealer Warrants to CNL Securities Corp. In addition, as of June 30,
2000, CNL Securities Corp. was entitled to approximately 168,500 additional
Soliciting Dealer Warrants for shares sold during the quarter then ended.
The Advisor is entitled to receive acquisition fees forservices 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 six months ended June 30, 2000
and 1999, the Company incurred $6,241,911 and $5,057,012, respectively, of such
fees. Such 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 June 30, 2000 and 1999, the
Company's operating expenses did not exceed the Expense Cap.
The Company and the Advisor have entered into an advisory agreement pursuant to
which the Advisor will receive a monthly asset management fee of one-twelfth of
0.60% of the Company's real estate asset value and the outstanding principal
balance of any Mortgage Loans as of the end of the preceding month. The
management fee, which will not exceed fees which are competitive for similar
services in the same geographic area, may or may not be taken, in whole or in
part as to any year, in the sole discretion of the Advisor. All or any portion
of the management fee not taken as to any fiscal year shall be deferred without
interest and may be taken in such other fiscal year, as the Advisor shall
determine. During the six months ended June 30, 2000 and 1999, the Company
incurred $362,280 and $67,436, respectively, of such fees.
<PAGE>
CNL HOSPITALITY PROPERTIES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Quarters and Six Months Ended June 30, 2000 and 1999
9. Related Party Transactions - Continued:
The Advisor and its affiliates provide various administrative
services to the Company, including services related to accounting;
financial, tax and regulatory compliance reporting; stockholder distributions
and reporting; due diligence and marketing; and investor relations (including
administrative services in connection with the offerings), on a day-to-
day basis. The expenses incurred for these services were classified as
follow for the six months ended June 30:
<TABLE>
<CAPTION>
2000 1999
<S><C> ------------- -------------
Stock issuance costs $2,064,571 $1,709,008
General operating and
administrative expenses 138,923 150,380
Land, buildings and equipment on
operating leases and other assets 735 --
------------- -------------
$2,204,229 $1,859,388
============== ==============
The amounts due to related parties consisted of the following at:
June 30, 2000 December 31,1999
------------- -------------
Due to the Advisor:
Expenditures incurred on behalf
of the Company for accounting
and administrative services $30,412 $387,690
Acquisition fees 305,204 337,797
Management fees 362,270 19,642
------------- -------------
697,886 745,129
------------- -------------
Due to CNL Securities Corp.:
Commissions 235,030 229,834
Marketing support and due diligence
expense reimbursement fee 15,669 16,764
------------- -------------
250,699 246,598
------------- -------------
Due to other related party -- 3,773
------------- -------------
$948,585 $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
affiliat was $15,947,271 and $15,275,629 at June 30, 2000 and December 31,
1999, respectively.
<PAGE>
CNL HOSPITALITY PROPERTIES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Quarters and Six Months Ended June 30, 2000 and 1999
10. Concentration of Credit Risk:
Crestline Capital Corp., which operates and leases two Properties, and
City Center Annex Tenant Corporation contributed more than ten percent of the
Company's total rental income for the quarter and six months ended June 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 risk of default,
failure of these lessees or the Marriott brand chains could significantly impact
the results of operations of the Company. However, management believes that the
risk of such a default is reduced due to the essential or important nature of
these Properties for the ongoing operations of the lessees.
It is expected that the percentage of total rental income contributed by these
lessees will decrease as additional Properties are acquired and leased during
2000 and subsequent years.
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 six months ended June 30, 2000,
approximately 7.3 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. 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 six months ended June 30:
<TABLE>
<CAPTION> Quarter Ended June 30, Six Months Ended June 30,
2000 1999 2000 1999
<S><C> ------------- ------------- ------------- -------------
Basic Earnings Per Share:
Net earnings $4,642,940 $1,462,249 $8,588,024 $1,892,529
============== ============== ============== ==============
Weighted average number of shares outstanding 36,163,184 12,330,853 33,693,585 9,391,870
============== ============== ============== ==============
Basic earnings per share $0.13 $0.12 $0.25 $0.20
============== ============== ============== ==============
</TABLE>
<PAGE>
CNL HOSPITALITY PROPERTIES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Quarters and Six Months Ended June 30, 2000 and 1999
11. Earnings Per Share - Continued:
<TABLE>
<CAPTION> Quarter Ended June Six Months Ended June 30,
2000 1999 2000 1999
<S><C> ------------- ------------- ------------- -------------
Diluted Earnings Per Share:
Net earnings $4,642,940 $1,462,249 $8,588,024 $1,892,529
Additional income attributable to investment
investment in unconsolidated subsidiary
assuming all Class A Preferred Shares
were converted 835,331 -- 1,692,802 --
------------- ------------ ------------- -------------
Adjusted net earnings assuming dilution $5,478,271 $1,462,249 $10,280,826 $1,892,529
============== ============== ============== ==============
Weighted average number of shares
outstanding 36,163,184 12,330,853 33,693,585 9,391,870
Assumed conversion of Class A Preferred
Stock 7,362,682 -- 7,281,774 --
------------- ------------- ------------- -------------
Adjusted weighted average number of
shares outstanding 43,525,866 12,330,853 40,975,359 9,391,870
============== ============== ============== ==============
Diluted earnings per share $0.13 $0.12 $0.25 $0.20
============== ============== ============== ==============
</TABLE>
12. Commitments and Contingencies:
The Company has commitments to acquire 15 hotel Properties for an anticipated
aggregate purchase price of approximately $255 million. In connection with these
commitments, the Company has deposits of approximately $7.4 million held in
escrow.
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 June 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 June 30, 2000 no such
amounts were payable under this agreement
<PAGE>
CNL HOSPITALITY PROPERTIES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Quarters and Six Months Ended June 30, 2000 and 1999
12. Commitments and Contingencies - Continued:
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 July 1, 2000 through August 7, 2000, the Company received
subscription proceeds for an additional 2,128,424 shares ($21,284,244) of common
stock.
On July 1, 2000 and August 1, 2000, the Company declared distributions totaling
$2,404,414 and $2,513,813, respectively or $0.0625 per share of common stock,
payable in September 2000, to stockholders of record on July 1 and August 1,
2000, respectively.
On July 28, 2000, the Company acquired two Properties located in Gaithersburg,
Maryland and Merrifield, Virginia for approximately $34.0 million. The Company
has entered into long-term, triple-net leases, as landlord, in connection with
each of the Properties. These Properties are being operated by the tenant, a
subsidiary of Marriott International, Inc., as a Courtyard by Marriott and a
SpringHill Suites by Marriott.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following information contains forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Act of 1934. These statements generally are characterized by the use
of terms such as "believe," "expect" and "may." Although the Company believes
that the expectations reflected in such forward-looking statements are based
upon reasonable assumptions, the Company's actual results could differ
materially from those set forth in the forward-looking statements. Certain
factors that might cause such a difference include the following: changes in
general economic conditions, changes in local and national real estate
conditions, availability of capital from borrowings under the Company's line of
credit and security agreement, continued availability of proceeds from the
Company's equity offerings, the ability of the Company to obtain permanent
financing on satisfactory terms, the ability of the Company to identify suitable
investments, the ability of the Company to locate suitable tenants for its
properties and borrowers for its mortgage loans and secured equipment leases,
and the ability of such tenants and borrowers to make payments under their
respective leases, mortgage loans or secured equipment leases. Given these
uncertainties, readers are cautioned not to place undue reliance on such
statements. The Company undertakes no obligation to update these forward-looking
statements to reflect any future events or circumstances.
Introduction
The Company
CNL Hospitality Properties, Inc. was organized in Maryland on June 12,1996.
CNL Hospitality GP Corp. and CNL Hospitality LP Corp. are wholly owned
subsidiaries of CNL Hospitality Properties, Inc., organized in Delaware in June
1998. CNL Hospitality Partners, LP is a Delaware limited partnership formed in
June 1998. CNL Hospitality GP Corp. and CNL Hospitality LP Corp. are the general
and limited partner, respectively, of CNL Hospitality Partners, LP. The term
"Company" includes, unless the context otherwise requires, CNL Hospitality
Properties, Inc., CNL Hospitality Partners, LP, CNL Hospitality GP Corp., CNL
Hospitality LP Corp, and CNL Philadelphia Annex, LLC (formerly known as
Courtyard Annex, L.L.C.) (the "LLC"). The Company was formed to acquire
properties ("Properties") located across the United States to be leased on a
long-term, "triple-net" basis and the hotels are all operated as national
hotel chains.
The Company may also provide mortgage financing ("Mortgage Loans") and
furniture, fixture and equipment financing ("Secured Equipment Leases") to
operators of hotel chains. Secured Equipment Leases will be funded from the
proceeds of financing to be obtained by the Company. The aggregate outstanding
principal amount of Secured Equipment Leases will not exceed 10% of gross
proceeds from the Company's offerings of shares of common stock.
Liquidity and Capital Resources
Common Stock Offerings
The Company was formed in June 1996, at which time it received initial
capital contributions of $200,000 for 20,000 shares of common stock from CNL
Hospitality Corp. On July 9, 1997, the Company commenced an offering to the
public of up to 16,500,000 shares of common stock ($165,000,000) (the "Initial
Offering") pursuant to a registration statement on Form S-11 under the
Securities Act of 1933, as amended. Of the 16,500,000 shares of common stock
offered, 1,500,000 ($15,000,000) were available only to stockholders who elected
to participate in the Company's reinvestment plan. Upon completion of the
Initial Offering on June 17, 1999, the Company had received aggregate
subscription proceeds of $150,072,637 (15,007,264 shares), including $72,637
(7,264 shares) through the Company's reinvestment plan. Following the completion
of its Initial Offering, the Company commenced a second offering of up to
27,500,000 shares of common stock ($275,000,000) (the "1999 Offering"). As of
June 30, 2000, the Company had received subscription proceeds of $235,211,997
(23,521,199 shares) from its 1999 Offering and sale of warrants, including
96,514 shares ($965,145) issued pursuant to the reinvestment plan. The price per
share and the other terms of the 1999 Offering, including the percentage of
gross proceeds payable (i) to the managing dealer for selling commissions and
expenses in connection with the offering and (ii) to the CNL Hospitality Corp.
(the "Advisor") for acquisition fees, are substantially the same as those for
the Initial Offering.
<PAGE>
As of June 30, 2000, net proceeds to the Company from its Initial
Offering and 1999 Offering of Shares and capital contributions from the Advisor,
after deduction of selling commissions, marketing support and due diligence
expense reimbursement fees and organizational and offering expenses totaled
approximately $340,000,000. The Company has used net proceeds from the offerings
to invest, directly or indirectly, approximately $224,300,000 in 15 hotel
Properties, to pay $7,381,500 as deposits on six additional hotel Properties, to
redeem 75,761 Shares of common stock for $696,997 and to pay approximately
$20,900,000 in acquisition fees and expenses, leaving approximately $87,000,000
available for investment in Properties and Mortgage Loans.
On October 26, 1999, the Company filed a registration statement on Form
S-11 with the Securities and Exchange Commission in connection with the proposed
sale by the Company of up to an additional 45,000,000 shares of common stock
($450,000,000) in an offering expected to commence immediately following the
completion of the 1999 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 the other terms of the
2000 Offering, including the percentage of gross proceeds payable (i) to the
managing dealer for selling commissions and expenses in connection with the
offering and (ii) to the Advisor for acquisition fees, are substantially the
same as those for the Initial Offering and 1999 Offering.
During the period July 1, 2000 through August 7, 2000, the Company received
additional net offering proceeds of approximately $21,000,000 and had
approximately $90,000,000 available for investment in Properties and Mortgage
Loans. The Company expects to use the uninvested net proceeds, plus any
additional net proceeds from the sale of shares from the 1999 Offering and 2000
Offering to purchase additional Properties and, to a lesser extent, invest in
Mortgage Loans. In addition, the Company intends to borrow money to acquire
additional Properties, to invest in Mortgage Loans and Secured Equipment Leases,
and to pay certain related fees. The Company intends to encumber assets in
connection with such borrowings. The Company currently has a $30,000,000 line of
credit available, as described below. Borrowings on the line of credit may be
repaid with offering proceeds, 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 quarter
and six months ended June 30, 2000, 48,271 and 62,876 shares, respectively, were
redeemed at $9.20 per share ($440,093 and $578,455, respectively) and retired
from shares outstanding of common stock.
Indebtedness
The Company has a line of credit and security agreement in the amount
of $30,000,000 which expires on July 30, 2003. Advances under the line of credit
will bear interest at either (i) a rate per annum equal to 318 basis points
above the London Interbank Offered Rate (LIBOR) or (ii) a rate per annum equal
to 30 basis points above the bank's base rate, whichever the Company selects at
the time advances are made. In addition, a fee of 0.5% per advance will be due
and payable to the bank on funds as advanced. Each advance made under the line
of credit will be collateralized by an assignment of rents and leases. In
connection with the line of credit, the Company incurred a commitment fee, legal
fees and closing costs of approximately $138,000. As of June 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
twenty 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.
<PAGE>
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 June 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 being operated by Crestline Capital Corp. as
Residence Inn(R) by Marriott(R). During 1999, the Company, with Five Arrows
Realty Securities II L.L.C., formed a jointly owned real estate investment
trust, CNL Hotel Investors, Inc. ("Hotel Investors"), which acquired seven hotel
Properties. In order to fund the acquisition of the Properties, Five Arrows
invested approximately $48 million and the Company invested approximately $38
million in Hotel Investors. Hotel Investors funded the remaining amount of
approximately $88 million with permanent financing, collateralized by Hotel
Investors' interests in the Properties. In return for their respective
investments, Five Arrows received a 51% common stock interest and the Company
received a 49% common stock interest in Hotel Investors. Five Arrows received
48,337 shares of Hotel Investors' 8% Class A cumulative, preferred stock and the
Company received 37,979 shares of Hotel Investors' 9.76% Class B cumulative,
preferred stock. The Class A Preferred Stock is exchangeable upon demand into
common stock of the Company, as determined pursuant to a formula that is
intended to make the conversion not dilutive to funds from operations (based on
the revised definition adopted by the Board of Governors of the National
Association of Real Estate Investment Trusts which means net earnings determined
in accordance with generally accepted accounting principles, excluding gains or
losses from debt restructuring and sales of property, plus depreciation and
amortization of real estate assets and after adjustments for unconsolidated
partnerships and joint ventures) per share of the Company's common stock.
Five Arrows also invested approximately $14 million in the Company
through the purchase of common stock pursuant to the Company's Initial Offering
and the 1999 Offering, the proceeds of which were used by the Company to fund
approximately 38% of its funding commitment to Hotel Investors.
In November 1999, the Company acquired an 89% interest in CNL
Philadelphia Annex, LLC (formerly known as Courtyard Annex, L.L.C.) for
approximately $58 million. The sole purpose of the LLC is to own and lease the
Courtyard by Marriott hotel Property located in Philadelphia, Pennsylvania. This
historic Property was recently renovated and converted into a hotel which
commenced operations in late November 1999. The LLC is included with the
accounts of the Company except for the 11% interest which is reflected as
minority interest in the accompanying consolidated financial statements.
Additionally, in late 1999, the Company acquired a newly constructed
Property located in Mira Mesa, California for approximately $15.5 million. The
Property is being operated b 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, MA, and Denver, Colorado for approximately $43.5 million.
These Properties are being operated by Wyndham International, Inc. as Wyndham
Hotels.
Additionally, 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 $34.0 million.
The Company has entered into long-term, triple-net leases, as landlord, in
connection with each of the Properties. These Properties are being operated by a
subsidiary of Marriott International Inc. as a Courtyard by Marriott and a
SpringHill Suites 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."
<PAGE>
Commitments
As of August 7, 2000, the Company had initial commitments to acquire
directly 13 hotel Properties for an anticipated aggregate purchase price of
approximately $221 million. The acquisition of each of these Properties is
subject to the fulfillment of certain conditions. In order to acquire these
Properties, the Company must obtain additional funds through the receipt of
additional offering proceeds and/or advances on the line of credit. In
connection with three of these agreements, the Company has a deposit, in the
form of a letter of credit, collateralized by a certificate of deposit,
amounting to $5 million. In connection with one of the remaining agreements, the
Company has a deposit of approximately $680,000 held in escrow. There
can be no assurance that any or all of the conditions will be satisfied or, if
satisfied, that one or more of these Properties will be acquired by the Company.
The Company is presently negotiating to acquire additional Properties, but as of
August 7, 2000, the Company had not acquired any such Properties or entered into
any Mortgage Loans. In addition, as of August 7, 2000, the Company had not
entered into any other arrangements creating a reasonable probability a
Property, Mortgage Loan or Secured Equipment Lease would be funded.
Cash and Cash Equivalents
Until Properties are acquired, or Mortgage Loans are entered into, net
offering proceeds are held in short-term (defined as investments with a maturity
of three months or less), highly liquid investments, such as demand deposit
accounts at commercial banks, certificates of deposit and money market accounts.
This investment strategy provides high liquidity in order to facilitate the
Company's use of these funds to acquire Properties at such time as Properties
suitable for acquisition are located or to fund Mortgage Loans. At June 30,
2000, the Company had $105,926,387 invested in such short-term investments as
compared to $101,972,441 at December 31, 1999. The increase in the amount
invested in short-term investments was primarily attributable to proceeds
received from the sale of common stock in the Initial Offering and the 1999
Offering. These funds will be used to purchase additional Properties, to make
Mortgage Loans, to pay offering and acquisition expenses, to pay distributions
to stockholders and other Company expenses and, in management's discretion, to
create cash reserves.
Liquidity Requirements
The Company expects to meet its short-term liquidity requirements,
other than for offering expenses and the acquisition and development of
Properties and investment in Mortgage Loans and Secured Equipment Leases,
through cash flow provided by operating activities. The Company believes that
cash flow provided by operating activities will be sufficient to fund normal
recurring operating expenses, regular debt service requirements and
distributions to stockholders. To the extent that the Company's cash flow
provided by operating activities is not sufficient to meet such short-term
liquidity requirements as a result, for example, of unforeseen expenses due to
tenants defaulting under the terms of their lease agreements, the Company will
use borrowings under its line of credit.
Due to the fact that the Company leases its Properties on a triple-net
basis, meaning that tenants are generally required to pay all repairs and
maintenance, property taxes, insurance and utilities, management does not
believe that working capital reserves are necessary at this time. Management
believes that the Properties are adequately covered by insurance. In addition,
the Advisor has obtained contingent liability and property coverage for the
Company. This insurance policy is intended to reduce the Company's exposure in
the unlikely event a tenant's insurance policy lapses or is insufficient to
cover a claim relating to a Property. The Company expects to meet its other
short-term liquidity requirements, including payment of offering expenses,
Property acquisitions and development and investment in Mortgage Loans and
Secured Equipment Leases, with additional advances under its line of credit and
proceeds from its equity offerings. The Company expects to meet its long-term
liquidity requirements through short- or long-term, unsecured or secured debt
financing or equity financing.
<PAGE>
Distributions
During the six months ended June 30, 2000 and 1999, the Company
generated cash from operations of $14,746,948 and $2,033,757, respectively.
Based on cash from operations and dividends due to the Company from Hotel
Investors at June 30, 2000 (and received in July 2000), the Company declared and
paid distributions to its stockholders of $11,936,334 and $3,052,616 during the
six months ended June 30, 2000 and 1999, respectively. In addition, on July 1
and August 1, 2000, the Company declared distributions to stockholders of record
on July 1 and August 1, 2000 totaling $2,404,414 and $2,513,813 ($0.0625 per
share), respectively, payable in September 2000.
During the six months ended June 30, 2000 and 1999, approximately 51
percent and 64 percent, respectively, of the distributions received by
stockholders were considered to be ordinary income and approximately 49 percent
and 36 percent, respectively, were considered a return of capital for federal
income tax purposes. No amounts distributed to the stockholders for the six
months ended June 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.
Related Party Transactions
During the quarters and six months ended June 30, 2000 and 1999,
affiliates of the Company incurred on behalf of the Company $2,841,899 and
$1,539,215, respectively ($1,908,121 and $951,717 of which was incurred during
the quarters ended June 30, 2000 and 1999, respectively) for certain
organizational and offering expenses, $368,037 and $418,353, respectively
($286,082 and $56,505 of which was incurred during the quarters ended June 30,
2000 and 1999, respectively) for certain acquisition expenses, and $438,451 and
$169,220, respectively ($306,778 and $107,075 of which was incurred during the
quarters ended June 30, 2000 and 1999, respectively) for certain operating
expenses. As of June 30, 2000 and 1999, the Company owed the Advisor and other
related parties $948,585 and $443,914, 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 from the Company's equity offerings.
During 1999, the Company opened three bank accounts in a bank in which
certain officers and directors of the Company serve as directors, and in which
an affiliate of the Advisor is a stockholder. The amount deposited with this
affiliate was $15,947,271 and $15,275,629 at June 30, 2000 and December 31,
1999, respectively.
Other
As of June 30, 2000 and 1999, the tenants of the Properties have
established reserve funds which will be used for the replacement and renewal of
furniture, fixtures and equipment relating to the hotel Properties (the "FF&E
Reserve"). Funds in the FF&E Reserve have been paid, granted and assigned to the
Company. For the six months ended June 30, 2000 and 1999, revenues relating to
the FF&E Reserve of the Properties directly owned by the Company totaled
$480,113 and $126,033, respectively ($320,876 and $65,006 of which was earned
during the quarters ended June 30, 2000 and 1999, respectively), of which
$100,777 was classified as a receivable at June 30, 2000. For the six months
ended June 30, 2000, revenues relating to the FF&E Reserve of the Properties
indirectly owned through Hotel Investors totaled $428,309 ($252,088 of which was
earned during the quarter ended June 30, 2000), of which $80,107 was classified
as a receivable as of June 30, 2000. Due to the fact that the Properties are
leased on a long-term, triple-net basis, management does not believe that other
working capital reserves are necessary at this time. Management has the right to
cause the Company to maintain additional reserves if, in their discretion, they
determine such reserves are required to meet the Company's working capital
needs.
<PAGE>
Results of Operations
Comparison of quarter and six months ended June 30, 2000 to quarter
and six months ended June 30, 1999
As of June 30, 2000, the Company owned 15 Properties, either directly
or indirectly, consisting of land, buildings and equipment and had entered into
long-term, triple-net lease agreements relating to these Properties. The
Property leases provide for minimum base annual rental payments ranging from
approximately $1,204,000 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 six months
ended June 30, 2000 and 1999.
During the six months ended June 30, 2000 and 1999, the Company earned
rental income from operating leases and FF&E Reserve revenue of $6,456,916 and
$1,612,559, respectively ($3,571,785 and $813,914 of which was earned during the
quarters ended June 30, 2000 and 1999, respectively). No contingent rental
income was earned for the quarters and six months ended June 30, 2000 and 1999.
The increase in rental income and FF&E Reserve income was due to the fact that
the Company owned eight Properties during the quarter and six months ended June
30, 2000, as compared to two Properties during the quarter and six months ended
June 30, 1999. Because the Company has not yet acquired all of its Properties,
revenues for the six months ended June 30, 2000, represent only a portion of
revenues which the Company is expected to earn in future periods.
During 1999, the Company acquired and leased seven Properties
indirectly through its investment in Hotel Investors, as described above in
"Liquidity Capital Resources - Property Acquisitions and Investments." In
connection with its investment during the six months ended June 30, 2000 and
1999, the Company recorded $1,853,735 and $900,131, respectively, in dividend
income and $260,437 and $390,450, respectively, in equity in loss after
deduction of preferred stock dividends, resulting in net earnings of $1,593,298
and $509,681, respectively ($786,284 and $452,377 represented net earnings from
this investment for the quarters ended June 30, 2000 and 1999, respectively).
During the six months ended June 30, 2000 and 1999, the Company also
earned $3,961,188 and $907,739, respectively, in interest income from
investments in money market accounts and other short-term, highly liquid
investments and other income ($2,191,979 and $614,875 of which was earned during
the quarters ended June 30, 2000 and 1999, respectively). The increase in
interest income was primarily attributable to increased offering proceeds in the
current year being temporarily invested in money market accounts or other
short-term, highly liquid investments pending investment in Properties or
Mortgage Loans. As net offering proceeds from the Company's offerings are
invested in Properties and used to make Mortgage Loans, the percentage of the
Company's total revenues from interest income from investments in money market
accounts or other short-term, highly liquid investments is expected to decrease.
Crestline Capital Corp., which operates and leases two Properties, and City
Center Annex Tenant Corporation each contributed more than ten percent of the
Company's total rental income. In addition, all of the Company's rental income
was earned from Properties operating as Marriott(R) brand chains. Although the
Company intends to acquire additional Properties located in various states and
regions and to carefully screen its tenants in order to reduce risks of default,
failure of these lessees or the Marriott chains could significantly impact the
results of operations of the Company. However, management believes that the risk
of such a default is reduced due to the essential or important nature of these
Properties for the ongoing operations of the lessees. It is expected that the
percentage of total rental income contributed by these lessees will decrease as
additional Properties are acquired and leased during 2000 and subsequent years.
Operating expenses, including interest expense and depreciation and
amortization expense, were $3,157,168 and $1,137,450 for the six months ended
June 30, 2000 and 1999, respectively ($1,765,588 and $418,917 of which was
incurred during the quarters ended June 30, 2000 and 1999, respectively). The
increase in the dollar amount of operating expenses during the quarter and six
months ended June 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 six months ended June 30, 1999 compared to eight
properties during the quarter and six months ended June 30, 2000. This resulted
in an increase in asset management fees of $217,987 and $294,844, respectively,
and an increase in depreciation and amortization expense of $843,846 and
$1,506,729, respectively, for the quarter and six months ended June 30, 2000, as
compared to the same periods for 1999. Additionally, general operating and
administrative expenses increased as a result of Company growth, while interest
expense, including loan cost amortization, decreased from $233,330 for the six
months ended June 30, 1999 to $16,222 for the six months ended June 30, 2000
($8,112 and $32,757 of which was incurred during the quarters ended June 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
six months ended June 30, 2000.
Pursuant to the advisory agreement, 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 Year ended June 30,
2000 and 1999, the Company's operating expenses did not exceed the Expense Cap.
The dollar amount of operating expenses is expected to increase as the
Company acquires additional Properties and invests in Mortgage Loans. However,
general operating and administrative expenses as a percentage of total revenues
is expected to decrease as the Company acquires additional Properties and
invests in Mortgage Loans.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
See Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations - Market Risk for information related to quantitative
and qualitative disclosure about market risk.
<PAGE>
PART II
Item 1. Legal Proceedings. Inapplicable.
Item 2. Changes in Securities and Use of Proceeds. Inapplicable.
Item 3. Defaults upon Senior Securities. Inapplicable.
Item 4. Submission of Matters to a Vote of Security Holders.
(a) The regular annual meeting of stockholders of the Company
was held in Orlando, Florida on May 23, 2000 for the
purposes of electing the board of directors and voting on
the proposals described below.
(b) Proxies for the meeting were solicited and there was no
solicitation in opposition to management's solicitations.
All of management's nominees for director were elected.
(c) Three proposals were submitted to a vote of stockholders as follows:
(1) The stockholders approved the election of the
following persons as directors of the Company:
------------------------ --------------------------
Name For Withheld
------------------------ --------------------------
------------------------ --------------------------
James M. Seneff, Jr. 18,133,495 225,706
------------------------ --------------------------
------------------------ --------------------------
Robert A. Bourne 18,125,344 233,857
------------------------ --------------------------
------------------------ --------------------------
Charles E. Adams 18,118,671 240,530
------------------------ --------------------------
------------------------ --------------------------
Mathew W. Kaplan 18,130,608 228,593
------------------------ --------------------------
------------------------ --------------------------
Craig M. McAllaster 18,128,470 230,731
------------------------ --------------------------
------------------------ --------------------------
Lawrence A. Dustin 18,130,411 228,790
------------------------ --------------------------
------------------------ --------------------------
John A. Griswold 18,121,411 237,790
------------------------ --------------------------
(2) The stockholders approved the proposal to approve
amendments to the Company's Amended and Restated
Articles of Incorporation to increase the number of
authorized shares with 16,920,872 affirmative
votes, 496,270 negative votes and 942,059
abstentions.
(3) The stockholders approved the proposal to approve
amendments to the Company's Amended And Restated
Articles of Incorporation to expand the class of
borrowers to which the Company may make loans with
15,933,913 affirmative votes, 1,092,501 negative
votes and 1,312,787 abstentions.
Item 5. Other Information. Inapplicable.
Item 6. Exhibits and Reports on Form 8-K.
(a) The following documents are filed as part of this report.
1. Exhibits
3.1 CNL American Realty Fund, Inc. Amended and Restated Articles of
Incorporation (Included as Exhibit 3.2 to the Registration
Statement on Form S-11 (Registration No. 333-9943)
(the "1996 Form S-11") and incorporated herein by reference).
3.2 CNL American Realty Fund, Inc. Bylaws (Included as Exhibit 3.3 to the
1996 Form S-11 and incorporated herein by reference).
3.3 CNL American Realty Fund, Inc. Articles of Amendment to the Amended and
Restated Articles of Incorporation dated June 3, 1998 (Included
as Exhibit 3.4 to the 1996 Form S-1 and incorporated herein by
reference).
3.4 Articles of Amendment to the Amended and Restated Articles of
Incorporation of CNL Hospitality Properties, Inc. dated May 26,
1999 (Included as Exhibit 3.5 to the Registration Statement on
Form S-11 (Registration No. 333-67787) (the "1998 Form S-11")
and incorporated herein by reference).
3.5 Articles of Amendment to the Amended and Restated Articles of
Incorporation of CNL Hospitality Properties, Inc. dated June 27,
2000 (Included as Exhibit 3.6 to the Registration Statement
on Form S-11 (Registration No. 333-89691) and incorporated
herein by reference).
4.1 Reinvestment Plan (Included as Exhibit 4.4 to the 1996 Form S-11 and
incorporated herein by reference).
4.2 CNL American Realty Fund, Inc. Amended and Restated Articles of
Incorporation (Included as Exhibit 3.2 t the 1996 Form S-11
and incorporated herein by reference).
4.3 CNL American Realty Fund, Inc. Bylaws (Included as Exhibit 3.3 to the
1996 Form S-11 and incorporated herein by reference).
4.4 Articles of Amendment to the Amended and Restated Articles of Incorp-
oration of CNL American Realty Fund, Inc. dated June 3, 1998
(Included as Exhibit 3.4 to the 1996 Form S-11 and incorpo-
rated herein by reference).
4.5 Articles of Amendment to the Amended and Restated Articles of Incorp-
oration of CNL Hospitality Properties, Inc.(Included as
Exhibit 3.5 to the 1998 Form S-11 and incorporated herein by
reference).
4.6 Articles of Amendment to the Amended and Restated Articles of Incorp-
oration of CNL Hospitality Properties, Inc.(Included as
Exhibit 3.6 to the 1999 Form S-11 and incorporated herein by
reference).
10.1 Advisory Agreement dated as of June 17, 2000 between CNL Hospitality
Properties, Inc. and CNL Hospitality Corp. (Included as Exhibit
10.1 to the 1999 Form S-11 and incorporated herein by reference).
10.2 Indemnification Agreement between CNL Hospitality Properties, Inc.
and Lawrence A. Dustin dated February 24, 1999. Each of the
following directors and/or officers has signed a substantially
similar agreement as follows: James M. Seneff, Jr., Robert A.
Bourne, G. Richard Hostetter, J. Joseph Kruse, Richard C.
Huseman, Charles A. Muller, Jeanne A. Wall and Lynn E. Rose,
dated July 9, 1997, C.Brian Strickland, John A. Griswold dated
January 7, 1999, Charles E.Adams and Craig M. McAllaster, dated
February 10, 1999, Matthew W. Kaplan dated February 24,1999 and
Thomas J. Hutchison III dated May 16, 2000
(Included as Exhibit 10.2 to the March 31, 1999 Form 10-Q and
incorporated herein by reference).
10.3 Agreement of Limited Partnership of CNL Hospitality Partners, LP
(Included as Exhibit 10.10 to the 1996 Form S-11 and incorporated
herein by reference).
10.4 Hotel Purchase and Sale Contract between CNL Real Estate Advisors, Inc.
and Gwinnett Residence Associates, LLC, relating to the Residence
Inn(R) - Gwinnett Place (Included as Exhibit 10.11 to the 1996
Form S-11 and incorporated herein by reference).
10.5 Assignment and Assumption Agreement between CNL Real Estate Advisors,
Inc. and CNL Hospitality Partners, LP, relating to the
Residence Inn(R) - Gwinnett Place (Included as Exhibit
10.12 to the 1996 Form S-11 and incorporated herein by
reference).
10.6 Hotel Purchase and Sale Contract between CNL Real Estate Advisors, Inc.
and Buckhead Residence Associates, LLC, relating to the
Residence Inn(R) - Buckhead (Lenox Park) (Included as
Exhibit 10.13 to the 1996 Form S-11 and incorporated herein by
reference).
10.7 Assignment and Assumption Agreement between CNL Real Estate Advisors,
Inc. and CNL Hospitality Partners, LP, relating to the
Residence Inn(R) - Buckhead (Lenox Park) (Included as
Exhibit 10.14 to the 1996 Form S-11 and incorporated herein by
reference).
10.8 Lease Agreement between CNL Hospitality Partners, LP and STC Leasing
Associates, LLC, dated August 1, 1998, relating to the
Residence Inn(R) - Gwinnett Place (Included as Exhibit 10.15
to the 1996 Form S-11 and incorporated herein by reference).
10.9 Lease Agreement between CNL Hospitality Partners, LP and STC Leasing
Associates, LLC, dated August 1, 1998, relating to the Residence
Inn(R) - Buckhead (Lenox Park) (Included as Exhibit 10.16 to the
1996 Form S-11 and incorporated herein by reference).
10.10 Master Revolving Line of Credit Loan Agreement with CNL
Hospitality Properties, Inc., CNL Hospitality Partners,
LP and Colonial Bank, dated July 31, 1998 (Included as Exhibit
10.17 to the 1996 Form S-11 and incorporated herein by
reference).
10.11 Master Loan Agreement by and between CNL Hotel Investors, Inc.
and Jefferson-Pilot Life Insurance Company, dated February 24,
1999 (Included as Exhibit 10.18 to the 1996 Form S-11 and
incorporated herein by reference).
10.12 Securities Purchase Agreement between CNL Hospitality
Properties, Inc. and Five Arrows Realty Securities II L.L.C.,
dated February 24, 1999 (Included as Exhibit 10.19 to the
1996 Form S-11 and incorporated herein by reference).
10.13 Subscription and Stockholders' Agreement among CNL Hotel Investors,
Inc., Five Arrows Realty Securities II L.L.C., CNL Hospitality
Partners, LP and CNL Hospitality Properties, Inc., dated
February 24, 1999 (Included as Exhibit 10.20 to the 1996
Form S-11 and incorporated herein by reference).
10.14 Registration Rights Agreement by and between CNL Hospitality
Properties, Inc. and Five Arrows Realty Securities II L.L.C.,
dated February 24, 1999 (Included as Exhibit 10.21 to the
1996 Form S-11 and incorporated herein by reference).
10.15 First Amendment to Lease Agreement between CNL Hospitality
Partners, LP and STC Leasing Associates, LLC, dated August
1, 1998, related to the Residence Inn - Gwinnett Place, (amends
Exhibit 10.8 above) and the First Amendment to Agreement of
Guaranty, dated August 1, 1998 (amends Agreement of
Guaranty attached as Exhibit I to 10.8 above) (Included as
Exhibit 10.15 to the September 30, 1999 Form 10-Q and
incorporated herein by reference).
10.16 First Amendment to Lease Agreement between CNL Hospitality
Partners, LP and STC Leasing Associates, LLC, dated
August 1, 1998, related to the Residence Inn - Buckhead (Lenox
Park) (amends Exhibit 10.9 above) and the First Amendment
to Agreement of Guaranty, dated August 1, 1998 (amends
Agreement of Guaranty attached as Exhibit I to 10.9 above)
(Included as Exhibit 10.16 to the September 30, 1999 Form 10-Q
and incorporated herein by reference).
10.17 Lease Agreement between Courtyard Annex, L.L.C. and City Center
Annex Tenant Corporation, dated November 15, 1999,
relating to the Courtyard - Philadelphia (Included as Exhibit
10.22 to the 1998 Form S-11 and incorporated herein by
reference).
10.18 First Amended and Restated Limited Liability Company
Agreement of Courtyard Annex, L.L.C., relating to the Courtyard
-Philadelphia (Included as Exhibit 10.23 to the 1998 Form S-11
and incorporated herein by reference).
10.19 Purchase and Sale Agreement between
Marriott International, Inc., CBM Annex,
Inc., Courtyard Annex, Inc., as Sellers,
and CNL Hospitality Partners, LP, as
Purchaser, dated November 15, 1999,
relating to the Courtyard - Philadelphia
(Included as Exhibit 10.24 to the 1998
Form S-11 and incorporated herein by
reference).
10.20 Lease Agreement between CNL Hospitality
Partners, LP, and RST4 Tenant LLC, dated
December 10, 1999, relating to the
Residence Inn - Mira Mesa (Included as
Exhibit 10.25 to the 1998 Form S-11 and
incorporated herein by reference).
10.21 Purchase and Sale Agreement between
Marriott International, Inc., Towneplace
Management Corporation, and Residence
Inn by Marriott, Inc., as Sellers, and
CNL Hospitality Partners, L.P., as
Purchaser, dated November 24, 1999,
relating to the Residence Inn - Mira
Mesa (Included as Exhibit 10.26 to the
1998 Form S-11 and incorporated herein
by reference).
10.22 Lease Agreement between CNL Hospitality
Partners, LP and WYN Orlando Lessee,
LLC, dated May 31, 2000, relating to the
Wyndham Denver Tech Center (Included as
Exhibit 10.29 to the 1999 Form S-11 and
incorporated herein by reference).
10.23 Lease Agreement between CNL Hospitality
Partners, LP and WYN Orlando Lessee,
LLC, dated May 31, 2000, relating to the
Wyndham Billerica (Included as Exhibit
10.30 to the 1999 Form S-11 and
incorporated herein by reference).
10.24 Purchase and Sale Agreement between CNL
Hospitality Corp., as Buyer, and WII
Denver Tech, LLC and PAH Billerica
Realty Company, LLC, as Sellers, and
Wyndham International, Inc., relating to
the Wyndham Denver Tech Center and the
Wyndham Billerica (Included as Exhibit
10.31 to the 1999 Form S-11 and
incorporated herein by reference).
10.25 Lease Agreement between CNL Hospitality
Partners, LP and RST4 Tenant LLC, dated
June 17, 2000, relating to the Courtyard
Palm Desert and the Residence Inn - Palm
Desert (Included as Exhibit 10.32 to the
1999 Form S-11 and incorporated by
reference).
10.26 Purchase and Sale Agreement between PDH
Associates LLC, as Seller, and CNL
Hospitality Corp., as Buyer, dated
January 19, 2000, relating to the
Courtyard - Palm Desert and the
Residence Inn - Palm Desert (Included as
Exhibit 10.33 to the 1999 Form S-11 and
incorporated by reference).
10.27 Amendment to Purchase and Sale Agreement
between PDH Associates LLC and CNL
Hospitality Corp., dated January 19,
2000, relating to Courtyard - Palm
Desert and the Residence Inn - Palm
Desert (amends Exhibit 10.23 above)
(Included as Exhibit 10.34 to the 1999
Form S-11 and incorporated by
reference).
10.28 Assignment Agreement between CNL
Hospitality Corp. and CNL Hospitality
Partners, LP, relating to the Courtyard
- Palm Desert and the Residence Inn -
Palm Desert (Included as Exhibit 10.35
to the 1999 Form S-11 and incorporated
by reference).
10.29 Lease Agreement between CNL Hospitality
Partners, LP and RST4 Tenant LLC, dated
July 28, 2000, relating to the
SpringHill Suites - Gaithersburg
(Included as Exhibit 10.36 to the 1999
Form S-11 and incorporated by
reference).
10.30 Purchase and Sale Agreement between
SpringHill SMC Corporation, as Seller,
and CNL Hospitality Partners, LP, as
Purchaser, and joined in by Marriott
International, Inc., dated June 30,
2000, relating to the SpringHill Suites
- Gaithersburg (Included as Exhibit
10.37 to the 1999 Form S-11 and
incorporated by reference).
10.31 Lease Agreement between CNL Hospitality
Partners, LP and RST4 Tenant LLC, dated
July 28, 2000, relating to the Residence
Inn - Merrifield (Included as Exhibit
10.38 to the 1999 Form S-11 and
incorporated by reference).
10.32 Purchase and Sale Agreement between
TownePlace Management Corporation and
Residence Inn by Marriott, Inc., as
Sellers, and CNL Hospitality Partners,
LP, as Purchaser, and joined in by
Marriott International, Inc., dated
November 24, 1999, relating to the
Residence Inn - Merrifield (Included as
Exhibit 10.39 to the 1999 Form S-11 and
incorporated by reference).
10.33 First Amendment to Purchase and Sale
Agreement between TownePlace Management
Corporation and Residence Inn by
Marriott, as Sellers, and CNL
Hospitality Partners, LP, as Purchaser,
and joined in by Marriott International,
Inc., dated November 24, 1999, relating
to the Residence Inn -Mira Mesa and the
Residence Inn - Merrifield (amends
Exhibits 10.21 and 10.29 above)
(Included as Exhibit 10.40 to the 1999
Form S-11 and incorporated by
reference).
27. Financial Data Schedule (Filed herewith).
(b) The Company filed two reports on Forms 8-K during the six months ended
June 30, 2000 in connection with the acquisition of Properties.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
DATED this 14th day of August, 2000.
CNL HOSPITALITY PROPERTIES, INC.
By: /s/ James M. Seneff, Jr.
JAMES M. SENEFF, JR.
Chairman of the Board and
Chief Executive Officer
(Principal Executive Officer)
By: /s/ C. Brian Strickland
C. BRIAN STRICKLAND
Vice President, Finance & Administration
(Principal Financial and Accounting Officer)
