<PAGE 1>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
Commission file number 0-23732
WINSTON HOTELS, INC.
(Exact name of registrant as specified in its charter)
North Carolina 56-1624289
(State of incorporation) (I.R.S. Employer
Identification No.)
2209 Century Drive
Raleigh, North Carolina 27612
(Address of principal executive offices)
(Zip Code)
(919) 510-6010
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 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 __
The number of shares of Common Stock, $.01 par value, outstanding on
October 31, 1997 was 16,194,480.
<PAGE 2>
WINSTON HOTELS, INC.
INDEX
<TABLE>
<CAPTION>
Page
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. WINSTON HOTELS, INC.
Consolidated Balance Sheets - September 30, 1997
(unaudited) and December 31, 1996 3
Unaudited Consolidated Statements of Income - For the
three and nine months ended September 30, 1997 and
1996 4
Unaudited Consolidated Statements of Cash Flows - For
the nine months ended September 30, 1997 and 1996 5
Notes to consolidated financial statements (unaudited) 6
WINSTON HOSPITALITY, INC.
Balance Sheets - September 30, 1997 (unaudited) and
December 31, 1996 9
Unaudited Statements of Income - For the three and
nine months ended September 30, 1997 and 1996 10
Unaudited Statements of Cash Flows - For the nine
months ended September 30, 1997 and 1996 11
Notes to financial statements (unaudited) 12
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 13
PART II. OTHER INFORMATION
Item 2. Changes in Securities 21
Item 5. Other Information 21
Item 6. Exhibits and Reports on Form 8-K 21
Signature Page 23
</TABLE>
<PAGE 3>
WINSTON HOTELS, INC.
CONSOLIDATED BALANCE SHEETS
($ in thousands, except per share amounts)
<TABLE>
<CAPTION>
ASSETS
September 30, December 31,
1997 1996
------------- ------------
(unaudited)
<S> <C> <C>
Investment in hotel properties:
Land $ 26,089 $ 20,639
Buildings and improvements 212,978 166,664
Furniture and equipment 20,276 15,749
------------- ------------
Operating properties 259,343 203,052
Less accumulated depreciation 18,690 11,508
------------- ------------
240,653 191,544
Properties under development 17,232 5,138
------------- ------------
Net investment in hotel properties 257,885 196,682
Cash and cash equivalents 792 234
Lease revenue receivable 7,596 4,611
Deferred expenses, net 1,401 1,362
Prepaid expenses and other assets 1,204 613
------------- ------------
Total assets $ 268,878 $ 203,502
============= ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Due to banks $ 24,481 $ 42,800
Accounts payable and accrued expenses 2,847 1,799
Distributions payable 5,216 4,352
Amounts due to Lessee 836 1,391
Minority interest in Partnership 16,112 11,347
------------- ------------
Total liabilities 49,492 61,689
Shareholders' equity:
Preferred stock, $.01 par value,
10,000,000 shares authorized,
3,000,000 and 0 shares issued and
outstanding (liquidation preference
of $75,366) 30 -
Common stock, $.01 par value,
50,000,000 shares authorized,
16,194,480 and 15,799,580 shares
issued and outstanding 162 158
Additional paid-in capital 223,358 145,216
Unearned directors' compensation (125) (181)
Deficit (4,039) (3,380)
------------- ------------
Total shareholders' equity 219,386 141,813
------------- ------------
Total liabilities and
shareholders' equity $ 268,878 $ 203,502
============= ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE 4>
WINSTON HOTELS, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
($ in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Three Nine Nine
Months Months Months Months
Ended Ended Ended Ended
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
1997 1996 1997 1996
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Revenue:
Percentage lease revenue $ 10,328 $ 8,389 $ 27,098 $ 19,721
Interest and other income 78 46 132 84
--------- --------- --------- ---------
Total revenue 10,406 8,435 27,230 19,805
--------- --------- --------- ---------
Expenses:
Real estate taxes and
property and casualty
insurance 670 408 1,826 1,102
General & administrative 723 385 1,585 1,283
Interest expense 977 452 2,788 2,026
Depreciation 2,612 2,063 7,182 4,672
Amortization 45 40 127 108
--------- --------- --------- ---------
Total expenses 5,027 3,348 13,508 9,191
--------- --------- --------- ---------
Income before allocation
to minority interest 5,379 5,087 13,722 10,614
Income allocation to
minority interest 490 337 1,100 567
--------- --------- --------- ---------
Net income 4,889 4,750 12,622 10,047
Preferred share distribution 366 - 366 -
--------- --------- --------- ---------
Net income applicable to
common shareholders $ 4,523 $ 4,750 $ 12,256 $ 10,047
========= ========= ========= =========
Net income per common share $ 0.28 $ 0.30 $ 0.77 $ 0.84
========= ========= ========= =========
Weighted average number of
common shares and common
share equivalents 17,800,169 16,947,610 17,324,704 12,695,440
========== ========== ========== ==========
Distributions per share:
Common $ 0.27 $ 0.255 $ 0.81 $ 0.75
========== ========== ========== ==========
Preferred $ 0.12 $ - $ 0.12 $ -
========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE 5>
WINSTON HOTELS, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
($ in thousands)
<TABLE>
<CAPTION>
Nine Months Nine Months
Ended Ended
Sept. 30, 1997 Sept. 30, 1996
-------------- --------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 12,622 $ 10,047
Adjustments to reconcile net income
to net cash provided by operating
activities:
Minority Interest 1,100 567
Depreciation 7,182 4,672
Amortization recorded as interest
expense 316 164
Amortization of franchise fees 71 52
Unearned compensation amortization 56 56
Changes in assets and liabilities:
Lease revenue receivable (2,985) (3,729)
Prepaid expenses and other assets (591) (187)
Accounts payable and accrued
expenses 683 (166)
-------------- --------------
Net cash provided by operating
activities 18,454 11,476
-------------- --------------
Cash flows used in investing activities:
Franchise fees paid (337) (502)
Deferred acquisition costs 2 (421)
Investment in hotel properties (57,653) (62,805)
-------------- --------------
Net cash used in investing
activities (57,988) (63,728)
-------------- --------------
Cash flows provided by financing activities:
Purchase of interest rate cap agreements (69) -
Fees paid to increase and extend the
line of credit (21) (23)
Net proceeds from issuance of common stock 200 60,623
Net proceeds from issuance of preferred
stock 71,866 -
Payment of distributions to common
shareholders (12,417) (9,033)
Payment of distributions to minority
interest (1,148) (332)
Net decrease in line of credit borrowings (18,319) (1,400)
-------------- --------------
Net cash provided by financing
activities 40,092 49,835
-------------- --------------
Net increase/(decrease) in cash and cash
equivalents 558 (2,417)
Cash and cash equivalents at beginning
of period 234 2,496
-------------- --------------
Cash and cash equivalents at end of
period $ 792 $ 79
============== ==============
Supplemental disclosure:
Cash paid for interest $ 2,809 $ 1,823
============== ==============
Summary of non-cash investing and
financing activities:
Investment in hotel properties
payable $ 703 $ 1,736
Distributions declared but not
yet paid 5,216 4,340
Issuance of partnership units in
connection with the acquisition of
hotel properties 11,287 8,900
Amounts included in accounts payable
and accrued expenses related to the
September 1997 stock offering 363 -
Adjustment to minority interest due to
follow-on offerings and issuance of
partnership units in connection with
the acquisition of hotel properties 1,675 1,495
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE 6>
WINSTON HOTELS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
($ in thousands, except per share amounts)
1.ORGANIZATION
------------
Winston Hotels, Inc. (the "Company") operates so as to qualify as
a real estate investment trust ("REIT") for federal income tax
purposes. The accompanying unaudited consolidated financial
statements reflect, in the opinion of management, all adjustments
necessary for a fair presentation of the interim financial
statements. All such adjustments are of a normal and recurring
nature. Due to the seasonality of the hotel business, the
information for the three and nine month periods ended September
30, 1997 and 1996 are not necessarily indicative of the results
for a full year.
2.ACQUISITIONS
------------
On July 14, 1997, the Company acquired two hotel properties for
purchase prices totaling approximately $16,700 which included a
cash payment of approximately $6,300 and the issuance of 815,000
limited partnership units by WINN Limited Partnership. The
properties purchased were the 202-room Courtyard by Marriott-
Brookhollow in Houston, TX and the 126-room Hampton Inn in West
Springfield, MA. On July 17, 1997, the seller redeemed 374,900 of
these limited partnership units, valued at $4,799, in exchange for
374,900 newly issued shares of the Company's Common Stock, valued
at $4,799.
On August 6, 1997, the Company purchased a 127-room Holiday Inn
Express in Clearwater, FL for approximately $6,400 in cash.
On September 30, 1997, the Company acquired two hotel properties
in Ann Arbor, MI for purchase prices totaling approximately
$15,100 in cash. These properties include the 160-room Courtyard
by Marriott and the 110-room Fairfield Inn hotels.
3.PRO FORMA FINANCIAL INFORMATION
-------------------------------
These unaudited pro forma condensed statements of income of the
Company are presented as if the June 1996 Common Stock and
September 1997 Preferred Stock follow-on offerings had occurred
January 1, 1996 and the Company had acquired all 37 of the current
hotels on the later of January 1, 1996 or the hotel opening date.
These unaudited pro forma condensed statements of income are not
necessarily indicative of what actual results of operations of the
Company would have been assuming such transactions had been
completed as of the dates described above, nor does it purport to
represent the results of operations for future periods:
<PAGE 7>
WINSTON HOTELS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
(UNAUDITED)
($ in thousands, except per share amounts)
<TABLE>
<CAPTION>
Pro Forma Pro Forma
Nine Months Ended Nine Months Ended
Sept. 30, 1997 Sept. 30, 1996
----------------- -----------------
<S> <C> <C>
Percentage lease and other
revenue $ 32,033 $ 29,270
----------------- -----------------
Expenses:
Real estate taxes and property
and casualty insurance 2,181 1,755
General and administrative 1,620 1,362
Interest expense 550 260
Depreciation 8,006 7,172
Amortization 145 145
----------------- -----------------
Total expense 12,502 10,694
----------------- -----------------
Income before allocation to
minority interest 19,531 18,576
Income allocation to minority
interest 1,924 1,722
----------------- -----------------
Net income 17,607 16,854
Preferred share distribution 5,203 5,203
----------------- -----------------
Net income applicable to common
shareholders $ 12,404 $ 11,651
================= =================
Net income per common share $ 0.82 $ 0.78
================= =================
Weighted average number of
common shares and common share
equivalents 17,458,621 17,207,820
================= =================
</TABLE>
4.PREFERRED STOCK
---------------
On September 11, 1997, the Company issued 3,000,000 shares of
9.25% Series A Cumulative Preferred Stock ($25 liquidation
preference per share plus unpaid cumulative distributions).
Except in the event of certain occurrences, the preferred shares
are not redeemable prior to September 28, 2001. The Company used
the net proceeds from the offering of approximately $72,000 to pay
down most of the then outstanding debt under its line of credit,
and thereby created additional borrowing capacity to finance the
acquisition and development of additional hotel properties. As of
September 30, 1997, distributions have been accrued for the
portion of the quarter the Preferred Stock was outstanding. These
distributions will be paid, together with the fourth quarter
distributions, in January 1998.
5.SUBSEQUENT EVENTS
-----------------
On October 29, 1997, the Company purchased a 156-room Hampton Inn
in White Plains, New York (the "White Plains hotel") for
approximately $12,500 in cash.
<PAGE 8>
WINSTON HOTELS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
(UNAUDITED)
($ in thousands, except per share amounts)
On October 29, 1997, Winston Hospitality, Inc. (the "Lessee")
entered into an agreement with CapStar Hotel Company ("CapStar")
under which a subsidiary of CapStar would acquire the rights to
leases for the Current Hotels, the White Plains hotel, and five
hotels currently under development by the Company. Conditional
upon the closing of this agreement, which is anticipated to occur
during 1997, and in exchange for certain other undertakings by
CapStar, the Company intends to extend the term of the Percentage
Leases to 15 years from the date of closing.
6.EARNINGS PER SHARE
------------------
The Company will adopt Statement of Financial Accounting Standards
(SFAS) No. 128, "Earnings Per Share," on December 31, 1997. SFAS
No. 128 requires the Company to change its method of computing,
presenting and disclosing earnings per share information. Upon
adoption, all prior period data presented will be restated to
conform to the provisions of SFAS No. 128.
If the Company had adopted SFAS No. 128 for the period ended
September 30, 1997, the following computation would have been used
to arrive at basic income per common share and diluted income per
common share that would have been presented on the consolidated
statements of income:
<TABLE>
<CAPTION>
Three Three Nine Nine
Months Months Months Months
Ended Ended Ended Ended
Sept. Sept. Sept. Sept.
30, 1997 30, 1996 30, 1997 30, 1996
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Basic income per common share:
Net income $ 4,889 $ 4,750 $ 12,622 $ 10,047
Less preferred stock
dividends (366) - (366) -
-------- -------- -------- --------
Income available to common
shareholders $ 4,523 $ 4,750 $ 12,256 $ 10,047
======== ======== ======== ========
Weighted average common
shares outstanding 16,129,280 15,688,415 15,922,592 11,951,787
========== ========== ========== ==========
Basic income per common
share $ 0.28 $ 0.30 $ 0.77 $ 0.84
======== ======== ======== ========
Diluted income per common share:
Net income $ 4,889 $ 4,750 $ 12,622 $ 10,047
Plus income allocation to
minority interest 490 337 1,100 567
Less preferred stock
dividends (366) - (366) -
-------- -------- -------- --------
Income available to common
shareholders and minority
interest $ 5,013 $ 5,087 $ 13,356 $ 10,614
======== ======== ======== ========
Weighted average shares:
Common shares outstanding 16,129,280 15,688,415 15,922,592 11,951,787
Units with redemption
rights 1,670,889 1,124,217 1,402,112 665,722
Stock options 78,294 134,978 70,397 77,931
---------- ---------- ---------- ----------
Total shares 17,878,463 16,947,610 17,395,101 12,695,440
========== ========== ========== ==========
Diluted income per common
share $ 0.28 $ 0.30 $ 0.77 $ 0.84
======== ======== ======== ========
</TABLE>
<PAGE 9>
WINSTON HOSPITALITY, INC.
BALANCE SHEETS
($ in thousands, except per share amounts)
<TABLE>
<CAPTION>
ASSETS
September 30, December 31,
1997 1996
------------- ------------
(unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 9,720 $ 5,463
Accounts receivable:
Trade 2,147 1,166
Lessor 836 1,391
Affiliates 100 95
Shareholders - 71
Prepaid expenses and other assets 274 220
------------- ------------
Total current assets 13,077 8,406
------------- ------------
Furniture, fixtures and equipment:
Furniture and equipment 395 323
Leasehold improvements 113 113
------------- ------------
508 436
Less accumulated depreciation and
amortization 239 178
------------- ------------
Net furniture, fixtures
and equipment 269 258
------------- ------------
Total assets $ 13,346 $ 8,664
============= ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable:
Trade $ 1,417 $ 1,259
Affiliates - 146
Shareholders 208 -
Percentage lease payable to Lessor 7,596 4,611
Accrued salaries and wages 954 874
Accrued sales and occupancy taxes 736 462
Other current liabilities 841 618
------------- ------------
Total current liabilities 11,752 7,970
Shareholders' equity:
Common stock, $.01 par value, 100 shares
authorized, issued and outstanding 1 1
Additional paid-in capital 49 49
Retained earnings 1,544 644
------------- ------------
Total shareholders' equity 1,594 694
------------- ------------
Total liabilities and
shareholders' equity $ 13,346 $ 8,664
============= ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE 10>
WINSTON HOSPITALITY, INC.
UNAUDITED STATEMENTS OF INCOME
($ in thousands)
<TABLE>
<CAPTION>
Three Three Nine Nine
Months Months Months Months
Ended Ended Ended Ended
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
1997 1996 1997 1996
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Revenue:
Room $ 22,098 $ 17,702 $ 58,911 $ 43,129
Food and beverage 713 584 2,123 1,024
Other, net 492 323 1,179 889
Interest income 64 26 129 75
--------- --------- --------- ---------
Total revenue 23,367 18,635 62,342 45,117
--------- --------- --------- ---------
Expenses:
Property operating 7,999 6,223 21,264 15,184
Repairs and maintenance 988 934 2,823 2,259
Food and beverage 533 437 1,512 796
General and administrative 700 475 1,860 1,471
Franchise costs 2,041 1,537 5,376 3,765
Management fees 260 283 909 976
Percentage lease payments 10,328 8,389 27,098 19,721
--------- --------- --------- ---------
Total expenses 22,849 18,278 60,842 44,172
--------- --------- --------- ---------
Net income $ 518 $ 357 $ 1,500 $ 945
========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE 11>
WINSTON HOSPITALITY, INC.
UNAUDITED STATEMENTS OF CASH FLOWS
($ in thousands)
<TABLE>
<CAPTION>
Nine Months Nine Months
Ended Ended
Sept. 30, 1997 Sept. 30, 1996
-------------- --------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 1,500 $ 945
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation 61 60
Changes in assets and liabilities:
Accounts receivable - trade (981) (1,378)
Prepaid expenses and other assets (54) (112)
Accounts payable - trade 158 591
Percentage lease payable to Lessor 2,985 3,729
Accrued expenses and other
liabilities 577 891
-------------- --------------
Net cash provided by operating
activities 4,246 4,726
-------------- --------------
Cash flows provided by (used in) investing
activities:
Purchases of furniture, fixture and
equipment (72) (94)
Advances from/(to) lessor, affiliates
and shareholders 683 (2,037)
-------------- --------------
Net cash provided by (used in)
investing activities 611 (2,131)
-------------- --------------
Cash flows used in financing activities:
Distributions to shareholders (600) (485)
-------------- --------------
Net cash used in financing
activities (600) (485)
-------------- --------------
Net increase in cash and cash equivalents 4,257 2,110
Cash and cash equivalents at beginning
of period 5,463 2,249
-------------- --------------
Cash and cash equivalents at end of
period $ 9,720 $ 4,359
============== ==============
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE 12>
WINSTON HOSPITALITY, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
($ in thousands)
The accompanying unaudited financial statements reflect, in the
opinion of management, all adjustments necessary for a fair
presentation of the interim financial statements. All such
adjustments are of a normal and recurring nature.
RECLASSIFICATIONS
Certain reclassifications have been made to the 1996 financial
statements to conform with the 1997 presentation. These
reclassifications have no effect on net income or shareholders'
equity as previously reported.
SUBSEQUENT EVENTS
On October 29, 1997, Winston Hospitality, Inc. (the "Lessee") signed
agreements with CapStar Hotel Company ("CapStar"), a Washington, D.C.
- -based public company which owns and operates full-service hotels, under
which a subsidiary of CapStar would acquire the rights to leases with
the Company and certain furniture, fixtures and equipment and other
assets, for approximately $10,000 in cash and $24,000 in one of CapStar's
operating partnership units. Pursuant to the terms of the agreements,
substantially all of the Lessee's employees would be offered positions
with CapStar. Management contracts for the 10 hotels currently managed
by third parties would be assumed by CapStar, as would operations for
the remaining Current Hotels, one hotel which was acquired by the Company
in October 1997, and five hotels currently under development by the
Company. In connection with the transactions, the Lessee anticipates
incurring approximately $1,550 in costs, primarily related to the
transfer of franchise rights, termination of certain employees and legal,
advisory and other fees. In addition, the Lessee would be at risk for
the eventual collection of accounts receivable and the liquidation of
other current assets as of the date of closing.
<PAGE 13>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
($ in thousands, except per share amounts)
OVERVIEW
Winston Hotels, Inc. (the "Company"), which consummated an
underwritten initial public offering in June, 1994, follow-on
offerings of Common Stock in May 1995 and in June 1996, and of
Preferred Stock in September 1997, operates as a REIT to invest in
hotel properties and owned 37 hotels (the "Current Hotels") as of
September 30, 1997. The Company owned twenty-one hotels as of
December 31, 1995 (the "1995 Hotels"), acquired five hotels in May
1996, three hotels in July 1996, one hotel in September 1996, one
hotel in December 1996 (collectively, all ten are the "1996 Acquired
Hotels") and acquired one hotel in May 1997, two hotels in July 1997,
one hotel in August 1997 and two hotels in September 1997
(collectively, all six are the "1997 Acquired Hotels"). Three of the
1996 Acquired Hotels opened in 1996, on February 29, June 27 and
November 8 respectively (the "Newly Developed Hotels"). The Company
currently leases the Current Hotels to Winston Hospitality, Inc.,
(the "Lessee") under percentage lease agreements (the "Percentage
Leases") through which it receives its principal source of revenue.
On October 29, 1997 the Lessee entered into an agreement with CapStar
Hotel Company ("CapStar") under which a subsidiary of CapStar would
acquire the rights to leases for the Current Hotels, one hotel
acquired in October, 1997, and five hotels currently under
development by the Company. Conditional upon the closing of this
agreement, which is anticipated to occur during 1997, and in exchange
for certain other undertakings by CapStar, the Company intends to
extend the term of the Percentage Leases to 15 years from the date of
closing.
RESULTS OF OPERATIONS
For the three and nine months ended September 30, 1997 and 1996, the
differences in operating results are primarily attributable to the
fact that the Company owned more hotels in 1997 than it did in 1996.
The table below outlines the Company's number of hotel properties
owned as of September 30, 1997 and 1996:
<TABLE>
<CAPTION>
Properties Owned
------------------------------------------
Type of Hotel September 30, 1997 September 30, 1996
--------------- ------------------ -------------------
<S> <C> <C>
Limited Service Hotels 34 27
Extended Stay Hotels 2 2
Full Service Hotels 1 1
--- ---
Total 37 30
</TABLE>
In order to present a more meaningful comparison of operations, in
addition to the comparison of actual results of the Company and the
Lessee for the three and nine months ended September 30, 1997 versus
actual results for the three and nine months ended September 30,
1996, below is an analysis of the pro forma results for the Company
for the three and nine months ended September 30, 1997 versus pro
forma results for the three and nine months ended September 30, 1996
as if the follow-on offerings and, the 1996 and the 1997 acquisitions
had occurred on the later of January 1, 1996 or the hotel opening
dates for the two Newly Developed Hotels which opened prior to
September 30, 1996.
<PAGE 14>
THE COMPANY
ACTUAL - THREE MONTHS ENDED SEPTEMBER 30, 1997 VS ACTUAL - THREE
- ----------------------------------------------------------------
MONTHS ENDED SEPTEMBER 30, 1996
- -------------------------------
The Company had revenues of $10,406 in 1997, consisting of $10,328 of
Percentage Lease revenues and $78 of interest and other income.
Percentage Lease revenues increased by $1,939, or 23%, in 1997 from
$8,389 in 1996. This increase was comprised of: (i) $142 due to the
rent formulas of the Percentage Leases increasing rent payments by
the Lessee by an average of 35% of the $194 in increased room
revenues attributable to inflation and by an average 65% of the $114
in increased room revenues attributable primarily to higher rates;
plus (ii) $719 for the 1996 Acquired Hotels; and (iii) $1,292 for the
1997 Acquired Hotels; offset in-part by (iv) a net decrease of $214
in lease revenues, primarily attributable to changes in occupancy at
several hotels which were undergoing renovations.
Real estate taxes and property and casualty insurance costs incurred
in 1997 were $670, an increase of $262 from $408 in 1996. This
increase was primarily attributable to the greater number of hotels
owned during the 1997 period than in the 1996 period. General and
administrative expenses increased $338 to $723 in 1997 from $385 in
1996. This increase was primarily attributable to approximately $225
in one-time costs incurred with both listing our Common Stock on the
New York Stock Exchange and changes in the financial management
staff, as well as additional overhead costs related to increased
activities of the Company in 1997. Interest expense increased by
$525 to $977 in 1997 from $452 in 1996. This increase was
attributable to: (i) $74 related to the increase in weighted average
interest rates from the third quarter of 1996 to the third quarter of
1997; (ii) $675 related to the increase in the weighted average level
of borrowings from the third quarter of 1996 to the third quarter of
1997; and (iii) $68 of increased amortization of line of credit fees
and unused line of credit fees in connection with the $125,000 line
of credit which was obtained in the fourth quarter of 1996. These
increases were offset by an increase of $292 of capitalized interest
costs during the third quarter of 1997 in connection with the
Company's development projects. Depreciation increased $549 to
$2,612 in 1997 from $2,063 in 1996, primarily due to depreciation
related to the 1996 Acquired Hotels, the 1997 Acquired Hotels and
renovations completed during 1996 and 1997.
PRO FORMA - THREE MONTHS ENDED SEPTEMBER 30, 1997 VS PRO FORMA -
- ----------------------------------------------------------------
THREE MONTHS ENDED SEPTEMBER 30, 1996
- -------------------------------------
The Company had pro forma revenues of $11,414 for the three months
ended September 30, 1997, consisting of $11,330 of pro forma
Percentage Lease revenues and $84 of pro forma interest and other
income. Pro forma Percentage Lease revenues increased by $664, or
6%, to $11,330 in 1997 from $10,666 in 1996. This increase was
primarily comprised of: (i) $476 due to the rent formulas of the
Percentage Leases increasing pro forma rent payments by the Lessee by
an average of 37% of the $256 in increased pro forma revenues
attributable to inflation and 68% of the $560 in increased pro forma
room revenues attributable primarily to higher rates, plus (ii) $436
in increased pro forma lease revenues attributable to the opening of
the Newly Developed Hotels; offset in part by (iii) a net decrease of
$248 in pro forma lease revenues, primarily attributable to changes
in occupancy at several hotels which were undergoing renovations.
Pro forma real estate taxes and property and casualty insurance costs
incurred in 1997 were $736, an increase of $142 from $594 in 1996.
This increase was attributable primarily to the Newly Developed
Hotels. General and administrative expenses increased $327 to $730
in 1997 from $403 in 1996. This
<PAGE 15>
increase was primarily attributable to approximately $225 in one-time
costs incurred in connection with both listing our Common Stock on the
New York Stock Exchange and changes in the financial management staff,
as well as additional overhead costs related to increased activities
of the Company in 1997. Interest expense increased $87 to $170 in 1997
from $83 in 1996. The increase was attributable to the increase in the
Company's line of credit from $50,000 to $125,000 in October, 1996.
Depreciation increased $172 to $2,779 in 1997 from $2,607 in 1996.
This was attributable primarily to the Newly Developed Hotels.
ACTUAL - NINE MONTHS ENDED SEPTEMBER 30, 1997 VS ACTUAL - NINE
- --------------------------------------------------------------
MONTHS ENDED SEPTEMBER 30, 1996
- -------------------------------
The Company had revenues of $27,230, in 1997, consisting of $27,098
of Percentage Lease revenues and $132 of interest and other income.
Percentage Lease revenues increased by $7,377, or 37%, in 1997 from
$19,721 in 1996. This increase was comprised of: (i) $598 due to
rent formulas of the Percentage Leases increasing rent payments by
the Lessee by an average of 35% of the $590 in increased room
revenues attributable to inflation and by an average 66% of the $595
in increased room revenues attributable primarily to higher rates;
plus (ii) $5,515 for the 1996 Acquired Hotels; and (iii) $1,637 for
the 1997 Acquired Hotels; offset in-part by (iv) a net decrease of
$373 in lease revenues, primarily attributable to changes in
occupancy at several hotels which were undergoing renovations.
Real estate taxes and property and casualty insurance costs incurred
in 1997 were $1,826, an increase of $724 from $1,102 in 1996. This
increase was primarily attributable to the greater number of hotels
owned during the 1997 period than in the 1996 period. General and
administrative expenses increased $302 to $1,585 in 1997 from $1,283
in 1996. This increase was primarily attributable to approximately
$225 in one-time costs incurred with both listing our Common Stock on
the New York Stock Exchange and changes in the financial management
staff, as well as additional overhead costs related to increased
activities of the Company in 1997. Interest expense increased by
$762 to $2,788 in 1997 from $2,026 in 1996. This increase was
attributable to: (i) $84 related to the increase in weighted average
interest rates from the third quarter of 1996 to the third quarter of
1997; (ii) $1,105 related to the increase in the weighted average
level of borrowings from the third quarter of 1996 to the third
quarter of 1997; and (iii) $269 of increased amortization of line of
credit fees and unused line of credit fees in connection with the
$125,000 line of credit which was obtained in the fourth quarter of
1996. These increases were offset by $696 of capitalized interest
costs during the third quarter of 1997 in connection with the
Company's development projects. Depreciation increased $2,510 to
$7,182 in 1997 from $4,672 in 1996, primarily due to depreciation
related to the 1996 Acquired Hotels, the 1997 Acquired Hotels and
renovations completed during 1996 and 1997.
PRO FORMA - NINE MONTHS ENDED SEPTEMBER 30, 1997 VS PRO FORMA - NINE
- --------------------------------------------------------------------
MONTHS ENDED SEPTEMBER 30, 1996
- -------------------------------
The Company had pro forma revenues of $32,033 for the nine months
ended September 30, 1997, consisting of $31,808 of pro forma
Percentage Lease revenues and $225 of pro forma interest and other
income. Pro forma Percentage Lease revenues increased by $2,752, or
9%, to $31,808 in 1997 from $29,056 in 1996. This increase was
primarily composed of: (i) $1,432 due to rent formulas of the
Percentage Leases increasing pro forma rent payments by the Lessee by
an average of 36% of the $741 in increased pro forma room revenues
attributable to inflation and 68% of the $1,712 in increased pro
forma room revenues attributable primarily to higher rates; plus (ii)
$1,847 in increased pro forma lease revenues attributable to the
opening of the Newly Developed Hotels; offset in part by (iii) a net
<PAGE 16>
decrease of $527 in pro forma lease revenues attributable to changes
in occupancy at several hotels which were undergoing renovations.
Pro forma real estate taxes and property and casualty insurance costs
incurred in 1997 were $2,181, an increase of $426 from $1,755 in
1996. This increase was attributable primarily to the Newly Developed
Hotels. Pro forma general and administrative expenses increased $258
to $1,620 in 1997 from $1,362 in 1996. This increase is primarily
attributable to approximately $225 in one-time costs incurred in
connection with listing our Common Stock on the New York Stock
Exchange and changes in the financial management staff. Interest
expense increased $290 to $550 in 1997 from $260 in 1996. The
increase was attributable to the increase in the Company's line of
credit from $50,000 to $125,000 in October, 1996. Deprecation
increased $834 to $8,006 in 1997 from $7,172 in 1996. This increase
was primarily attributable to the Newly Developed Hotels.
THE LESSEE
ACTUAL - THREE MONTHS ENDED SEPTEMBER 30, 1997 VS ACTUAL - THREE
- ------------------------------------------------------------------
MONTHS ENDED SEPTEMBER 30, 1996
- -------------------------------
The following table sets forth certain historical financial
information for the periods indicated:
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended Change
September 30, September 30,
1997 1996 $ %
-------------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Revenue:
Room $22,098 94.5% $17,702 95.0% $4,396 24.8%
Food and beverage 713 3.1% 584 3.1% 129 22.1%
Other, net 492 2.1% 323 1.7% 169 52.3%
Interest income 64 0.3% 26 0.2% 38 146.2%
-------------- -------------- -------------
Total revenue 23,367 100.0% 18,635 100.0% 4,732 25.4%
-------------- -------------- -------------
Expenses:
Property operating
expenses 7,999 34.2% 6,223 33.4% 1,776 28.5%
Repairs and maintenance 988 4.2% 934 5.0% 54 5.8%
Food and beverage 533 2.3% 437 2.3% 96 22.0%
General and administrative 700 3.0% 475 2.6% 225 47.4%
Franchise costs 2,041 8.8% 1,537 8.3% 504 32.8%
Management fees 260 1.1% 283 1.5% (23) (8.1%)
Percentage lease
payments 10,328 44.2% 8,389 45.0% 1,939 23.1%
-------------- -------------- --------------
Total expenses 22,849 97.8% 18,278 98.1% 4,571 25.0%
-------------- -------------- --------------
Net income $ 518 2.2% $ 357 1.9% $ 161 45.1%
============== ============== ==============
</TABLE>
The increase of $4,732 in total revenue and $4,571 in total expenses
is primarily due to the operation of a greater number of hotels for
the three months ended September 30, 1997 as compared with the same
period of 1996.
The increase of $4,396 in room revenues was due to: (i) a decrease in
room revenues of $2 for the 1995 Hotels; (ii) an increase in room
revenues of $1,626 for the 1996 Acquired Hotels (including $1,055 for
the Newly Developed Hotels); and (iii) room revenues of $2,772 for
the 1997 Acquired Hotels.
<PAGE 17>
Repairs and maintenance expense declined as a percentage of total
revenue, in part because of the timing of certain costs which are
expected to occur during the fourth quarter of 1997, and in part
because of the nature of certain fixed costs which generally do not
vary as a percentage of revenues. Management fees decreased to 1.1%
of total revenues in 1997 from 1.5% of total revenues in 1996, as a
result of a lower proportion of hotels and total revenues under third
party management in 1997 than 1996 and also as a result of lower
profits from hotels under management in 1997 than 1996.
The increase in net income was generally a result of: (i) the
increase in profits from a higher volume of revenues; (ii) temporary
savings from repairs and maintenance expenses which are expected to
be incurred during the fourth quarter of 1997; and (iii) a lesser
portion of profitable operations under third party management in 1997
than in 1996.
ACTUAL - NINE MONTHS ENDED SEPTEMBER 30, 1997 VS ACTUAL - NINE MONTHS
ENDED SEPTEMBER 30, 1996
The following table sets forth certain historical financial
information for the periods indicated:
<TABLE>
<CAPTION>
Nine Months Nine Months
Ended Ended Change
September 30, September 30,
1997 1996 $ %
-------------- -------------- --------------
<S> <C> <C> <C> <C>
Revenue:
Room $58,911 94.5% $43,129 95.6% $15,782 36.6%
Food and beverage 2,123 3.4% 1,024 2.3% 1,099 107.3%
Other, net 1,179 1.9% 889 2.0% 290 32.6%
Interest income 129 0.2% 75 0.1% 54 72.0%
-------------- -------------- --------------
Total revenue 62,342 100.0% 45,117 100.0% 17,225 38.2%
-------------- -------------- --------------
Expenses:
Property operating
expenses 21,264 34.1% 15,184 33.7% 6,080 40.0%
Repairs and maintenance 2,823 4.5% 2,259 5.0% 564 25.0%
Food and beverage 1,512 2.4% 796 1.8% 716 89.9%
General and
administrative 1,860 3.0% 1,471 3.2% 389 26.4%
Franchise costs 5,376 8.6% 3,765 8.3% 1,611 42.8%
Management fees 909 1.5% 976 2.2% (67) (6.9%)
Percentage lease
payments 27,098 43.5% 19,721 43.7% 7,377 37.4%
-------------- -------------- --------------
Total expenses 60,842 97.6% 44,172 97.9% 16,670 37.7%
-------------- -------------- --------------
Net income $ 1,500 2.4% $ 945 2.1% $ 555 58.7%
============== ============== ==============
</TABLE>
The increase of $17,225 in total revenue and $16,670 in total
expenses is primarily due to the operation of a greater number of
hotels for the nine months ended September 30, 1997 as compared with
the same period of 1996.
The increase of $15,782 in room revenues was due to: (i) an increase
in room revenues of $678, for the 1995 Hotels; (ii) an increase in
room revenues of $11,606 for the 1996 Acquired Hotels (including
$4,901 from the Newly Developed Hotels); and (iii) room revenues of
$3,498 for the 1997 Acquired Hotels. Food and beverage revenue
increased $1,099 primarily due to the acquisition of a full service
hotel in May 1996.
<PAGE 18>
Repairs and maintenance expense declined as a percentage of total
revenue, in part because of the timing of certain costs which are
expected to occur during the fourth quarter of 1997, and in part
because of the nature of certain fixed costs which generally do not
vary as a percentage of revenues. Food and beverage expense
increased $716 primarily due to the acquisition of a full-service
hotel in May 1996. General and administrative expense declined as a
percentage of total revenue, primarily because certain fixed costs do
not vary as a percentage of revenues. Management fees decreased to
1.5% of total revenues in 1997 from 2.2% of total revenues in 1996,
primarily as a result of a lower proportion of hotels and total
revenues under third party management in 1997 than 1996.
The increase in net income was generally a result of: (i) the
increase in profits from a higher volume of revenues; (ii) temporary
savings from repairs and maintenance expenses which are expected to
be incurred during the fourth quarter of 1997; (iii) economies noted
above relating to general and administrative expenses; and (iv) a
lesser portion of profitable operations under third party management
in 1997 than in 1996; offset in part by (v) increases in food and
beverage costs from the full-service hotel operation of one hotel
that was acquired in May 1996.
LIQUIDITY AND CAPITAL RESOURCES
The Company finances its operations from operating cash flow, which
is principally derived from Percentage Leases. For the nine months
ended September 30, 1997, cash flow provided by operating activities
was $18,454 and funds from operations, which is equal to net income
before minority interest, plus depreciation, less preferred
dividends, was $20,538. Under Federal income tax law provisions
applicable to REITs, the Company is required to distribute at least
95% of its taxable income to maintain its tax status as a REIT.
During the first nine months of 1997, the Company declared
distributions of $14,076 to its common shareholders and $366 to its
preferred shareholders. Because the Company's cash flow from
operating activities is expected to exceed its taxable income due to
depreciation and amortization expenses, the Company expects to be
able to meet its distribution requirements out of cash flow from
operating activities.
The Company's net cash used in investing activities for the nine
months ended September 30, 1997 totaled $57,988, including $39,750
related to the acquisition of the 1997 Acquired Hotels, $6,676 for
hotel renovations primarily of the 1996 Acquired Hotels, and $11,227
for the development of four new extended-stay hotels and one limited-
service hotel, which are expected to cost approximately $50,000. The
development of these hotels is expected to be completed during the
first and second quarters of 1998. The total cost of the 1997
Acquired Hotels was $50,182 including $39,750 in cash and $10,432 in
WINN Limited Partnership units.
The Company plans to spend approximately $8,500 to renovate certain
of its recently acquired Current Hotels during the next twelve
months. These expenditures are in addition to the reserve of 5% of
room revenues for its limited-service hotels and 7% of room revenues
and food and beverage revenues from its full-service hotels which the
Company is required to set aside under its Percentage Leases for
periodic capital improvements and the refurbishment and replacement
of furniture, fixtures and equipment at its Current Hotels. In the
nine months ended September 30, 1997, the Company set aside $3,130
for such reserves. These reserves are in addition to amounts spent
on normal repairs and maintenance which have approximated 4.8% and
5.2% of room revenues for the nine months ended September 30, 1997
and 1996, respectively, and are paid by the Lessee.
The Company's net cash provided by financing activities for the nine
months ended September 30, 1997 totaled $40,092, primarily
attributable to net proceeds from the issuance of Preferred Stock of
<PAGE 19>
$71,866, offset by a net decrease of $18,319 in the line of credit
borrowings, the payment of distributions to shareholders of $12,417,
and to minority interest of $1,148.
The Company has collateralized a portion of its $125,000 line of
credit with 28 of its Current Hotels. As of September 30, 1997 there
was $94,447 available for borrowing ("Line Availability"), of which
$24,481 was outstanding. The Line Availability is calculated
quarterly, and increases if cash flow attributable to the collateral
hotels increases and/or the Company adds additional hotels as
collateral. The Company's Articles of Incorporation limit its total
amount of indebtedness to 45% of the purchase prices paid by the
Company for its investments in hotel properties, as defined. As of
September 30, 1997, the Company had additional borrowing capacity
under the debt limitation of approximately $190,000 assuming it
invests all borrowings in additional hotels.
Under an arrangement with Promus Hotels, Inc. ("Promus") the Company
has an agreement to acquire a 123-suite Homewood Suites hotel being
developed by Promus in Richmond, Virginia. The Company expects to
acquire this hotel upon its completion, which Promus estimates will
occur during the first quarter of 1998, for a purchase price
approximating Promus' development cost, estimated to be $8,600.
Conditions to the Company's obligation to purchase include its
approval of the building specifications and Promus' completion of
construction within certain cost limitations and by a specified
delivery date. Pursuant to the arrangement, Promus has agreed to
invest $1,845 in the Company's Common Stock (at the then-current
market price per share), in connection with the purchase of this
hotel.
The Company intends to acquire and develop additional hotel
properties, including those described herein, that meet its
investment criteria and is continually evaluating acquisition
opportunities. It is expected that future hotel acquisitions and
development will be financed, in whole or in part, from additional
follow-on offerings, from borrowings under the line of credit, from
joint venture agreements, and/or from the issuance of other debt or
equity securities. There can be no assurances that the Company will
acquire any additional hotels, or that any hotel development will be
undertaken, or if commenced, that it will be completed on schedule or
on budget. Further, there can be no assurances that the Company will
be able to obtain any additional financing.
SEASONALITY
The hotels' operations historically have been seasonal in nature,
reflecting higher REVPAR during the second and third quarters. This
seasonality and the structure of the Percentage Leases, which
provide for a higher percentage of room revenues above the minimum
equal quarterly levels to be paid as Percentage Rent, can be expected
to cause fluctuations in the Company's quarterly lease revenue under
the Percentage Leases.
FORWARD LOOKING STATEMENTS
This report contains certain "forward looking" statements within the
meaning of Section 21E of the Securities Exchange Act of 1934, as
amended, including, but not limited to, those paragraphs relating to
development and acquisition of hotels in this section. These
statements represent the Company's judgment and are subject to risks
and uncertainties that could cause actual operating results to differ
materially from those expressed or implied in the forward looking
statements. Important factors that could cause actual results to
differ include, but are not limited to the following (i) risks
associated with the Company's acquisition of hotels with little or no
operating history, including the risk that such hotels will not
achieve the level of revenue assumed by the Company in calculating
the respective Percentage Rent formula; (ii) development risks,
including risk of construction delay, cost overruns,
<PAGE 20>
receipt of zoning, occupancy and other required governmental permits
and authorizations and the incurrence of development costs in
connection with projects that are not pursued through completion;
and (iii) factors identified in the Company's filings with the
Securities and Exchange Commission, including the factors listed in
the Company's Registration Statement on Form S-3 filed with the
Securities and Exchange Commission on August 1, 1997.
<PAGE 21>
PART II - OTHER INFORMATION
Item 2. Changes in Securities
On September 11, 1997, the Company issued 3,000,000 shares
of 9.25% Series A Cumulative Preferred Stock ($25
liquidation preference per share plus cumulative unpaid
distributions). The Series A Preferred Stock will, with
respect to dividend rights and rights upon liquidation,
dissolution or winding up of the Company, rank (i) senior
to all classes or series of Common Stock of the Company,
and to all equity securities ranking junior to the Series A
Preferred Stock with respect to dividend rights or rights
upon liquidation, dissolution or winding up of the Company;
(ii) on a parity with all equity securities issued by the
Company the terms of which specifically provide that such
equity securities rank on a parity with the Series A
Preferred Stock with respect to dividend rights or rights
upon liquidation, dissolution or winding up of the Company;
and (iii) junior to all existing and future indebtedness of
the Company. The term "equity securities" does not include
convertible debt securities, which will rank senior to the
Series A Preferred Stock prior to conversion.
Item 5. Other Information
On August 19, 1997, the Company announced that Philip R.
Alfano would resign as Chief Financial Officer of the
Company to pursue personal interests. Mr. Alfano's
resignation became effective October 3, 1997. The Company
is currently in the process of searching for a new Chief
Financial Officer.
On October 9, 1997, the Company announced the appointment
of Brent V. West to the newly created position of
Controller. Mr. West assumes the day-to-day responsibility
of overseeing all of the financial operations of the REIT.
On October 14, 1997, the Company announced that David C.
Sullivan, Executive Vice President and Chief Operating
Officer of Promus Hotel Corporation, has been appointed to
the Company's Board of Directors. Mr. Sullivan will serve,
effective January 1, 1998, after his retirement from Promus
Hotel Corporation.
Item 6. Exhibits and Reports on Form 8-K.
27.1 Financial Data Schedule (For SEC use only)
(b) Reports on Form 8-K.
(1) The Company filed a report on Form 8-K dated July
11, 1997 reporting the Second Amended and
Restated Agreement of Limited Partnership of WINN
Limited Partnership, of which the Company
currently is the Sole General Partner, became
effective. A copy of the Second Amended
Agreement was attached as Exhibit 4.1.
<PAGE 22>
(2) The Company filed a report on Form 8-K dated
September 8, 1997 reporting the public offering
of 3,000,000 shares of the Company's 9.25% Series
A Cumulative Preferred Stock, par value $.01 per
share. Certain items of the Form 8-K were
incorporated by reference into the Company's
Registration Statement on Form S-3.
<PAGE 23>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
WINSTON HOTELS, INC.
Date November 14, 1996 /s/Robert W. Winston, III
---------------------- --------------------------------
Robert W. Winston, III
Chief Executive Officer
and President
Date November 14, 1997 /s/ Brent V. West
---------------------- --------------------------------
Brent V. West
Controller (Principal Financial
Officer)
<PAGE 24>
WINSTON HOTELS, INC.
FORM 10-Q for the quarter ended September 30, 1997
EXHIBIT INDEX
Exhibit
Number Description of Exhibit
27.1 Financial Data Schedule (For SEC use only)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 30, 1997 AND THE
UNAUDITED CONSOLIDATED STATEMENT OF INCOME FOR THE THREE MONTHS ENDED
SEPTEMBER 30, 1997 AND IS QUALIFIED IN ITS ENTIRITY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 792
<SECURITIES> 0
<RECEIVABLES> 7,596
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 257,885
<DEPRECIATION> 18,690
<TOTAL-ASSETS> 268,878
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
30
<COMMON> 162
<OTHER-SE> 268,686
<TOTAL-LIABILITY-AND-EQUITY> 268,878
<SALES> 10,328
<TOTAL-REVENUES> 10,406
<CGS> 0
<TOTAL-COSTS> 4,050
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 977
<INCOME-PRETAX> 5,379
<INCOME-TAX> 0
<INCOME-CONTINUING> 5,379
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,889
<EPS-PRIMARY> 0.28
<EPS-DILUTED> 0
</TABLE>
