SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
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Date of Report (Date of earliest event reported): December 21, 2000
CNL HOSPITALITY PROPERTIES, INC.
(Exact Name of Registrant as Specified in Charter)
Florida 0-24097 59-3396369
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
450 South Orange Avenue 32801
Orlando, Florida (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (407) 650-1000
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Item 2. Acquisition or Disposition of Assets.
Desert Ridge Marriott Resort & Spa located in Phoenix, Arizona. On
December 21, 2000, the Company, through subsidiaries, acquired a 44% interest in
Desert Ridge Resort Partners, LLC, a joint venture (the "Joint Venture") with an
affiliate of Marriott International, Inc. and a partnership in which an
Affiliate of the Advisor is the general partner. The Joint Venture invested in
Desert Ridge Resort, LLC, a single purpose limited liability company (the
"Resort Owner") that owns the proposed Desert Ridge Resort & Spa in Phoenix,
Arizona. (the "Desert Ridge Property"). The Company made an initial capital
contribution of $8.8 million of its anticipated $25 million investment in the
Joint Venture. The total cost of the Property (including acquisition of land,
development and construction) is estimated to be approximately $298 million. On
December 14, 2000, the Resort Owner obtained permanent financing from a third
party lender for $179 million of this amount, secured by a mortgage on the
Desert Ridge Property. The notes will have a term of seven years with interest
expense payable quarterly in arrears commencing on March 2, 2001. Interest with
respect to $109 million of the notes will be payable at a rate of 9.49% per
annum, while interest with respect to $70 million of the notes will be payable
at a floating rate equal to 185 basis points above three-month LIBOR. All unpaid
interest and principal will be due at maturity. In connection with the issuance
of the notes, the Resort Owner incurred fees of $5,370,000. In addition,
Marriott International, Inc. or an affiliate thereof will provide financing for
an additional 19% of the costs to the Desert Ridge Joint Venture, secured by
pledges of the co-venturers' equity contributions to the Desert Ridge Joint
Venture.
In connection with the development of the Desert Ridge Property, the
Company anticipates that the Desert Ridge Joint Venture will pay Development
Fees, which have been approved by the Board of Directors, to a wholly owned
subsidiary of the Advisor that will act, along with an affiliate of Marriott
International, Inc., as co-developer of the Property. The Development Fees to
the Affiliate of the Advisor are anticipated to equal approximately 1.8% of the
total project costs for the purchase and development of the Property, and will
be borne by the co-venturers in proportion to their ownership interest in the
Desert Ridge Joint Venture. The Property will be leased to a subsidiary of the
Desert Ridge Joint Venture (which will also be an indirect subsidiary of the
Company and will make an election after January 1, 2001 to be treated as a
taxable REIT subsidiary under the Code) and will be managed by Marriott
International, Inc.
The Desert Ridge Property will be constructed on a 400 acre site as
part of a 5,700 acre master-planned development in the north Phoenix/Scottsdale,
Arizona area. The Property will be operated as a Marriott Resort & Spa and is
expected to include 950 guest rooms (including 85 suites), approximately 77,000
square feet of meeting and banquet facilities, a full service health spa, eating
and beverage facilities that seat 947 people, two 18-hole golf courses and 8
tennis courts. The Desert Ridge Property is currently anticipated to open to the
public in January 2003.
Courtyard by Marriott located in Weston, Florida. On December 22, 2000,
CNL Hotel C-Orlando Ltd., a Florida limited partnership that is an indirect,
wholly owned subsidiary of the Company, acquired a parcel of land located in
Weston, Florida and entered into a development services agreement to construct a
Courtyard by Marriott on the Property (the "Courtyard Weston Property"). In this
section, the term "Company" includes CNL Hotel C-Orlando Ltd. The Company
acquired the land for $1,742,000 from Marriott International, Inc. The Company
anticipates that the cost of development of the Courtyard Weston Property will
be approximately $14,800,000. The Property will be leased to a subsidiary of the
Company which will make an election after January 1, 2001 to be treated as a
taxable REIT subsidiary under the Code and will be managed by Marriott
International, Inc.
Marriott International, Inc. will enter into an agreement with the
tenant in which Marriott International, Inc. will advance and loan to the tenant
any amounts needed to pay minimum rent under the lease (the "Liquidity Facility
Agreement"). The Liquidity Facility Agreement will terminate 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 liquidity facility will be
$1,650,000.
In connection with the acquisition of the Courtyard Weston Property,
CNL Hotel Development Company, a subsidiary of the Advisor, has entered into a
development services agreement with CNL Hotel C-Orlando Ltd. As the developer of
the Property, CNL Hotel Development Company will have financial and
administrative control over the project and will act as CNL Hotel C-Orlando
Ltd.'s agent in negotiations with architects, engineers and other service
providers to the project, as well as in dealings with governmental authorities
to obtain necessary permits and approvals. As compensation for its services
under this agreement, CNL Hotel Development Company will receive a Development
Fee, which has been approved by the Board of Directors, equal to four percent of
the cost of development of the Courtyard Weston Property with incentive
provisions that would permit CNL Hotel Development Company to receive up to an
additional one percent if certain construction cost savings are achieved.
On December 6, 2000, the Company entered into a revolving construction
line of credit with a bank to be used by the Company to fund the land
acquisition and the development of the Residence Inn SeaWorld Property and the
Courtyard Weston Property, described below. The construction line of credit
provides that the Company will be able to receive advances of up to $55,000,000
until November 8, 2003. Interest expense on each advance will be payable
monthly, with all unpaid interest and principal due no later than three years
from the date of the advance. Advances under the construction line of credit
will bear interest at a rate per annum equal to 275 basis points above LIBOR.
The loan will be secured by mortgages on the Residence Inn Buckhead (Lenox
Park), the Residence Inn Gwinnett Place, the Residence Inn SeaWorld and the
Courtyard Weston Properties. In connection with the construction line of credit,
the Company incurred a commitment fee, legal fees and closing costs of $275,000.
As of December 22, 2000, the Company had obtained two advances totalling
$5,142,000 relating to the construction line of credit.
The Courtyard Weston Property, which is scheduled to open in the first
quarter of 2002, is located in Weston, Florida. Once constructed, the Courtyard
Weston is expected to include 174 guest rooms, two meeting rooms and two
conference room suites, an outdoor swimming pool, an exercise room , a spa, a
76-seat restaurant and a lounge/library/bar area. There are currently no other
lodging facilities located in proximity to the Courtyard Weston Property;
however, three other hotel properties are planned and are expected to begin
construction soon.
The following updates information contained in the Form 10-Q filed with
the Securities and Exchange Commission on November 13, 2000.
Western International Portfolio.
In return for their respective investments, Five Arrows received a 51%
common stock interest and the Company received a 49% common stock interest in
Hotel Investors. Five Arrows received 48,337 shares of Hotel Investors' 8% Class
A cumulative, preferred stock ("Class A Preferred Stock"), and the Company
received 37,979 shares of Hotel Investors' 9.76% Class B cumulative, preferred
stock ("Class B Preferred Stock"). In October 2000, Five Arrows, the Company and
Hotel Investors entered into an agreement under which Hotel Investors agreed to
redeem 2,104 shares of Class A Preferred Stock and an equivalent number of
shares of common stock of Hotel Investors held by Five Arrows for $2,104,000. In
addition, the Company purchased 7,563 shares of both Class A Preferred Stock and
common stock of Hotel Investors from Five Arrows for $11,395,000. Hotel
Investors agreed to redeem 1,653 shares of Class B Preferred Stock and an
aggregate of 10,115 shares of common stock of Hotel Investors held by the
Company for $1,653,000. Five Arrows' remaining 38,670 shares of Class A
Preferred Stock and the Company's 7,563 shares of Class A Preferred Stock were
exchanged for an equivalent number of shares of Class E Preferred Stock, par
value $0.01 ("Class E Preferred Stock"), of Hotel Investors. Upon the
consummation of this transaction, the Company owned an interest of approximately
53% and Five Arrows owned an interest of approximately 47%, in the common stock
of Hotel Investors. Pursuant to this agreement, the Company repurchased 65,285
Shares held by Five Arrows for an aggregate price of $620,207. Additionally,
Five Arrows granted the Company the following options: (1) on or before January
31, 2001, the Company had the option to purchase 7,250 shares of Class E
Preferred Stock and an equal number of shares of common stock of Hotel Investors
held by Five Arrows for $1,000 per pair of Class E Preferred Stock and common
stock of Hotel Investors, and (2) provided that the Company purchased all of the
shares under the first option, the Company had the option, until June 30, 2001,
to purchase 7,251 shares of Class E Preferred Stock and an equal number of
shares of common stock of Hotel Investors for $1,000 for each pair. If the
Company elected not to purchase the remaining shares under the first and/or
second options, Five Arrows would have had the right, at certain defined dates,
to exchange its shares in Hotel Investors for Common Stock of the Company at an
exchange rate of 157.000609 Shares of the Company's Common Stock for each share
of Class E Preferred Stock, subject to adjustment in the event of stock
dividends, stock splits and certain other corporate actions by the Company. On
December 22, 2000, the Company exercised the two options described above and as
a result, the Company now owns an interest of approximately 72% and Five Arrows
owns an interest of approximately 28%, in the common stock of Hotel Investors.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be filed on its behalf by
the undersigned thereunto duly authorized.
CNL HOSPITALITY PROPERTIES, INC.
Dated: January 4, 2001 By: /s/ Robert A. Bourne
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ROBERT A. BOURNE, President
