Rule 424(b)(3)
No. 333-67787
CNL HOSPITALITY PROPERTIES, INC.
This Supplement is part of, and should be read in conjunction with, the
Prospectus dated March 30, 2000 and the Prospectus Supplement dated June 9,
2000. Capitalized terms used in this Supplement have the same meaning as in the
Prospectus unless otherwise stated herein.
Information as to proposed properties for which the Company has
received initial commitments and as to the number and types of Properties
acquired by the Company is presented as of July 11, 2000, and all references to
commitments or Property acquisitions should be read in that context. Proposed
properties for which the Company receives initial commitments, as well as
property acquisitions that occur after July 11, 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
The Company recently acquired a Courtyard(R) by Marriott(R) and a
Residence Inn(R) by Marriott(R) both located in Palm Desert, California. The
Courtyard Palm Desert Property, which opened in September 1999, has 151 guest
rooms. The Residence Inn Palm Desert Property, which opened in February 1999,
has 130 guest suites.
The Courtyard Palm Desert and the Residence Inn Palm Desert Properties
are located in the Coachella Valley, which according to Hospitality Real Estate
Counselors, Inc. (HREC) is one of the fastest growing areas in California. The
Coachella Valley is approximately 110 miles east of Los Angeles and is a tourist
destination noted for its warm climate, recreational activities and the San
Jacinto, Santa Rosa and Chocolate mountain ranges that border the area. Guests
of the hotels have convenient access to four golf courses, all within one mile
of the hotels. The Properties are accessible by Interstate 10, the major highway
in the area.
As of July 11, 2000, the Company owned interests in 15 Properties and
had commitments to acquire an additional 15 properties. The Company's interests
in the Properties are focused on real estate only, not hotel operations. All of
the Properties owned by the Company are leased on a long-term, triple-net basis
and the hotels are all operated as national hotel chains.
On July 1, 2000, the Board of Directors declared a distribution of
$0.0625 per Share to stockholders of record on July 1, 2000, representing an
annualized distribution rate of 7.50%.
THE OFFERINGS
Upon completion of its Initial Offering on June 17, 1999, the Company
had received aggregate subscriptions for 15,007,264 Shares totalling
$150,072,637 in Gross Proceeds, from 5,567 stockholders, including 7,264 Shares
($72,637) issued pursuant to the Reinvestment Plan. Following the completion of
the Initial Offering, the Company commenced this offering of up to 27,500,000
Shares. As of July 11, 2000, the Company had received aggregate subscriptions
for 38,948,332 Shares totalling $389,483,322 in Gross Proceeds, including
103,778 Shares ($1,037,782) issued pursuant to the Reinvestment Plan from its
Initial Offering and this offering. As of July 11, 2000, net proceeds to the
Company from its offerings of Shares and
July 13, 2000 Prospectus Dated March 30, 2000
<PAGE>
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 $347,100,000. The
Company has used Net Offering Proceeds from the offerings to invest, directly or
indirectly, approximately $210,200,000 in 15 hotel Properties, to pay $6,620,800
as deposits on five additional hotel Properties, to redeem 27,490 Shares of
Common Stock for $252,905 and to pay approximately $25,247,000 in Acquisition
Fees and certain Acquisition Expenses, leaving approximately $105,000,000
available to invest in Properties and Mortgage Loans.
CONFLICTS OF INTEREST
The following sentence replaces the first sentence in item 3 under the
heading " - Certain Conflict Resolution Procedures" on page 34 of the
Prospectus.
The Company will not make loans to Affiliates, except (A) to wholly
owned subsidiaries of the Company, or (B) Mortgage Loans to Joint Ventures (and
joint ventures of wholly owned subsidiaries of the Company) in which no
co-venturer is the Sponsor, the Advisor, the Directors or any Affiliate of those
persons or of the Company (other than a wholly owned subsidiary of the Company)
subject to the restrictions governing Mortgage Loans in the Articles of
Incorporation (including the requirement to obtain an appraisal from an
independent expert).
BUSINESS
PROPERTY ACQUISITIONS
Palm Desert Portfolio. On June 16, 2000, the Company acquired two hotel
Properties. The Properties are a Courtyard by Marriott and a Residence Inn by
Marriott, both located in Palm Desert, California (the "Courtyard Palm Desert
Property" and the "Residence Inn Palm Desert Property").
The Company acquired the Palm Desert Properties for an aggregate
purchase price of $30,250,000 from PDH Associates LLC. In connection with the
purchase of the two Properties, the Company, as lessor, entered into a long-term
lease agreement. Both hotels are managed by Marriott International, Inc. The
general terms of the lease agreement are described in the section of the
Prospectus entitled "Business -- Description of Property Leases." The principal
features of the lease are as follows:
o The initial term of the lease is approximately 15 years.
o At the end of the initial lease term, the tenant will have two
consecutive renewal options of ten years each.
o The lease requires minimum rent payments to the Company of $1,351,000
per year for the Courtyard Palm Desert Property and $1,674,000 per year
for the Residence Inn Palm Desert Property.
o In addition to minimum rent, for each lease year after the second lease
year, the lease will require percentage rent equal to seven percent of
room revenues, in excess of room revenues for the second lease year.
o A security deposit equal to approximately $419,000 for the Courtyard
Palm Desert Property and approximately $519,000 for the Residence Inn
Palm Desert Property has been retained by the Company as security for
the tenant's obligations under the leases.
o The tenant of the Courtyard Palm Desert and Residence Inn Palm Desert
Properties has established a reserve fund which will be used for the
replacement and renewal of furniture, fixtures and equipment relating
to the hotel Properties (the "FF&E Reserve"). Deposits to the FF&E
Reserve are made monthly as follows: 3% of gross receipts for the first
lease year; 4% of gross receipts for the second lease year; and 5% of
gross receipts every lease year thereafter. Funds in the FF&E Reserve
and all property purchased with funds from the FF&E Reserve shall be
paid, granted and assigned to the Company as additional rent.
o Marriott International, Inc. has guaranteed the tenant's obligation to
pay minimum rent under the lease. The guarantee terminates on the
earlier of the end of the third lease year or at such time as the net
operating income from the Property exceeds minimum rent due under the
lease by 25% for any trailing 12-month period. The maximum amount of
the guarantee is $3,025,000. Upon acquisition of the Gaithersburg
Property, the Merrifield Property and the Newark Property, as described
in the Prospectus under the heading "Business-- Pending Investments,"
the maximum amount of the guarantee will increase to $6,405,400 and the
guarantee will cover minimum rent payments for the pending investments
listed above and the Mira Mesa Property, in addition to the Palm Desert
Properties (collectively, the "Pooled Properties"). From this time, net
operating income from all of the Pooled Properties will be pooled in
determining whether the Pooled Properties' aggregate net operating
income exceeds the aggregate minimum rent due under the leases by 25%.
o In addition, upon the acquisition of the Little Lake Bryan Properties,
as described in the Prospectus under the heading "Business -- Pending
Investments," the leases for the Little Lake Bryan Properties will
contain cross-default terms with respect to the leases for the Pooled
Properties, meaning that if the tenant to any of the Little Lake Bryan
Properties or the Pooled Properties defaults on its obligations under
its lease, the Company will have the ability to pursue its remedies
under the leases with respect to all of the Little Lake Bryan
Properties and the Pooled Properties, regardless of whether the tenant
of any such Property is under default under its lease.
The federal income tax basis of the depreciable portion of the
Courtyard Palm Desert Property and the Residence Inn Palm Desert Property is
approximately $12,109,000 and $14,680,000, respectively.
The Courtyard Palm Desert Property, which opened in September 1999, has
151 guest rooms, three meeting rooms, a 60-seat dining room and lounge/bar area,
tennis courts, exercise room, pool and putting green. The Residence Inn Palm
Desert Property, which opened in February 1999, has seven two-story buildings
with 130 guest suites and a separate building with a lobby, hearth room, three
meeting rooms and a ballroom. Additional amenities include a swimming pool,
whirlpool, two tennis courts and a putting green. The hotel Properties are
located in the Coachella Valley, which according to Hospitality Real Estate
Counselors, Inc. (HREC) is one of the fastest growing areas in California. The
Residence Inn and Courtyard Properties are the first new hotels to be
constructed in Palm Desert in ten years. Approximately 110 miles east of Los
Angeles, the Coachella Valley is a tourist destination noted for its warm
climate, recreational activities and the San Jacinto, Santa Rosa and Chocolate
mountain ranges that border the area. Leisure and residential development define
the immediate surroundings of the two hotels. Both of the Properties are
adjacent to the Desert Willow Golf Resort and within close proximity to the
Desert Springs Marriott Resort and Spa. Guests of the hotels have convenient
access to four golf courses, all within one mile of the hotels. The Properties
are accessible by Interstate 10, the major highway in the area. Airport access
to the area includes Palm Springs Regional Airport, Ontario International
Airport and Los Angeles International Airport. Other lodging facilities located
in proximity to the Courtyard Palm Desert and Residence Inn Palm Desert
Properties include the Marriott Desert Springs, an Embassy Suites, the Shadow
Mountain Resort, the Indian Wells Resort, the Miramonte Resort and the
Renaissance Esmeralda. The average occupancy rate, the average daily room rate
and the revenue per available room for the periods the hotels have been
operational are as follows:
<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 82.60% 114.39 94.53 74.80% 166.55 124.54
</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 April 30, 2000.
The Company believes that the results achieved by the Properties for
1999, as shown in the table above, are not indicative of their long-term
operating potential, as the Properties had only been open since September and
February 1999, respectively.
INVESTMENT OBJECTIVES AND POLICIES
In addition, the following sentence replaces item 16 under the heading
" - Certain Investment Limitations" on page 97 of the Prospectus.
The Company will not make loans to the Advisor or its Affiliates,
except (A) to wholly owned subsidiaries of the Company, or (B) Mortgage Loans to
Joint Ventures (and joint ventures of wholly owned subsidiaries of the Company)
in which no co-venturer is the Sponsor, the Advisor, the Directors or any
Affiliate of those persons or of the Company (other than a wholly owned
subsidiary of the Company) to the restrictions governing Mortgage Loans in the
Articles of Incorporation (including the requirement to obtain an appraisal from
an independent expert).
SUMMARY OF THE
ARTICLES OF INCORPORATION AND BYLAWS
The following sentence replaces the first sentence of the first
paragraph under the heading " Description of Capital Stock" on page 100 of the
Prospectus.
The Company has authorized a total of 216,000,000 shares of capital
stock, consisting of 150,000,000 shares of Common Stock, $0.01 par value per
share, 3,000,000 shares of Preferred Stock ("Preferred Stock"), and 63,000,000
additional shares of excess stock ("Excess Shares"), $0.01 par value per share.
The fourth and fifth sentences in the second paragraph under the
heading "Prospectus Summary - CNL Hospitality Properties, Inc. - Our Business"
on page 5 of the Prospectus and the second paragraph under the heading "Summary
of the Articles of Incorporation and Bylaws - Description of Capital Stock" on
page 100 of the Prospectus are deleted in their entirety.
