SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_______________________
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report: November 19, 1997
ShoLodge, Inc.
(Exact name of registrant as specified in its charter)
Tennessee
(State or other jurisdiction of
incorporation or organization)
0-19840 62-1015641
(Commission File Number) (I.R.S. Employer Identification
Number)
130 Maple Drive North
Hendersonville, TN
(Address of principal executive offices)
37075
(Zip Code)
615-264-8000
(Registrant's telephone number)
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ITEM 2 - ACQUISITION OR DISPOSITION OF ASSETS
On November 19, 1997, the Company completed a sale/leaseback transaction under
which it sold the real property relating to 14 Sumner Suites hotels for a total
sales price of $140.0 million and simultaneously executed a long-term lease
under which it will continue to operate the hotels. The lease calls for an
initial annual rent payment of $14.0 million. Beginning in 1999, additional
rent will be payable at 8% of each hotel's revenue in excess of the 1998 (base)
year. The lease is for an initial term of ten years with ten, five-year
renewal options. The lessor retains $28.0 million from the transaction; a
security deposit of $14.0 million to be held until the end of the lease term,
and a guaranty deposit of $14.0 million to be held until a certain rent
coverage level is reached.
The $140 million gross proceeds of the transaction have been applied to (1)
reduce debt by $32.7 million by paying off the Company's revolving bank credit
facility, a bank line of credit loan, and furniture, fixture and equipment
loans on the properties sold, (2) pay fees and expenses of this transaction in
an amount of $1.3 million, (3) pay rent for the balance of the month of
November in the amount of $462,000, (4) fund the required security deposit and
guaranty deposit of $14.0 million each, and (5) invest in temporary short-term
securities in the amount of $77.5 million until needed to be invested in
productive assets within the next six months.
The effect of this transaction on a pro forma basis, had it occurred as of the
beginning of the year ended December 29, 1996, would be to increase rent
expense by approximately $9.2 million, decrease depreciation and amortization
expense by approximately $4.0 million, and decrease net interest expense by
approximately $7.2 million.
The pro forma effect on the three quarters ended October 5, 1997, would be to
increase rent expense by approximately $7.1 million, decrease depreciation and
amortization expense by approximately $3.1 million, and decrease net interest
expense by approximately $7.0 million.
On a pro forma basis as of October 5, 1997, the Company's cash would increase
by $82.3 million, cash deposits would increase by $28.0 million, net property
and equipment would decrease by $101.7 million, net other assets would decrease
by $2.5 million, a deferred gain of approximately $32.1 million would be added,
short-term debt would decrease by $2.7 million, and long-term debt would
decrease by $23.3 million.
ITEM 7 - FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(b) Proforma condensed financial statements
See narrative description in Item 2 above.
(c) Exhibits:
10.1. Purchase and Sale Agreement by and between ShoLodge, Inc. and
certain of its Affiliates, as Sellers, and Hospitality Properties Trust, as
Purchaser, dated October 24, 1997. (1)
10.2 Agreement to Lease between Hospitality Properties Trust and
ShoLodge, Inc. dated October 24, 1997. (1)
10.3 Form of Lease Agreement to be entered into between certain
Affiliates of ShoLodge, Inc., as Tenant, and Hospitality Properties Trust, as
Landlord. (1)
10.4 Form of Security Agreement to be entered into between certain
Affiliates of ShoLodge, Inc., as Tenant, and Hospitality Properties Trust, as
Secured Party. (1)
10.5 Form of Assignment and Security Agreement to be entered into
between certain Affiliates of ShoLodge, Inc., as Assignor, and Hospitality
Properties Trust, as Assignee. (1)
10.6 Form of Stock Pledge Agreement to be entered into between
ShoLodge, Inc., as Pledgor, and Hospitality Properties Trust, as Secured Party.
(1)
10.7 Form of Limited Guaranty Agreement to be entered into by
ShoLodge, Inc., as Guarantor, for the benefit of Hospitality Properties Trust.
(1)
10.8 Letter between Hospitality Properties Trust and ShoLodge, Inc.
dated November 19, 1997.
99.1. Press release issued by ShoLodge, Inc. on November 19, 1997.
(1) Incorporated by reference to the Company's Current Report on Form 8-K filed
November 13, 1997.
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Signatures
Pursuant to the requirements of the Securities and Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
SHOLODGE, INC.
Date: December 3, 1997 By : /s/ Bob Marlowe
Bob Marlowe
Secretary-Treasurer
Chief Accounting Officer
EXHIBIT 10.8
Hospitality Properties Trust
400 Centre Street
Newton, MA 02158
November 19, 1997
Mr. Leon L. Moore
Chairman
ShoLodge, Inc.
130 Maple Drive North
Hendersonville, TN 37075
Dear Leon:
Congratulations on the closing of our first sale-leaseback
transaction today. It has been a pleasure to work with you, Michael and
the various ShoLodge team members, advisors and pilots who made it happen.
This will confirm our continued interest in considering future transactions
between HPT and ShoLodge for additional Sumner Suites hotels as set forth
in Section 13(k) of the letter of intent dated September 23, 1997 between
HPT and ShoLodge, Inc.
I look forward to a long, friendly and growing relationship
between ShoLodge and HPT as both our firms continue their growth.
Very truly yours,
/s/John G. Murray
John G. Murray
JGM:ccb
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Section 13(k) excerpted from Letter of Intent dated September 23, 1997
between HPT and ShoLodge, Inc.
(k) In addition to the above proposed transaction, HPT is
interested in working together with LODG on future transactions for
existing hotels and/or new development properties for its Sumner Suites
hotels or other brands. Such potential future business will be subject to
mutual agreement upon purchase prices, lease terms, etc. To the extent any
such future transaction involves newly developed properties, HPT would
expect credit support to be provided by LODG through stabilization. It is
presently HPT's expectation that such future business would involve
additional investments by HPT of up to $150 million, subject to mutual
agreement on terms.
EXHIBIT 99.1
Contact: Michael A. Corbett
Chief Financial Officer
(675) 264-8000
SHOLODGE ANNOUNCES COMPLETION OF SALE AND LEASEBACK OF
14 SUMNER SUITES HOTELS
Hendersonville, Tennessee (November 19, 1997) - ShoLodge, Inc. (Nasdaq/NM:
LODG today announced that it has completed the previously announced sell
and leaseback transaction covering 14 Sumner Suites hotels for a total
price of $140 million with Hospitality Properties Trust (NYSE:HPT). In
addition, HPT has indicated its continued willingness to consider
additional sale-leaseback transactions of up to $150 million for Sumner
Suites hotels subject to agreement on mutually acceptable terms.
ShoLodge is the owner, operator, and developer of the Sumner Suites
brand and also owns, develops, manages, and franchises the Shoney's Inns
and Shoney's Inns & Suites brand.
HPT is a real estate investment trust which has $1.2 billion of
investments in hotels that are leased to unaffiliated hotel operating
companies.
Commenting on the announcement, Leon Moore, chairman, president and
chief executive officer of ShoLodge, said, "The 14 Sumner Suites hotels are
located in eight states; Arizona, Florida, Georgia, Ohio, Indiana, New
Mexico, Tennessee, and Texas and have a total of 1,641 suites. Sumner
Suites hotels address the very desirable mid-market, all-suites segment of
the hospitality industry. The sale of these initial 14 Sumner Suites
coupled with our proven managerial ability to develop, build, and operate
these properties provides us with the capital to continue to implement our
aggressive growth strategy to rapidly expand the Sumner Suites brand. We
believe that HPT is an excellent strategic partner and we look forward to
working with them in the future."
