<PAGE> 1
================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 1-14236
FelCor Lodging Trust Incorporated
(Exact name of registrant as specified in its charter)
MARYLAND 75-2541756
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
545 E. JOHN CARPENTER FRWY., SUITE 1300, IRVING, TEXAS 75062
(Address of principal executive offices) (Zip Code)
(972) 444-4900
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
<TABLE>
<CAPTION>
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
------------------- ----------------------
<S> <C>
COMMON STOCK NEW YORK STOCK EXCHANGE, INC.
$1.95 SERIES A CUMULATIVE CONVERTIBLE PREFERRED STOCK NEW YORK STOCK EXCHANGE, INC.
DEPOSITARY SHARES REPRESENTING 9% SERIES B CUMULATIVE
REDEEMABLE PREFERRED STOCK NEW YORK STOCK EXCHANGE, INC.
</TABLE>
Securities registered pursuant to Section 12(g) of the Act:
NONE
(Title of class)
Indicate by check mark whether the registrant (i) 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 (ii) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of the common equity securities of the
registrant held by non-affiliates of the registrant, as of March 15, 2000, was
approximately $707 million.
As of March 15, 2000, the registrant had issued and outstanding 55,577,407
shares of Common Stock.
DOCUMENTS INCORPORATED BY REFERENCE
NONE
================================================================================
<PAGE> 2
FELCOR LODGING TRUST INCORPORATED
INDEX
<TABLE>
<CAPTION>
FORM 10-K
REPORT
ITEM NO. PAGE
- -------- ---------
<S> <C> <C>
PART I
1. Business...............................................................................................1
2. Properties........................................................................................... 14
3. Legal Proceedings.....................................................................................20
4. Submission of Matters to a Vote of Security Holders...................................................20
PART II
5. Market for Registrant's Common Equity and Related Stockholder Matters.................................21
6. Selected Financial Data...............................................................................23
7. Management's Discussion and Analysis of Financial Condition and Results of Operations.................24
7A. Quantitative and Qualitative Disclosures About Market Risk............................................37
8. Financial Statements and Supplementary Data...........................................................37
9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure..................37
PART III
10. Directors and Executive Officers of the Company ......................................................38
11. Executive Compensation................................................................................42
12. Security Ownership of Certain Beneficial Owners and Management........................................45
13. Certain Relationships and Related Transactions........................................................47
PART IV
14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K......................................49
</TABLE>
<PAGE> 3
PART I
ITEM 1. BUSINESS
FelCor Lodging Trust Incorporated ("FelCor"), a Maryland corporation,
is one of the nation's largest hotel real estate investment trusts ("REIT"). At
December 31, 1999, FelCor owned interests in 188 hotels with nearly 50,000 rooms
and suites (collectively the "Hotels") through its greater than 95% equity
interest in FelCor Lodging Limited Partnership (the "Operating Partnership").
FelCor, the Operating Partnership, and their subsidiaries are herein referred
to, collectively, as the "Company." The Company owns 100% interests in 163 of
the Hotels, a 90% or greater interest in entities owning seven hotels, a 60%
interest in an entity owning two hotels and 50% interests in separate entities
that own 16 hotels. The Hotels are located in the United States (35 states) and
Canada, with concentrations in Texas (41 hotels), California (20 hotels),
Florida (18 hotels) and Georgia (15 hotels).
The Company is the owner of the largest number of Embassy Suites(R),
Crowne Plaza(R), Holiday Inn(R), and independently owned Doubletree(R) branded
hotels in the world. The following table provides a schedule of the Hotels, by
brand, at December 31, 1999:
<TABLE>
<CAPTION>
BRAND TOTAL
----- -----
<S> <C>
Embassy Suites 58
Holiday Inn 44
Doubletree and Doubletree Guest Suites(R) 16(1)
Crowne Plaza and Crowne Plaza Suites(R) 18
Holiday Inn Select(R) 10
Sheraton(R)and Sheraton Suites(R) 10
Hampton Inn(R) 9
Holiday Inn Express(R) 5
Fairfield Inn(R) 5
Harvey Hotel(R) 4
Independents 3
Courtyard by Marriott(R) 2
Four Points by Sheraton(R) 1
Hilton Suites(R) 1
Homewood Suites(R) 1
Westin(R) 1
Total Hotels 188
</TABLE>
-------------
(1) On January 1, 2000, two of these Doubletree Guest Suites
hotels were converted to the Embassy Suites brand.
The Company seeks to increase operating cash flow through both internal
growth and selective acquisitions, while maintaining a flexible and conservative
capital structure. In addition to renovating, redeveloping and repositioning the
Company's acquired hotels, the Company may seek to acquire new upscale
properties that will benefit from affiliation with one of the premium brands
available to the Company through our strategic brand owner and manager
relationships with Hilton Hotels Corporation ("Hilton"), Bass Hotels & Resorts
Inc. ("Bass") and Starwood Hotels & Resorts Worldwide, Inc. ("Starwood").
In support of this strategy, on July 28, 1998, the Company merged
Bristol Hotel Company into FelCor, acquiring its 107 primarily full-service
hotels (the "Merger"). These hotels added more than 28,000 rooms and suites to
the Company's portfolio, more than doubling the Company's size. The merger also
provided diversification, both geographically and by asset class, by adding
hotels in many of our key markets and broadening our portfolio in the
full-service, upscale and midscale hotel markets. During 1998, the
-1-
<PAGE> 4
Company purchased 16 hotels in addition to those acquired in the merger. During
1999, the Company sold six of the hotels acquired in the Merger that did not
meet our investment criteria and acquired a 50% joint venture interest in one
hotel.
The Leases. To enable FelCor to satisfy certain requirements for
qualification as a REIT, generally the Company cannot operate the hotels in
which it invests. Accordingly, at December 31, 1999, the Company leased 85
hotels to DJONT Operations, L.L.C. and its consolidated subsidiaries ("DJONT")
and 100 hotels to Bristol Hotels & Resorts and its consolidated subsidiaries
("Bristol"), which succeeded to the hotel operating business of Bristol Hotel
Company prior to its merger into FelCor. On February 28, 2000, bass plc and
Bristol jointly announced a definitive merger agreement pursuant to which Bass
plc expects to acquire Bristol during April 2000. Three of the hotels were not
leased at December 31, 1999 (on January 1, 2000, a lease on one of these hotels
became effective between the Company and DJONT).
The Company's leases generally have initial terms of five to 15 years
and provide for rent equal to the greater of a minimum base rent or a percentage
rent based on room and suite revenues, food and beverage revenues, food and
beverage rents and, in certain instances, other hotel revenues. Such
arrangements are generally referred to as Percentage Leases.
The Lessees. Bristol, which is a publicly traded company, is one of the
largest independent hotel operating companies in North America and operated the
largest number of Bass-branded hotels in the world. DJONT is a private company
controlled by Thomas J. Corcoran, Jr., the President, Chief Executive Officer
and a director of FelCor.
Bristol manages all of the hotels leased by it, plus one of the three
FelCor hotels that were not leased at December 31, 1999. DJONT has entered into
management agreements pursuant to which 72 hotels leased by it are managed by
subsidiaries of Hilton, ten are managed by subsidiaries of Starwood and three
are managed by two unrelated management companies.
THE INDUSTRY
The United States hotel industry profitability has improved each year
since 1992, the longest sustained growth in history. According to
PricewaterhouseCoopers LLP's December 1999/January 2000 Lodging Research
Journal, after a period of extended unprofitability in the late 1980's and early
1990's, during which time the increase in supply of new hotel rooms
significantly outpaced growth in room demand, lodging industry revenues
increased every year from 1992 through 1999 and is expected to increase again in
2000. The percentage growth in room demand exceeded percentage growth in new
room supply from 1992 through 1996. While 1997 and 1998 experienced the highest
number of new room starts in the prior 10 years, 1999 showed a decline in new
room starts from 1997-1998 levels. In spite of the above-average increases in
room supply, according to PricewaterhouseCoopers LLP's December 1999/January
2000 Lodging Research Journal, annual revenue per available room has grown each
year from 1995 through 1999 and is expected to continue to grow in 2000.
Smith Travel Research, another leading provider of industry data,
classifies hotel chains into five distinct categories: Upper Upscale, Upscale,
Midscale with Food & Beverage, Midscale Without Food & Beverage, and Economy. We
remain focused primarily on properties in the Upper Upscale, Upscale, and
Midscale With Food & Beverage categories, from which we derived approximately
97% of our revenues in 1999. PricewaterhouseCoopers LLP's December 1999/January
2000 Lodging Research Journal projects that for 2000, RevPAR growth will be 2.4%
for Upper Upscale hotels, 2.9% for Upscale hotels, and 3.0% for hotels in the
Midscale With Food & Beverage category. The same publication projects 2000
changes in supply and demand for each segment: Upper Upscale hotels, supply
growth of 4.3% with a demand growth of 3.2%; Upscale hotels, supply growth of 7%
with a demand growth of 7.3%; and hotels in the Midscale With Food & Beverage
category with no change in supply growth and a decline in demand of 0.7%.
-2-
<PAGE> 5
BUSINESS STRATEGY
The Company seeks to increase operating cash flow through active asset
management. In addition to actively overseeing the operation of its hotels by
the Lessees and their managers, the Company applies its asset management
expertise to the renovation, redevelopment and rebranding of its hotels, to the
maintenance of strong strategic relationships with its brand owners and
managers, and to maintaining financial flexibility and a conservative balance
sheet.
HOTEL RENOVATION, REDEVELOPMENT AND REBRANDING
The Company has historically differentiated itself from many of its
competitors by:
o the practice of upgrading, renovating and/or redeveloping most
of the Company's acquired hotels to enhance their competitive
position and, in certain instances, rebranding them to improve
their revenue generating capacity; and
o the ongoing program for the maintenance of our upgraded
hotel's, which includes:
o the contribution of at least 4% of annual room and
suite revenue for the DJONT hotels and 3% of total
annual hotel revenue for the Bristol hotels for
routine capital replacements and improvements; and
o ensuring the Lessees' adherence to a maintenance and
repair program amounting to approximately 4.5% of
annual hotel revenues.
For information regarding the Company's renovation, redevelopment and
rebranding activities during 1999 and 1998, see "Item 7. Management's Discussion
and Analysis of Financial Condition and Results of Operations-Renovations,
Redevelopments and Rebrandings" contained elsewhere in this Annual Report on
Form 10-K for the year ended December 31, 1999.
MAINTENANCE OF STRONG STRATEGIC RELATIONSHIPS
The Company benefits from strategic brand owner and manager
relationships with Hilton (Embassy Suites, Doubletree and Hilton Suites), Bass
and Bristol (Crowne Plaza and Holiday Inn) and Starwood (Sheraton and Westin).
o Hilton, which acquired Promus Hotel Corporation on November
30, 1999, now has a hotel portfolio of more than 1,750 hotels
with more than 300,000 rooms in 50 countries, and is now the
largest operator of full-service, all-suite hotels in the
United States. In addition to its Hilton and Conrad
International-branded hotels, Hilton now owns the Embassy
Suites, Doubletree and Doubletree Guest Suites brands and
manages 72 of our hotels. As a result of its acquisition of
Promus, Hilton acquired an equity interest in our Company
having an aggregate value of approximately $25 million at
December 31, 1999, and it became a 50% partner in joint
ventures with us in the ownership of 12 hotels and the holder
of a 10% equity interest in certain subsidiaries owning six
hotels. The relationship with Promus and its Embassy Suites
brand provided the foundation for our historical growth, and
we expect to expand our relationship with Hilton, as the
successor to Promus.
o Bass operates or franchises more than 2,800 hotels worldwide,
with over 457,000 guest rooms in more than 90 countries around
the world. Among the brands owned by Bass are Crowne Plaza,
Holiday Inn, Holiday Inn Select, Holiday Inn Express and
Inter-Continental. Bass, together with its subsidiaries,
beneficially owns approximately 49.6% of the stock of Bristol
and have announced a definitive merger agreement pursuant to
which they expect to acquire the remaining shares of Bristol
during April 2000. Subsidiaries of Bass also own approximately
8.8% of FelCor's outstanding common stock ("Common Stock"). In
addition, subsidiaries of Bass own an aggregate of 4,713,185
units of limited partner interest in the Operating Partnership
("Units"). Under certain circumstances, these Units may be
redeemed for a like number of shares of FelCor
-3-
<PAGE> 6
Common Stock. If so redeemed, Bass and its affiliates would
own approximately 16.0% of FelCor's Common Stock. Bristol is
one of the largest hotel operating companies in North America
and operates the largest number of Bass-branded hotels in the
world. On February 28, 2000, Bass and Bristol jointly
announced a definitive merger agreement pursuant to which Bass
expects to acquire the remaining shares of Bristol during
April 2000.
o Starwood is one of the world's largest hotel operating
companies. Directly and through subsidiaries, Starwood owns,
leases, manages or franchises approximately 716 hotels with
more than 217,000 rooms in 70 countries. The Company's
strategic alliance with Starwood, coupled with the purchase of
seven Sheraton hotels in 1997, provided the Company with its
initial entry into the upscale, full-service, non-suite hotel
market. Most recently, in October 1999, the Company formed a
joint venture with Starwood, owned 50% by us and 50% by
Starwood, which acquired the 437-room Sheraton Premier Hotel
in Tysons Corner, Virginia.
MAINTENANCE OF FINANCIAL FLEXIBILITY
The Company is committed to maintaining substantial financial
flexibility. FelCor's Board of Directors has authorized the repurchase of up to
$300 million of FelCor's Common Stock. Through March 15, 2000, the Company has
completed the repurchase of approximately 7.8 million shares for $134 million at
an average purchase price of $17.22 per share.
At December 31, 1999, the consolidated indebtedness of the Company was
approximately 40% of its investment in hotels, at cost, and its interest
coverage ratio was 3.3-to-1. In funding its growth, the Company has used a broad
selection of financing sources to minimize the cost of capital, including public
equity, collateralized mortgage-backed securities, public and private debt, and
asset divestitures. We believe that our capital structure, following the
completion of our share repurchases, will continue to be among the most
conservative in the hotel REIT industry. We believe our financial flexibility
should enable us to pursue selective expansion opportunities and to take
advantage of renovation, redevelopment and rebranding opportunities to help us
improve our hotels' competitive position. Our ability to make significant future
acquisitions will be largely dependent upon the Company's ability to obtain
additional equity financing.
FINANCING TRANSACTIONS
On March 4, 1999, the Company completed a $63 million first mortgage
term loan. This loan is collateralized by three hotels, bears interest at 200
basis points over LIBOR, matures in February 2003 and amortizes over 25 years.
The proceeds from this loan were used to pay off a $44 million mortgage loan due
December 2002 and to acquire ownership of land previously held under ground
leases.
On April 1, 1999, the Company entered into a $375 million term loan
("the Senior Term Loan"), increasing its credit facilities to $1.2 billion,
consisting of the Senior Term Loan which matures in March 2004 and an $850
million revolving line of credit ("Line of Credit") which matures in June 2001.
The Line of Credit, Senior Term Loan and the Company's publicly traded term
notes are collateralized by stock and partnership interests in certain
subsidiaries of FelCor. The financial covenants in the Senior Term Loan are
consistent with those in the Company's existing Line of Credit. If the Company
achieves investment grade credit ratings from the applicable rating agencies, or
when the Senior Term Loan is retired, the stock and partnership interest
collateral will be released. The proceeds of the Senior Term Loan were used to
prepay a $250 million term loan, which was to mature on December 31, 1999, and
initially to reduce borrowings under the Company's Line of Credit. Interest
payable on borrowings under the credit facilities is variable, determined from a
ratings and leverage-based pricing matrix, ranging from 87.5 basis points to 275
basis points above LIBOR (30-day LIBOR at December 31, 1999, was 5.83%). The
interest rate spread on the Line of Credit ranged from 150 to 162.5 basis points
in 1999. Additionally, the Company is required to pay an unused commitment fee
on the Line of Credit which is variable, determined from a ratings-based pricing
matrix, ranging from 20 to 30 basis points. In 1999 and 1998, the Company wrote
off approximately $1.1 million and $2.5 million, respectively, of deferred
financing fees relating to the term loan of $250 million and the previous
unsecured credit facility of $550 million, respectively. For the years ended
December 31, 1999, 1998, and 1997, the Company paid interest on its unsecured
credit facilities at weighted average interest rates of 7.1%, 7.1% and 7.6%,
respectively. At December 31, 1999, the Company had borrowing capacity under its
Line of Credit of $186 million.
-4-
<PAGE> 7
On April 1, 1999, the Company also closed a 10-year, $100 million
mortgage loan. This loan is non- recourse (with certain exceptions), is
collateralized by seven Embassy Suites hotels, carries a fixed rate coupon of
7.54%, matures in April 2009 and amortizes over 25 years. The proceeds from this
loan were used to reduce outstanding borrowings under the Company's Line of
Credit.
On May 13, 1999, the Company closed a 10-year, $75 million mortgage
loan. This loan is non- recourse (with certain exceptions), is collateralized by
six Embassy Suites hotels, carries a fixed rate coupon of 7.55%, matures in June
2009 and amortizes over 25 years. The proceeds from this loan were used
initially to reduce outstanding borrowings under the Company's Line of Credit.
The Line of Credit and the Senior Term Loan contain various affirmative
and negative covenants, including limitations on total indebtedness, total
secured indebtedness, and cash distributions, as well as the obligation to
maintain a certain minimum tangible net worth and certain minimum interest and
debt service coverage ratios. At December 31, 1999, the Company was in
compliance with all such covenants.
FelCor had approximately $186 million in borrowing capacity under its
Line of Credit at December 31, 1999 and also had the ability to issue up to $946
million of Common Stock, Preferred Stock, debt securities and/or Common Stock
warrants under shelf registration statements previously declared effective.
Given the current market prices of its equity securities, FelCor has no present
intention to effect a public offering of equity securities in the near future.
HOTEL OPERATING PERFORMANCE
Upscale and full service hotels like Embassy Suites, Crowne Plaza,
Holiday Inn and Holiday Inn Select, Doubletree Guest Suites, and Sheraton and
Sheraton Suites hotels account for approximately 97% of the Company's Percentage
Lease revenue. As a result of the renovation and rebranding of hotels,
approximately 98% of Percentage Lease revenue for 2000 is expected to be derived
from upscale and full service hotels.
For a detailed discussion of the Company's hotel operating performance,
see "Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations-Results of Operations-The Hotels-Actual" contained
elsewhere in this Annual Report on Form 10-K for the year ended December 31,
1999.
SEASONALITY
The Hotels' operations historically have been seasonal in nature,
reflecting higher occupancy rates primarily during the first three quarters of
each year. This seasonality can be expected to cause fluctuations in the
Company's quarterly lease revenue, particularly during the fourth quarter, to
the extent that it receives Percentage Rent. To the extent cash flow from
operations is insufficient during any quarter, due to temporary or seasonal
fluctuations in lease revenue, the Company expects to utilize other cash on hand
or borrowings under the Line of Credit to make distributions to its equity
holders.
COMPETITION
The hotel industry is highly competitive. Each of the Company's hotels
is located in a developed area that includes other hotel properties and competes
for guests primarily with other full-service hotels in its immediate vicinity
and secondarily with other hotel properties in its geographic market. An
increase in the number of competitive hotel properties in a particular area
could have a material adverse effect on the occupancy, average daily rate
("ADR") and revenue per available room or suite ("RevPAR") of the Company's
hotels in that area. The Company believes that brand recognition, location, the
quality of the hotel and services provided, and price are the principal
competitive factors affecting the Company's hotels.
The Company competes for investment opportunities with other entities,
some of which have substantially greater financial resources than the Company.
These larger entities may generally be able to accept more risk than the Company
can prudently manage. Competition may generally reduce the number of
-5-
<PAGE> 8
suitable investment opportunities offered to the Company and may increase the
bargaining power of owners seeking to sell their hotels.
PROPERTY TAXES
Each Hotel is subject to real and personal property taxes, which are
borne by the Company under the Percentage Leases. During 1999, real and personal
property taxes incurred by the Company amounted to $52.1 million, or 10.3 % of
the Company's total revenues. Real and personal property taxes on the Hotels may
increase as property tax rates change and as the properties are assessed or
reassessed by taxing authorities. FelCor's Vice President, Taxes, Michael L.
Hunter and his staff, work with the numerous taxing authorities, both directly
and through independent agents, to assure that the Hotels are fairly assessed
and to minimize the Company's tax liabilities.
TAX STATUS
FelCor has elected to be taxed as a REIT under Sections 856 through 860
of the Internal Revenue Code of 1986, as amended (the "Code"), commencing with
its initial taxable year ending December 31, 1994. As a REIT, FelCor generally
is not subject to federal income taxation at the corporate level, on its taxable
income that is distributed to its shareholders. The Company may, however, be
subject to certain state and local taxes on its income and property. A REIT is
subject to a number of organizational and operational requirements, including a
requirement that it distribute annually at least 95% of its taxable income (this
will change to 90% beginning in 2001). In connection with FelCor's election to
be taxed as a REIT, FelCor's Charter imposes restrictions on the ownership and
transfer of shares of its Common Stock. FelCor has adopted the calendar year as
its taxable year.
REIT MODERNIZATION ACT
On December 17, 1999, the provisions of the REIT Modernization Act were
enacted into law. These provisions, which will become effective January 1, 2001,
will, among other things:
o reduce the percentage of taxable income required to be
distributed by a REIT from 95% to 90%, and
o subject to certain limitations, permit a REIT to own taxable
subsidiaries that engage in businesses previously prohibited
to a REIT, including, among other things, leasing hotels from
its parent hotel REIT, provided that the hotels in question
continue to be managed by unrelated third parties.
LESSEE OPERATIONS
At December 31, 1999, the Lessees leased all but three of the Hotels
under Percentage Leases, pursuant to which the Lessee is obligated to pay the
Company the greater of a minimum Base Rent or Percentage Rent based on a
percentage of revenues. See "Item 2. Properties" for additional information
regarding the terms of the Percentage Leases. The Lessees have entered into, and
are responsible for the payment of all fees under, the franchise licenses and
management agreements relating to the Hotels, may hold the liquor licenses
applicable to the Hotels, own and maintain the inventories required for the
operation of the Hotels, pay for normal maintenance and repair expenses, enter
into various operating, maintenance and service agreements with respect to the
Hotels, and are responsible for compliance with the license, management and
other agreements affecting hotel operations. In addition, the Lessees provide
asset management services to the Hotels, including the supervision of the
day-to-day operations of the Hotels by the management companies engaged to
manage such Hotels and the establishment and implementation of capital
expenditure programs.
Thomas J. Corcoran, the President, Chief Executive Officer and a
Director of the Company and Hervey A. Feldman, Chairman Emeritus of FelCor, as
the beneficial owners of an aggregate 50% common equity interest in DJONT, have
entered into an agreement with the Company pursuant to which they have agreed
that, through April 15, 2005, any distributions received by them from DJONT (in
excess of their tax liabilities with respect to the income of DJONT) will be
utilized to purchase Common Stock or Units from the Company in an underwritten
public offering or annually, at the then current market prices. The agreement
stipulates that Messrs. Feldman and Corcoran are restricted from selling the
stock so acquired for a period of two years from the date of purchase. RGC
Leasing, Inc., which owns the other 50% common equity interest in
-6-
<PAGE> 9
the Lessee, may elect to purchase Common Stock or Units upon similar terms, at
its option. Pursuant to this agreement, each of Messrs. Feldman and Corcoran
purchased 3,775 shares of Common Stock in December 1995. The Independent
Directors (as herein defined) may suspend or terminate such agreement at any
time.
DJONT, as a related third party, has elected to provide its audited
financial statements to the Company for inclusion elsewhere in this Form 10-K,
although such statements are not generally required to be disclosed. See "Index
to Financial Statements" at page F-1.
Bristol, which succeeded to the hotel operating business conducted by
Bristol Hotel Company prior to its July 1998 merger into FelCor, is an
independent publicly owned company whose common stock is traded on the New York
Stock Exchange. Bristol is required to file with the Securities and Exchange
Commission such financial statements and other information as may be required
under the Securities Exchange Act of 1934, as amended. Reference is made to
Bristol's filings with the Securities and Exchange Commission for information
relating to Bristol.
REPAIRS AND MAINTENANCE
During the year ended December 31, 1999, approximately $38.5 million
and $32.7 million was spent by the Lessees on routine repairs and maintenance at
the Hotels leased by DJONT and Bristol, respectively. This represents
approximately 4.6% of total hotel revenues.
EMPLOYEES
Mr. Corcoran entered into an employment agreement with the Company in
1994 that continues through 2000. None of FelCor's other executive officers has
an employment agreement with FelCor. In addition to Mr. Corcoran, the Company
had 48 other full-time employees at December 31, 1999. All persons employed in
the day-to-day operation of the Company's Hotels are employees of the management
companies engaged by the Lessees to operate such Hotels and are not employees of
the Company.
PERSONNEL AND OFFICE SHARING ARRANGEMENTS
The Company shares executive offices and certain employees with DJONT
and FelCor, Inc. (a private company controlled by Messrs. Feldman and Corcoran).
Each entity bears an allocated share of the costs thereof, including but not
limited to rent, compensation of certain personnel (other than Mr. Corcoran,
whose compensation is borne solely by the Company), office supplies, telephones
and depreciation of office furniture, fixtures and equipment. Any such
allocation of shared expenses to the Company is required to be approved by a
majority of the Independent Directors. During 1999, approximately $5.7 million
(approximately 89.5% of all allocable expenses) were paid by the Company under
this arrangement.
CAUTIONARY FACTORS THAT MAY AFFECT FUTURE RESULTS
CERTAIN STATEMENTS AND ANALYSES CONTAINED IN THIS ANNUAL REPORT ON FORM
10-K, IN FELCOR'S 1999 ANNUAL REPORT TO STOCKHOLDERS, OR THAT MAY IN THE FUTURE
BE MADE BY, OR BE ATTRIBUTABLE TO, THE COMPANY, MAY CONSTITUTE "FORWARD-LOOKING
STATEMENTS" WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT
OF 1995, AND CAN BE IDENTIFIED BY THE USE OF FORWARD-LOOKING TERMINOLOGY SUCH AS
"MAY," "WILL," "EXPECT," "ANTICIPATE," "ESTIMATE" OR "CONTINUE" OR THE NEGATIVE
THEREOF OR OTHER VARIATIONS THEREON OR COMPARABLE TERMINOLOGY. ALL OF SUCH
FORWARD-LOOKING STATEMENTS ARE BASED UPON PRESENT EXPECTATIONS AND ASSUMPTIONS
THAT MAY OR MAY NOT ACTUALLY OCCUR. THE FOLLOWING FACTORS CONSTITUTE CAUTIONARY
STATEMENTS IDENTIFYING IMPORTANT FACTORS, INCLUDING MATERIAL RISKS AND
UNCERTAINTIES, WITH RESPECT TO SUCH FORWARD-LOOKING STATEMENTS THAT COULD CAUSE
ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE REFLECTED IN SUCH FORWARD-LOOKING
STATEMENTS OR IN THE COMPANY'S HISTORICAL RESULTS. EACH OF THE FOLLOWING
FACTORS, AMONG OTHERS, COULD ADVERSELY AFFECT THE ABILITY OF THE COMPANY TO MEET
ITS CURRENT EXPECTATIONS.
Increases in Leverage and Floating Rate Debt; Inability to Retain Earnings
or Refinance Debt.
As a result of the Merger with Bristol Hotel Company, the Company's
leverage increased significantly during 1998. As a result of the Company's
aggressive renovation, redevelopment and rebranding program and its share
repurchases, its leverage also increased during 1999, and may increase further.
At December 31,
-7-
<PAGE> 10
1999, FelCor had approximately $1.8 billion in indebtedness, of which
approximately $464.0 million was collateralized, and consolidated debt equal to
approximately 40% of its investment in hotels, at cost. FelCor's ratio of EBITDA
to interest expense for the years ended December 31, 1999 and 1998 was 3.3-to-1
and 3.8-to-1, respectively. At December 31, 1999, FelCor had $695.8 million in
floating rate debt, or 37.9% of all FelCor indebtedness, that provided for the
payment of interest at floating rates. Most of this floating rate debt bears
interest at a rate equal to between 1.63% and 2.50% plus the 30-day LIBOR rate.
At December 31, 1999, the 30-day LIBOR rate was 5.83%. Changes in economic
conditions could result in higher interest rates, thereby increasing FelCor's
interest expense on its floating rate debt and reducing funds available for its
current renovation, redevelopment and rebranding plans, for future share
repurchases, and for distribution to FelCor's stockholders.
In order to qualify as a REIT, FelCor must distribute to its
stockholders, annually, at least 95% (90% effective in 2001) of its net taxable
income (excluding capital gains) and, accordingly, cannot retain any substantial
portion of its earnings to meet its capital needs. At December 31, 1999, FelCor
had $42.6 million in debt maturing prior to December 31, 2000 and $186 million
in borrowing capacity available under its existing Line of Credit. If FelCor
were to default in the payment of more than $10 million of its outstanding
indebtedness, cross default provisions under most of its credit facilities could
result in substantially all of FelCor's debt being declared immediately due and
payable. Should that occur, FelCor may be unable to refinance or repay such
indebtedness in full under such circumstances.
Dependence on Lessees' Hotel Operations.
FelCor's revenues currently and in the future will consist primarily of
rents received under its leases. The Lessees' payment of such rental obligations
is generally unsecured. As the lessee of 100 of the Bristol Hotels, Bristol had
a net worth of approximately $43.1 million at December 31, 1999, and is
obligated to maintain certain net worth and liquidity requirements. DJONT, which
leases 85 of the Hotels, has limited assets, derives its revenue solely from the
operation of FelCor's hotels and, at December 31, 1999, had a accumulated
deficit of approximately $13.1 million. However, DJONT or its subsidiaries have
the right to borrow from FelCor, Inc., Promus Hotels, Inc., Doubletree Hotel
Corporation, Lee & Urbahns, L.P. and ITT Sheraton Corporation (which have equity
interests in and/or are managers of hotels leased by DJONT), on a subordinated
basis and subject to certain limitations, up to an aggregate of approximately
$17.3 million to meet certain of its rental obligations. The Company will be
substantially dependent upon the successful operation of its hotels to enable
the Lessees (particularly DJONT) to meet their rental obligations under the
leases.
The leases with DJONT and Bristol have varying terms, generally no
longer than 15 years. At the expiration of the lease terms, the Company will be
required to negotiate renewals or seek replacement leases, which could adversely
affect its results of operations.
Conflicts of Interest
Certain FelCor Directors. As of December 31, 1999, DJONT leased 85 of
the Company's hotels. All of the voting interests (and a 50% common equity
interest) in DJONT are beneficially owned by Hervey A. Feldman and Thomas J.
Corcoran, Jr. The remaining 50% of the common equity interests in DJONT are non-
voting and are beneficially owned by the children of Charles N. Mathewson, a
Director of FelCor. Mr. Feldman is a co-founder and the Chairman Emeritus of
FelCor. Mr. Corcoran is a co-founder, President, Chief Executive Officer and
Director of FelCor.
All of the Bristol Hotels are leased to and/or managed by Bristol. No
officer or director of Bristol is also an officer or director of FelCor.
However, Donald J. McNamara, the Chairman of the Board of FelCor, is a principal
in a firm that controls the general partner of United/Harvey Holdings, L.P.
("United Harvey"), which beneficially owns approximately 39.5% of the stock of
Bristol. Five partnerships that own substantial equity interests in United
Harvey also own in the aggregate approximately 17.3% of FelCor's outstanding
Common Stock. In addition, Richard C. North joined FelCor's Board during 1998.
Mr. North is the Group Finance Director of the parent of Holiday Hospitality
Franchising, Inc. ("Holiday Hospitality"), a subsidiary of Bass plc. Holiday
Hospitality is the franchisor of most of the Bristol Hotels and, together with
its affiliates, beneficially owns approximately 49.6% of the stock of Bristol
and owns approximately 8.8% of FelCor's outstanding Common Stock. In connection
with the efforts of Bass to acquire Bristol, as announced on
-8-
<PAGE> 11
February 28, 2000, a Bass subsidiary (Bass America, Inc.) contributed 4,713, 185
shares of outstanding FelCor Common Stock held by it to the Operating
Partnership in exchange for a like number of Units of limited partner interest.
If these Units were to be redeemed for FelCor Common Stock, Bass and its
affiliates would own approximately 16.0% of FelCor's Common Stock. The exchange
by Bass of Common Stock for Units will not affect FelCor's FFO or earnings per
share, although it results in reducing FelCor's percentage ownership in the
Operating Partnership from approximately 95% to approximately 89%.
Issues may arise under the leases, franchise agreements and management
contracts, and in the allocation of acquisition and leasing opportunities, that
present conflicts of interests due to the relationship of these directors to the
companies with which they are or have been associated. As an example, any
decreases in lease rental rates payable by DJONT would benefit DJONT, in which
Messrs. Feldman and Corcoran and Mr. Mathewson's children have a direct economic
interest, at the expense of FelCor and its stockholders. In the event FelCor
enters into new or additional hotel leases or other transactions with Bristol,
the interests of Mr. McNamara and Mr. North, by virtue of their relationships to
significant investors in Bristol, may conflict with the interests of FelCor and
its stockholders. For example, any decrease in lease rental rates payable by
Bristol may decrease FelCor's profits to the benefit of Bristol. Also, as the
Company seeks to take advantage of the opportunity provided by the REIT
Modernization Act to acquire the Lessees, and/or the leases on the Hotels, the
personal interests of Messrs. Feldman, Corcoran, Mathewson, McNamara and North
may conflict with those of FelCor and its stockholders. It is anticipated that
any director who has a conflict of interest with respect to an issue presented
to the FelCor Board will abstain from voting upon that issue although he will
have no legal obligation to do so. FelCor has no provisions in its bylaws or
charter that require an interested director to abstain from voting upon an
issue, although each director will have a fiduciary duty of loyalty to FelCor.
There is a risk that, should an interested director vote upon an issue in which
he or one of his affiliates has an interest, his vote may reflect a bias that
could be contrary to the best interests of FelCor. In addition, even if an
interested director abstains in the actual vote, that director's participation
in the meeting and discussion of an issue in which he or companies with which he
is associated have an interest could influence the votes of other directors
regarding the issue.
No Arms-Length Bargaining on DJONT Percentage Leases. The terms of the
original leases between FelCor and DJONT were not negotiated on an arms-length
basis. Accordingly, these Percentage Leases may not reflect fair market values
or terms. However, the management of FelCor believes that the terms of these
leases are fair to FelCor. The rental terms of these leases were set based upon
historical financial information and projected operating performance of the
respective hotels. The other terms of the leases are typical of the provisions
found in other leases entered into in similar circumstances. The leases were
approved by a majority of the Independent Directors of FelCor at the time they
were entered into.
Adverse Tax Consequences to Certain Affiliates on a Sale of Certain
Hotels. Messrs. Corcoran and Mathewson may have additional tax liability if
FelCor sells its investments in six hotels acquired by FelCor in July 1994 from
partnerships controlled by these individuals. Consequently, the interests of
FelCor and of Messrs. Corcoran and Mathewson could be different in the event
that FelCor decided to consider a sale of any of these hotels. Decisions
regarding a sale of any of these six hotels must be made by a majority of the
Independent Directors of FelCor.
Restrictive Debt Covenants
At December 31, 1999, FelCor's unsecured Line of Credit and Senior Term
Loan provided for borrowings of up to an aggregate of $1.2 billion, of which
FelCor had borrowed approximately $1.0 billion. FelCor also had issued and
outstanding $298 million (net of discount) in principal amount of
publicly-traded senior term notes. The agreements governing FelCor's Line of
Credit, Senior Term Loan and senior notes contain various restrictive covenants,
including, among others, provisions restricting FelCor from incurring
indebtedness, making investments, engaging in transactions with stockholders and
affiliates, incurring liens, merging or consolidating with another person,
disposing of all or substantially all of its assets or permitting limitations on
its subsidiaries with respect to the payment of dividends or other amounts to
FelCor. In addition, these agreements require FelCor to maintain certain
specified financial ratios. Under the most restrictive of these provisions,
FelCor's maximum additional indebtedness that could be incurred for the
-9-
<PAGE> 12
acquisition of hotel properties would have been limited to approximately $989.5
million at December 31, 1999. These covenants also may restrict FelCor's ability
to engage in certain transactions. In addition, any breach of these limitations
could result in the acceleration of most of FelCor's outstanding indebtedness.
FelCor may not be able to refinance or repay this indebtedness in full under
such circumstances.
Matters That May Adversely Affect the Hotel Industry
Fewer Growth Opportunities. There has been substantial consolidation
in, and capital allocated to, the U.S. lodging industry since the early 1990s.
This has generally resulted in higher prices for hotels and fewer attractive
acquisition opportunities. The hotel REIT industry, including FelCor, has
suffered from declining stock prices over the past two years, limiting the
ability to raise additional equity capital at reasonable prices. An important
part of FelCor's historical growth strategy has been the acquisition and, in
many instances, the renovation and repositioning, of hotels at less than
replacement cost. Continued industry consolidation and competition for
acquisitions, and limitations on the availability of reasonably priced equity
capital, could adversely affect FelCor's future growth prospects. FelCor
competes for hotel investment opportunities and capital with other companies,
some of which have greater financial or other resources. Certain competitors may
be able to obtain capital at lower costs and to pay higher prices for properties
than FelCor.
Potential Adverse Effects on Hotel Operations. The Hotels owned by
FelCor are subject to all of the risks common to the hotel industry. These risks
could adversely affect hotel occupancy and the rates that can be charged for
hotel rooms, and generally include:
o The existence of competition from other hotels;
o The construction of more hotel rooms in a particular area than
needed to meet demand;
o The increase in energy costs and other travel expenses that
reduce business and leisure travel;
o The adverse effects of declines in general and local economic
activity; and
o The risks generally associated with the ownership of hotels
and real estate, as discussed in the following four paragraphs
and under "-- Matters That May Adversely Affect Real Estate
Ownership."
In addition, annual adjustments (based on changes in the Consumer Price Index)
are made to the Base Rent and the thresholds used to compute Percentage Rent
under the Percentage Leases. These adjustments, unless offset by increases in
hotel revenues, would reduce the amount of rent payable to FelCor under the
Percentage Leases and, consequently, FelCor's results of operations.
Competition. Each of FelCor's Hotels competes with other hotels in its
geographic area. A number of additional hotel rooms have been or may be built in
a number of the geographic areas in which the Hotels are located, which could
adversely affect the results of operations of these hotels. According to
PricewaterhouseCoopers LLP's December 1999/January 2000 Hospitality Directions,
total hotel room supply in the United States is expected to increase by 3.5% or
approximately 136,500 rooms, from 1999 to 2000, while the demand for hotel rooms
is expected to increase only 3.0% during the same period. Management believes
that most of the increase in United States hotel room supply has been in the
limited service or extended stay segments of the hotel industry, from which
FelCor derives approximately 5% of its revenues. An oversupply of hotel rooms,
regardless of market segment, could adversely affect both occupancy and rates in
the markets in which the Hotels are located. However, a significant increase in
the supply of midscale and upscale hotel rooms and suites, if demand fails to
increase proportionately, could have a more severe adverse effect on the
Company's operations.
Seasonality. The hotel industry is seasonal in nature. Generally, hotel
revenues are highest in the first three quarters of each year. Seasonality
causes quarterly fluctuations in FelCor's revenue. FelCor may be able to reduce,
but not eliminate, the effects of seasonality by continuing to diversify the
geographic location and primary customer base of its Hotels.
-10-
<PAGE> 13
Investment Concentration in a Single Industry. Historically, FelCor has
only invested in hotel-related assets. In the event of a downturn in the hotel
industry, the adverse effect on FelCor may be greater than on a more diversified
company with assets outside of the hotel industry.
Requirements of Franchise Agreements. Most of FelCor's Hotels are
operated under various franchise licenses. Each license agreement requires that
the franchised hotel be maintained and operated in accordance with certain
standards. The franchisors also may require substantial improvements to FelCor's
Hotels, for which FelCor would be responsible under the Percentage Leases, as a
condition to the renewal or continuation of these franchise licenses. If a
franchise license terminates due to FelCor's failure to make required
improvements or to otherwise comply with its terms, FelCor may be liable to the
franchisor for a termination payment. These termination payments would vary
among the various franchise agreements and by hotel. The loss of a substantial
number of franchise licenses and the related termination payments could have a
material adverse effect on FelCor's results of operations.
Limitations on Acquisitions and Improvements
Since the completion of the Merger with Bristol Hotel Company in July
1998, the Company's growth strategy has been focused, and it presently intends
to focus during 2000, on its internal growth strategy, which includes the
renovation, redevelopment and rebranding of its hotels to achieve improved
revenue performance. FelCor is limited in its ability to fund its growth solely
from cash provided from operating activities because it must distribute to its
stockholders at least 95% (90% beginning in 2001) of its taxable income each
year to maintain its status as a REIT. Consequently, FelCor may rely, to a
significant extent, upon the availability of debt or equity capital to fund
hotel acquisitions and improvements. Given the current market prices of its
equity securities, FelCor has no present intention to effect a public offering
of equity securities in the near future. Consequently, FelCor will be dependent
upon its ability to attract debt financing from public or institutional lenders.
There can be no assurance that FelCor will be successful in attracting
sufficient debt financing to fund future growth at an acceptable cost. In
addition, FelCor's Board has adopted a policy of limiting indebtedness to not
more than 50% of FelCor's investment in hotel assets, at cost, which could also
limit FelCor's ability to incur additional indebtedness to fund its continued
growth. At December 31, 1999, FelCor's indebtedness represented approximately
40% of its investment in hotel assets, at cost.
Potential Tax Risks
General. Failure to qualify as a REIT would subject FelCor to federal
income tax. FelCor has operated and will continue to operate in a manner that is
intended to qualify it as a REIT under federal income tax laws. The REIT
qualification requirements are extremely complicated and interpretations of the
federal income tax laws governing qualification as a REIT are limited.
Accordingly, FelCor cannot be certain that it has been or will continue to be
successful in operating so as to qualify as a REIT. At any time, new laws,
interpretations or court decisions may change the federal tax laws or the
federal income tax consequences of qualification as a REIT.
If FelCor failed to qualify as a REIT, FelCor would be required to pay
federal income tax on its taxable income. FelCor might need to borrow money or
sell hotels in order to pay any such tax. FelCor's payment of income tax would
decrease the amount of its income available to be paid out to its stockholders.
In addition, FelCor would no longer be required to pay out most of its taxable
income to its stockholders. Unless its failure to qualify as a REIT were excused
under federal income tax laws, FelCor could not re-elect REIT status until the
fifth calendar year following the year in which it failed to qualify.
Failure to Make Required Distributions Would Subject FelCor to Tax. In
order to qualify as a REIT, each year FelCor must pay out to its stockholders at
least 95% (90% beginning in 2001) of its taxable income (other than any net
capital gain). In addition, FelCor would be subject to a 4% nondeductible tax if
the actual amount it pays out to its stockholders in a calendar year were less
than the minimum amount specified under federal tax laws. FelCor has paid out
and intends to continue to pay out its income to its stockholders in a manner
intended to satisfy the 95% test and to avoid the 4% tax. In doing so, FelCor
may be required to borrow money or sell assets to pay out enough of its taxable
income to satisfy the 95% test and to avoid the 4% tax in a particular year.
-11-
<PAGE> 14
Failure to Distribute Earnings and Profits in Connection With the 1998
Merger With Bristol Hotel Company Would Cause FelCor to Fail to Qualify as a
REIT. At the end of any taxable year, a REIT may not have any accumulated
earnings and profits (described generally for federal income tax purposes as
cumulative undistributed net income) from a non-REIT corporation. Arthur
Andersen LLP prepared and provided to FelCor its computation of the accumulated
earnings and profits of Bristol Hotel Company through the date of the Merger.
Based upon such computation, in addition to its regular fourth quarter 1998
distribution, FelCor paid a special one-time distribution of $0.345 per share on
its Common Stock, and $0.207 per share on its Series A Preferred Stock, in
respect of such accumulated earnings and profits. However, the determination of
a company's accumulated earnings and profits for federal income tax purposes is
extremely complex and the computations by Arthur Andersen LLP are not binding
upon the Internal Revenue Service. Should the Internal Revenue Service
successfully assert that the accumulated earnings and profits of Bristol Hotel
Company were greater than the amount so distributed by FelCor, it may fail to
quality as a REIT.
Sale of Assets Acquired in the Merger Within Ten Years After the Merger
Will Result in Corporate Tax. If FelCor sells any asset acquired in the Merger,
within ten years after the Merger, and recognizes gain, FelCor will be taxed at
the highest corporate rate on an amount equal to the fair market value of the
asset minus the adjusted basis of the asset as of the Merger. The sales of
Bristol Hotels that have been made, and are currently planned to be made, are
not expected to result in any material amount of income tax liability.
Effect of Market Interest Rates on the Price of the Common Stock
One of the factors that may affect the price of the Common Stock is the
amount of distributions to stockholders in comparison to yields on other
financial instruments. An increase in market interest rates would provide higher
yields on other financial instruments, which could adversely affect the price of
the Common Stock.
Reliance on Key Personnel and Board of Directors
FelCor's stockholders have no right to participate in FelCor's
management, except through the exercise of their voting rights. FelCor's Board
of Directors will be responsible for oversight of the management of FelCor.
FelCor's future success will be dependent in part on its ability to retain key
personnel, including Mr. Corcoran.
Matters That May Adversely Affect Real Estate Ownership
General. FelCor's investments in hotels are subject to the numerous
risks generally associated with owning real estate. These risks include, among
others, adverse changes in general or local economic or real estate market
conditions, zoning laws, traffic patterns and neighborhood characteristics, real
estate tax assessments and rates, governmental regulations and fiscal policies,
the potential for uninsured or underinsured casualty and other losses, the
impact of environmental laws and regulations (discussed below) and other
circumstances beyond the control of FelCor. Moreover, real estate investments
are relatively illiquid, which means that FelCor's ability to vary its portfolio
in response to changes in economic and other conditions may be limited.
Possible Liability for Environmental Matters. There are numerous
federal, state and local environmental laws and regulations to which owners of
real estate are subject. Under these laws a current or prior owner of real
estate may be liable for the costs of cleaning up and removing hazardous or
toxic substances found on its property, whether or not it was responsible for
their presence. In addition, if an owner of real property arranges for the
disposal of hazardous or toxic substances at another site, it may also be liable
for the costs of cleaning up and removing such substances from the disposal
site, even if it did not own or operate the disposal site. A property owner may
also be liable to third parties for personal injuries or property damage
sustained as a result of its release of hazardous or toxic substances (including
asbestos-containing materials) into the environment. Environmental laws may
require FelCor to incur substantial expenses and limit the use of its
properties. FelCor could be liable for substantial amounts for a failure to
comply with applicable environmental laws, which may be enforced by the
government or, in certain instances, by private parties. The existence of
hazardous or toxic substances on a property can also adversely affect the value
of, and the owner's ability to use, sell or borrow against, the property.
-12-
<PAGE> 15
Generally, FelCor obtains a Phase I environmental audit from an
independent environmental engineer prior to its acquisition of a hotel. With
respect to the Bristol Hotels, FelCor has relied upon the Phase I audits
obtained by Bristol Hotel Company in connection with its acquisition of these
properties. No updates or new environmental audits were obtained.
The primary purpose of a Phase I environmental audit is to identify
indications of potential environmental contamination at a property and,
secondarily, to make a limited assessment as to the potential for environmental
regulatory compliance costs. Consistent with current industry standards, the
Phase I environmental audits on which FelCor has relied did not include an
assessment of potential off-site liability or involve any testing of
groundwater, soil or air conditions. Accordingly, they would not reveal
information that could only be obtained by such tests. In addition, the
assessment of environmental compliance contained in such reports is general in
nature and was not a detailed determination of the property's complete
compliance status.
The Phase I environmental audits relied upon by FelCor disclose the
existence of certain hazardous or toxic substances at or near a limited number
of FelCor's hotels. In these instances, FelCor made such additional
investigations, if any, as they considered necessary to evaluate the risk of
liability. However, FelCor's management does not believe that the identified
conditions, or any other environmental conditions known to it, will have a
material adverse effect on FelCor's business, assets or profits. It is possible,
however, that such environmental audits and investigations do not reveal all
environmental conditions or liabilities for which FelCor could be liable and
there could be potential environmental liabilities of which FelCor is unaware.
Costs of Complying with Americans with Disabilities Act. Under the
Americans with Disabilities Act of 1990 ("ADA"), all public accommodations
(including hotels) are required to meet certain federal requirements for access
and use by disabled persons. FelCor's management believes that its hotels are
substantially in compliance with the requirements of the ADA. However, a
determination that the hotels are not in compliance with the ADA could result in
liability for both governmental fines and damages to private parties. If FelCor
were required to make unanticipated major modifications to the hotels to comply
with the requirements of the ADA, it could adversely affect its ability to pay
its obligations and make distributions to its stockholders.
Ownership Limitation
In order for FelCor to maintain its status as a REIT, no more than 50%
in value of its outstanding stock may be owned (actually or constructively under
the applicable tax rules) by five or fewer persons during the last half of any
taxable year. In connection with this requirement, FelCor's Charter prohibits,
subject to certain exceptions, any person from owning more than 9.9% (determined
in accordance with the Internal Revenue Code and the Securities Exchange Act of
1934, as amended) of the number of outstanding shares of any class of its
capital stock. FelCor's Charter also prohibits any transfer of its capital stock
that would result in a violation of the 9.9% ownership limit, reduce the number
of stockholders below 100 or otherwise result in FelCor failing to qualify as a
REIT. Any attempted transfer in violation of the charter prohibitions will be
void and the intended transferee will not acquire any right in the shares
resulting in such violation. FelCor has the right to take any lawful action that
it believes necessary or advisable to ensure compliance with these ownership and
transfer restrictions and to preserve its status as a REIT, including refusing
to recognize any transfer of capital stock in violation of its charter.
If a person holds or attempts to acquire shares in excess of FelCor's
ownership and transfer restrictions, these shares will be immediately designated
as "shares-in-trust" and transferred automatically and by operation of law, in
trust, to a trustee designated by FelCor. The trustee will have the right to
receive all distributions on, to vote and to sell these shares. The holder of
the excess shares will have no right or interest in these shares, except the
right (under certain circumstances) to receive the lesser of: (i) the proceeds
of any sale of these shares by the trustee to a permitted owner and (ii) the
amount paid for these shares (or the market value of these shares, determined in
accordance with the Charter, if the shares were received by gift, bequest or
otherwise without payment). Accordingly, the record owner of any shares
designated as shares-in-trust would suffer a financial loss if the price at
which these shares are sold to a permitted owner is less than what was paid for
these shares.
-13-
<PAGE> 16
ITEM 2. PROPERTIES
THE HOTELS
The following table sets forth certain descriptive information
regarding the Hotels in which the Company had ownership interests at December
31, 1999:
<TABLE>
<CAPTION>
YEAR NUMBER OF
LOCATION FRANCHISE BRAND LESSEE ACQUIRED ROOMS/SUITES
- -------- --------------- ------ -------- ------------
<S> <C> <C> <C> <C>
Birmingham, AL(1).................................. Embassy Suites DJONT 1996 242
Montgomery, AL..................................... Holiday Inn Bristol 1998 213
Flagstaff, AZ...................................... Embassy Suites DJONT 1995 119
Phoenix (Airport), AZ.............................. Embassy Suites DJONT 1998 229
Phoenix (Camelback), AZ............................ Embassy Suites DJONT 1996 232
Phoenix, (Crescent), AZ............................ Sheraton DJONT 1997 342
Scottsdale, AZ(2).................................. Fairfield Inn Bristol 1998 218
Tempe, AZ(1)....................................... Embassy Suites DJONT 1998 224
Texarkana (I-30), AR(2)............................ Holiday Inn Bristol 1998 210
Anaheim (Disney(R)Area), CA(1)..................... Embassy Suites DJONT 1996 222
Burlingame (S.F. Airport So.), CA(2)............... Embassy Suites DJONT 1995 340
Covina (I-10), CA(1)(3)............................ Embassy Suites DJONT 1997 259
Dana Point, CA..................................... Doubletree Guest Suites DJONT 1997 196
El Segundo (LAX Airport South), CA(2).............. Embassy Suites DJONT 1996 350
Irvine (Orange County Airport, CA.................. Crowne Plaza Bristol 1998 335
Los Angeles (LAX Airport North), CA................ Embassy Suites DJONT 1997 215
Milpitas, CA(1).................................... Embassy Suites DJONT 1996 266
Milpitas, CA....................................... Crowne Plaza Bristol 1998 305
Napa, CA(1)........................................ Embassy Suites DJONT 1996 205
Oxnard (Mandalay Beach), CA........................ Embassy Suites DJONT 1996 249
Palm Desert, CA(1) ................................ Embassy Suites DJONT 1998 198
Pleasanton, CA..................................... Crowne Plaza Bristol 1998 244
Santa Barbara, CA(1)............................... Holiday Inn Bristol 1998 160
San Diego (On-the-Bay), CA(2)...................... Holiday Inn Bristol 1998 600
San Francisco (Financial District), CA(2).......... Holiday Inn Bristol 1998 566
San Francisco (Fisherman's Wharf), CA(2)........... Holiday Inn Bristol 1998 585
San Francisco (Union Square), CA................... Crowne Plaza Bristol 1998 403
San Rafael (Marin Co.), CA(1)(3)................... Embassy Suites DJONT 1996 235
South San Francisco (Airport North), CA............ Embassy Suites DJONT 1996 312
Avon (Beaver Creek Resort), CO..................... Independent 1996 73
Denver (Southeast), CO(5).......................... Doubletree DJONT 1998 248
Hartford (Downtown), CT............................ Crowne Plaza Bristol 1998 342
Stamford, CT(2).................................... Holiday Inn Select Bristol 1998 383
Wilmington, DE(5).................................. Doubletree Guest DJONT 1998 154
Boca Raton, FL..................................... Doubletree Guest Suites DJONT 1995 182
Boca Raton, FL..................................... Embassy Suites DJONT 1996 263
Cocoa, Beach (Ocean Front Resort), FL.............. Holiday Inn Bristol 1998 500
Deerfield Beach, FL(1)............................. Embassy Suites DJONT 1996 244
Ft. Lauderdale, FL(1).............................. Embassy Suites DJONT 1996 359
Ft. Lauderdale (Cypress Creek), FL................. Sheraton Suites DJONT 1998 253
Jacksonville, FL................................... Embassy Suites DJONT 1994 277
Kissimmee (Nikki Bird Resort), FL(2)............... Holiday Inn Bristol 1998 529
Lake Buena Vista (Walt Disney World(R)), FL(2)..... Doubletree Guest Suites DJONT 1997 229
Miami (Airport), FL(2)............................. Crowne Plaza Bristol 1998 304
Miami (Airport), FL(1)............................. Embassy Suites DJONT 1996 316
Orlando (North), FL................................ Embassy Suites DJONT 1994 277
Orlando (South), FL................................ Embassy Suites DJONT 1994 244
Orlando (International Drive Resort), FL........... Holiday Inn Bristol 1998 652
Orlando (Airport), FL.............................. Holiday Inn Select Bristol 1998 288
Tampa (Busch Gardens), FL.......................... Doubletree Guest Suites DJONT 1995 129
Tampa (Rocky Point), FL............................ Doubletree Guest Suites DJONT 1997 203
Tampa (Near Busch Gardens), FL(2).................. Holiday Inn Bristol 1998 395
Atlanta, GA........................................ Courtyard by Marriott Bristol 1998 211
Atlanta (Airport), GA(2)........................... Crowne Plaza Bristol 1998 378
Atlanta (Powers Ferry), GA(1)...................... Crowne Plaza Bristol 1998 296
Atlanta (Buckhead), GA............................. Embassy Suites DJONT 1998 317
Atlanta (Airport), GA.............................. Embassy Suites DJONT 1998 233
Atlanta (Perimeter Center), GA(1)(3)............... Embassy Suites DJONT 1998 241
</TABLE>
-14-
<PAGE> 17
<TABLE>
<CAPTION>
YEAR NUMBER OF
LOCATION FRANCHISE BRAND LESSEE ACQUIRED ROOMS/SUITES
- -------- --------------- ------ -------- ------------
<S> <C> <C> <C> <C>
Atlanta (Downtown), GA....................... Fairfield Inn Bristol 1998 242
Atlanta (Marietta), GA....................... Hampton Inn Bristol 1998 140
Atlanta (Airport North), GA(1)(2)............ Holiday Inn Bristol 1998 493
Atlanta (Jonesboro South), GA(1)............. Holiday Inn Bristol 1998 180
Atlanta (Perimeter Dunwoody), GA(1).......... Holiday Inn Select Bristol 1998 250
Atlanta (Airport Gateway), GA................ Sheraton DJONT 1997 395
Atlanta (Galleria), GA....................... Sheraton Suites DJONT 1997 278
Brunswick, GA................................ Embassy Suites DJONT 1995 130
Columbus (Airport I-85), GA(2)............... Holiday Inn Bristol 1998 223
Chicago (Allerton), IL....................... Crowne Plaza Bristol 1998 443
Chicago (Lombard), IL(1)(3).................. Embassy Suites DJONT 1995 262
Chicago (O'Hare), IL......................... Sheraton Suites DJONT 1997 297
Deerfield, IL................................ Embassy Suites DJONT 1996 237
Moline, IL................................... Hampton Inn Bristol 1998 138
Moline (Airport), IL(1)...................... Holiday Inn Bristol 1998 216
Moline (Airport), IL(1)...................... Holiday Inn Express Bristol 1998 111
Indianapolis (North), IN(1)(3).............. Embassy Suites DJONT 1996 221
Davenport, IA................................ Hampton Inn Bristol 1998 132
Davenport, IA................................ Holiday Inn Bristol 1998 287
Colby, KS.................................... Holiday Inn Express Bristol 1998 70
Great Bend, KS............................... Holiday Inn Bristol 1998 173
Hays, KS..................................... Hampton Inn Bristol 1998 116
Hays, KS..................................... Holiday Inn Bristol 1998 191
Overland Park, KS(1)(3)...................... Embassy Suites DJONT 1997 199
Salina, KS(7)................................ Holiday Inn Bristol 1998 192
Salina (I-70), KS(2)......................... Holiday Inn Express Hotel & Suites Bristol 1998 93
Lexington, KY................................ Hilton Suites DJONT 1996 174
Lexington, KY................................ Sheraton Suites DJONT 1998 155
Baton Rouge, LA(1)........................... Embassy Suites DJONT 1996 223
New Orleans, LA.............................. Embassy Suites DJONT 1994 372
New Orleans (Chateau LeMoyne), LA(1)(2)(3)... Holiday Inn 1998 171
New Orleans (French Quarter), LA(1)(2)....... Holiday Inn Bristol 1998 276
Baltimore (BWI), MD(5)(6).................... Doubletree Guest Suites DJONT 1997 251
Boston (Marlborough), MA..................... Embassy Suites DJONT 1995 229
Boston (Government Center), MA(2)............ Holiday Inn Select Bristol 1998 303
Leominster, MA............................... Four Points(R) Bristol 1998 187
Troy, MI(5)(6)............................... Doubletree Guest Suites DJONT 1997 251
Bloomington, MN.............................. Embassy Suites DJONT 1997 219
Minneapolis (Airport), MN(1)................. Embassy Suites DJONT 1995 310
Minneapolis (Downtown), MN................... Embassy Suites DJONT 1995 217
St. Paul, MN(7).............................. Embassy Suites DJONT 1995 210
Jackson (Downtown), MS(1).................... Crowne Plaza Bristol 1998 354
Jackson (Briarwood), MS(1)................... Hampton Inn Bristol 1998 119
Jackson (North), MS(1)....................... Holiday Inn & Suites Bristol 1998 224
Olive Branch (Whispering Woods Hotel
and Conference Center), MS.................. Independent Bristol 1998 179
Kansas City (Plaza), MO (1)(2)(3)............ Embassy Suites DJONT 1997 266
Kansas City (Northeast), MO.................. Holiday Inn Bristol 1998 167
St. Louis (Downtown), MO..................... Embassy Suites DJONT 1998 297
St. Louis (Westport), MO(1).................. Holiday Inn Bristol 1998 320
Omaha, NE.................................... Doubletree Guest Suites DJONT 1998 189
Omaha (Central), NE(1)....................... Hampton Inn Bristol 1998 132
Omaha (Southwest), NE........................ Hampton Inn Bristol 1998 132
Omaha (I-80), NE(1).......................... Holiday Inn Bristol 1998 383
Omaha (Old Mill Northwest), NE............... Crowne Plaza Bristol 1998 213
Omaha (Southwest), NE........................ Holiday Inn Express Hotel & Suites Bristol 1998 78
Omaha (Southwest), NE........................ Homewood Suites Bristol 1998 108
Parsippany, NJ(1)(3)......................... Embassy Suites DJONT 1996 274
Piscataway, NJ............................... Embassy Suites DJONT 1996 225
Secaucus (Meadowlands), NJ(2)(3)............. Embassy Suites DJONT 1997 261
Secaucus (Meadowlands), NJ................... Crowne Plaza Bristol 1998 301
Albuquerque (Mountain View), NM.............. Holiday Inn Bristol 1998 360
Syracuse, NY................................. Embassy Suites DJONT 1997 215
Charlotte, NC(1)(3).......................... Embassy Suites DJONT 1996 274
Raleigh/Durham, NC........................... Doubletree Guest Suites DJONT 1997 203
Raleigh, NC(1)(3)............................ Embassy Suites DJONT 1997 225
</TABLE>
15
<PAGE> 18
<TABLE>
<CAPTION>
YEAR NUMBER OF
LOCATION FRANCHISE BRAND LESSEE ACQUIRED ROOMS/SUITES
- -------- --------------- ------ -------- ------------
<S> <C> <C> <C> <C>
Cleveland, OH................................ Embassy Suites DJONT 1995 268
Columbus, OH................................. Doubletree Guest Suites DJONT 1998 194
Dayton, OH(1)................................ Doubletree Guest Suites DJONT 1997 138
Tulsa, OK.................................... Embassy Suites DJONT 1994 240
Philadelphia (Center City), PA............... Crowne Plaza Bristol 1998 445
Philadelphia (Independence Mall), PA(1)...... Holiday Inn Bristol 1998 364
Philadelphia (Society Hill), PA.............. Sheraton DJONT 1997 362
Pittsburgh, PA(1)............................ Holiday Inn Select Bristol 1998 251
Charleston (Mills House), SC................. Holiday Inn Bristol 1998 214
Myrtle Beach (Kingston Plantation), SC....... Embassy Suites DJONT 1996 255
Roper (Greenville), SC....................... Crowne Plaza Bristol 1998 208
Knoxville (Central), TN(2)................... Holiday Inn Bristol 1998 242
Nashville, TN................................ Doubletree Guest Suites DJONT 1997 138
Nashville (Airport), TN...................... Embassy Suites DJONT 1994 296
Nashville (Opryland/Airport), TN(2).......... Holiday Inn Select Bristol 1998 385
Amarillo (I-40), TX(2)....................... Holiday Inn Bristol 1998 248
Austin (Downtown), TX(5)..................... Doubletree Guest Suites DJONT 1997 189
Austin (Airport North), TX(1)(3)............. Embassy Suites DJONT 1997 260
Austin (Town Lake), TX....................... Holiday Inn Bristol 1998 320
Beaumont (Midtown I-10), TX.................. Holiday Inn Bristol 1998 253
Corpus Christi, TX........................... Embassy Suites DJONT 1995 150
Dallas (Alpha Road), TX...................... Bristol House(R) Bristol 1998 127
Dallas (Addison North), TX(1)................ Crowne Plaza Bristol 1998 429
Dallas (Market Center), TX(1)................ Crowne Plaza Bristol 1998 354
Dallas, TX(1)................................ Crowne Plaza Suites Bristol 1998 295
Dallas (Campbell Centre), TX(5).............. Doubletree DJONT 1998 302
Dallas (DFW Airport South), TX............... Embassy Suites DJONT 1998 305
Dallas (Love Field), TX(1)................... Embassy Suites DJONT 1995 248
Dallas (Market Center), TX(1)................ Embassy Suites DJONT 1997 244
Dallas (Park Central), TX.................... Embassy Suites DJONT 1994 279
Dallas (Regal Row), TX....................... Fairfield Inn Bristol 1998 204
Dallas (Downtown West End), TX............... Hampton Inn Bristol 1998 311
Dallas, TX(1)................................ Harvey Hotel Bristol 1998 313
Dallas (DFW Airport North), TX(1)............ Harvey Hotel Bristol 1998 506
Dallas (DFW Airport North), TX(1)............ Harvey Suites Bristol 1998 164
Dallas (Park Central), TX(8)................. Sheraton DJONT 1998 438
Dallas (Park Central), TX(8)................. Westin DJONT 1997 545
Houston (Near the Galleria), TX.............. Courtyard by Marriott Bristol 1998 209
Houston (Medical Center), TX(1).............. Crowne Plaza Bristol 1998 297
Houston (Near the Galleria), TX.............. Fairfield Inn Bristol 1998 107
Houston (I-10 East), TX...................... Fairfield Inn Bristol 1998 160
Houston (I-10 East), TX...................... Hampton Inn Bristol 1998 90
Houston (Medical Center), TX(1)(2)........... Holiday Inn & Suites Bristol 1998 285
Houston (Intercontinental Airport), TX(1).... Holiday Inn Bristol 1998 401
Houston (I-10 West), TX...................... Holiday Inn Select Bristol 1998 349
Houston (Near Greenway Plaza), TX(1)......... Holiday Inn Select Bristol 1998 355
Midland (Country Villa), TX.................. Holiday Inn Bristol 1998 250
Odessa (Parkway Blvd.), TX................... Holiday Inn Express Hotel & Suites Bristol 1998 186
Odessa (Center), TX.......................... Holiday Inn Hotel & Suites Bristol 1998 245
Plano, TX(1)................................. Harvey Hotel Bristol 1998 279
Plano, TX.................................... Holiday Inn Bristol 1998 161
San Antonio (Airport), TX(1)(2)(3)........... Embassy Suites DJONT 1997 261
San Antonio (Northwest), TX(1)(3)............ Embassy Suites DJONT 1997 217
San Antonio (Downtown), TX(2)................ Holiday Inn Bristol 1998 315
San Antonio (International Airport), TX...... Holiday Inn Select Bristol 1998 397
Waco (I-35), TX.............................. Holiday Inn Bristol 1998 171
Salt Lake City (Airport), UT(2).............. Holiday Inn Bristol 1998 191
Vienna, VA (Tyson's Corner)(1)(3)(9)......... Sheraton 1999 437
Burlington, VT............................... Sheraton DJONT 1997 309
Cambridge, Canada............................ Holiday Inn Bristol 1998 139
Kitchener (Waterloo), Canada................. Holiday Inn Bristol 1998 182
Peterborough (Waterfront), Canada ........... Holiday Inn Bristol 1998 154
Sarnia, Canada............................... Holiday Inn Bristol 1998 151
Toronto (Yorkdale), Canada................... Holiday Inn Bristol 1998 370
Toronto (Airport), Canada.................... Holiday Inn Select Bristol 1998 444
</TABLE>
-16-
<PAGE> 19
- -------------
(1) Encumbered by mortgage debt.
(2) Situated on land leased under a long-term ground lease.
(3) This hotel is one of 16 hotels owned by unconsolidated entities in
which the Company owns a 50% equity interest.
(4) This hotel is owned by an entity in which the Company has greater than
a 90% interest.
(5) This hotel is one of 6 hotels owned by an entity in which the Company
owns a 90% equity interest.
(6) Converted to the Embassy Suites brand January 1, 2000.
(7) Owned subject to a capitalized industrial revenue bond lease which
permits the Company to purchase the fee interest at expiration for a
nominal amount.
(8) This hotel is one of two hotels in which the Company owns a 60% equity
interest.
(9) On January 1, 2000, a lease on this hotel became effective between the
Company and DJONT.
THE PERCENTAGE LEASES
At December 31, 1999, each of the Hotels (with three exceptions) was
leased to a Lessee pursuant to a Percentage Lease. The terms of each Percentage
Lease with DJONT was approved by the Company's Independent Directors at the time
it was entered into.
The DJONT Percentage Leases.
The principal terms of the Percentage Leases with DJONT ("DJONT
Leases") are summarized below, although certain terms will vary from hotel to
hotel.
Term. The DJONT Leases typically have a stated term of 10 years.
Rent. The annual Base Rent is typically set at approximately 60% of the
initial year's anticipated total rent. The Percentage Rent is calculated in two
tiers, a first tier typically equal to 17% of room and suite revenues up to a
specified amount ("Room and Suite Revenue Breakpoint") and a second tier
typically equal to 65% of room and suite revenues above such Room and Suite
Revenue Breakpoint. In addition, the DJONT Lessee typically pays the Company 5%
of the food and beverage revenues from each Hotel in which the restaurant and
bar operations are conducted directly by the DJONT Lessee and 98% of the food
and beverage rent revenues from each Hotel in which the restaurant and bar
operations are subleased by the DJONT Lessee to an unrelated third party. The
Room and Suite Revenue Breakpoint is established at the time the Percentage
Lease is entered into, based upon the historical and anticipated operations of
the particular hotel, in a manner expected to provide the Company with
approximately 95% of the anticipated operating profits of the hotels in which it
invests.
Generally, the Percentage Leases provide for the computation of rent on
a standalone quarterly basis.
The amount of Base Rent and of the Room and Suite Revenue Breakpoint in
each DJONT Lease formula generally is subject to adjustment, annually, based
upon a formula taking into account changes in the Consumer Price Index ("CPI").
The adjustment is calculated at the beginning of each calendar year, for the
hotels acquired prior to July of the previous year. The adjustment in any year
may not exceed 7%. The CPI adjustments applicable to 2000, 1999 and 1998 were
1.05%, 0.55% and 0.50%, respectively.
Events of Default. If an Event of Default occurs and continues beyond
any curative period, the Company has the option of terminating the DJONT Lease
or any or all other DJONT Leases. Events of Default under the DJONT Leases
include typical defaults such as failure to pay rent, certain insolvency events
and, among others, the following:
o the breach by the DJONT Lessee of any term of a DJONT Lease
that is not cured within certain specified periods or an Event
of Default under any other DJONT Lease;
o if the DJONT Lessee voluntarily discontinues operations of a
leased hotel for more than 30 days, except as a result of
damage, destruction, or condemnation; or
o if the franchise agreement with respect to a leased hotel is
terminated by the franchisor as a result of any action or
failure to act by the DJONT Lessee or its agents.
-17-
<PAGE> 20
Termination of Percentage Leases on Disposition of the Hotels. If the
Company enters into an agreement to sell or otherwise transfer a leased hotel,
the Company has the right to terminate the DJONT Lease with respect to such
leased hotel upon 90 days' prior written notice upon either (i) paying the DJONT
Lessee the fair market value of the DJONT Lessee's leasehold interest in the
remaining term of the DJONT Lease to be terminated or (ii) offering to lease to
the DJONT Lessee a substitute hotel on terms that would create a leasehold
interest with a fair market value equal to or exceeding the fair market value of
the DJONT Lessee's remaining leasehold interest under the DJONT Lease to be
terminated. The Company also is obligated to pay, or reimburse the DJONT Lessee
for certain fees and expenses resulting from the termination of the DJONT Lease.
Maintenance and Modifications. Under the DJONT Leases, the Company is
required to maintain the underground utilities and the structural elements of
the improvements, including exterior walls (excluding plate glass) and the roof
of each leased hotel. In addition, the DJONT Leases obligate the Company to fund
periodic improvements (in addition to maintenance of structural elements) to the
buildings and grounds comprising the leased hotels, and the periodic repair,
replacement and refurbishment of furniture, fixtures and equipment in the leased
hotels, when and as required to meet the requirements of the applicable
franchise licenses, and to establish and maintain a reserve, which is available
to the DJONT Lessee for such purposes, in an amount equal to 4% of hotel room
and suite revenues, on a cumulative basis. The Company's obligation is not
limited to the amount in such reserve. Otherwise, the DJONT Lessee is required,
at its expense, to maintain the leased hotels in good order and repair, except
for ordinary wear and tear, and to make nonstructural repairs, whether foreseen
or unforeseen, ordinary or extraordinary, which may be necessary and appropriate
to keep the leased hotels in good order and repair.
Insurance and Property Taxes. The Company is responsible for paying
real estate and personal property taxes and property insurance premiums on the
leased hotels (except to the extent that personal property associated with the
leased hotels is owned by the DJONT Lessee). The DJONT Lessee is responsible for
the cost of all liability insurance on the leased hotels, which must include
extended coverage, comprehensive general public liability, workers' compensation
and other insurance appropriate and customary for properties similar to the
leased hotels.
Indemnification. Under each of the DJONT Leases, the DJONT Lessee will
indemnify the Company for certain losses relating to the leased hotel, including
losses related to any accident or injury to person or property at the leased
hotels, certain environmental liability, taxes and assessments (other than real
estate and personal property taxes and any income taxes of the Company on income
attributable to the leased hotels), the sale or consumption of alcoholic
beverages, or any breach of the DJONT Leases by the DJONT Lessee.
Other Lease Covenants. The DJONT Lessee has agreed that during the term
of the DJONT Leases it will maintain a ratio of total debt to consolidated net
worth of less than or equal to 50%, exclusive of capitalized leases and
indebtedness subordinated in right to repayment to the rent due under the DJONT
Leases. In addition, the DJONT Lessee has agreed that it will not pay fees to
any of its affiliates.
Breach by Company. Upon notice from the DJONT Lessee that the Company
has breached the Lease, the Company has 30 days to cure the breach or proceed to
cure the breach, which period may be extended in the event of certain specified,
unavoidable delays. If the Company fails to cure a breach on its part under a
DJONT Lease, the DJONT Lessee may purchase the leased hotel from the Company for
a purchase price equal to the leased hotel's then fair market value.
Bristol Master Hotel Agreement.
Bristol and the Company are parties to an Amended and Restated Master
Hotel Agreement ("MHA"), pursuant to which, among other things, Bristol and the
Bristol Lessees are required to use their reasonable best efforts to permit the
Company to continue to qualify as a real estate investment trust under the Code.
Bristol and the Bristol Lessees are required to maintain a minimum liquid net
worth (including not only working capital and other liquid assets, but also
income-producing or readily-marketable assets, and any letters of credit or
other credit enhancements necessary to meet such requirement) at all times at
least equal to fifteen percent (15%) of projected annual rent under all of the
Bristol leases during each calendar year. If such minimum liquid net worth is
not maintained, and Bristol fails to cure the deficiency, the leases will be in
default, and the Bristol Lessees generally will be prohibited from making cash
dividends or other distributions or any other payments to affiliates.
-18-
<PAGE> 21
Under the MHA, the Bristol Hotels also are treated as a whole, and the
leases are cross-defaulted, for purposes of the Company's remedies upon default.
Upon certain material defaults under one or more leases, the Company has the
option to terminate the particular lease(s) in default, or all leases to which
the defaulting Bristol Lessee is a party, or all (but not less than all) of the
Bristol leases.
The Bristol Percentage Leases.
The principal terms of the Percentage Leases with Bristol (the "Bristol
Leases") are summarized below, although certain terms will vary from hotel to
hotel.
Term. The Bristol Leases are for initial terms of five to ten years,
with renewal options on the same terms for a total of 15 years. If a Bristol
Lease has been extended to 15 years, the Bristol Lessee may renew the lease for
an additional five years at then current market rates.
Rent. The Bristol Lessees pay a monthly rent equal to the greater of
Base Rent or Percentage Rent. The Percentage Rent is based on specified
percentages of various revenue streams. Those percentages will vary from hotel
to hotel within the following ranges:
<TABLE>
<S> <C>
Room and Suite Revenues: 0% to 10% up to a revenue breakpoint amount specified for
each hotel, then 60% to 75% above such breakpoint.
Food & Beverage Revenues: 5% to 25%.
Telephone Revenues: 5% to 10%.
Other Revenues: Varying percentages depending on the nature and source of
such revenues.
</TABLE>
Generally, the Percentage Leases provide for the computation of rent on
a standalone quarterly basis.
The Base Rent and the thresholds for computing Percentage Rent under
the Bristol Leases will be adjusted annually to reflect changes in the CPI. The
CPI adjustment applicable to 2000 and 1999 were 2.2% and 1.6%, respectively. The
parties to the Bristol Leases also agree to renegotiate the rent in the event of
any rebranding, substantial renovations (other than those agreed upon prior to
the execution of the Bristol Leases) or other, future hotel repositioning
strategies resulting in significant disruption of the operations of the leased
hotels.
The Bristol Lessees have the right to require the Company to
renegotiate the rent for all the hotels in a particular region if there is an
extended, material reduction in midscale hotel occupancy rates in the U.S. and
in such region. If the Company and the Bristol Lessees are unable to agree on a
reduction in rent, the Bristol Lessees may terminate all Bristol Leases in the
respective region. The Bristol Lessee also may require the Company to
renegotiate the rent for a particular hotel if, as a result of certain force
majeure events, there is an extended, material decline in the travel or hotel
business and a material reduction in the occupancy rate of such hotel and the
hotel's competitive set. If the Bristol Lessee and the Company are unable to
agree on a change in rent, the Bristol Lessee may terminate the lease for such
hotel.
Termination. A Bristol Lease also may be terminated by the Company for
typical defaults such as failure to pay rent, certain insolvency events and the
following reasons, among others:
o if Bristol fails to satisfy certain performance targets for
any one hotel and all other hotels in the aggregate during any
three consecutive years based on budgeted room revenues,
unless Bristol pays the Company the difference between the
actual rent paid and 80% (or, in certain circumstances, 90%)
of the budgeted rent;
o upon a change in control of Bristol, defined as the
acquisition of more than 50% of Bristol's stock by any person
or group not approved by Bristol's Board of Directors or the
election of a majority of directors not supported by Bristol's
Board of Directors;
-19-
<PAGE> 22
o upon any breach by the Bristol Lessee of the agreements under
the lease that is not cured within certain specified periods;
o if Bristol fails to maintain a minimum liquid net worth or to
provide other credit support for the obligations of the
Bristol Lessees under the Bristol Leases;
o if a franchisor terminates a franchise license as a result of
the Bristol Lessee's default under the franchise agreement;
and
o if the Company sells the hotel to an unaffiliated third party.
If the Company terminates the lease upon sale of a hotel and Bristol
does not continue as a manager or lessee of the hotel (or a substitute hotel
offered by the Company), Bristol will be entitled to monthly termination
payments during the remainder of the lease term equal to one-twelfth of 60% of
the average monthly profit and allocable overhead contribution associated with
operating the hotel over the 12 months ending on the termination date.
Indemnification. The Bristol Lessee agrees to indemnify the Company for
certain losses relating to the hotel, including losses related to any accident
or injury to persons or property at the hotel, any breach of the lease by the
Bristol Lessee and certain environmental and tax liabilities not assumed by the
Company in connection with its acquisition of the Bristol Hotels. The Company
will indemnify the Bristol Lessee for any breach of the lease by the Company,
for liability for the environmental condition of the hotel at the time the lease
commences and for the Company's acts of gross negligence or willful misconduct.
Maintenance and Capital Expenditures. The Bristol Lessee is responsible
for maintaining the leased hotel in good order and repair and for making all
repairs that do not constitute capital improvements. The Bristol Lessee is
generally required to budget and expend an amount equal to at least 4.5% of
gross revenues of the hotel for maintenance and repairs (other than capital
improvements) during each lease year. The Bristol Lessee must supply and
maintain the inventory that is necessary to operate the leased hotel. The
Company is responsible for all hotel capital improvements (including those
required by applicable law or, with certain exceptions, the respective franchise
license) and for maintaining the underground utilities and all hotel
improvements, furniture, fixtures and equipment owned by the Company to the
extent such maintenance constitutes capital expenditures in accordance with
generally accepted accounting principles or the capital improvements policy
agreed to by both the Company and the Bristol Lessee. The Company must make
available an amount equal to at least 3% of the hotel's gross revenues, on a
cumulative basis, for budgeted or other approved capital expenditures.
Insurance and Property Taxes. The Company will pay all real estate and
personal property taxes and property insurance premiums on the leased hotels,
other than with respect to the Bristol Lessee's personal property. The Bristol
Lessee will pay for all liability insurance on the leased hotels, including
extended coverage, comprehensive general public liability, workers' compensation
and other insurance appropriate and customary for properties similar to the
leased hotels.
ITEM 3. LEGAL PROCEEDINGS
There is no litigation pending or known to be threatened against the
Company or affecting any of its Hotels other than claims arising in the ordinary
course of business or which are not considered to be material. Furthermore, most
of such claims are substantially covered by insurance. Management does not
believe that any claims known to it (individually or in the aggregate) will have
a material adverse effect on the Company, without regard to any potential
recoveries from insurers or other third parties.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
-20-
<PAGE> 23
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
MARKET INFORMATION
The Company's Common Stock is traded on the New York Stock Exchange
under the symbol "FCH." The following table sets forth for the indicated periods
the high and low sale prices for the Common Stock, as traded on such exchange.
<TABLE>
<CAPTION>
HIGH LOW
---- ---
<S> <C> <C>
1998
----
First quarter................................................ $ 38 5/16 $ 34 15/16
Second quarter............................................... 37 5/16 31 3/16
Third quarter................................................ 32 1/4 20
Fourth quarter............................................... 24 3/16 18 3/16
1999
----
First quarter................................................ $ 24 1/2 $ 21 13/16
Second quarter............................................... 25 7/16 20 3/8
Third quarter................................................ 21 7/16 16 13/16
Fourth quarter............................................... 18 16 3/8
</TABLE>
STOCKHOLDER INFORMATION
At March 15, 2000, the Company had approximately 590 holders of record
of its Common Stock and approximately 50 holders of record of the Series A
Preferred Stock (which is convertible into Common Stock). It is estimated that
there were approximately 28,000 beneficial owners, in the aggregate, of the
Common Stock and Series A Preferred Stock at that date.
IN ORDER TO COMPLY WITH CERTAIN REQUIREMENTS RELATED TO QUALIFI-
CATION OF THE COMPANY AS A REIT, THE COMPANY'S CHARTER LIMITS THE NUMBER
OF SHARES OF COMMON STOCK THAT MAY BE OWNED BY ANY SINGLE PERSON OR
AFFILIATED GROUP TO 9.9% OF THE OUTSTANDING COMMON STOCK.
DISTRIBUTION INFORMATION
The Company has adopted a policy of paying regular quarterly
distributions on its Common Stock, and cash distributions have been paid on the
Company's Common Stock with respect to each quarter since its inception. The
following table sets forth information regarding the declaration and payment of
distributions by the Company on its Common Stock during 1998 and 1999.
-21-
<PAGE> 24
<TABLE>
<CAPTION>
QUARTER TO DISTRIBUTION DISTRIBUTION PER SHARE
WHICH DISTRIBUTION RECORD PAYMENT DISTRIBUTION
RELATES DATE DATE AMOUNT
------------------ ------------ ------------ ------------
1998
----
<S> <C> <C> <C>
First quarter................................................... 4/15/98 4/30/98 $ 0.55
Second quarter.................................................. 7/15/98 7/31/98 $ 0.55
Third quarter................................................... 10/15/98 10/30/98 $ 0.55
Fourth quarter.................................................. 12/30/98 1/29/99 $ 0.895(1)
1999
----
First quarter................................................... 4/15/99 4/30/99 $ 0.55
Second quarter.................................................. 7/15/99 7/30/99 $ 0.55
Third quarter................................................... 10/15/99 10/29/99 $ 0.55
Fourth quarter.................................................. 12/30/99 1/31/00 $ 0.55
</TABLE>
- -------------
(1) Includes a special one-time distribution of $0.345 per share
of Common Stock, representing accumulated earnings and profits
from FelCor's July 1998 merger with Bristol Hotel Company.
The foregoing distributions represent an approximate 7.2% return of
capital in 1999 and an approximate 17.0% return of capital in 1998. In order to
maintain its qualification as a REIT, FelCor must make annual distributions to
its shareholders of at least 95% (90% beginning in 2001) of its taxable income
(which does not include net capital gains). For the years ended December 31,
1999 and December 31, 1998, FelCor had distributions totaling $2.20 and $2.545
per common share, respectively, of which only $1.84 and $2.01 per share,
respectively, were required to satisfy the 95% REIT distribution test. Under
certain circumstances FelCor may be required to make distributions in excess of
cash available for distribution in order to meet such REIT distribution
requirements. In such event, FelCor presently would expect to borrow funds, or
to sell assets for cash, to the extent necessary to obtain cash sufficient to
make the distributions required to retain its qualification as a REIT for
federal income tax purposes.
FelCor currently anticipates that it will maintain at least the current
dividend rate for the immediate future, unless actual results of operations,
economic conditions or other factors differ from its current expectations.
Future distributions, if any, paid by FelCor will be at the discretion of the
Board of Directors and will depend on the actual cash flow of FelCor, its
financial condition, capital requirements, the annual distribution requirements
under the REIT provisions of the internal revenue code and such other factors as
the Board of Directors deems relevant.
RECENT SALES OF UNREGISTERED SECURITIES
During 1999, FelCor issued an aggregate of 2,490 shares of its Common
Stock in redemption of a like number of outstanding Units. Neither the Units,
nor the shares of Common Stock issued in redemption thereof, were registered
under the Securities Act in reliance upon certain exemptions from the
registration requirements thereof, including the exemption provided by section
4(2) of that act.
During 1999, the Operating Partnership issued an aggregate of 54,319
Units, in connection with the acquisition of a joint venture interest in a hotel
and the purchase of land previously leased under a long term land lease, which
may be redeemed for a like number of shares of FelCor's Common Stock. Neither
the Units, nor the shares of Common Stock issuable in redemption thereof, were
registered under the Securities Act in reliance upon certain exemptions from the
registration requirements thereof, including the exemption provided by section
4(2) of that act.
-22-
<PAGE> 25
ITEM 6. SELECTED FINANCIAL DATA
The following tables set forth selected financial data for the Company
for the years ended December 31, 1999, 1998, 1997, 1996 and 1995 that has been
derived from the financial statements of the Company and the notes thereto,
audited by PricewaterhouseCoopers LLP, independent accountants. Such data should
be read in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the Consolidated Financial Statements
and Notes thereto.
SELECTED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------------------------------------------
1999 1998 (1) 1997 1996 1995
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Total revenue ................................. $ 504,001 $ 339,617 $ 176,651 $ 100,944 $ 25,991
Income before nonrecurring items .............. $ 131,957 $ 117,437 $ 63,835 $ 43,291 $ 12,191
Net income .................................... $ 131,080 $ 114,839 $ 63,650 $ 40,937 $ 12,191
Net income applicable to common
shareholders ............................... $ 106,345 $ 93,416 $ 51,853 $ 33,203 $ 12,191
DILUTED EARNINGS PER SHARE:
Income applicable to common
shareholders before extraordinary charge ... $ 1.59 $ 1.92 $ 1.65 $ 1.53 $ 1.69
Net income applicable to common
shareholders ............................... $ 1.57 $ 1.86 $ 1.64 $ 1.43 $ 1.69
OTHER DATA:
Cash dividends per common share ............... $ 2.20 $ 2.545(2) $ 2.10 $ 1.92 $ 1.84
Funds From Operations (3) ..................... $ 286,895 $ 217,363 $ 129,815 $ 77,141 $ 20,707
EBITDA (4) .................................... $ 432,690 $ 306,361 $ 165,613 $ 88,355 $ 22,869
Weighted average common shares and
units outstanding .......................... 75,251 58,013 39,157 29,306 8,989
BALANCE SHEET DATA:
Total assets .................................. $4,255,751 $4,175,383 $1,673,364 $ 978,788 $ 548,359
Debt .......................................... $1,833,954 $1,594,734 $ 476,819 $ 239,425 $ 19,666
</TABLE>
- --------------
(1) On July 28, 1998, the Company completed the merger of Bristol Hotel
Company's real estate holdings with and into the Company. The merger
resulted in the net acquisition of 107 primarily full-service hotels in
return for approximately 31.0 million shares of newly issued Common Stock.
(2) In 1998, the Company declared a special one-time distribution of
accumulated but undistributed earnings and profits as a result of the
merger of Bristol Hotel Company into FelCor (the "Merger"), in addition to
the regular quarterly dividend of $0.55 per common share and $0.4875 per
Series A preferred share. The amount of the one-time distribution was
$0.345 per common share and $0.207 per Series A preferred share.
(3) A more detailed description of FFO is contained in the "Funds From
Operations" section of Management's Discussion and Analysis of Financial
Condition and Results of Operations.
(4) EBITDA is computed by adding FFO, interest expense, the Company's portion
of interest expense from unconsolidated entities, amortization expense, and
Series B preferred share dividends.
-23-
<PAGE> 26
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GENERAL
FelCor is one of the nation's largest hotel REIT's. At December 31,
1999, it owned interests in 188 hotels with nearly 50,000 rooms and suites
through its greater than 95% equity interest in the Operating Partnership.
Additional organizational information relating to the Company, and the
definitions of certain capitalized terms, are contained in the Notes to
Consolidated Financial Statements of FelCor Lodging Trust Incorporated appearing
elsewhere herein.
The Company is the owner of the largest number of Embassy Suites(R),
Crowne Plaza(R), Holiday Inn(R) and independently owned Doubletree(R) branded
hotels in the world. The Hotels are located in 35 states and Canada with
concentrations in Texas (41), California (20), Florida (18) and Georgia (15
hotels). The following table provides a schedule of the Hotels, by brand,
operated by each of the Company's Lessees at December 31, 1999:
<TABLE>
<CAPTION>
NOT OPERATED
BRAND DJONT BRISTOL UNDER A LEASE TOTAL
----- ----- ------- ------------- -----
<S> <C> <C> <C> <C>
Embassy Suites................................... 58 58
Holiday Inn...................................... 43 1 44
Doubletree and Doubletree Guest Suites(R)........ 16(1) 16
Crowne Plaza and Crowne Plaza Suites(R).......... 18 18
Holiday Inn Select(R)............................ 10 10
Sheraton(R)and Sheraton Suites(R)................ 9 1(2) 10
Hampton Inn(R)................................... 9 9
Holiday Inn Express(R)........................... 5 5
Fairfield Inn(R)................................. 5 5
Harvey Hotel(R).................................. 4 4
Independents..................................... 2 1 3
Courtyard by Marriott(R)......................... 2 2
Hilton Suites(R)................................. 1 1
Homewood Suites(R)............................... 1 1
Four Points by Sheraton(R)....................... 1 1
Westin(R)........................................ 1 1
-- --- --- ---
Total Hotels.................................. 85 100 3 188
== === === ===
</TABLE>
(1) On January 1, 2000 two of these Doubletree Guest Suites hotels
were converted to the Embassy Suites brand.
(2) On January 1, 2000 a lease on this hotel became effective
between the Company and DJONT.
The principal factors affecting the Company's results of operations are
changes in room and suite revenues reflected by revenue per available room
("RevPAR"), renovations, redevelopments, and rebrandings of hotels and
acquisitions. On July 28, 1998, the Company completed the acquisition of the
real estate assets of Bristol Hotel Company through the Merger, which resulted
in the net addition of 107 hotels, valued at approximately $2 billion, to the
Company's portfolio. In addition to the assets acquired in the Merger, the
Company acquired ownership interests in 16 hotels in 1998 and one additional
hotel in 1999. Nine of the hotels acquired in the Merger did not meet the
Company's investment criteria, and were sold in 1998 and 1999.
In 1999, the Company completed the major portion of its program of
renovation, redevelopment, and rebranding of hotels, undertaken to improve
under-performing assets and increase revenues. The Company and, prior to the
Merger, Bristol Hotel Company, spent nearly $220 million in 1998 on renovations,
redevelopments, rebrandings, room additions to existing hotels, and other hotel
improvements. In 1999 the Company completed renovations at 44 hotels during the
year, totaling $193 million. Nineteen hotels were undergoing renovation at the
end of 1999 and renovation expenditures on the hotel portfolio totaled $177
million during the year. A total of eight hotels were rebranded during 1999. On
January 1, 2000, two
-24-
<PAGE> 27
Doubletree Guest Suites hotels were rebranded as Embassy Suites hotels.
Management believes that its strategy of renovating, redeveloping and rebranding
selected hotels continues to be effective in improving revenue performance.
Historically the Company has been financed primarily with equity,
resulting in a conservative financial structure. The Company's emphasis on
maintaining this conservative approach is evidenced in part, by the following,
as of December 31, 1999:
o Interest coverage ratio of 3.3x
o Total debt to annual EBITDA of 4.5x
o Borrowing capacity under its Line of Credit of $186 million
o Consolidated debt equal to 40% of its investment in hotels at
cost
o Fixed interest rate debt comprising 62% of total debt
o Secured mortgage debt to total assets of 11%
o Debt of approximately $43 million maturing in 2000
FelCor's historical results of operations for 1999, 1998, and 1997 are
summarized as follows (in millions, except percentages and hotel counts):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, PERCENTAGE CHANGE
------------------------------- ---------------------
1999 1998 1997 99 VS 98 98 VS 97
------ ------- ------- -------- --------
<S> <C> <C> <C> <C> <C>
Hotels owned at year end.................................... 188 193 73 (2.6)% 164.4%
Revenues.................................................... $504.0 $339.6 $176.7 48.4 % 92.2%
Income before nonrecurring items............................ $132.0 $117.4 $ 63.8 12.4 % 84.0%
Net income applicable to common shareholders................ $106.3 $ 93.4 $ 51.9 13.8 % 80.0%
Funds From Operations (FFO)................................. $286.9 $217.4 $129.8 32.0 % 67.5%
</TABLE>
RESULTS OF OPERATIONS
THE COMPANY -- ACTUAL
Comparison of the Years Ended December 31, 1999 and 1998.
For the years 1999 and 1998, FelCor had total revenue of $504.0
million and $339.6 million, respectively, consisting primarily of Percentage
Lease revenue of $490.9 million and $328.0 million. The increase in revenue is
primarily attributable to the Company's acquisition and subsequent leasing,
pursuant to Percentage Leases, of interests in more than 100 hotels in 1998,
including the hotels that were acquired through the Merger on July 28, 1998. The
hotels which were acquired during 1998, including those acquired through the
Merger, accounted for $151.1 million (93%) of the change in Percentage Lease
revenue for the twelve months ended December 31, 1999 compared to 1998. The 73
hotels owned throughout both of the years ended December 31, 1999 and 1998
produced an increase in Percentage Lease revenues of $10.9 million (or 1.9%)
between 1998 and 1999.
Changes in room and suite revenues significantly affect the Company
because its principal source of revenue is rent payments from the Lessees under
the Percentage Leases. The Percentage Leases provide for rent based on a
percentage of room and suite revenue, food and beverage revenue, food and
beverage rents, and in some instances, other hotel revenues. In 1999 and 1998,
Percentage Lease revenue derived from room and suite revenue represented 91% and
93% of total Percentage Lease revenue, respectively. The 73 hotels owned
throughout both 1999 and 1998 increased room and suite revenue by $11.6 million
(or 2%) in 1999 compared to 1998 and increased RevPAR by 1.4%. The RevPAR
increase was driven by an increase in average daily rate ("ADR") of 1.5%,
despite a slight drop in occupied rooms ("Occupancy") of 0.1 percentage points.
Of the 73 hotels, 18 had undergone renovation in either 1998 or 1999. Those
renovated hotels reflected increases in ADR of 2.2% and in RevPAR of 1.9%, which
was greater than the results for hotels that had not undergone renovation. This
reflects both the improvement from renovation and the impact of taking rooms out
of service for such renovation.
The Company generally seeks to improve those of its hotels that
management believes can achieve increases in room and suite revenue and RevPAR
as a result of renovation, redevelopment and rebranding. However, during the
course of such improvements hotel revenue performance is often adversely
affected,
-25-
<PAGE> 28
compared to the prior year, by such temporary factors as rooms and suites out of
service and disruptions of hotel operations. During 1999, FelCor spent $177
million on the renovation, redevelopment and rebranding of its hotels. As a
result of the extensive renovations, FelCor's portfolio experienced significant
disruption during 1999, with approximately 350,000 room nights out of service,
or 2% of its portfolio. (A more detailed discussion of hotel room and suite
revenue is contained in the "The Hotels--Actual" section of this Management's
Discussion and Analysis of Financial Condition and Results of Operations.)
Total expenses increased $149.9 million in the year ended December
31, 1999, to $372.0 million from $222.2 million in 1998. This increase resulted
primarily from the additional hotels acquired in July 1998 through the Merger.
Total expenses as a percentage of total revenue increased to 73.8%
for the twelve months ended December 31, 1999, compared to 65.4% in the same
period of 1998. The major components of the increase in expenses, as a
percentage of total revenue, are depreciation, land leases, and interest
expense.
Depreciation increased, as a percentage of total revenue, to 30.4% in
the twelve months ended December 31, 1999, from 26.8% in 1998. The relative
increase in depreciation expense is primarily attributed to depreciation on
$341.4 million in capital expenditures made over the past two years,
approximately 40% of which are short-lived assets that are depreciated over 3 to
5 years.
Land lease expenses represent 3.5% of total revenue in 1999 as
compared to 2.4% in 1998. This increase, as a percentage of total revenue,
results primarily from the larger percentage of hotels subject to land leases
among those acquired through the Merger.
Interest expense increased, as a percentage of total revenue, to
24.9% in the twelve months ended December 31, 1999, from 21.6% in 1998. This
increase in interest expense is attributed to the increased debt used to finance
renovations, higher interest rates on debt that was refinanced to extend
maturities and convert such debt from variable to fixed rates, the assumption of
debt related to the more highly leveraged Bristol assets, and borrowings to fund
the Company's stock repurchase program.
General and administrative expenses and taxes, insurance and other
expense remained relatively constant as a percentage of total revenue in 1999
and 1998.
Comparison of the Years Ended December 31, 1998 and 1997.
For the years 1998 and 1997, FelCor had total revenue of $339.6 million
and $176.7 million, respectively, consisting primarily of Percentage Lease
revenue of $328.0 million and $169.1 million. The 43 hotels owned by the Company
throughout both of the years 1998 and 1997, which reflect the effect of the
Company's ownership and the management by its strategic partners, experienced a
growth in RevPAR during 1998 of 5.4% over 1997. The largest portion of this
increase came from the 18 former Crown Sterling Suite hotels, which continued
their trend of improved RevPAR throughout 1998, achieving a RevPAR of $92.05 in
1998 compared to $85.04 for 1997, an increase of 8.2%. These hotels have
improved their RevPAR performance by 31.4% since 1996. The Company attributes
this dramatic increase to the renovation, redevelopment and rebranding of these
hotels in 1996 and early 1997.
Total expenses increased $109.4 million in 1998 over 1997, primarily
resulting from the net acquisition of 120 hotels during 1998 and 30 hotels in
1997. Total expenses as a percentage of total revenue increased in 1998 to 65.4%
from 63.9% in 1997.
The major component of the increase in expenses, as a percentage of
total revenue, was interest expense. Interest expense increased by $44.4
million, from $28.8 million in 1997 to $73.2 million in 1998, and increased as a
percentage of total revenue, from 16.3% in 1997 to 21.6% in 1998. The relative
increase in interest expense is attributed to the assumption of debt related to
the more highly leveraged Bristol assets. Debt as a percentage of total assets
increased from 28.5% at December 31, 1997 to 38.2% at December 31, 1998.
General and administrative expenses, depreciation, and taxes, insurance
and other expenses remained relatively constant as a percentage of total revenue
in 1998 and 1997.
-26-
<PAGE> 29
FUNDS FROM OPERATIONS
The Company considers Funds From Operations to be a key measure of a
REIT's performance which should be considered along with, but not as an
alternative to, net income and cash flow as a measure of the Company's operating
performance and liquidity.
The White Paper on Funds From Operations approved by the Board of
Governors of the National Association of Real Estate Investment Trusts
("NAREIT") defines Funds From Operations as net income or loss (computed in
accordance with GAAP), excluding gains or losses from debt restructuring and
extraordinary gains or losses from sales of properties, plus real estate related
depreciation and amortization, after comparable adjustments for the Company's
portion of these items related to unconsolidated entities and joint ventures.
The Company believes that Funds From Operations is helpful to investors as a
measure of the performance of an equity REIT because, along with cash flow from
operating activities, financing activities and investing activities, it provides
investors with an indication of the ability of the Company to incur and service
debt, to make capital expenditures and to fund other cash needs. The Company
computes Funds From Operations in accordance with standards established by
NAREIT which may not be comparable to Funds From Operations reported by other
REITs that do not define the term in accordance with the current NAREIT
definition or that interpret the current NAREIT definition differently than the
Company. Funds From Operations does not represent cash generated from operating
activities determined by GAAP and should not be considered as an alternative to
net income (determined in accordance with GAAP) as an indication of the
Company's financial performance or to cash flow from operating activities
(determined in accordance with GAAP) as a measure of the Company 's liquidity,
nor is it indicative of funds available to fund the Company's cash needs,
including its ability to make cash distributions. Funds From Operations may
include funds that may not be available for management's discretionary use due
to requirements to conserve funds for capital expenditures and property
acquisitions and other commitments and uncertainties.
The following table details the computation of Funds From Operations
(in thousands):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------------
1999 1998 1997
---------- ---------- ----------
FUNDS FROM OPERATIONS (FFO):
<S> <C> <C> <C>
Net income ........................................................... $ 131,080 $ 114,839 $ 63,650
Series B preferred share dividends ................................ (12,937) (8,373)
Extraordinary charge from write off of deferred financing fees ... 1,113 3,075 185
Depreciation ...................................................... 152,948 90,835 50,798
Depreciation for unconsolidated entities .......................... 9,995 10,487 9,365
Minority interest in Operating Partnership ........................ 4,696 6,500 5,817
---------- ---------- ----------
FFO .................................................................. $ 286,895 $ 217,363 $ 129,815
========== ========== ==========
Weighted average common shares and units outstanding ................. 75,251 58,013 39,157
</TABLE>
THE HOTELS -- ACTUAL
Upscale and full service hotels like Embassy Suites, Crowne Plaza,
Holiday Inn and Holiday Inn Select, Doubletree and Doubletree Guest Suites, and
Sheraton and Sheraton Suites hotels account for approximately 97% of the
Company's Percentage Lease revenue. As a result of the renovation and rebranding
of hotels, approximately 98% of Percentage Lease revenue for 2000 is expected to
be derived from upscale and full service hotels.
The Company believes that when analyzing the performance of the hotels,
looking at "Comparable Hotels" is the most meaningful. The Company defines
"Comparable Hotels" as those not undergoing renovation, redevelopment or
rebranding in either of the comparison years. Major renovations generally have
an adverse affect on hotel earnings by taking rooms out of service and
disrupting hotel operations. "Non- comparable Hotels" are those undergoing
renovation, redevelopment or rebranding during either year.
-27-
<PAGE> 30
The following table sets forth historical Occupancy, ADR and RevPAR at December
31, 1999 and 1998, and the percentage changes therein between the years
presented for the Hotels in which the Company had an ownership interest at
December 31, 1999. This information is presented regardless of the date of
acquisition.
<TABLE>
<CAPTION>
1999
----
OCCUPANCY ADR RevPAR
--------- -------- --------
<S> <C> <C> <C>
DJONT Comparable Hotels 73.0% $ 123.00 $ 89.79
Bristol Comparable Hotels 65.7% $ 81.55 $ 53.59
Total Comparable Hotels (A) 69.6% $ 104.61 $ 72.79
DJONT Non-comparable Hotels 67.9% $ 108.58 $ 73.74
Bristol Non-comparable Hotels 66.4% $ 89.84 $ 59.64
Total Non-comparable Hotels (B) 66.9% $ 96.64 $ 64.68
Total Hotels 68.3% $ 100.72 $ 68.77
</TABLE>
<TABLE>
<CAPTION>
1998
----
OCCUPANCY ADR RevPAR
--------- --------- ---------
<S> <C> <C> <C>
DJONT Comparable Hotel 73.0% $ 121.42 $ 88.67
Bristol Comparable Hotels 67.3% $ 80.00 $ 53.86
Total Comparable Hotels 70.3% $ 102.74 $ 72.27
DJONT Non-comparable Hotels 69.7% $ 106.08 $ 73.96
Bristol Non-comparable Hotels 65.9% $ 83.67 $ 55.14
Total Non-comparable Hotels 67.3% $ 92.02 $ 61.90
Total Hotels 68.8% $ 97.56 $ 67.16
</TABLE>
<TABLE>
<CAPTION>
CHANGE FROM PRIOR PERIOD
1999 VS. 1998
------------------------
OCCUPANCY ADR RevPAR
--------- --------- ---------
<S> <C> <C> <C>
DJONT Comparable Hotels 0.0 pts 1.3% 1.3%
Bristol Comparable Hotels (1.6) pts 1.9% (0.5)%
Total Comparable Hotels (0.7) pts 1.8% 0.7%
DJONT Non-comparable Hotels (1.8) pts 2.4% (0.3)%
Bristol Non-comparable Hotels 0.5 pts 7.4% 8.2%
Total Non-comparable Hotels (0.3) pts 5.0% 4.5%
Total Hotels (0.5) pts 3.2% 2.4%
</TABLE>
(A) DJONT Comparable Hotels includes 55 hotels and Bristol
Comparable Hotels includes 49 hotels which were not undergoing
renovation, redevelopment, or rebranding in either the 1999 or
1998 periods reported.
(B) DJONT Non-comparable Hotels includes 32 hotels and Bristol
Non-comparable Hotels includes 52 hotels undergoing
redevelopment in either the 1999 or 1998 periods reported.
-28-
<PAGE> 31
Comparison of the Hotels' Operating Statistics for the Years Ended December
31, 1999 and 1998.
For the twelve months ended December 31, 1999, the Company's Comparable
Hotels' RevPAR increased, compared to the same period in 1998, by 0.7%. In the
twelve months ended December 31, 1999, the Comparable Hotels' ADR increased
1.8%, but Occupancy fell 0.6 percentage points. In general, the Company is
encouraged by the relative firming of room rates in the last half of the year,
which appears to be indicative of the absorption of the new rooms introduced in
certain markets during the past year.
The DJONT Comparable Hotels are predominately Embassy Suites,
Doubletree and Doubletree Guest Suites, and Sheraton hotels. The Bristol
Comparable Hotels are predominately Holiday Inn and Crowne Plaza hotels. The
following table shows the Comparable Hotel RevPAR changes for these five brands
for the year ended December 31, 1999, compared to 1998:
<TABLE>
<CAPTION>
RevPAR Percentage of Total
------ -------------------
Change Room Revenue
------ ------------
<S> <C> <C>
Embassy Suites (45 hotels) 1.3% 56.9%
Holiday Inn (29 hotels) 1.4% 22.5%
Sheraton (3 hotels) 1.4% 4.4%
Doubletree (5 hotels) 2.5% 2.9%
Crowne Plaza (2 hotels) (8.9)% 2.0%
</TABLE>
The poor performance of the Comparable Crowne Plaza hotels is primarily
the result of one hotel in Jackson, Mississippi, which was converted to a Crowne
Plaza in 1997. This hotel suffered both significant competition from a new full
service hotel and the relocation of a major employer that had contributed
significant business in prior years. The Comparable Embassy Suites and Holiday
Inn hotels showed improving RevPAR trends in the last half of 1999, which appear
to be continuing into 2000.
Nearly 52% of the Company's 1999 Comparable Hotel revenue was derived
from four states: Texas, California, Georgia and Florida. Changes in Comparable
Hotel RevPAR during 1999 for these states, compared to 1998, are illustrated in
the following table:
<TABLE>
<CAPTION>
RevPAR Percentage of Total
------ -------------------
Change Room Revenue
------ ------------
<S> <C> <C>
Texas (25 hotels) (3.9)% 24.0%
California (12 hotels) 3.3% 11.5%
Georgia (10 hotels) 1.0% 9.6%
Florida (7 hotels) 4.6% 6.7%
</TABLE>
FelCor's exposure in overbuilt markets, such as Dallas, Texas, had a
negative impact on Comparable Hotel trends during 1999, although management
expects the rate of new supply additions to decline in 2000. During 1999, the
Company's Texas hotels experienced a 3.9% decrease in RevPAR, while the 10
Comparable Hotels in the Dallas market experienced a 5.9% decline in RevPAR.
Management is encouraged, although it continues to see an oversupply in the
Dallas market, that the situation appears to be improving and supply growth is
now expected to begin a gradual decline. In addition, the Company has recently
renovated eight of its 18 Dallas-based properties and management is currently
projecting positive RevPAR growth for the majority of its hotels in this market
during 2000.
The Non-comparable Hotel performance was most profoundly affected by
the Allerton Crowne Plaza, which was closed for renovation in the third quarter
1998 and partially reopened in the second quarter of 1999. The Allerton
generated an 84.3% increase in its RevPAR for the year ended December 31, 1999,
as compared to the same period in 1998. The remainder of the Bristol
Non-comparable Hotels also showed improvements
-29-
<PAGE> 32
in RevPAR, which are attributed to the completion of renovations at many of
these hotels. Most of the DJONT Non-comparable Hotels where renovations had been
completed also showed strong RevPAR increases for the year, compared to the same
period last year.
Other factors which management believes will have favorable impacts on
future hotel revenues are the recent merger between Hilton Hotels Corporation
and Promus Hotel Corporation and the recently announced merger agreement between
Bristol and Bass plc.
The Hilton/Promus merger, which was completed in November 1999, should
provide stability and focus for the Embassy Suites and Doubletree brands. In
addition, the Promus brands should benefit from the distribution of the Hilton
brands in the United States and worldwide, cross-selling through the larger
Hilton/Promus reservation system and the addition of Hilton's HHonors(R)
frequent traveler and loyalty program to the Company's Embassy Suites and
Doubletree hotels.
The proposed Bass/Bristol merger will serve to match the management of
the Company's Bass branded hotels with the brand owner, which management expects
to be beneficial to the development and strengthening of these brands and should
help strengthen the Company's relationship with the brand owner.
DJONT - ACTUAL
Comparison of the Years Ended December 31, 1999 and 1998
Total revenues increased to $797.6 million in the twelve months ended
December 31, 1999, from $749.5 million in the same period of 1998, an increase
of 6.4%. Total revenues consisted primarily of room and suite revenue of $649.3
million and $618.1 million in the twelve months of 1999 and 1998, respectively.
The increase in total revenues is primarily a result of the acquisition
of twelve additional hotels in 1998. Room and suite revenues from the these 12
hotels, for the twelve months ended December 31, 1999 over 1998, increased 1.9%
or $10.6 million. The room and suite revenue for the 73 hotels which were leased
for all of 1999 and 1998, increased $11.6 million as a result of an increase in
ADR of $1.81, with a slight decrease in Occupancy of 0.1%.
The Embassy Suites and Doubletree branded hotels, collectively 74
hotels, should benefit from the recently completed merger between Hilton Hotels
Corporation and Promus Hotel corporation (the brand manager for all but two of
DJONT's Embassy Suites and Doubletree hotels). Hilton's upscale hotel experience
and integration into Hilton's central reservation system, marketing
infrastructure and frequent stay program have the potential to drive both
incremental occupancy and rate.
DJONT's income before Percentage Lease rent decreased as a percentage
of total revenues from 38.8% in the twelve months ended December 31, 1998 to
37.9% in the twelve months ended December 31, 1999. For the twelve months ended
December 31, 1999, DJONT incurred losses of $4.9 million. This was largely due
to higher labor costs and related payroll benefits, increased reservation costs,
and increased fees related to the former Crown Sterling Suite hotels.
Percentage lease expense remained relatively constant as a percentage
of total revenue in 1999 and 1998.
Comparison of the Years Ended December 31, 1998 and 1997
Total revenues increased to $749.5 million in 1998 from $534.5 million
in 1997, an increase of 40.2%. Total revenues consisted primarily of suite
revenue of $ 618.1 million and $456.6 million in 1998 and 1997, respectively.
Percentage lease expenses as a percentage of total revenue increased.
The increase in total revenues is primarily a result of the increase in
the number of hotels leased to 86 hotels at December 31, 1998 from 73 hotels at
December 31, 1997. Suite revenues for the 43 hotels which were leased for all of
1998 and 1997 increased 8.0% or $19.3 million. The increase in revenues at these
hotels
-30-
<PAGE> 33
is due primarily to improved average daily room rates of $122.33 for the year
ended December 31, 1998, as compared to $114.77 for the year ended December 31,
1997.
DJONT recorded a net income of $844,000 in 1998 compared to a net loss
of $2.7 million in 1997. This improvement in operating performance is primarily
attributed to improved profitability of food and beverage operations for DJONT
and a decrease in percentage lease expenses as a percentage of total revenue.
Food and beverage profits increased to 1.6% of total revenue in 1998
from 0.3% in 1997, an increase of $10.2 million. This change is attributed to
the increased number of hotels leased by DJONT which have a greater emphasis on
food and beverage than the traditional Embassy Suites hotel. Food and beverage
revenue, as a percentage of total revenue, increased to 10.4% in 1998 compared
to 6.5% in 1997.
Percentage lease expenses as a percentage of total revenue decreased to
39% from 41%. A portion of this change is attributed to the increase in food and
beverage revenues, as a percentage of total revenues, which bear a lower
percentage rent than room revenues.
RENOVATIONS, REDEVELOPMENTS AND REBRANDINGS
The Company has historically differentiated itself from many of its
competitors by:
o the practice of upgrading, renovating and/or redeveloping most
of its acquired hotels to enhance their competitive position,
and, in certain instances, rebranding them to improve their
revenue generating capacity; and
o the ongoing program for the maintenance of the Company's
upgraded hotel assets, which includes:
o the contribution of at least 4% of annual room and
suite revenue for the DJONT hotels, and 3% of total
annual hotel revenue for the Bristol hotels, for
routine capital replacements and improvements; and
o ensuring the Lessees' adherence to a maintenance and
repair program amounting to approximately 4.5% of
annual hotel revenues.
Renovation and Redevelopment Program
The Company has demonstrated its ability to successfully execute
renovations. Its renovation and rebranding of the 18 Crown Sterling Suites
hotels, which were acquired during 1996 and 1997, achieved an overall RevPAR
increase of 34.1% between 1996 and 1999. During 1998 and 1999, an aggregate of
approximately $442 million in capital improvements were made to the Company's
hotels, with approximately 3% of total hotel room nights being lost due to
renovation in 1998 and 2% in 1999. During 2000, the Company currently expects to
spend approximately $15 million on the renovation of 28 hotels, approximately
$42 million to complete renovations started in 1999 at 28 hotels, and
approximately $40 million for other capital expenditures. The Company is
currently reviewing the feasibility of undertaking between $4 and $20 million of
additional renovations and room additions during 2000. The Company currently
expects an insignificant number of room nights to be lost during 2000 as a
result of renovations. By the end of 2000, the Company will have spent nearly
$650 million since 1994 on renovations and other capital expenditures to its
hotel portfolio, which should limit the need for future renovation expenditures
primarily to those necessary to maintain the hotels in their upgraded condition.
The largest single renovation project completed during 1999 was the
Allerton Crowne Plaza in Chicago, which was partially reopened in July 1999,
after having been closed for more than a year. This project has received
numerous awards, including Lodging Hospitality magazine's Year's Best Design
competition in two categories, Bass Hotels & Resorts 1999 Newcomer of the Year
award, and Chicago's Greater North Michigan Avenue Association 1999 Avenue
Enhancement award.
-31-
<PAGE> 34
Rebranding
In 1998 and 1999, the Company re-branded 24 hotels as follows:
<TABLE>
<CAPTION>
NEW BRAND PRIOR BRAND LOCATION
--------- ----------- --------
<S> <C> <C>
Crowne Plaza Holiday Inn Hartford, Connecticut
Crowne Plaza Holiday Inn San Francisco, California
Crowne Plaza Hilton Secaucus, New Jersey
Crowne Plaza Holiday Inn Houston, Texas
Crowne Plaza Holiday Inn Select Greenville, South Carolina
Crowne Plaza Holiday Inn Select Miami, Florida
Crowne Plaza Holiday Inn Select Philadelphia, Pennsylvania
Crowne Plaza Harvey Hotel Atlanta, Georgia
Crowne Plaza Harvey Hotel Dallas, Texas
Crowne Plaza Harvey Hotel Addison, Texas
Crowne Plaza Holiday Inn Select Irvine, California
Crowne Plaza Holiday Inn San Jose, California
Crowne Plaza Independent Chicago, Illinois
Crowne Plaza Holiday Inn Omaha, Nebraska
Crowne Plaza Suites Bristol Suites Dallas, Texas
Doubletree Radisson Wilmington, Delaware
Embassy Suites Doubletree Guest Suites Bloomington, Minnesota
Embassy Suites Doubletree Guest Suites Dallas, Texas
Holiday Inn & Suites Harvey Suites Houston, Texas
Independent Embassy Suites Beaver Creek, Colorado
Sheraton Radisson Dallas, Texas
Sheraton Suites Doubletree Guest Suites Lexington, Kentucky
Sheraton Suites Doubletree Guest Suites Ft. Lauderdale, Florida
Westin Sheraton Dallas, Texas
</TABLE>
On January 1, 2000, two hotels were converted from Doubletree Guest
Suites hotels to the Embassy Suites brand. They are located in Troy, Michigan,
and near the Baltimore/Washington International Airport in Linthicum, Maryland.
Room Additions
During 1998, the Company completed construction of an aggregate of 224
suites at its Embassy Suites hotels in Jacksonville (67) and Orlando (North)
(67), Florida, and New Orleans (90), Louisiana. In early 2000, the Company
expects to complete construction on a 90 room addition to its Doubletree hotel
in Wilmington, Delaware.
Capital Reserve
It is the Company's policy to contribute a minimum of 4% of room and
suite revenue from the DJONT leased hotels and 3% of total hotel revenue from
the Bristol leased hotels to a capital reserve account in order to provide funds
for necessary ongoing capital replacements and improvements. During 1999,
approximately $49.3 million was spent on such replacements and improvements
(which is in addition to the $161 million spent under the Renovation and
Redevelopment Program described above).
-32-
<PAGE> 35
Repairs and Maintenance
During the year ended December 31, 1999, approximately $38.5 million
and $32.7 million were spent by the Lessees on routine repairs and maintenance
at the Hotels leased by DJONT and Bristol, respectively. This represents
approximately 4.6% of total hotel revenues.
LIQUIDITY AND CAPITAL RESOURCES
FelCor's principal source of cash to meet its cash requirements,
including distributions to shareholders and repayments of indebtedness, is its
share of the Operating Partnership's cash flow from the Percentage Leases. For
the year ended December 31, 1999, cash flow provided by operating activities,
consisting primarily of Percentage Lease revenue, was $282.4 million and Funds
From Operations was $286.9 million.
The Lessees' obligations under the Percentage Leases are largely
unsecured. The Lessees have limited capital resources and, accordingly, their
ability to make lease payments under the Percentage Leases is substantially
dependent on the ability of the Lessees to generate sufficient cash flow from
the operation of the Hotels. At December 31, 1999, the Lessees had paid all
amounts then due the Company under the Percentage Leases.
DJONT recorded a net loss of $4.9 million for the year ended December
31, 1999. Because of the current year loss and losses in prior years, DJONT's
accumulated deficit totaled $13.1 million at December 31, 1999. The losses in
the current year are attributed to weaker than anticipated revenues in 1999 and
lower operating margins. A significant portion of prior year losses are
attributable to the operation of hotels during periods of substantial
renovation.
Management anticipates modest revenue growth at the DJONT hotels during
2000, which may result in additional operating losses. Management anticipates
that DJONT will be able to generate profits over the next five years and to
significantly reduce the accumulated deficit, as a result of the planned
rebranding of one of its hotels, the elimination of certain expenses, and
Percentage Leases that expire and are expected to be renewed with more favorable
terms at the time of their expiration. Management believes that the loan
commitments from certain entities owning interests in DJONT and the managers of
certain hotels, aggregating approximately $17.3 million, and improvements in
operating margins will be sufficient to enable DJONT to continue to make
necessary payments when due. It is anticipated that a substantial portion of any
future profits of DJONT will be retained until a positive net worth equity is
restored. The Company deems DJONT to be a viable going concern and, as such, no
adjustments are required to the accompanying financial statements.
Bristol has entered into an absolute and unconditional guarantee of the
obligations of the Bristol Lessees under the Percentage Leases. As an additional
credit enhancement, the Bristol Lessees obtained a letter of credit (the "Letter
of Credit") issued by Bankers Trust Company for the benefit of the Company in
the original amount of $20 million. This Letter of Credit is subject to periodic
reductions upon satisfaction of certain conditions and at December 31, 1999 was
in the amount of $9.1 million. According to Bristol's earnings release dated
February 1, 2000, for the years ended December 31, 1999 and 1998, Bristol had
net income of $8.2 million and $2.6 million, respectively, and a shareholder's
equity of $43.1 million at December 31, 1999.
The Company may incur indebtedness to make property acquisitions, to
purchase shares of its capital stock or to meet distribution requirements
imposed on a REIT under the Internal Revenue Code, to the extent that working
capital and cash flow from the Company's investments are insufficient for such
purposes. At December 31, 1999, the Company had $36.1 million of cash and cash
equivalents and had utilized $664 million under its $850 million revolving Line
of Credit.
-33-
<PAGE> 36
The following details the Company's debt outstanding at December 31,
1999 and 1998 (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------
COLLATERAL INTEREST RATE MATURITY DATE 1999 1998
---------- ------------- ------------- ----------- ----------
<S> <C> <C> <C> <C> <C>
FLOATING RATE DEBT:
Line of credit (a) LIBOR + 163bp June 2001 $ 351,000 $ 411,000
Senior term loan (a) LIBOR + 250bp March 2004 250,000
Term loan Unsecured LIBOR + 150bp December 1999 250,000
Mortgage debt 3 hotels LIBOR + 200bp February 2003 62,553
Other Unsecured Up to LIBOR + 200bp Various 32,282 34,750
---------- ----------
Total floating rate debt 695,835 695,750
---------- ----------
FIXED RATE DEBT:
Line of credit - swapped (a) 7.17 - 7.56% March 2000- 2001 313,000 325,000
Publicly-traded term notes (a) 7.38% October 2004 174,377 174,249
Publicly-traded term notes (a) 7.63% October 2007 124,221 124,122
Mortgage debt 15 hotels 7.24% November 2022 142,542 145,062
Senior term loan - swapped (a) 8.30% March 2000-2004 125,000
Mortgage debt 3 hotels 6.97% December 2002 43,836
Mortgage debt 7 hotels 7.54% April 2009 99,075
Mortgage debt 6 hotels 7.55% June 2009 74,483
Other 13 hotels 6.96% - 7.23% 2000 - 2005 85,421 86,715
---------- ----------
Total fixed rate debt 1,138,119 898,984
---------- ----------
Total debt $1,833,954 $1,594,734
========== ==========
</TABLE>
- --------------------
(a) Collateralized by stock and partnership interests in certain
subsidiaries of FelCor.
The Line of Credit and the Senior Term Loan contain various affirmative
and negative covenants, including limitations on total indebtedness, total
secured indebtedness, and cash distributions, as well as the obligation to
maintain a certain minimum tangible net worth and certain minimum interest and
debt service coverage ratios. At December 31, 1999, the Company was in
compliance with all such covenants.
The Company's other borrowings contain affirmative and negative
covenants that are generally equal to or less restrictive than the Line of
Credit and Senior Term Loan. Most of the mortgage debt is nonrecourse to the
Company (with certain exceptions) and contains provisions allowing for the
substitution of collateral upon satisfaction of certain conditions. Most of the
mortgage debt is prepayable, subject to various prepayment penalties, yield
maintenance, or defeasance obligations.
To provide for additional financing flexibility, the Company has
approximately $946 million of Common Stock, Preferred Stock, debt securities,
and/or Common Stock warrants available for offerings under shelf registration
statements previously declared effective.
On September 3, 1999, FelCor announced that its Board of Directors had
authorized the Company to repurchase up to $100 million of its outstanding
common shares. At December 31, 1999, the Company had completed the repurchase of
approximately 5.8 million common shares at a cost of approximately $98.4
million, which has been recorded as treasury stock.
On January 4, 2000, FelCor announced that its Board of Directors had
approved a $200 million increase to the existing $100 million stock repurchase
program, authorizing the Company to purchase up to an aggregate of $300 million
of its outstanding common shares. Through March 15, 2000, the Company had
purchased an aggregate of 7.8 million common shares at an aggregate cost of
approximately $137.3 million.
The Company's $75.4 million in cash flow used in financing activities
for the year ended December 31, 1999, relates primarily to the repurchase of
approximately 5.8 million shares of FelCor's Common Stock for approximately
$98.4 million and distributions aggregating $206.8 million. These expenditures
were partially offset by net borrowings by the Company of $229.8 million during
the year.
-34-
<PAGE> 37
Quantitative and Qualitative Disclosures About Market Risk
The Company's primary market risk exposure is to changes in interest
rates on its floating rate debt. The Company manages the risk of increasing
interest rates on its floating rate debt through the use of interest rate swaps,
which effectively convert variable rate debt to a fixed rate, by locking the
interest rates paid. The Company had entered into interest rate swap contracts
relating to debt of $438 million at December 31, 1999.
The following table provides information about the Company's financial
instruments that are sensitive to changes in interest rates, including interest
rate swaps and debt obligations. For debt obligations at December 31, 1999, the
table presents scheduled maturities and weighted average interest rates, by
maturity dates. For interest rate swaps, the table presents notional amounts and
weighted average interest rates, by contractual maturity dates. Weighted average
variable rates are based on implied forward rates in the yield curve as of
December 31, 1999. The Fair Value of the Company's fixed rate debt indicates
the estimated principal amount of debt having the same debt service
requirements which could have been borrowed at December 31, 1999 at then
current market interest rates. The Fair Value of the Company's variable to
fixed interest rate swaps indicates the estimated amount that would have been
received by the Company had they been sold at December 31, 1999.
EXPECTED MATURITY DATE
(IN THOUSANDS)
<TABLE>
<CAPTION>
2000 2001 2002 2003 2004 THEREAFTER TOTAL FAIR VALUE
---- ---- ---- ---- ---- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
LIABILITIES
Debt:
Fixed rate $ 10,332 $ 19,878 $8,836 $ 30,355 $183,684 $ 447,034 $ 700,119 $ 567,603
Average interest rate 7.90% 9.52% 7.88% 7.57% 7.41% 7.66%
Variable rate $ 32,276 $664,711 $ 785 $ 60,413 $375,000 $ 650 $1,133,835 $1,133,835
Average interest rate 7.55% 8.76% 9.38% 9.25% 9.01% 9.30%
INTEREST RATE
DERIVATIVES
Interest rate swaps:
Variable to fixed $188,000 $125,000 $ -- $125,000 -- -- $ 438,000 $ 6,292
Average pay rate 5.31% 5.72% 5.80% 5.80%
Average receive rate 5.83% 5.83% 5.83% 5.83%
</TABLE>
Swap contracts, such as those described above, contain a credit risk,
in that the counterparties may be unable to fulfill the terms of the agreement.
The Company minimizes that risk by evaluating the creditworthiness of its
counterparties, who are limited to major banks and financial institutions, and
does not anticipate nonperformance by the counterparties.
REIT MODERNIZATION ACT
On December 17, 1999, the provisions of the REIT Modernization Act
became law. These provisions, among other things, will reduce the distribution
requirement for REITs from 95% of taxable income to 90% of taxable income,
effective January 1, 2001.
In addition, these provisions will allow REITs, subject to certain
limitations, to own (directly or indirectly) up to 100% of the stock of a
taxable REIT subsidiary ("TRS") that can engage in businesses previously
prohibited to a REIT. In particular, these provisions will permit a hotel REIT
to own a TRS that can lease hotels from its parent hotel REIT, rather than
requiring the lessee to be a separate, unaffiliated party. However, hotels
leased to a TRS will still have to be managed by an unaffiliated third party.
The provisions are complex and impose several conditions on the use of a TRS,
generally to assure that the TRS is subject to an appropriate level of corporate
taxation. Further, no more than 20% of a REIT's assets may consist of non-
qualifying assets, including securities of a TRS and other taxable subsidiaries.
These provisions also go into effect on January 1, 2001. However, a taxable
subsidiary in existence on July 12, 1999, such as Kingston Plantation
Development Corp. ("KPDC"), a corporation of which the Company owns 100% of the
nonvoting stock, representing 97% of the value of KPDC's outstanding stock, will
be grandfathered unless and until (1) it engages in a new line of business or
acquires a substantial new asset or (2) the related REIT acquires additional
stock in the taxable subsidiary. Such existing taxable subsidiaries can be
converted into TRS's on a tax-free
-35-
<PAGE> 38
basis at any time before January 1, 2004. As a result of these provisions,
FelCor will be able to form a TRS to serve as the lessee for any hotels it
acquires after the effective date. Any "profit" from leases held by the TRS,
after payment of the applicable corporate tax, will be available for
distribution to the REIT. FelCor is currently considering formation of a TRS to
acquire the Lessees or all or a portion of their existing Hotel leases. However,
numerous issues and potential conflicts of interest will need to be resolved to
do so, and there can be no assurance that the Company will ultimately acquire
any of the existing leases through a TRS.
INFLATION
Operators of hotels, in general, possess the ability to adjust room
rates daily to reflect the effects of inflation. Competitive pressures may,
however, limit the Lessees' ability to raise room rates.
SEASONALITY
The Hotels' operations historically have been seasonal in nature,
reflecting higher occupancy rates primarily during the first three quarters of
each year. This seasonality can be expected to cause fluctuations in the
Company's quarterly lease revenue, particularly during the fourth quarter, to
the extent that it receives Percentage Rent. To the extent cash flow from
operations is insufficient during any quarter, due to temporary or seasonal
fluctuations in lease revenue, the Company expects to utilize cash on hand or
borrowings under the Line of Credit to make distributions to its equity holders.
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
Portions of this Annual Report on Form 10-K include forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995. Although the Company believes that the expectations reflected in such
forward-looking statements are based upon reasonable assumptions, it can give no
assurance that its expectations will be achieved. A number of important factors
which, among others, could adversely affect the ability of the Company to meet
its current expectations are disclosed in conjunction with the forward- looking
statements and under "Cautionary Factors That May Affect Future Results" in Item
1 of this Annual Report on Form 10-K ("Cautionary Statements"). Subsequent
written and oral forward-looking statements made by or attributable to the
Company or persons acting on its behalf are expressly qualified in their
entirety by the Cautionary Statements.
RECENTLY ISSUED STATEMENTS OF FINANCIAL ACCOUNTING STANDARDS
In June 1998, the FASB issued Statement of Financial Accounting
Standards No. 133, "Accounting for Derivative Instruments and Hedging
Activities" ("FAS 133"). FAS 133 establishes accounting and reporting standards
for derivative instruments, including certain derivative instruments embedded in
other contracts (collectively referred to as derivatives) and for hedging
activities. It requires that an entity recognize all derivatives as either
assets or liabilities in the statement of financial position and measure those
instruments at fair value. In June 1999, the FASB issued Statement of Financial
Accounting Standards No. 137, "Accounting for Derivative Instruments and Hedging
Activities - Deferral of the Effective Date of FASB 133" which deferred the
effective date of FAS 133 for all fiscal quarters of fiscal years beginning
after June 15, 2000. The Company believes that, upon implementation, FAS 133
will not have a material impact on the financial statements of the Company.
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101 ("SAB 101") which provides guidance on revenue
recognition. SAB 101 is effective for fiscal years beginning after December 15,
1999. SAB 101 requires that a lessor not recognize contingent rental income
until annual specified thresholds have been achieved by the lessee. During 1999,
the Company's leases had quarterly, rather than annual, specified rental
thresholds and the Company recognized contingent rentals earned in each quarter
pursuant to the Percentage Lease terms. The Company has reviewed the terms of
its Percentage Leases and has determined that the provisions of SAB 101 will not
materially impact the Company's revenue recognition on an interim basis in 2000,
since a significant majority of the Percentage Leases contain quarterly
specified thresholds. SAB 101 will not impact the Company's revenue recognition
on an annual basis given the Company maintains only calendar year leases. SAB
101 will have no impact on the Company's interim or annual cash flow from the
Lessees, and therefore on its ability to pay dividends.
-36-
<PAGE> 39
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Information and disclosures regarding market risks applicable to FelCor
is incorporated herein by reference to the discussion under "Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources - Quantitative and Qualitative
Disclosures About Market Risk"contained elsewhere in this Annual Report on Form
10-K for the fiscal year ended December 31, 1999.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Included herein beginning at page F-1.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
-37-
<PAGE> 40
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
The board of directors has ten members, at least six of whom are not
officers or employees of the Company or the Lessees (Independent Directors). The
board of directors is divided into three classes who serve staggered three-year
terms with the term of each director expiring at the annual meeting of
shareholders held three years after his election.
The directors and executive officers are as follows:
<TABLE>
<CAPTION>
YEAR
FIRST TERM
NAME POSITION ELECTED CLASS EXPIRES
---- -------- ------- ----- -------
<S> <C> <C> <C> <C>
Donald J. McNamara............... Chairman of the Board 1998 Class II 2002
Thomas J. Corcoran, Jr........... President and Chief Executive Officer, 1994 Class II 2002
Director
Richard S. Ellwood............... Independent Director 1994 Class III 2000 (1)
Richard O. Jacobson.............. Independent Director 1994 Class III 2000 (1)
Charles A. Ledsinger, Jr......... Independent Director 1997 Class I 2001
Robert H. Lutz, Jr............... Independent Director 1998 Class I 2001
Charles N. Mathewson............. Director 1994 Class III 2000 (1)
Thomas A. McChristy.............. Independent Director 1994 Class II 2002
Richard C. North................. Director 1998 Class II 2002
Michael D. Rose.................. Independent Director 1998 Class I 2001
Lawrence D. Robinson............. Senior Vice President, General Counsel 1996
and Secretary
William P. Stadler............... Senior Vice President, Director of 1995
Corporate Acquisitions
Jack Eslick...................... Senior Vice President, Director of Asset 1996
Management
June H. McCutchen................ Senior Vice President, Director of 1995
Design and Construction
Larry J. Mundy................... Senior Vice President, Director of Hotel 1998
Acquisitions
Andrew J. Welch.................. Vice President and Treasurer 1998
Lester C. Johnson................ Vice President and Controller 1995
</TABLE>
- -------------
(1) Nominated for reelection at the Company's 2000 annual meeting of
shareholders; if reelected, such director's term would continue until
2003.
Donald J. McNamara (age 47) Mr. McNamara was the Chairman of the Board
of Bristol Hotel Company from November 1994 until its merger into FelCor in July
1998. Since the Merger, he has served as Chairman of the Board of FelCor. Mr.
McNamara previously served as a director of FelCor from July 1994 until November
1997. He is also the Chairman of The Hampstead Group, a private equity real
estate investment company, and is an affiliate of certain partnerships owning,
in the aggregate, approximately 39.9% of the outstanding common stock of Bristol
and approximately 17.3% of FelCor's outstanding Common Stock.
Thomas J. Corcoran, Jr. (age 51) Mr. Corcoran is the President and
Chief Executive Officer of FelCor and has served in that capacity since its
formation in 1994. From 1991 to 1994, Mr. Corcoran held the same positions with
the general partner of the partnerships that were merged into FelCor at its
formation. From October 1990 to December 1991, he served as the Chairman,
President and Chief Executive Officer of Fiesta Foods, Inc., a manufacturer of
tortilla chips and taco shells. From 1979 to 1990, Mr. Corcoran held various
-38-
<PAGE> 41
positions with ShowBiz Pizza Time, Inc. (now CEC Entertainment, Inc.), an
operator and franchisor of family entertainment center/pizza restaurants, and
with Integra -- A Hotel and Restaurant Company (Formerly Brock Hotel
Corporation). He served as the President and Chief Executive Officer of Integra
from 1986 to 1990.
Richard S. Ellwood (age 68) Mr. Ellwood, a director of FelCor since its
formation in 1994, is the founder and President of R.S. Ellwood & Co., Inc., a
real estate investment banking firm which was organized in 1987. Prior to 1987,
as an investment banker, Mr. Ellwood was elected successively in 1963 a vice
president of Morgan Guaranty Trust Company, in 1968 a general partner of White
Weld & Co., in 1978 a managing director of Warburg Paribas Becker, Incorporated
and in 1984 a managing director and senior banker of Merrill Lynch Capital
Markets. Mr. Ellwood has extensive experience in hotel financing. He was a
founder of Hotel Investors Trust, a REIT, and served as a trustee from 1970
until its merger with another REIT in 1987. He is currently a director of
Apartment Investment and Management Company and Florida East Coast Industries,
Inc.
Richard O. Jacobson (age 63) Mr. Jacobson has served as a director of
FelCor since its formation in 1994 and is the Chairman of the Board of Jacobson
Warehouse Company, Inc., a privately held warehouse company with facilities in
30 locations in eight states, which Mr. Jacobson founded 32 years ago. He is
also Chairman of the Board of Jacobson Transportation Company, Inc., a truckload
common carrier with authority to operate in the United States (48 states) and
Canada. Mr. Jacobson is a member of the boards of directors of Atrion
Corporation, Firstar Bank Des Moines, N.A., Firstar Bank of Iowa, N.A. and
Heartland Express, Inc.
Charles A. Ledsinger, Jr. (age 50) Mr. Ledsinger has served as director
of FelCor since November 1997. Mr. Ledsinger became the President and Chief
Executive Officer of Choice Hotels International in August 1998. Prior to that
time, Mr. Ledsinger served as Senior Vice President and Chief Financial Officer
of St. Joe Corporation from May 1997 until his election as President and Chief
Operating Officer of that corporation in February 1998. From June 1995 until May
1997, Mr. Ledsinger was Senior Vice President and Chief Financial Officer of
Harrah's Entertainment, Inc. For more than three years prior to that, Mr.
Ledsinger served as Senior Vice President and Chief Financial Officer of The
Promus Companies Incorporated, the former parent of Harrah's Entertainment, Inc.
He is also a director of Choice Hotels International, TBC Corporation and
Friendly Ice Cream Corporation. He is a past co-chairman of the Real Estate
Financial Advisory Council of the American Hotel and Motel Association.
Robert H. Lutz, Jr. (age 50) Mr. Lutz served as a director of Bristol
from December 1995 until its merger into FelCor in July 1998, and has served as
a director of FelCor since that time. Since 1994, Mr. Lutz has been the Chairman
and Chief Executive Officer, and is a member of the executive committee, of
Amresco, Inc., a financial services company. From 1991 to 1994, Mr. Lutz served
as President and Chief Operating Officer of Balcor/Allegiance Realty Group, a
subsidiary of the American Express Company engaged in real estate ownership and
management.
Charles N. Mathewson (age 71) Mr. Mathewson has served as a director of
FelCor since its formation in 1994. Additionally, Mr. Mathewson has served, for
more than the past five years, in various positions with International Game
Technology (IGT), a company engaged in the design and manufacture of
microprocessor based gaming products and gaming monitoring systems. Mr.
Mathewson joined IGT's Board of Directors in 1985 and, in February 1986, he
became the Chairman of the Board. In December 1986, he also became the President
and Chief Executive Officer of IGT. In February 1988, he resumed his position as
Chairman of the Board and Chief Executive Officer of IGT. Mr. Mathewson is also
a member of the board of directors of Baron Asset Fund.
Thomas A. McChristy (age 73) Mr. McChristy has served as director of
FelCor since its formation in 1994. He was the President of T.A. McChristy Co.,
Inc., a real estate investment company from 1957 to 1996. Mr. McChristy also
served as the President and Chief Operating Officer of Syntech International,
Inc., a lottery systems and equipment manufacturing company, from 1986 to 1988
and as its Chief Executive Officer from 1989 to 1992.
Richard C. North (age 50) Mr. North served as director of Bristol from
1997 until its merger into FelCor in July 1998, and has served as a director of
FelCor since that time. Mr. North has been the Group Finance Director of Bass
plc since 1994. Bass plc is the parent of Bass Hotels & Resorts, Inc., which
operates or franchises more than 2,700 hotels in more than 75 countries under
various brands, including Crowne Plaza
-39-
<PAGE> 42
and Holiday Inn. Prior to 1994, Mr. North served as the Group Finance Director
of The Burton Group. Subsidiaries of Bass plc beneficially own approximately
49.6% of the stock of Bristol and have announced a definitive merger agreement
pursuant to which they expect to acquire the remaining shares of Bristol during
April 1999. Subsidiaries of Bass also own approximately 8.8% of FelCor's
outstanding Common Stock. In addition, subsidiaries of Bass plc also own an
aggregate of 4,713,185 Units of limited partner interest in the Operating
Partnership. Under certain circumstances, these Units may be redeemed for a like
number of shares of FelCor Common Stock. If so redeemed, Bass and its affiliates
would own approximately 16.0% of FelCor's Common Stock.
Michael D. Rose (age 58) Mr. Rose has served as a director of FelCor
since July 1998. He served as the Chairman of the Board of Promus from April
1995 through December 1997 and, thereafter, as a director until December 1998.
Mr. Rose served as Chairman of the Board of Harrah's Entertainment, Inc. from
June 1995 until his retirement as of December 31, 1996. He also served as
Chairman of the Board of The Promus Companies Incorporated from November 1989
through June 1995 and as Chief Executive Officer of that company from November
1989 to April 1994. Mr. Rose is also a director of Ashland, Inc., First
Tennessee National Corporation, General Mills, Inc., Stein Mart, Inc.,
Resortquest International, Inc. and Darden Restaurants, Inc.
Lawrence D. Robinson (age 56) Mr. Robinson has served as the Senior
Vice President, General Counsel and Secretary of FelCor since May 1996. From
1972 to 1989, Mr. Robinson was a partner in the Kansas City-based law firm of
Stinson, Mag & Fizzell, for which he founded and managed a Dallas, Texas office
from 1982 to 1989. From 1989 through April 1996, Mr. Robinson was a partner in
the Houston-based law firm of Bracewell & Patterson, L.L.P., where he served as
the managing partner of its Dallas office until 1992, as the head of that
office's corporate and securities law section and as chairman of its firmwide
hospitality group.
William P. Stadler (age 45) Mr. Stadler began his employment with
FelCor in July 1995 as Vice President, Director of Acquisition and Development.
On January 14, 1998, Mr. Stadler was promoted to Senior Vice President, Director
of Corporate Acquisitions. Mr. Stadler has more than 17 years of experience in
hotel acquisition and development, having served as Vice President Development
for Coastal Hotel Group from 1994 until he joined FelCor in 1995, as Vice
President-Development for Embassy Suites, Inc. from 1992 to 1994, as Senior Vice
President-Development for Landmark Hotels, Inc. from 1989 to 1991 and as Vice
President- Development for Marriott Corporation form 1985 to 1989.
Jack Eslick (age 48) Mr. Eslick Joined FelCor in April 1996 as its Vice
President, Director of Asset Management. He was named Senior Vice President,
Director of Asset Management in 1998. Mr. Eslick has more than 20 years
experience in hotel operations. From April 1991 until he joined FelCor, Mr.
Eslick served as Vice President of Operations of Promus, where he had direct
responsibility for all operations in a region that grew from 14 hotels to 26
hotels. Prior to April 1991, he served in various capacities with Holiday Inns,
Inc., including serving as general manager of various hotels and as a Regional
Director of Operations.
June H. McCutchen (age 44) Ms. McCutchen joined FelCor in October 1995
as Vice President, Director of Design and Construction, and was named Senior
Vice President, Director of Design and Construction in 1998. Prior to her
engagement by FelCor, she was an Account Executive for Hospitality Restoration &
Builders, Inc. From 1992 to 1994 she was Project Manager for American General
Hospitality, Inc. where she managed all capital improvement work for more than
35 properties. Prior to 1992, Ms. McCutchen was Project Manager for Hilton
Hotels, Inc. from 1987 to 1992, and prior to 1987, she served as design
coordinator and purchasing manager for Embassy Suites, Inc.
Larry J. Mundy (age 49) Mr. Mundy joined FelCor in January 1998 and is
the Senior Vice President, Director of Hotel Acquisitions. From 1995 until he
joined FelCor, he was Vice President of Franchise Development for Motel 6. From
1987 to 1995, he was Vice President of Development in the South/Southeast for
Hilton Hotels and prior to 1987 he served as corporate counsel for Residence
Inns and Embassy Suites.
Andrew J. Welch (age 38) Mr. Welch joined FelCor in July 1998 and is
the Company's Vice President and Treasurer. Prior to joining FelCor, Mr. Welch
had served as Vice President and Treasurer of Bristol Hotel Company from August
1997. Prior to joining Bristol, Mr. Welch was responsible for originating
investment
-40-
<PAGE> 43
banking and corporate banking business for Bank of America, N.A. from October
1991 to August 1997, Citibank, N.A., from January 1990 to October 1991, and
NationsBank, N.A., from May 1984 to January 1990.
Lester C. Johnson (age 47) Mr. Johnson joined FelCor in September 1995
as its Vice President and Controller. Prior to joining FelCor, Mr. Johnson held
various positions with Integra -- A Hotel and Restaurant Company and Show Biz
Pizza Time, Inc. (now CEC Entertainment, Inc.) from 1981 to 1995. He served as
the Vice President and Controller of Integra from 1991 to 1995.
In addition to the executive officers, Hervey A. Feldman, the founding
Chairman of the Board of FelCor, serves as the Chairman Emeritus of FelCor, a
position he has held since his retirement from the board of directors in July
1998. In his capacity as Chairman Emeritus, Mr. Feldman is an honorary
non-voting member of the board of directors who is entitled to attend meetings
of the board, although his presence or absence from a meeting is not considered
for purposes of determining a quorum of the board of directors. We expect that
Mr. Feldman will be available from time to time to consult with the board of
directors and senior management on significant strategic and other corporate
matters. Mr. Feldman spent over 25 years in the hotel industry, including
serving in various management positions with Embassy Suites, Inc., Brock Hotel
Corporation, Holiday Inns, Inc. and Brock Residence Inns, Inc.
TERMS OF OFFICE AND RELATIONSHIPS
The officers of the Company are elected annually by the Board of
Directors at a meeting held following each annual meeting of shareholders, or as
soon thereafter as necessary and convenient in order to fill vacancies or newly
created offices. Each officer holds office until his successor is duly elected
and qualified or until death, resignation or removal, if earlier. Any officer or
agent elected or appointed by the Board of Directors may be removed by the Board
of Directors whenever in its judgement the best interests of the Company will be
served thereby, but such removal shall be without prejudice to the contractual
rights, if any, of the person so removed.
There are no family relationships among any of the directors or
executive officers of the Company. Except as described above, none of the
Company's directors hold directorships in any company with a class of securities
registered pursuant to Section 12 of the Securities Exchange Act of 1934 (the
"Exchange Act") or pursuant to Section 15 (d) of the Exchange Act or any company
registered as an investment company under the Investment Company Act of 1940.
There are no arrangements or understandings between any nominee for election as
a director or officer and any other person pursuant to which that director was
nominated or officer was selected.
SECTION 16 (A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires officers and directors, and
persons who beneficially own more than ten percent (10%) of the Company's stock,
to file initial reports of ownership and reports of changes in ownership with
the Securities and Exchange Commission ("SEC"). Officers, directors and greater
than ten percent (10%) beneficial owners are required by SEC regulations to
furnish the Company with copies of all Section 16(a) forms they file.
Based solely on a review of the copies furnished to the Company and
representations from the officers and directors, the Company believes that all
Section 16(a) filing requirements for the year ended December 31, 1999
applicable to its officers, directors and greater than ten percent (10%)
beneficial owners were satisfied, except that Robert H. Lutz, Jr. filed one late
Form 4 report reflecting a single purchase of Common Stock.
Based on written representations from the officers and directors, the
Company believes that no Forms 5 for directors, officers and greater than ten
percent (10%) beneficial owners were required to be filed with the SEC for the
period ended December 31, 1999.
-41-
<PAGE> 44
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth information, for the fiscal years ended
December 31, 1999, 1998 and 1997, regarding the compensation of the Company's
Chief Executive Officer and the four other most highly compensated executive
officers ("Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION
---------------------------------------- ----------------------------
SECURITIES
OTHER ANNUAL RESTRICTED UNDERLYING ALL OTHER
COMPENSATION STOCK OPTIONS/ COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) ($) AWARDS($)(1) SARS(#) ($)(4)
- --------------------------- ---- ---------- --------- ------------ ------------ ----------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Thomas J. Corcoran, Jr........ 1999 325,000 None None None None 15,000
President and Chief 1998 250,000 150,000 None None 324,953 15,000
Executive Officer 1997 200,000 250,000 None 525,000 (2) 201,000 14,250
Lawrence D. Robinson.......... 1999 225,000 50,000 None None None 15,000
Senior Vice President 1998 175,000 95,000 None None 137,262 15,000
General Counsel 1997 115,500 27,500 None 87,500 (3) 70,000 None
William P. Stadler ........... 1999 175,000 50,000 None None None 15,000
Vice President, Director 1998 150,000 151,250 None None 64,256 15,000
of New Development 1997 99,383 115,000 None None 25,000 None
Jack Eslick................... 1999 180,000 50,000 None None None 15,000
Senior Vice President 1998 150,000 70,000 None None 66,564 15,000
Director of Asset Management 1997 111,800 72,000 None None 25,000 9,500
June H. McCutchen............. 1999 150,000 62,120 None None None 15,000
Senior Vice President, Direct1998 100,000 112,472 None None 44,804 15,000
of Design and Construction 1997 70,000 94,723 None None 25,000 5,400
</TABLE>
- ---------------------------
(1) There were no shares of restricted stock awarded in the 1999 fiscal
year. Holders of restricted stock are entitled to vote and receive
dividends on such shares from the date of grant. The amount reported in
this table represents the market value of the shares awarded on the
date of grant, determined by the closing price of the Common Stock on
such date, without giving effect to the diminution of value
attributable to the restrictions on such stock. As of December 31,
1999, the aggregate unvested restricted stock holdings by the Named
Executive Officers consisted of 19,400 shares as set forth below, with
a then current aggregate market value, determined in the same manner as
of December 31, 1999, of $339,500, as follows: Mr. Corcoran 12,600
shares, ($220,500 value); Mr. Robinson 6,300 shares, ($110,250 value);
and Mr. Stadler 500 shares, ($8,750 value).
(2) Represents an award of 15,000 shares of restricted stock on February
19, 1997 which become vested over a five-year period at the rate of 20%
per year. The value is based upon the closing price of the Common Stock
on the date of grant of $35.00 per share.
(3) Represents an award of 2,500 shares of restricted stock on February 19,
1997 which becomes vested over a five-year period at the rate of 20%
per year. The value is based upon the closing price of the Common Stock
on the date of grant of $35.00 per share.
(4) These amounts represent the Company's contributions to the Company's
employee savings and investment plan in the amount of up to $15,000 to
each executive officer. The executive officers receive health and
disability insurance benefits which do not exceed 10% of their
respective salaries. These benefits are also made available to other
employees of the Company.
Option Grants
There were no grants of stock options to the Company's named executive
officers during the 1999 fiscal year. No stock appreciation rights ("SARs") were
granted during the 1999 fiscal year.
The unexpired stock options to purchase the Company's Common Stock held
by named executive officers of the Company at December 31, 1999 are summarized
in the following table:
-42-
<PAGE> 45
FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised
Options at In-the-Money Options at
December 31, 1999 December 31, 1999(1)
-------------------------- --------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Thomas J. Corcoran, Jr....................... 150,000 324,953 $0 $0
Lawrence D. Robinson......................... 0 137,262 0 0
William P. Stadler........................... 0 64,256 0 0
Jack Eslick.................................. 0 66,564 0 0
June H. McCutchen............................ 0 44,804 0 0
</TABLE>
- ---------------------------
(1) The option exercise price for all outstanding options exceeded the
closing price for the Common Stock on the New York Stock Exchange on
December 31, 1999, which was $17.50 per share.
Employment Arrangements
FelCor has entered into an employment agreement with Mr. Corcoran that
continues in effect until December 31, 2000 and automatically renews for
successive one-year terms, unless otherwise terminated. Under this agreement,
Mr. Corcoran serves as the President and Chief Executive Officer of FelCor. The
agreement provides that Mr. Corcoran be paid a salary of not less than $120,000
per year and that a comprehensive medical plan be maintained for the benefit of
Mr. Corcoran and his dependents. None of the other officers of FelCor has an
employment agreement.
FelCor has entered into change in control and severance agreements with
each of its executive officers and certain other key employees. Each of these
agreements extend until December 31, 2000, and automatically renews for
successive one-year terms unless terminated. In the event of a potential change
in control, each covered employee agrees to remain in the employ of FelCor until
the earlier of one following the "potential change in control" or six months
following an actual "change in control." "Change in control" is defined to
include (i) the acquisition of 35% of more of FelCor's voting stock by any
person or group, (ii) a change in a majority of the board of director not
approved by existing directors, (iii) a merger in which existing stockholders of
FelCor would own less than 65% of the surviving corporation's voting stock (but
excluding transactions which are the functional equivalent of an asset
acquisition by FelCor and in which there is no change in its senior management),
and (iv) the adoption of a plan for the liquidation, sale or other disposition
(excluding leases in the ordinary course of business) of all or substantially
all of FelCor's assets. Following a "change in control," if a covered employee's
employment is terminated by FelCor other than for disability, retirement, or
"cause" (or by the employee for "good reason"), then the employee will be
entitled to (i) the immediate vesting of all stock options, awards of restricted
stock and other benefits previously awarded or credited to his account and (ii)
a lump sum severance payment of between 2.99 and 0.5 times the employee's
average total annual compensation over the past three years. FelCor will be
required to "gross-up" the severance payment to cover excise taxes on the
benefits, thereby providing such benefits to the employee on a net basis, after
payment of any such excise taxes.
FelCor maintains a 401(k) Plan, health insurance and other benefits
generally available to all employees. During 1998 FelCor adopted a deferred
compensation plan that is available only to directors and employees making in
excess of $100,000 per year. FelCor makes no matching or other contributions to
this plan, other than the payment of its operating and administrative expenses.
-43-
<PAGE> 46
Director Compensation
In lieu of cash compensation for their services, FelCor will issue to
each director, except as described below, that number of shares of FelCor Common
Stock determined by dividing (i) the sum of $35,000 plus, if a director attended
more than five Board meetings during the year, $1,000 for each additional
meeting attended in person and $500 for each additional telephonic meeting in
which he participated, by (ii) $17.125, the closing price of the Common Stock on
February 24, 2000, the date the issuance was authorized by the Board, and
rounding to the nearest whole lot of 100 shares. In addition to such
compensation, each director is reimbursed for out-of-pocket expenses incurred in
connection with his service on the FelCor Board. No additional compensation is
paid to directors for service on various Board committees.
The number of shares of FelCor Common Stock to be issued to each
director for his services during 1999 are set forth below:
<TABLE>
<CAPTION>
NAME NUMBER OF SHARES
---- ----------------
<S> <C>
Donald J. McNamara 2,100
Thomas J. Corcoran, Jr. 2,100
Richard S. Ellwood 2,000
Richard O. Jacobson 2,100
Charles A. Ledsinger, Jr. 2,000
Robert H. Lutz, Jr. 2,100
Charles N. Mathewson 2,000
Thomas A. McChristy 2,100
Michael D. Rose 2,000
</TABLE>
Mr. North is not permitted by his employer to accept any compensation for his
services as a director of FelCor.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION ON
COMPENSATION DECISIONS
During 1999, the Company's Compensation Committee of the Board of
Directors consisted of Michael D. Rose (Chairman), Richard S. Ellwood, Robert H.
Lutz, Jr. and Thomas A. McChristy, all of which are Independent Directors, none
of whom was, prior to or during 1999, an officer or employee of the Company.
None of such persons had any relationships requiring disclosure under applicable
rules and regulations. The Company did not have a policy during 1999 prohibiting
its executive officers from participating in deliberations of the Compensation
Committee regarding executive compensation. Consequently, Mr. Corcoran, who is
the President, Chief Executive Officer and a director of the Company, and Mr.
Robinson, as Secretary of the Company, were present during certain deliberations
of the Compensation Committee regarding executive compensation during 1999, to
provide information to, and to record the actions of, the Compensation
Committee.
-44-
<PAGE> 47
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Security Ownership of Certain Beneficial Owners
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
NAME AND ADDRESS BENEFICIAL PERCENT OF
OF BENEFICIAL OWNER OWNERSHIP CLASS(1)
------------------- ----------- ---------
<S> <C> <C>
Hampstead Genpar, L.P.; HHGenpar Partners;
Hampstead Associates, Inc.; RAW Genpar, Inc.;
InMed, Inc.; Donald J. McNamara;
Robert A. Whitman; and Daniel A. Decker................................ 9,630,878(2) 17.3%
4200 Texas Commerce Tower West
2200 Ross Avenue
Dallas, Texas 75201
Bass, plc.............................................................. 4,905,558(3) 8.8%
20 North Audley Street
London, England W1Y1WE
Franklin Resources, Inc................................................ 2,860,120(4) 5.1%
777 Mariners Island Blvd.
San Mateo, California 94403
</TABLE>
- ---------------------
(1) Based upon 55,577,407 shares outstanding as of March 15, 2000.
(2) Based solely upon information contained in Schedule 13D, dated August
6, 1998. The named persons reported that they shared voting and
dispositive power with respect to 9,630,878 shares of Common Stock held
of record by United/Harvey Investors I, L.P., United/Harvey Investors
II, L.P., United/Harvey Investors III, L.P., United/Harvey Investors
IV, L.P., and United/Harvey Investors V, L.P.
(3) Based solely upon information contained in Schedule 13D/A, dated
February 29, 2000. Bass plc reported that, through its subsidiaries, it
shared voting and dispositive power with respect to 4,905,558 shares of
Common Stock.
(4) Based solely upon information contained n Schedule 13G, dated January
19, 2000. Franklin Resources, Inc. reported that, through its
subsidiaries, it had sole dispositive power with respect to 2,860,120
shares of Common Stock and sole voting power with respect to 2,851,920
shares of Common Stock. Includes 1,627,920 shares of Common Stock
issuable upon conversion of 2,100,000 shares of FelCor's Series A
Preferred Stock.
Security Ownership of Management
The following table shows how much FelCor Common Stock, Series A Preferred
Stock and Series B Preferred Stock was beneficially owned on March 15, 2000, by
certain executive officers, each director and all directors and those executive
officers as a group. Unless otherwise indicated, each person owns directly the
shares shown after his name in the following table.
-45-
<PAGE> 48
<TABLE>
<CAPTION>
AMOUNT AND AMOUNT AND
AMOUNT AND NATURE OF NATURE OF
NATURE OF BENEFICIAL BENEFICIAL
BENEFICIAL PERCENT OWNERSHIP OF PERCENT OWNERSHIP OF PERCENT
NAME OF OWNERSHIP OF OF SERIES A OF SERIES B OF
BENEFICIAL OWNER COMMON STOCK CLASS(1) PREFERRED STOCK CLASS(1) PREFERRED STOCK CLASS(1)
- ---------------- ------------ -------- --------------- -------- --------------- --------
<S> <C> <C> <C> <C> <C> <C>
Thomas J. Corcoran, Jr....... 734,205 (2) 1.3% 3,000 * 800 *
Richard S. Ellwood........... 11,800 (3) * 0 0 0 0
Richard O. Jacobson.......... 39,958 * 0 0 0 0
Charles A. Ledsinger, Jr..... 1,975 * 0 0 0 0
Robert H. Lutz, Jr........... 24,514 (4) * 0 0 0 0
Charles N. Mathewson......... 1,347,493 (5) 2.4% 170,000(14) 2.8% 70,000(14) *
Thomas A. McChristy.......... 142,873 (6) * 0 0 0 0
Donald J. McNamara........... 9,637,078 (7) 17.3% 0 0 0 0
Richard C. North............. 0 0 0 0 0 0
Michael D. Rose.............. 44,425 (8) * 0 0 0 0
Jack Eslick.................. 47,768 (9) * 0 0 0 0
June H. McCutchen............ 27,360 (10) * 0 0 0 0
Lawrence D. Robinson......... 98,377 (11) * 0 0 0 0
William P. Stadler........... 40,222 (12) * 100 * 0 0
All executive officers and
directors as a group
(17 persons).............. 12,237,024 (13) 20.8% 173,100 2.9% 70,800 *
</TABLE>
- ---------------------------------
* Represents less than 1% of the outstanding shares of such class.
(1) Based upon 55,577,407 shares of Common Stock, 6,050,000 shares of
Series A Preferred Stock and 5,750,000 Depository Shares representing
57,500 shares of Series B Preferred Stock outstanding as of March 15,
2000.
(2) Includes 294,915 shares that FelCor, Inc. has the right to receive upon
redemption of FelCor Lodging Limited Partnership Units. Mr. Corcoran is
a 50% shareholder and director of FelCor, Inc. and may be deemed to
beneficially own all of the Units owned by FelCor, Inc. Also includes
(i) an aggregate of 33,000 shares issued pursuant to stock grants
(9,000 in February 1995, 9,000 in December 1995, and 15,000 in February
1997), which vest over a five-year period from the date of grant at 20%
annually and of which 25,200 shares are fully vested, (ii) 359,257
shares issuable pursuant to stock options that are currently
exercisable or exercisable within 60 days, (iii) 2,325 shares issuable
upon conversion of 3,000 shares of Series A Preferred Stock, (iv) 4,210
shares owned by his children, (v) 1,795 shares owned by his IRA, and
(vi) 500 shares owned by Corcoran Investments, L.L.C., a limited
liability company wholly-owned by him.
(3) Includes (i) 2,200 shares held by trusts of which Mr. Ellwood is a
beneficiary and trustee, and (ii) 1,000 shares held by R.S. Ellwood &
Co., Inc., of which Mr. Ellwood is the sole shareholder.
(4) Includes (i) 15,414 shares issuable pursuant to currently exercisable
stock options, and (2) 2,500 shares owned by Mr. Lutz's spouse.
(5) Includes 540,009 shares representing Mr. Mathewson's pro rata interest
in partnerships having the right to receive Common Stock upon
redemption of FelCor Lodging Limited Partnership Units. Also includes
131,784 shares issuable upon conversion of 170,000 shares of Series A
Preferred Stock.
(6) Includes (i) 101,503 shares held by the T. A. McChristy Living Trust,
(ii) 4,200 shares held by his spouse's trust, (3) 1,800 shares held by
his spouse's IRA, and (iv) 3,000 shares held by Mr. McChristy's IRA.
(7) Includes 9,630,878 shares held by United/Harvey Investors I, L.P.;
United /Harvey Investors II, L.P.; United/Harvey Investors III, L.P.;
United/Harvey Investors IV, L.P.; and United/Harvey Investors V, L.P.
("Partnerships"). Mr. McNamara is the sole shareholder and director of
Hampstead Associates, Inc., which is the managing general partner of HH
GenPar Partners. HH GenPar Partners is the managing general partner of
Hampstead GenPar, L.P., which is the general partner of each of the
Partnerships. Mr. McNamara disclaims beneficial ownership of the shares
held by the Partnerships, except to the extent of his pecuniary
interest therein.
(8) Includes (i) 21,600 shares owned by a trust for which Mr. Rose is the
trustee, (ii) 21,275 shares owned by a corporation controlled by Mr.
Rose, (iii) 750 shares owned by Mr. Rose's spouse, and (iv) 800 shares
credited to his account in the FelCor Deferred Compensation Plan.
(9) Includes 44,768 shares issuable pursuant to currently exercisable stock
options.
(10) Includes 27,360 shares issuable pursuant to currently exercisable stock
options.
(11) Includes (i) 14,500 shares issued pursuant to stock grants, which
shares vest over a five-year period from the date of grant at 20%
annually, of which 8,700 shares are fully vested, (ii) 79,717 shares
issuable pursuant to currently exercisable stock options, (iii) 2,160
shares held by his IRA, and (iv) 2,000 shares credited to his account
in the FelCor Deferred Compensation Plan.
(12) Includes (i) 37,644 shares issuable pursuant to currently exercisable
stock options, (ii) 2,500 shares issued pursuant to a stock grant,
which vests over a five-year period from the date of grant at 20%
annually, of which 2,000 shares are fully vested, (iii) 77 shares
issuable upon conversion of 100 shares of Series A Preferred Stock.
(13) See notes 2 through 12.
(14) Represents shares held by the Charles N. Mathewson Trust.
-46-
<PAGE> 49
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company leased all but three of the 188 hotels owned at December
31, 1999 directly to, or to subsidiaries of, either DJONT Operations, L.L.C. (85
hotels) or Bristol Hotels & Resorts (100 hotels) under Percentage Leases. Hervey
A. Feldman, who served as the Chairman of the Board of FelCor until July 1998,
and Thomas J. Corcoran, Jr., the President, Chief Executive Officer and a
director of FelCor, own all of the voting common equity interests (50% common
equity interest) in, and serve as officers and managers of, DJONT. The remaining
50% non-voting common equity interest in DJONT is owned by entities owned by the
children of Charles N. Mathewson, a director of FelCor. Donald J. McNamara, the
Chairman of the Board of FelCor, and certain individuals and entities with which
he is associated, have filed a Schedule 13D reflecting shared voting and
dispositive power with respect to 7,065,438 shares (39.9%) of the common stock
of Bristol Hotels & Resorts. Bass plc and certain of its subsidiaries filed a
Schedule 13D dated February 29, 2000, reflecting shared voting and dispositive
power with respect to 8,779,065 shares (49.6%) of the common stock of Bristol
Hotels & Resorts and have announced a definitive merger agreement pursuant to
which they expect to acquire the remaining shares of Bristol during April 2000.
Richard C. North, a director of FelCor, is the Group Finance Director of Bass
plc.
In connection with the efforts of Bass to acquire Bristol, as announced
on February 28, 2000, a Bass subsidiary (Bass America, Inc.) contributed 4,713,
185 shares of outstanding FelCor Common Stock held by it to the Operating
Partnership in exchange for a like number of Units of limited partner interest.
If these Units were to be redeemed for FelCor Common Stock, Bass and its
affiliates would own approximately 16.0% of FelCor's Common Stock. The exchange
by Bass of Common Stock for Units will not affect FelCor's FFO or earnings per
share, although it results in reducing FelCor's percentage ownership in the
Operating Partnership from approximately 95% to approximately 89%.
THE PERCENTAGE LEASES
The Percentage Leases generally have initial terms of five to 15 years
and provide for the payment by the Lessees to the FelCor subsidiary which owns
the property a minimum base rent, or if greater, rent measured as a percentage
of room or suite revenue and certain other hotel revenues. The Lessees are
entitled to all profits from the operation of the hotels leased by them, after
the payment of rent and the operating, management and certain other expenses of
the hotels. During 1999, DJONT paid approximately $256.1 million, and Bristol
Hotels & Resorts paid approximately $234.8 million, in lease rent to FelCor's
consolidated Subsidiaries.
EMPLOYMENT AGREEMENTS
FelCor has entered into an employment agreement with Mr. Corcoran that
continues in effect until December 31, 2000 and automatically renews for
successive one-year terms, unless otherwise terminated. Under this agreement,
Mr. Corcoran serves as the President and Chief executive Officer of FelCor. The
agreement provides that Mr. Corcoran be paid a salary of not less than $120,000
per year and that a comprehensive medical plan be maintained for the benefit of
Mr. Corcoran and his dependents. None of the other officers of FelCor has an
employment agreement.
FelCor has entered into change in control and severance agreements with
each of its executive officers and certain other key employees. Each of these
agreements extend until December 31, 2000, and automatically renews for
successive one-year terms unless terminated. In the event of a potential change
in control, each covered employee agrees to remain in the employ of FelCor until
the earlier of one year following the "potential change in control" or six
months following an actual "change in control." "Change in control" is defined
to include (i) the acquisition of 35% or more of FelCor's voting stock by any
person or group, (ii) a change in a majority of the board of directors not
approved by existing directors, (iii) a merger in which existing stockholders of
FelCor would own less than 65% of the surviving corporation's voting stock (but
excluding transactions which are the functional equivalent of an asset
acquisition by FelCor and in which there is not change in its senior
management), and (iv) the adoption of a plan for the liquidation, sale or other
disposition (excluding leases in the ordinary course of business) of all or
substantially all of FelCor's assets. Following a
-47-
<PAGE> 50
"change in control," if a covered employee's employment is terminated by FelCor
other than for disability, retirement, or "cause" (or by the employee for "good
reason"), then the employee will be entitled to (i) the immediate vesting of all
stock options, awards of restricted stock and other benefits previously awarded
or credited to his account and (ii) a lump sum severance payment of between 2.99
and 0.5 times the employee's average total annual compensation over the past
three years. FelCor will be required to "gross-up" the severance payment to
cover excise taxes on the benefits, thereby providing such benefits to the
employee on a net basis, after payment of any such excise taxes.
FelCor also maintains a 401(k) Plan, health insurance and other
benefits generally available to all employees. During 1998 FelCor adopted a
deferred compensation plan that is available only to directors and employees
making in excess of $100,000 per year. FelCor makes no matching or other
contributions to this plan, other than the payment of its operating and
administrative expenses.
SHARING OF OFFICES AND EMPLOYEES
FelCor shares its executive offices and certain employees with DJONT
and another entity controlled by Messrs. Feldman and Corcoran, and each company
bears its share of the costs thereof, including an allocated portion of the
rent, salaries of certain personnel (other than Mr. Corcoran), office supplies,
telephones and depreciation of office furniture, fixtures and equipment. Any
such allocation of shared expenses to FelCor must be approved by a majority of
the Independent Directors of FelCor. During 1999, FelCor paid approximately $5.7
million (or 89.5% of all allocable expenses) under this arrangement. Mr.
Corcoran's salary is paid solely by FelCor and he receives no salary from either
of the other entities. Mr. Corcoran is the President, Chief Executive Officer
and a director of FelCor and also serves as a director (or manager) and the
President of each of such other entities.
-48-
<PAGE> 51
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) 1. Financial Statements
Included herein at pages F-1 through F-40.
2. Financial Statement Schedules
The following financial statement schedule is included herein at page
F- 26.
Schedule III - Real Estate and Accumulated Depreciation for FelCor
Lodging Trust Incorporated
All other schedules for which provision is made in Regulation S-X are
either not required to be included herein under the related instructions or are
inapplicable or the related information is included in the footnotes to the
applicable financial statement and, therefore, have been omitted.
3. Exhibits
The following exhibits are filed as part of this Annual Report on Form
10-K:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------- ----------------------
<S> <C>
2.1 - Agreement and Plan of Merger by and between the Registrant and Bristol
Hotel Company ("Bristol") dated as of March 23, 1998 (filed as Exhibit
2.1 to the Registrant's Form 8-K dated April 23, 1998, and incorporated
herein by reference).
3.1 - Articles of Amendment and Restatement dated June 22, 1995, amending and
restating the Charter of the Registrant, as amended or supplemented by
Articles of Merger dated June 23, 1995, Articles Supplementary dated
April 30, 1996, Articles of Amendment dated August 8, 1996, Articles of
Amendment dated June 16, 1997, Articles of Amendment dated October 30,
1997, Articles Supplementary dated May 6, 1998, Articles of Merger and
Articles of Amendment dated July 27, 1998, and Certificate of
Correction dated March 11, 1999 (filed as Exhibit 3.1 to the
Registrant's Annual Report on Form 10-K for the fiscal year ended
December 31, 1998 (the "1998 10-K") and incorporated herein by
reference).
3.1.1 - Certificate of Correction to the Articles of Merger between FelCor
Lodging Trust Incorporated and Bristol Hotel Company, dated August 31,
1999 (filed as Exhibit 3.1.1 to the Registrant's Form 10-Q dated
September 30, 1999 ("September 1999 10-Q") and incorporated herein by
reference).
3.2 - Bylaws of the Registrant, as amended (filed as Exhibit 3.2 to the
Registrant's Registration Statement on Form S-11 (File No. 333-98332)
and incorporated herein by reference).
4.1 - Form of Share Certificate for Common Stock (filed as Exhibit 4.1 to the
Registrant's Form 10- Q for the quarter ended June 30, 1996, and
incorporated herein by reference).
4.2 - Form of Share Certificate for $1.95 Series A Cumulative Convertible
Preferred Stock (filed as Exhibit 4.4 to the Registrant's Form 8-K
dated May 1, 1996, and incorporated herein by reference).
</TABLE>
-49-
<PAGE> 52
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------- ----------------------
<S> <C>
4.3 - Form of Share Certificate for 9% Series B Cumulative Redeemable
Preferred Stock (filed as Exhibit 4.5 to the Registrant's Form 8-K
dated May 29, 1998, and incorporated herein by reference).
4.4 - Deposit Agreement dated April 30, 1998, between the Registrant and
SunTrust Bank, Atlanta, as preferred share depositary (filed as Exhibit
4.6 to the Registrant's Form 8-K dated May 29, 1998, and incorporated
herein by reference).
4.5 - Form of Depositary Receipt evidencing the Depositary Shares (filed as
Exhibit 4.7 to the Registrant's Form 8-K dated May 29, 1998, and
incorporated herein by reference).
4.6 - Indenture dated as of April 22, 1996 by and between the Registrant and
Sun Trust Bank, Atlanta, Georgia, as Trustee (filed as Exhibit 4.2 to
the Registrant's Form 8-K dated May 1, 1996 and incorporated herein by
reference).
4.7 - Indenture dated as of October 1, 1997 by and among FelCor Lodging
Limited Partnership, formerly FelCor Suites Limited Partnership (the
"Partnership"), the Registrant, the Subsidiary Guarantors named therein
and SunTrust Bank, Atlanta, Georgia, as Trustee (filed as Exhibit 4.1
to the Registration Statement on Form S-4 (file No. 333-39595) and the
other co- registrants named therein and incorporated herein by
reference).
4.7.1 - First Amendment to Indenture dated as of February 5, 1998 by and among
Registrant, the Partnership, the Subsidiary Guarantors named therein
and SunTrust Bank, Atlanta, Georgia, as Trustee (filed as Exhibit 4.2
to the Registrant's Registration Statement on Form S-4 (File No.
333-39595) and incorporated herein by reference).
4.7.2 - Second Amendment to Indenture and First Supplemental Indenture dated as
of December 30, 1998, by and among Registrant, the Partnership, the
Subsidiary Guarantors named therein and SunTrust Bank, Atlanta,
Georgia, as Trustee (filed as Exhibit 4.7.2 to the 1998 10-K and
incorporated herein by reference).
4.7.3 - Third Amendment to Indenture dated as of March 30,1999 by and among the
Partnership, the Registrant, the Subsidiary Guarantors named therein
and SunTrust Bank, Atlanta (filed as Exhibit 4.7.3 to Registrant's Form
10-Q for the quarter ended March 31,1999 ("March 1999 10-Q") and
incorporated herein by reference).
10.1 - Amended and Restated Agreement of Limited Partnership of the
Partnership (filed as Exhibit 10.1 to the Registrant's Annual Report on
Form 10-K/A Amendment No. 1 for the fiscal year ended December 31, 1994
(the "1994 10-K/A") and incorporated herein by reference).
10.1.1 - First Amendment to Amended and Restated Agreement of Limited
Partnership of the Partnership dated as of November 17, 1995 by and
among the Registrant, Promus Hotels, Inc. and all of the persons or
entities who are or shall in the future become of the limited partners
of the Partnership (filed as Exhibit 10.1.1 to the Registrant's Annual
Report on Form 10-K, as amended, for the fiscal year ended December 31,
1995 (the "1995 10-K") and incorporated herein by reference).
10.1.2 - Second Amendment to Amended and Restated Agreement of Limited
Partnership of the Partnership dated as of January 9, 1996 between the
Registrant and all of the persons or entities who are or shall in the
future become limited partners of the Partnership (filed as Exhibit
10.1.2 to the 1995 10-K and incorporated herein by reference).
</TABLE>
-50-
<PAGE> 53
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------- ----------------------
<S> <C>
10.1.3 - Third Amendment to Amended and Restated Agreement of Limited
Partnership of the Partnership dated as of January 10, 1996 by and
among the Registrant, MarRay-LexGreen, Inc. and all of the persons and
entities who are or shall in the future become limited partners of the
Partnership (filed as Exhibit 10.1.3 to the 1995 10-K and incorporated
herein by reference).
10.1.4 - Fourth Amendment to the Amended and Restated Agreement of Limited
Partnership of the Partnership dated as of January 10, 1996 by and
among the Registrant, Piscataway-Centennial Associates Limited
Partnership and all of the persons or entities who are or shall in the
future become limited partners of the Partnership (filed as Exhibit
10.1.4 to the 1995 10-K and incorporated herein by reference).
10.1.5 - Fifth Amendment to Amended and Restated Agreement of Limited
Partnership of the Partnership dated as of May 2, 1996, between the
Registrant and all of the persons or entities who are or shall in the
future become limited partners of the Partnership, adopting Addendum
No. 2 to Amended and Restated Agreement of Limited Partnership of the
Partnership dated as of May 2, 1996 (filed as Exhibit 10.1.5 to the
Form 10-Q for the quarter ended June 30, 1996, and incorporated herein
by reference).
10.1.6 - Sixth Amendment to Amended and Restated Agreement of Limited
Partnership of the Partnership dated as of September 16, 1996, by and
among the Registrant, John B. Urbahns, II and all of the persons or
entities who are or shall in the future become limited partners of the
Partnership (filed as Exhibit 10.1.6 to the Registrant's Annual Report
on Form 10-K for the fiscal year ended December 31, 1996, and
incorporated herein by reference).
10.1.7 - Seventh Amendment to Amended and Restated Agreement of Limited
Partnership of the Partnership dated as of May 16, 1997, by and among
the Registrant, PMB Associates, Ltd. and all of the persons or entities
who are or shall in the future become limited partners of the
Partnership (filed as Exhibit 10.1.7 to the Registrant's Annual Report
on Form 10-K for the fiscal year ended December 31, 1997, and
incorporated herein by reference).
10.1.8 - Eighth Amendment to Amended and Restated Agreement of Limited
Partnership of the Partnership dated as of February 6, 1998, by and
among the Registrant, Columbus/Front Ltd. and all of the persons or
entities who are or shall in the future become limited partners of the
Partnership (filed as Exhibit 10.1.8 to the Registrant's Annual Report
on Form 10-K for the fiscal year ended December 31, 1997, and
incorporated herein by reference).
10.1.9 - Ninth Amendment to Amended and Restated Agreement of Limited
Partnership of the Partnership dated as of May 1, 1998, between the
Registrant and all of the persons or entities who are or shall in the
future become limited partners of the Partnership, adopting Addendum
No. 3 to Amended and Restated Agreement of Limited Partnership dated as
of May 1, 1998 (filed as Exhibit 10.1.9 to the Registrant's Form 8-K
dated May 29, 1998, and incorporated herein by reference).
10.1.10- Tenth Amendment to Amended and Restated Agreement of Limited
Partnership of the Partnership dated as of June 22, 1998, by and among
the Registrant, Schenley Hotel Associates, and all of the persons or
entities who are or shall in the future become limited partners of the
Partnership (filed as Exhibit 10.1.10 to the Registrant's Form 10-Q for
the quarter ended October 30, 1998, and incorporated herein by
reference).
</TABLE>
-51-
<PAGE> 54
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------- ----------------------
<S> <C>
10.1.11- Eleventh Amendment to Amended and Restated Agreement of Limited
Partnership of the Partnership dated as of July 28, 1998, between the
Registrant and all of the persons or entities who are or shall in the
future become limited partners of the Partnership, changing the name of
the Partnership to "FelCor Lodging Limited Partnership" (filed as
Exhibit 10.1.11 to the Registrant's Form 10-Q for the quarter ended
October 30, 1998, and incorporated herein by reference).
10.1.12- Twelfth Amendment to Amended and Restated Agreement of Limited
Partnership of the Partnership dated as of December 29, 1998, between
the Registrant and all of the persons or entities who are or shall in
the future become limited partners of the Partnership, amending certain
provisions of the Partnership Agreement (filed as Exhibit 10.1.12 to
the Registrant's 1998 10-K and incorporated herein by reference).
10.1.13- Thirteenth Amendment to Amended and Restated Agreement of Limited
Partnership of the Partnership dated as of December 31, 1998, by and
between the Registrant, FelCor Nevada Holdings, L.L.C. and all of the
persons or entities who are or shall in the future become limited
partners of the Partnership (filed as Exhibit 10.1.13 to the
Registrant's 1998 10-K and incorporated herein by reference).
10.1.14- Fourteenth Amendment to Amended and Restated Agreement of Limited
Partnership of the Partnership dated as of March 1, 1999, by and among
the Registrant, Huie Properties, Ltd., and all of the persons or
entities who are or shall in the future become limited partners of the
Partnership (filed as Exhibit 10.1.14 to the Registrant's 1998 10-K and
incorporated herein by reference).
10.1.15- Fifteenth Amendment to Amended and Restated Agreement of Limited
Partnership of the Partnership dated as of October 15, 1999, by and
among the Registrant, SRS Properties Limited Partnership, and all of
the persons and entities who are or shall in the future become limited
partners of the Partnership.
10.1.16- Sixteenth Amendment to Amended and Restated Agreement of Limited
Partnership of the Partnership dated as of February 27, 2000, by and
among the Registrant, Bass America, Inc., and all of the persons and
entities who are or shall in the future become limited partners of the
Partnership.
10.2 - Form of Lease Agreement between the Partnership as Lessor and DJONT
Operations, L.L.C. or its subsidiaries ("DJONT") as Lessee (filed as
Exhibit 10.2.1 to the 1995 10-K and incorporated herein by reference).
10.2.1 - Omnibus Lease Amendment Agreement dated as of June 30, 1998 among the
Registrant, the Partnership and DJONT to clarify the meaning of Article
III of the lease as represented by the actual course of dealing between
lessors and lessees under such leases (filed as Exhibit 10.19 to the
Registrant's Form 10-Q for the quarter ended June 30, 1998, and
incorporated herein by reference).
10.3 - Form of Lease Agreement between the Partnership as Lessor and a
subsidiary of Bristol Hotels & Resorts ("BHR") as Lessee (the "Bristol
Lease Agreement") (filed as Exhibit 10.3 to the 1998 10-K. and
incorporated herein by reference).
</TABLE>
-52-
<PAGE> 55
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------- ----------------------
<S> <C>
10.3.1 - Amended and Restated Master Hotel Agreement dated as of July 27, 1998
among the Registrant, the Partnership, BHR and the lessors and lessees
named therein (filed as Exhibit 10.17 to the Registrant's Form 8-K
dated August 10, 1998, and incorporated herein by reference).
10.4 - Employment Agreement dated as of July 28, 1994 between the Registrant
and Thomas J. Corcoran, Jr. (filed as Exhibit 10.8 to the 1994 10-K/A
and incorporated herein by reference).
10.5 - Restricted Stock and Stock Option Plan of the Registrant (filed as
Exhibit 10.9 to the 1994 10- K/A and incorporated herein by reference).
10.6 - Savings and Investment Plan of the Registrant (filed as Exhibit 10.10
to the 1994 10-K/A and incorporated herein by reference).
10.7 - 1995 Restricted Stock and Stock Option Plan of the Registrant (filed as
Exhibit 10.9.2 to the 1995 10-K and incorporated herein by reference).
10.8 - Non-Qualified Deferred Compensation Plan, as amended and restated July
1999 (filed as exhibit 10.9 to Registrant's Form 10-Q for the quarter
ended September 30,1999 ("September 1999 10-Q") and incorporated herein
by reference).
10.9 - 1998 Restricted Stock and Stock Option Plan (filed as Exhibit 4.2 to
the Registrant's Registration Statement on Form S-8 (File No.
333-66041) and incorporated herein by reference).
10.10 - Second Amended and Restated 1995 Equity Incentive Plan (filed as
Exhibit 99.1 to the Registrant's Post-Effective Amendment on Form S-3
to Form S-4 Registration Statement (File No. 333-50509) and
incorporated herein by reference).
10.11 - Amended and Restated Stock Option Plan for Non-Employee Directors
(filed as Exhibit 99.2 to the Registrant's Post-Effective Amendment on
Form S-3 to Form S-4 Registration Statement (File No. 333-50509) and
incorporated herein by reference).
10.12 - Form of Severance Agreement for executive officers and certain key
employees of the Registrant (filed as Exhibit 10.13 to the 1998 10-K
and incorporated herein by reference).
10.13 - Agreement dated as of April 15, 1995 among the Registrant, the
Partnership, FelCor, Inc., Thomas J. Corcoran, Jr. and Hervey A.
Feldman relating to purchase of securities (filed as Exhibit 10.15 to
the Registration Statement on Form S-11 (File No. 33-91870) and
incorporated herein by reference).
10.14 - Credit Agreement dated as of February 6, 1996 by and among the
Partnership, as borrower, FelCor/CSS Holdings, L.P. and the Registrant,
as guarantors, and Canadian Imperial Bank of Commerce, as agent (filed
as Exhibit 10.30 to the Registrant's Form 8-K dated May 1, 1996, and
incorporated herein by reference).
10.15 - Voting and Cooperation Agreement dated as of March 23, 1998 among
Registrant, Bristol, Bass America Inc., Holiday Corporation and
United/Harvey Holdings, L.P. (filed as Exhibit 99.7 to the Registrant's
Registration Statement on Form S-4 (File No. 333-50509) and
incorporated herein by reference).
</TABLE>
-53-
<PAGE> 56
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------- ----------------------
<S> <C>
10.16 - Spin-Off Agreement dated as of March 23, 1998 among Bristol, Bristol
Hotel Management Corporation and Bristol Hotel and Resorts, Inc., as
agreed to by Registrant (filed as Exhibit 99.8 to the Registrant's
Registration Statement on Form S-4 (File No. 333-50509) and
incorporated herein by reference).
10.17 - Stockholders' and Registration Rights Agreement dated as of July 27,
1998 by and among Registrant, Bass America, Inc., Holiday Corporation,
Bass plc, United/Harvey Investors I, L.P., United/Harvey Investors II,
L.P., United/Harvey Investors III, L.P., United/Harvey Investors IV,
L.P., and United/Harvey Investors V, L.P. (filed as Exhibit 10.18 to
the Registrant's Form 8-K dated August 10, 1998, and incorporated
herein by reference).
10.18 - Fourth Amended and Restated Revolving Credit Agreement dated as of July
1, 1998 among Registrant and the Partnership, as Borrower, the Lenders
party thereto, The Chase Manhattan Bank, as Administrative Agent, Chase
Securities, Inc. as Arranger, and Bankers Trust Company, NationsBank,
N.A. and Wells Fargo Bank, National Association as Co-Arrangers and
Documentation Agents (filed as Exhibit 10.14 to the Registrant's Form
8-K dated August 10, 1998 and incorporated herein by reference).
10.18.1- Second Amendment to Credit Agreement dated as of August 20,1999, among
Registrant and the Partnership, as Borrower, the financial institutions
party thereto, and The Chase Manhattan Bank, as administrative agent
(filed as Exhibit 10.19.1 to the Registrant's September 1999 10- Q and
incorporated herein by reference).
10.18.2- Third Amendment to Credit Agreement dated as of December 1,1999, among
Registrant and the Partnership, as Borrower, the financial institutions
party thereto, and The Chase Manhattan Bank, as administrative agent.
10.19 - Loan Agreement dated as of October 10, 1997 among Bristol Lodging
Company, Bristol Lodging Holding Company, Nomura Asset Capital
Corporation as administrative agent and collateral agent for Lenders
and Bankers Trust Company as co-agent for Lenders (filed as Exhibit
10.10 to the Bristol Hotel Company Annual report on Form 10-K for the
year ended December 31, 1997 and incorporated herein by reference).
10.19.1- First Amendment to Loan Agreement and Ancillary Loan Documents made as
of May 28, 1999, among FelCor Lodging Company, L.L.C., FelCor Lodging
Holding Company, L.L.C. and LaSalle National Bank, as Trustee for
Nomura Asset Securities Corporation Commercial Pass-Through
Certificates Series 1998-D6, as administrative agent and collateral
agent.
10.20 - Deed of Trust, Security Agreement, Assignment of Leases and Rents,
Fixture Filing and Financing Statement, Dated March 1, 1999, by FelCor
Hotel Company II, Ltd., as Grantor, to Howard E. Schreiber, Trustee, in
trust for the benefit of Banker Trust Company, as Beneficiary (filed as
Exhibit 10.21 to the Registrant's March 1999 10-Q and incorporated
herein by reference).
10.21 - Loan Agreement, dated April 1, 1999, among Registrant and the
Partnership as Borrower, and The Lenders Party Thereto and The Chase
Manhattan Bank as Administrative Agent and Collateral Agent (filed as
Exhibit 10.22.1 to the Registrant's March 1999 10-Q and incorporated
herein by reference).
</TABLE>
-54-
<PAGE> 57
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------- ----------------------
<S> <C>
10.21.1- Guaranty, dated April 1, 1999, made by each of the named Guarantors
therein, who are signatories thereto (filed as Exhibit 10.22.2 to the
Registrant's March 1999 10-Q and incorporated herein by reference).
10.21.2- Pledge and Security Agreement, dated April 1, 1999, made by each of the
named Pledgors therein, who are signatories thereto, in favor of The
Chase Manhattan Bank, as Collateral Agent (filed as Exhibit 10.22.3 to
the Registrant's March 1999 10-Q and incorporated herein by reference).
10.21.3- Second Amendment to Loan Agreement dated as of August 20,1999, among
Registrant and the Partnership, as Borrower, the financial institutions
party thereto, and The Chase Manhattan Bank, as Administrative Agent
(filed as Exhibit 10.22.4 to the Registrant's September 10-Q and
incorporated herein by reference).
10.21.4- Third Amendment to Loan Agreement dated as of December 1,1999, among
Registrant and the Partnership, as Borrower, the financial institutions
party thereto, and The Chase Manhattan Bank, as Administrative Agent.
10.22 - Form of Mortgage, Security Agreement and Fixture Filing by and between
FelCor/CSS Holdings, L.P. as Mortgagor and The Prudential Insurance
Company of America, as Mortgagee (filed as Exhibit 10.23 to the
Registrant's March 1999 10-Q and incorporated herein by reference).
10.22.1- Promissory Note dated April 1, 1999, in the original principal amount
of $100,000,000 made by FelCor/CSS Holdings, Ltd., payable to the order
of The Prudential Insurance Company of America. (filed as Exhibit
10.23.1 to Registrant's Form 10-Q for the quarter ended June 30,1999
("June 1999 10-Q") and incorporated herein by reference).
10.23 - Form of Deed of Trust, Security Agreement and Fixture Filing, each
dated as of May 12, 1999, from FelCor/MM Holdings, L.P., as Borrower,
in favor of Fidelity National Title Insurance Company, as Trustee, and
Massachusetts Mutual Life Insurance Company, as Beneficiary, each
covering a separate hotel and securing one of the separate Promissory
Notes described in Exhibit 10.23.1, also executed by FelCor/CSS
Holdings, L.P. with respect to the Embassy Suites-Anaheim and Embassy
Suites-Deerfield Beach, and by the Partnership with respect to the
Embassy Suites-Palm Desert (filed as Exhibit 10.24.2 to Registrant's
June 1999 10-Q and incorporated herein by reference).
10.23.1- Form of six separate Promissory Notes each dated May 12, 1999, made by
FelCor/MM Holdings, L.P. payable to the order of Massachusetts Mutual
Life Insurance Company in the respective original principal amounts of
$12,500,000 (Embassy Suites-Dallas Market Center), $14,000,000 (Embassy
Suites-Dallas Love Field), $12,450,000 (Embassy Suites-Tempe),
$11,550,000 (Embassy Suites-Anaheim), $8,900,000 (Embassy Suites-Palm
Desert), $15,600,000 (Embassy Suites-Deerfield Beach) (filed as Exhibit
10.24.1 to Registrant's June 1999 10-Q and incorporated herein by
reference).
21 - List of Subsidiaries of the Registrant.
23 - Consent of PricewaterhouseCoopers LLP.
27 - Financial Data Schedule.
</TABLE>
-55-
<PAGE> 58
(b) Reports on Form 8-K.
Registrant did not file any reports on Form 8-K during the fourth
quarter of 1999.
-56-
<PAGE> 59
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) 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.
FELCOR LODGING TRUST INCORPORATED
By: /s/ Lawrence D. Robinson
--------------------------------
Lawrence D. Robinson
Senior Vice President
Date: March 29, 2000
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
DATE SIGNATURE
<S> <C>
March [ ], 2000
-----------------------------------------------------------------
Donald J. McNamara
Chairman of the Board and Director
March 29, 2000 /s/ Thomas J. Corcoran, Jr.
-----------------------------------------------------------------
Thomas J. Corcoran, Jr.
President and Director (Chief Executive Officer)
March 29, 2000 /s/ Lester C. Johnson
-----------------------------------------------------------------
Lester C. Johnson
Vice President and Controller
(Principal Financial Officer and Principal Accounting Officer)
March [ ], 2000 /s/ Richard S. Ellwood
-----------------------------------------------------------------
Richard S. Ellwood, Director
March [ ], 2000 /s/ Richard O. Jacobson
-----------------------------------------------------------------
Richard O. Jacobson, Director
March 24, 2000 /s/ Charles A. Ledsinger, Jr.
-----------------------------------------------------------------
Charles A. Ledsinger, Jr., Director
March 24, 2000 /s/ Robert H. Lutz, Jr.
-----------------------------------------------------------------
Robert H. Lutz, Jr., Director
March 24, 2000 /s/ Charles N. Mathewson
-----------------------------------------------------------------
Charles N. Mathewson, Director
March 24, 2000 /s/ Thomas A. McChristy
-----------------------------------------------------------------
Thomas A. McChristy, Director
March 27, 2000 /s/ Richard C. North
-----------------------------------------------------------------
Richard C. North, Director
March [ ], 2000 /s/ Michael D. Rose
-----------------------------------------------------------------
Michael D. Rose, Director
</TABLE>
-57-
<PAGE> 60
FELCOR LODGING TRUST INCORPORATED
INDEX TO FINANCIAL STATEMENTS
PART I - FINANCIAL INFORMATION
FELCOR LODGING TRUST INCORPORATED
<TABLE>
<S> <C>
Report of Independent Accountants............................................................................ F-2
Consolidated Balance Sheets - December 31, 1999 and 1998..................................................... F-3
Consolidated Statements of Operations for the years ended December 31, 1999, 1998 and 1997................... F-4
Consolidated Statements of Shareholders' Equity for the years ended December 31, 1999, 1998 and 1997......... F-5
Consolidated Statements of Cash Flows for the years ended December 31, 1999, 1998 and 1997................... F-6
Notes to Consolidated Financial Statements................................................................... F-7
Report of Independent Accountants............................................................................ F-25
Schedule III - Real Estate and Accumulated Depreciation as of December 31, 1999.............................. F-26
DJONT OPERATIONS, L.L.C.
Report of Independent Accountants............................................................................ F-30
Consolidated Balance Sheets - December 31, 1999 and 1998..................................................... F-31
Consolidated Statements of Operations for the years ended December 31, 1999, 1998 and 1997................... F-32
Consolidated Statements of Shareholders' Deficit for the years ended December 31, 1999, 1998 and 1997........ F-33
Consolidated Statements of Cash Flows for the years ended December 31, 1999, 1998 and 1997................... F-34
Notes to Consolidated Financial Statements................................................................... F-35
</TABLE>
F-1
<PAGE> 61
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
of FelCor Lodging Trust Incorporated
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, shareholders' equity and cash flows
present fairly, in all material respects, the financial position of FelCor
Lodging Trust Incorporated at December 31, 1999 and 1998, and the consolidated
results of operations and cash flows for the years ended December 31, 1999, 1998
and 1997, respectively, in conformity with accounting principles generally
accepted in the United States. These financial statements are the responsibility
of the Company's management; our responsibility is to express an opinion on
these financial statements based on our audits. We conducted our audits of these
statements in accordance with auditing standards generally accepted in the
United States which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Dallas, Texas
February 1, 2000,
except as to the information in Note 18,
for which the date is March 15, 2000.
F-2
<PAGE> 62
FELCOR LODGING TRUST INCORPORATED
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1999 AND 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
ASSETS
1999 1998
------------ ------------
<S> <C> <C>
Investment in hotels, net of accumulated depreciation of
$330,555 in 1999 and $178,072 in 1998 ...................................... $ 4,035,344 $ 3,955,582
Investment in unconsolidated entities .......................................... 136,718 140,299
Cash and cash equivalents ...................................................... 36,123 34,692
Due from Lessees ............................................................... 18,394 18,968
Note receivable from unconsolidated entity ..................................... 7,760 7,766
Deferred expenses, net of accumulated amortization of
$4,491 in 1999 and $2,096 in 1998 ........................................... 15,473 10,041
Other assets ................................................................... 5,939 8,035
------------ ------------
Total assets ............................................................ $ 4,255,751 $ 4,175,383
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Debt, net of discount of $1,401 in 1999 and $1,628 in 1998 ..................... $ 1,833,954 $ 1,594,734
Distributions payable .......................................................... 39,657 67,262
Accrued expenses and other liabilities ......................................... 65,480 57,312
Minority interest in Operating Partnership, 2,991 and 2,939 units issued
and outstanding at December 31, 1999 and 1998, respectively .................... 90,078 87,353
Minority interest in other partnerships ........................................ 51,671 51,105
------------ ------------
Total liabilities .............................................................. 2,080,840 1,857,766
------------ ------------
Commitments and contingencies (Notes 6 and 11)
Shareholders' equity:
Preferred stock, $.01 par value, 20,000 shares authorized:
Series A Preferred Stock, 6,050 shares issued and outstanding ............... 151,250 151,250
Series B Preferred Stock, 58 shares issued and outstanding .................. 143,750 143,750
Common stock, $.01 par value, 200,000 shares authorized, 69,291 and
69,284 shares issued at December 31, 1999 and 1998, respectively ............ 693 693
Additional paid-in capital ..................................................... 2,138,477 2,142,250
Distributions in excess of earnings ............................................ (119,385) (78,839)
------------ ------------
2,314,785 2,359,104
Less: Common stock in treasury, at cost, 6,976 and 1,213 shares
at December 31, 1999 and 1998, respectively ................................. (139,874) (41,487)
------------ ------------
Total shareholders' equity ............................................. 2,174,911 2,317,617
------------ ------------
Total liabilities and shareholders' equity ............................. $ 4,255,751 $ 4,175,383
============ ============
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
F-3
<PAGE> 63
FELCOR LODGING TRUST INCORPORATED
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998, AND 1997
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Revenues:
Percentage lease revenue ......................................... $ 490,893 $ 328,035 $ 169,114
Equity in income from unconsolidated entities .................... 8,484 7,017 6,963
Other revenue .................................................... 4,624 4,565 574
------------ ------------ ------------
Total revenues .............................. 504,001 339,617 176,651
------------ ------------ ------------
Expenses:
General and administrative ....................................... 9,122 5,254 3,743
Depreciation ..................................................... 152,948 90,835 50,798
Taxes, insurance and other ....................................... 59,572 37,158 21,483
Land leases ...................................................... 17,558 8,130 1,610
Interest expense ................................................. 125,435 73,182 28,792
Minority interest in Operating Partnership ...................... 4,696 6,500 5,817
Minority interest in other partnerships .......................... 2,713 1,121 573
------------ ------------ ------------
Total expenses ............................. 372,044 222,180 112,816
------------ ------------ ------------
Income before nonrecurring items ................................. 131,957 117,437 63,835
Gain on sale of hotels, net ...................................... 236 477
Extraordinary charge from write off of deferred financing fees ... 1,113 3,075 185
------------ ------------ ------------
Net income ....................................................... 131,080 114,839 63,650
Preferred dividends .............................................. 24,735 21,423 11,797
------------ ------------ ------------
Net income applicable to common shareholders ..................... $ 106,345 $ 93,416 $ 51,853
============ ============ ============
Per common share data:
Basic:
Income applicable to common shareholders
before extraordinary charge ................................ $ 1.59 $ 1.93 $ 1.67
Extraordinary charge ....................................... (0.02) (0.06) (0.01)
------------ ------------ ------------
Net income applicable to common shareholders ............... $ 1.57 $ 1.87 $ 1.66
============ ============ ============
Weighted average common shares outstanding ................. 67,392 49,968 31,269
Diluted:
Income applicable to common shareholders
before extraordinary charge ............................ $ 1.59 $ 1.92 $ 1.65
Extraordinary charge ....................................... (0.02) (0.06) (0.01)
------------ ------------ ------------
Net income applicable to common shareholders ............... $ 1.57 $ 1.86 $ 1.64
============ ============ ============
Weighted average common shares outstanding ................. 67,581 50,314 31,610
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
F-4
<PAGE> 64
FELCOR LODGING TRUST INCORPORATED
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998, AND 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON STOCK
-----------------------
NUMBER ADDITIONAL DISTRIBUTIONS TOTAL
PREFERRED OF PAID-IN IN EXCESS OF TREASURY SHAREHOLDERS'
STOCK SHARES AMOUNT CAPITAL EARNINGS STOCK EQUITY
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1996 $ 151,250 23,502 $ 235 $ 503,628 $ (13,187) $ 641,926
Issuance of common shares, net of
offering expenses 14,300 143 505,671 505,814
Allocation to minority interest (7,552) (7,552)
Repurchase of common shares
held in treasury $ (41,106) (41,106)
Distributions/dividends declared:
$2.10 per common share (72,437) (72,437)
$1.95 per preferred share (11,797) (11,797)
Net income 63,650 63,650
---------- ---------- ---------- ---------- ---------- ---------- ----------
BALANCE AT DECEMBER 31, 1997 151,250 37,802 378 1,001,747 (33,771) (41,106) 1,078,498
Issuance of common shares, net of
offering expenses 31,482 315 1,151,038 1,151,353
Forfeiture of restricted common stock
awards (381) (381)
Allocation to minority interest (5,848) (5,848)
Issuance of Series B Preferred
Stock, net of offering expenses 143,750 (4,687) 139,063
Distributions/dividends declared:
$2.545 per common share (138,484) (138,484)
$2.157 per Series A preferred share (13,050) (13,050)
$1.44 per Series B depositary
preferred share (8,373) (8,373)
Net income 114,839 114,839
---------- ---------- ---------- ---------- ---------- ---------- ----------
BALANCE AT DECEMBER 31, 1998 295,000 69,284 693 2,142,250 (78,839) (41,487) 2,317,617
Issuance of common shares 7 5 5
Repurchase of common shares (98,387) (98,387)
Allocation to minority interest (3,778) (3,778)
Distributions/dividends declared:
$2.20 per common share (146,891) (146,891)
$1.95 per Series A preferred share (11,797) (11,797)
$2.25 per Series B depositary
preferred share (12,938) (12,938)
Net income 131,080 131,080
---------- ---------- ---------- ---------- ---------- ---------- ----------
BALANCE AT DECEMBER 31, 1999 $ 295,000 69,291 $ 693 $2,138,477 $ (119,385) $ (139,874) $2,174,911
========== ========== ========== ========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
F-5
<PAGE> 65
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998, AND 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income ........................................................... $ 131,080 $ 114,839 $ 63,650
Adjustments to reconcile net income to net cash provided
by operating activities:
Gain on sale of assets ............................................ (236) (477)
Depreciation ...................................................... 152,948 90,835 50,798
Amortization of deferred financing fees and organization costs .... 1,816 1,985 1,468
Amortization of unearned officers' and directors' compensation .... 652 830 1,017
Equity in income from unconsolidated entities ..................... (8,484) (7,017) (6,963)
Extraordinary charge for write off of deferred financing fees ..... 1,113 3,075 185
Minority interest in Operating Partnership ........................ 4,696 6,500 5,817
Minority interest in other partnerships ........................... 2,713 1,121 573
Changes in assets and liabilities, net of effects of acquisitions:
Due from Lessees .................................................. 574 (3,035) (13,382)
Deferred financing fees ........................................... (9,313) (4,348) (8,825)
Other assets ...................................................... (282) (602) (1,175)
Accrued expenses and other liabilities ............................ 5,088 (11,123) 4,315
----------- ----------- -----------
Net cash flow provided by operating activities .......... 282,365 192,583 97,478
----------- ----------- -----------
Cash flows used in investing activities:
Acquisition of hotels ............................................. (10,802) (326,276) (574,100)
Acquisition of unconsolidated entities ............................ (7,452) (4,230) (65,271)
Improvements and additions to hotels .............................. (222,320) (119,107) (52,700)
Note receivable from unconsolidated entity ........................ (7,766)
Bristol interim credit facility ................................... (120,000)
Sale of hotels .................................................... 15,476 7,815
Cash distributions from unconsolidated entities ................... 19,581 19,066 4,211
----------- ----------- -----------
Net cash flow used in investing activities .............. (205,517) (550,498) (687,860)
----------- ----------- -----------
Cash flows from financing activities:
Proceeds from borrowings .......................................... 1,034,667 1,013,003 679,144
Repayment of borrowings ........................................... (804,915) (658,524) (445,900)
Proceeds from sale of common stock ................................ 516,700
Proceeds from sale of preferred stock ............................. 143,750
Costs associated with public offerings ............................ (4,687) (27,600)
Purchase of treasury stock ........................................ (98,387) (41,106)
Proceeds from exercise of stock options ........................... 8 3,884 592
Distributions paid to limited partners ............................ (7,559) (6,671) (6,026)
Distributions paid to common shareholders ......................... (173,244) (98,754) (63,875)
Dividends paid to preferred shareholders .......................... (25,987) (16,937) (11,797)
----------- ----------- -----------
Net cash flow provided (used) by financing activities ... (75,417) 375,064 600,132
----------- ----------- -----------
Net change in cash and cash equivalents ................................... 1,431 17,149 9,750
Cash and cash equivalents at beginning of years ........................... 34,692 17,543 7,793
----------- ----------- -----------
Cash and cash equivalents at end of years ................................. $ 36,123 $ 34,692 $ 17,543
=========== =========== ===========
Supplemental cash flow information - interest paid ........................ $ 125,085 $ 72,215 $ 21,414
----------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
F-6
<PAGE> 66
FELCOR LODGING TRUST INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION
FelCor Lodging Trust Incorporated ("FelCor") is one of the nation's
largest hotel real estate investment trusts ("REIT"). At December 31, 1999, it
owned interests in 188 hotels with nearly 50,000 rooms and suites (collectively
the "Hotels") through its greater than 95% equity interest in FelCor Lodging
Limited Partnership (the "Operating Partnership"). FelCor, the Operating
Partnership, and their subsidiaries are herein referred to, collectively, as the
"Company". The Company owns 100% of the interest in 163 of the Hotels, a 90% or
greater interest in entities owning seven hotels, a 60% interest in an entity
owning two hotels and 50% interests in separate entities that own 16 hotels.
The Company is the owner of the largest number of Embassy Suites(R),
Crowne Plaza(R), Holiday Inn(R), and independently owned Doubletree(R) branded
hotels in the world. The following table provides a schedule of the Hotels, by
brand, operated by each of the Company's Lessees at December 31, 1999:
<TABLE>
<CAPTION>
NOT OPERATED
BRAND DJONT BRISTOL UNDER A LEASE TOTAL
----- ----- ------- ------------- -----
<S> <C> <C> <C> <C>
Embassy Suites 58 58
Holiday Inn 43 1 44
Doubletree and Doubletree Guest Suites(R) 16(1) 16
Crowne Plaza and Crowne Plaza Suites(R) 18 18
Holiday Inn Select(R) 10 10
Sheraton(R) and Sheraton Suites(R) 9 1(2) 10
Hampton Inn(R) 9 9
Holiday Inn Express(R) 5 5
Fairfield Inn(R) 5 5
Harvey Hotel(R) 4 4
Independents 2 1 3
Courtyard by Marriott(R) 2 2
Four Points by Sheraton(R) 1 1
Hilton Suites(R) 1 1
Homewood Suites(R) 1 1
Westin(R) 1 1
-- --- -- ---
Total Hotels 85 100 3 188
== === == ===
</TABLE>
(1) On January 1, 2000, two of these Doubletree Guest Suites hotels were
converted to the Embassy Suites brand.
(2) On January 1, 2000, a lease on this hotels became effective between the
Company and DJONT.
The Hotels are located in the United States (35 states) and Canada,
with a concentration in California (20 hotels), Florida (18 hotels), Georgia (15
hotels) and Texas (41 hotels). The following table provides information
regarding the net acquisition and disposition of hotels through December 31,
1999:
<TABLE>
<CAPTION>
NET HOTELS
ACQUIRED/(DISPOSED OF)
----------------------
<S> <C>
1994 7
1995 13
1996 23
1997 30
1998 120
1999 (5)
----
188
====
</TABLE>
F-7
<PAGE> 67
FELCOR LODGING TRUST INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
1. ORGANIZATION -- (CONTINUED)
At December 31, 1999, the Company leased 85 of the Hotels to DJONT
Operations, L.L.C., a Delaware limited liability company, or a consolidated
subsidiary thereof (collectively "DJONT"), and leased 100 of the Hotels to
Bristol Hotels & Resorts, or a consolidated subsidiary thereof ("Bristol" and,
together with DJONT, the "Lessees"). Three Hotels were operated without a lease.
Thomas J. Corcoran, Jr., the President, Chief Executive Officer, and a
Director of FelCor, and Hervey A. Feldman, Chairman Emeritus of FelCor,
beneficially own a 50% voting common equity interest in DJONT. The remaining 50%
nonvoting common equity interest is beneficially owned by the children of
Charles N. Mathewson, a director of FelCor and major initial investor in the
Company. At December 31, 1999, DJONT had entered into management agreements
pursuant to which 72 of the Hotels leased by it were managed by subsidiaries of
Hilton Hotels Corporation ("Hilton"), ten were managed by subsidiaries of
Starwood Hotels & Resorts Worldwide, Inc. ("Starwood"), and three were managed
by two unrelated management companies.
Bristol, an independent publicly owned company, at December 31, 1999,
leased and managed 100 Hotels and managed one hotel which operated without a
lease. Bristol is one of the largest independent hotel operating companies in
North America and operates the largest number of Bass Hotels & Resorts-branded
hotels in the world.
Certain reclassifications have been made to prior period financial
information to conform to the current period's presentation with no effect to
previously reported net income or shareholder's equity.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation -- The consolidated financial statements
include the accounts of FelCor, the Operating Partnership, and their
consolidated subsidiaries. All significant intercompany balances and
transactions have been eliminated.
Use of Estimates -- The preparation of the financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.
Investment in Hotels -- Hotels are stated at cost and are depreciated
using the straight-line method over estimated useful lives ranging from 31 to 40
years for buildings and improvements and three to seven years for furniture,
fixtures, and equipment.
The Company periodically reviews the carrying value of each Hotel to
determine if circumstances exist indicating an impairment in the carrying value
of the investment in the hotel or that depreciation periods should be modified.
If facts or circumstances support the possibility of impairment, the Company
will prepare a projection of the undiscounted future cash flows, without
interest charges, of the specific hotel and determine if the investment in such
hotel is recoverable based on the undiscounted future cash flows. If impairment
is indicated, an adjustment will be made to the carrying value of the hotel
based on discounted future cash flows. The Company does not believe that there
are any factors or circumstances indicating impairment of any of its investment
in the Hotels.
Maintenance and repairs are charged to the Lessees' operations as
incurred; major renewals and betterments by the Company are capitalized. Upon
the sale or disposition of a fixed asset, the asset and related accumulated
depreciation are removed from the accounts and the related gain or loss is
included in operations.
F-8
<PAGE> 68
FELCOR LODGING TRUST INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
Investment in Unconsolidated Entities --The Company owns a 50% interest
in various partnerships or limited liability companies in which the partners
jointly make all material decisions concerning the business affairs and
operations. The Company also owns a 97% nonvoting interest in an entity.
Accordingly, the Company does not control these entities and carries its
investment in unconsolidated entities at cost, plus its equity in net earnings,
less distributions received since the date of acquisition. Equity in net
earnings is adjusted for the straight-line amortization, over a 40-year period,
of the difference between the Company's cost and its proportionate share of the
underlying net assets at the date of acquisition.
Cash and Cash Equivalents -- All highly liquid investments with a
maturity of three months or less when purchased are considered to be cash
equivalents.
Deferred Expenses -- Deferred expenses are recorded at cost.
Amortization is computed using the interest method over the maturity of the
related debt.
Revenue Recognition -- Percentage lease revenue is reported as income
over the lease term as it becomes receivable from the Lessees according to the
provisions of the Percentage Lease agreements. The Lessees are in compliance
with their rental obligations under the Percentage Leases.
Capitalized Interest -- The Company capitalizes interest and certain
other costs relating to hotels undergoing major renovations and redevelopments.
Such costs capitalized in 1999 and 1998 were approximately $7.4 million and $5.9
million, respectively.
Net Income Per Common Share -- Basic earnings per share have been
computed by dividing net income by the weighted average number of common shares
outstanding. Diluted earnings per share have been computed by dividing net
income by the weighted average number of common shares and equivalents
outstanding. Common stock equivalents represent shares issuable upon exercise of
stock options and unvested officers' restricted stock grants.
At December 31, 1999, 1998, and 1997, the Company's Series A Cumulative
Preferred Stock, if converted to common shares, would be antidilutive;
accordingly the Series A Cumulative Preferred Stock is not assumed to be
converted in the computation of diluted earnings per share.
Distributions and Dividends -- FelCor and the Operating Partnership pay
regular quarterly distributions on their Common Stock and Units. Additionally,
the Company pays regular quarterly dividends on preferred stock in accordance
with its preferred stock dividend requirements. FelCor's ability to make
distributions is dependent on its receipt of quarterly distributions from the
Operating Partnership.
For 1999 FelCor paid regular dividends of $2.20 per common share, $1.95
per share of Series A Cumulative Preferred Stock ("Series A Preferred Stock"),
and $2.25 per depositary share evidencing Series B Redeemable Preferred Stock
("Series B Preferred Stock").
Minority Interest in Operating Partnership -- Minority interest in the
Operating Partnership represents the proportionate share of the equity in the
Operating Partnership not owned by FelCor. Income is allocated to minority
interest based on the weighted average percentage ownership throughout the year.
F-9
<PAGE> 69
FELCOR LODGING TRUST INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
Income Taxes -- The Company has elected to be treated as a REIT under
Sections 856 to 860 of the Internal Revenue Code. Accordingly, no provision for
federal income taxes has been reflected in the financial statements.
Earnings and profits, which will determine the taxability of
distributions to shareholders, will differ from income reported for financial
reporting purposes primarily due to the differences for federal income tax
purposes in the estimated useful lives used to compute depreciation.
Distributions made in 1999 and 1998 represent an approximately 7% and 17% return
of capital, respectively, for federal income tax purposes.
3. BRISTOL MERGER
On July 28, 1998, the Company completed the merger of Bristol Hotel
Company's real estate holdings with and into the Company (the "Merger"). The
Merger resulted in the net acquisition of 107 primarily full-service hotels in
return for approximately 31.0 million shares of newly issued Common Stock.
A summary of the fair values of the assets and liabilities acquired in
the Merger, recorded at the date of acquisition, is as follows (in thousands):
<TABLE>
<S> <C>
Investment in hotels ............................... $ 2,014,250
Investment in unconsolidated entity ................ 16,839
Other assets ....................................... 4,151
------------
2,035,240
------------
Common stock issued ................................ 1,146,081
Debt obligations assumed ........................... 868,615
Accrued expenses and other liabilities assumed ..... 55,297
------------
2,069,993
------------
Total cash received in Merger ...................... $ 34,753
============
</TABLE>
The Merger has been accounted for as a purchase, and, accordingly, the
results of operations since the date of acquisition are included in the
Company's consolidated statements of operations.
4. INVESTMENT IN HOTELS
Investment in hotels at December 31, 1999 and 1998, consist of the
following (in thousands):
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
Land ................................... $ 346,862 $ 328,591
Building and improvements .............. 3,616,269 3,470,854
Furniture, fixtures and equipment ...... 383,931 300,501
Construction in progress ............... 18,837 33,708
----------- -----------
4,365,899 4,133,654
Accumulated depreciation ............... (330,555) (178,072)
----------- -----------
$ 4,035,344 $ 3,955,582
=========== ===========
</TABLE>
F-10
<PAGE> 70
FELCOR LODGING TRUST INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
5. INVESTMENT IN UNCONSOLIDATED ENTITIES
At December 31, 1999, the Company owned 50% interests in separate
entities owning 16 hotels, a parcel of undeveloped land, and a condominium
management company. The Company also owned a 97% nonvoting interest in an entity
that is developing condominiums for sale and that owns an annex to a hotel owned
by the Company. The Company accounts for its investments in these unconsolidated
entities under the equity method.
Summarized unaudited combined financial information for 100% of these
unconsolidated entities is as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1999 1998
---------- ----------
<S> <C> <C>
Balance sheet information:
Investment in hotels .......... $ 337,444 $ 269,881
Non-recourse mortgage debt .... $ 254,668 $ 176,755
Equity ........................ $ 101,120 $ 105,347
</TABLE>
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Statements of operations information:
Total revenues ................................... $ 69,146 $ 57,006 $ 54,000
Net income ....................................... $ 21,726 $ 17,438 $ 17,044
Net income attributable to the Company ........... 10,626 8,719 8,522
Amortization of cost in excess of book value ..... (2,142) (1,702) (1,559)
-------- -------- --------
Equity in income from unconsolidated entities .... $ 8,484 $ 7,017 $ 6,963
======== ======== ========
</TABLE>
6. DEBT
Debt at December 31, 1999 and 1998, consists of the following (in
thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
COLLATERAL INTEREST RATE MATURITY DATE 1999 1998
---------- ------------- ------------- ---------- ----------
<S> <C> <C> <C> <C> <C>
FLOATING RATE DEBT:
- -------------------
Line of credit (a) LIBOR + 163bp June 2001 $ 351,000 $ 411,000
Senior term loan (a) LIBOR + 250bp March 2004 250,000
Term loan Unsecured LIBOR + 150bp December 1999 250,000
Mortgage debt 3 hotels LIBOR + 200bp February 2003 62,553
Other Unsecured Up to LIBOR + 200bp Various 32,282 34,750
---------- ----------
Total floating rate debt 695,835 695,750
---------- ----------
FIXED RATE DEBT:
- ----------------
Line of credit - swapped (a) 7.17 - 7.56% March 2000-2001 313,000 325,000
Publicly-traded term notes (a) 7.38% October 2004 174,377 174,249
Publicly-traded term notes (a) 7.63% October 2007 124,221 124,122
Mortgage debt 15 hotels 7.24% November 2022 142,542 145,062
Senior term loan - swapped (a) 8.30% March 2000-2004 125,000
Mortgage debt 3 hotels 6.97% December 2002 43,836
Mortgage debt 7 hotels 7.54% April 2009 99,075
Mortgage debt 6 hotels 7.55% June 2009 74,483
Other 13 hotels 6.96% - 7.23% 2000 - 2005 85,421 86,715
---------- ----------
Total fixed rate debt 1,138,119 898,984
---------- ----------
Total debt $1,833,954 $1,594,734
========== ==========
</TABLE>
(a) Collateralized by stock and partnership interests in certain
subsidiaries of FelCor.
F-11
<PAGE> 71
FELCOR LODGING TRUST INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
6. DEBT -- (CONTINUED)
On March 4, 1999 the Company completed a $63 million first mortgage
term loan ("Mortgage Loan"). The Mortgage Loan is collateralized by three
hotels, bears interest at 200 basis points over LIBOR, matures in February 2003
and amortizes over 25 years. The proceeds from this loan were used to pay off a
$44 million mortgage loan due December 2002 and to acquire ownership of land
previously held under ground leases.
On April 1, 1999, the Company entered into a $375 million term loan
("the Senior Term Loan") increasing its credit facilities to $1.2 billion,
consisting of the Senior Term Loan which matures in March 2004 and an $850
million revolving line of credit ("Line of Credit") which matures in June 2001.
The Line of Credit, Senior Term Loan and the Company's publicly traded term
notes are collateralized by stock and partnership interests in certain
subsidiaries of FelCor. The financial covenants in the Senior Term Loan are
consistent with those in the Company's existing Line of Credit. If the Company
achieves investment grade credit ratings from the applicable rating agencies, or
when the Senior Term Loan is retired, the stock and partnership interest
collateral will be released. The proceeds of the Senior Term Loan were used to
prepay a $250 million term loan, which was to mature on December 31, 1999, and
initially to reduce borrowings under the Company's Line of Credit. Interest
payable on borrowings under the credit facilities is variable, determined from a
ratings and leverage-based pricing matrix, ranging from 87.5 basis points to 275
basis points above LIBOR (30-day LIBOR at December 31, 1999, was 5.83%). The
interest rate spread on the Line of Credit ranged from 150 to 162.5 basis points
in 1999. Additionally, the Company is required to pay an unused commitment fee
on the Line of Credit which is variable, determined from a ratings-based pricing
matrix, ranging from 20 to 30 basis points. In 1999 and 1998, the Company wrote
off approximately $1.1 million and $2.5 million, respectively, of deferred
financing fees relating to the term loan of $250 million and the previous
unsecured credit facility of $550 million, respectively. For the years ended
December 31, 1999, 1998, and 1997, the Company paid interest on its unsecured
credit facilities at weighted average interest rates of 7.1%, 7.1%, and 7.6%,
respectively. At December 31, 1999, the Company had borrowing capacity under its
Line of Credit of $186 million.
On April 1, 1999, the Company also closed a 10-year, $100 million
mortgage loan (the "April 1999 First Mortgage Term Loan"). The April 1999 First
Mortgage Term Loan is non-recourse (with certain exceptions), is collateralized
by seven Embassy Suites hotels, carries a fixed rate coupon of 7.54%, matures in
April 2009 and amortizes over 25 years. The proceeds from this loan were used
initially to reduce outstanding borrowings under the Company's Line of Credit.
On May 13, 1999, the Company closed a 10-year, $75 million mortgage
loan. This loan is non-recourse (with certain exceptions), is collateralized by
six Embassy Suites hotels, carries a fixed rate coupon of 7.55%, matures in June
2009 and amortizes over 25 years. The proceeds from this loan were used
initially to reduce outstanding borrowings under the Company's Line of Credit.
The Line of Credit and the Senior Term Loan contain various affirmative
and negative covenants including limitations on total indebtedness, total
secured indebtedness, and cash distributions, as well as the obligation to
maintain a certain minimum tangible net worth and certain minimum interest and
debt service coverage ratios. At December 31, 1999, the Company was in
compliance with all such covenants.
The Company's other borrowings contain affirmative and negative
covenants that are generally equal to or less restrictive than the Line of
Credit and Senior Term Loan. Most of the mortgage debt is non-recourse to the
Company (with certain exceptions) and contain provisions allowing for the
substitution of collateral upon satisfaction of certain conditions. Most of the
mortgage debt is prepayable; subject, however, to various prepayment, yield
maintenance, or defeasance obligations.
F-12
<PAGE> 72
FELCOR LODGING TRUST INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
6. DEBT -- (CONTINUED)
Future scheduled principal payments on debt obligations at December 31,
1999 are as follows (in thousands):
<TABLE>
<CAPTION>
YEAR
- ----
<S> <C>
2000 ................................... $ 42,608
2001 ................................... 684,588
2002 ................................... 9,622
2003 ................................... 90,768
2004 ................................... 559,306
2005 and thereafter .................... 448,463
---------------
1,835,355
Discount accretion over term ........... (1,401)
---------------
$ 1,833,954
===============
</TABLE>
To manage the relative mix of its debt between fixed and variable rate
instruments, the Company has entered into interest rate swap agreements with six
financial institutions. These interest rate swap agreements modify a portion of
the interest characteristics of the Company's outstanding debt under its Line of
Credit and Senior Term Loan without an exchange of the underlying principal
amount and effectively convert variable rate debt to a fixed rate. The fixed
rates to be paid, the effective fixed rate, and the variable rate to be received
by the Company at December 31, 1999, are summarized in the following table:
<TABLE>
<CAPTION>
EFFECTIVE
SWAP RATE
RECEIVED
SWAP RATE EFFECTIVE (VARIABLE) AT SWAP
NOTIONAL AMOUNT PAID (FIXED) FIXED RATE 12/31/99 MATURITY
- --------------- ------------ ---------- ------------- --------
<S> <C> <C> <C> <C>
$113 million 5.9300% 7.5550% 7.7450% March 2000
$ 75 million 5.9375% 7.5625% 7.7450% March 2000
$ 25 million 5.5750% 7.1830% 8.1013% July 2001
$ 25 million 5.5480% 7.1730% 8.1013% July 2001
$ 75 million 5.5550% 7.1800% 8.1013% July 2001
$100 million 5.7955% 8.2960% 8.9763% July 2003
$ 25 million 5.8260% 8.3260% 8.9763% July 2003
------------
$438 million
============
</TABLE>
The differences to be paid or received by the Company under the terms
of the interest rate swap agreements are accrued as interest rates change and
recognized as an adjustment to interest expense by the Company, pursuant to the
terms of its interest rate agreement, and will have a corresponding effect on
its future cash flows. Agreements such as these contain a credit risk in that
the counterparties may be unable to meet the terms of the agreement. The Company
minimizes that risk by evaluating the creditworthiness of its counterparties,
who are limited to major banks and financial institutions, and does not
anticipate nonperformance by the counterparties.
7. FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107 requires
disclosures about the fair value for all financial instruments, whether or not
recognized, for financial statement purposes. Disclosures about fair value of
financial instruments are based on pertinent information available to management
as of December 31, 1999.
F-13
<PAGE> 73
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
7. FAIR VALUE OF FINANCIAL INSTRUMENTS -- (CONTINUED)
Considerable judgement is necessary to interpret market data and develop
estimated fair value. Accordingly, the estimates presented herein are not
necessarily indicative of the amounts that could be realized on disposition of
the financial instruments. The use of different market assumptions and/or
estimation methodologies may have a material effect on the estimated fair value
amounts.
Management estimates the fair value of (i) accounts receivable,
accounts payable and accrued expenses approximate carrying value due to the
relatively short maturity of these instruments; (ii) the note receivable
approximates carrying value based upon effective borrowing rates for issuance of
debt with similar terms and remaining maturities; (iii) the borrowings under the
Line of Credit, Senior Term loan and various other mortgage notes approximate
carrying value because these borrowings accrue interest at floating interest
rates based on market. The estimated fair value of the Company's fixed rate debt
of $700 million is $568 million at December 31, 1999, based on current market
interest rates estimated by the Company for similar debt with similar
maturities.
The Company manages its debt portfolio by using interest rate swaps to
achieve an overall desired position of fixed and floating rates. The fair value
of interest rate hedge contracts is estimated based on quotes from the market
makers of these instruments and represents the estimated amounts the Company
would expect to receive or pay to terminate the contracts. Credit and market
risk exposures are limited to the net interest differentials. The estimated
unrealized net gain on these instruments was approximately $6.3 million at
December 31, 1999, which represents the amount the Company would receive to
terminate the agreements based on current market rates.
8. CAPITAL STOCK
As of December 31, 1999, the Company had approximately $946 million of
common stock, preferred stock, debt securities, and/or common stock warrants
available for offerings under shelf registration statements previously declared
effective.
Preferred Stock
The Board of Directors is authorized to provide for the issuance of up
to 20,000,000 shares of Preferred Stock in one or more series, to establish the
number of shares in each series, to fix the designation, powers preferences and
rights of each such series, and the qualifications, limitations or restrictions
thereof.
In 1996 the Company issued 6.1 million shares of its $1.95 Series A
Preferred Stock at $25 per share. The Series A Preferred Stock bears an annual
dividend equal to the greater of $1.95 per share or the cash distributions
declared or paid for the corresponding period on the number of shares of Common
Stock into which the Series A Preferred Stock is then convertible. Each share of
the Series A Preferred Stock is convertible at the shareholder's option to
0.7752 shares of Common Stock, subject to certain adjustments, and may not be
redeemed by the Company before April 30, 2001.
On May 1, 1998, the Company issued 5.75 million depositary shares,
representing 57,500 shares of 9% Series B Preferred Stock, at $25 per depositary
share. The Series B Preferred Stock and the corresponding depositary shares may
be called by FelCor at par on or after May 7, 2003, have no stated maturity,
sinking fund or mandatory redemption, and are not convertible into any other
securities of FelCor. The Series B Preferred Stock has a liquidation preference
of $2,500 per share (equivalent to $25 per depositary share) and is entitled to
annual dividends at the rate of 9% of the liquidation preference (equivalent to
$2.25 annually per depositary share).
F-14
<PAGE> 74
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
8. CAPITAL STOCK -- (CONTINUED)
At December 31, 1999, all dividends then payable on the Series A and
Series B Preferred Stock had been paid.
Operating Partnership Units
FelCor is the sole general partner of the Operating Partnership and is
obligated to contribute the net proceeds from any issuance of its equity
securities to the Operating Partnership in exchange for units of partnership
interest ("Units") corresponding in number and terms to the equity securities
issued by it. Units of limited partner interest may also be issued by the
Operating Partnership to third parties in exchange for cash or property, and
Units so issued to third parties are redeemable at the option of the holders
thereof for a like number of shares of FelCor Common Stock or, at the option of
FelCor, for the cash equivalent thereof.
Treasury Stock Repurchase Program
On September 3, 1999, FelCor announced that its Board of Directors had
authorized the Company to repurchase up to $100 million of its outstanding
common shares. At December 31, 1999, the Company had completed the repurchase of
approximately 5.8 million common shares at a cost of approximately $98.4 million
which has been recorded as treasury stock.
9. TAXES, INSURANCE AND OTHER
Taxes, insurance and other is comprised of the following for the years
ended December 31, 1999, 1998, and 1997 (in thousands):
<TABLE>
<CAPTION>
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
Real estate and personal property taxes .......... $ 52,118 $ 32,892 $ 18,976
Property insurance ............................... 3,481 2,341 1,627
State franchise taxes and Canadian income tax .... 3,973 1,609 718
Other ............................................ 316 162
---------- ---------- ----------
Total taxes, insurance, and other ..... $ 59,572 $ 37,158 $ 21,483
========== ========== ==========
</TABLE>
10. LAND LEASES
The Company leases land occupied by certain hotels from third parties
under various operating leases. Certain leases contain contingent rent features
based on gross revenue at the respective hotels. Future minimum lease payments
under the Company's land lease obligations at December 31, 1999, are as follows
(in thousands):
<TABLE>
<CAPTION>
YEAR
----
<S> <C>
2000 $ 18,358
2001 18,346
2002 17,951
2003 17,767
2004 17,703
2005 and thereafter 265,115
---------
$ 355,240
=========
</TABLE>
F-15
<PAGE> 75
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
11. COMMITMENTS AND RELATED PARTY TRANSACTIONS
Commitments
The Company is to receive rental income from the Lessees under the
Percentage Leases, which expire in 2002 (five hotels), 2003 (three hotels), 2004
(12 hotels), 2005 (19 hotels), 2006 (26 hotels), 2007 (37 hotels), 2008 (54
hotels), and thereafter (15 hotels). The rental income under the Percentage
Leases between 14 of the unconsolidated entities, of which the Company owns 50%,
is payable by the Lessee to the respective entities and is not included in the
following schedule of future lease commitments to the Company. Minimum future
rental income (i.e., base rents) payable to the Company under these
noncancelable operating leases at December 31, 1999 is as follows (in
thousands):
<TABLE>
<CAPTION>
LESSEES
----------------------
DJONT BRISTOL TOTAL
----- ------- -----
YEAR
----
<S> <C> <C> <C>
2000........................................... $ 140,235 $ 180,055 $ 320,290
2001........................................... 143,609 180,076 323,685
2002........................................... 143,966 180,049 324,015
2003........................................... 130,445 177,302 307,747
2004 126,885 169,930 296,815
2005 and thereafter............................ 392,499 650,239 1,042,738
----------- ---------- ----------
$ 1,077,639 $1,537,651 $2,615,290
=========== ========== ==========
</TABLE>
The Percentage Lease revenue is based on a percentage of room and suite
revenues, and a varying combination of food and beverage revenues, food and
beverage rents, and other revenues of the Hotels. Both the base rent and the
threshold suite revenue in each lease computation are subject to adjustments for
changes in the Consumer Price Index ("CPI"). The adjustment is calculated at the
beginning of each calendar year for the hotels acquired prior to July of the
previous year. The adjustment in any lease year may not exceed 7%. The CPI
adjustments made in January 2000 ranged from 1.05% to 2.20%, dependent upon the
Lessee. The CPI adjustments for 1999 ranged from 0.55% to 1.5%, dependent upon
the Lessee, and in 1998 was 0.50%.
Under the Percentage Leases, the Operating Partnership is obligated to
pay the costs of real estate and personal property taxes, property insurance,
maintenance of underground utilities and structural elements of the Hotels, and
to set aside a portion of the hotels' revenues (varying from 4% of room and
suite revenue to 3% of total hotel revenue) per month, on a cumulative basis, to
fund capital expenditures for the periodic replacement or refurbishment of
furniture, fixtures and equipment required for the retention of the franchise
licenses with respect to the Hotels. Included in cash and cash equivalents at
December 31, 1999 and 1998, were cash balances held by the Hotel managers for
these capital expenditures of $19.9 million and $14.8 million, respectively.
Related Party Transactions
The Company shares the executive offices and certain employees with
FelCor, Inc., and DJONT, and each company bears its share of the costs thereof,
including an allocated portion of the rent, compensation of certain personnel
(other than Mr. Corcoran, whose compensation is borne solely by the Company),
office supplies, telephones, and depreciation of office furniture, fixtures, and
equipment. Any such allocation of shared expenses to the Company is required to
be approved by a majority of the Independent Directors. During 1999, 1998, and
1997, the Company paid approximately $5.7 million (approximately 89.5%), $2.8
million (approximately 63%), and $1.3 million (approximately 38%), respectively,
of the allocable expenses under this arrangement.
F-16
<PAGE> 76
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
11. COMMITMENTS AND RELATED PARTY TRANSACTIONS -- (CONTINUED)
Included in the mortgage debt of the unconsolidated entities is a
mortgage loan payable to the Company in the amount of $7.8 million for 1999 and
1998. The note bears a fixed interest rate of 8% per annum with a 30 year
amortization, matures on December 31, 2004, and is collateralized by a Mortgage
and Assignment of Leases and Rents with respect to the annex of the hotel owned
by an entity in which the Company has a 97% nonvoting interest.
12. SUPPLEMENTAL CASH FLOW DISCLOSURE
The Company purchased certain assets and assumed certain liabilities in
connection with the acquisition of hotels in 1998 and 1997. During 1999 the
Company purchased the land related to three hotels, which was previously leased.
These purchases were recorded under the purchase method of accounting. The fair
values of the acquired assets and liabilities recorded at the date of
acquisition are as follows (in thousands):
<TABLE>
<CAPTION>
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Assets acquired ................... $ 19,776 $ 2,427,027 $ 588,053
Liabilities assumed ............... (7,800) (940,906) (5,932)
Common Stock and Units issued ..... (1,174) (1,152,856)
Minority interest contribution .... (6,989) (8,021)
----------- ----------- -----------
Net cash paid .......... $ 10,802 $ 326,276 $ 574,100
=========== =========== ===========
</TABLE>
Under the Merger Agreement with Bristol Hotel Company, FelCor provided
Bristol a $120 million interim credit facility (the "Interim Credit Facility").
At July 28, 1998, the Interim Credit facility was assumed and canceled by FelCor
upon completion of the Merger.
Approximately $39.7 million, $67.3 million, and $24.7 million of
aggregate preferred stock dividends and common stock distributions had been
declared as of December 31, 1999, 1998, and 1997, respectively. These amounts
were paid in the following January of each year.
In 1998 the Company entered into a joint venture, in which the Company
contributed a hotel with a net book value of $53.9 million for a 60% equity
interest in the venture. The Company has consolidated this venture in the
financial statements and recorded increases of $34.4 million in investment in
hotels and minority interest in other partnerships.
13. STOCK BASED COMPENSATION PLANS
The Company sponsors three restricted stock and stock option plans (the
"FelCor Plans"). In addition, upon completion of the Merger, FelCor assumed two
stock option plans previously sponsored by Bristol Hotel Company (the "Bristol
Plans"). FelCor was initially obligated to issue up to 1,271,103 shares of its
Common Stock pursuant to the Bristol Plans. No additional options may be awarded
under the Bristol Plans. The FelCor Plans and the Bristol Plans are referred to
collectively as the "Plans".
The Company applies APB Opinion 25 and related interpretations in
accounting for the Plans. In 1995 the Financial Accounting Standards Board
("FASB") issued FASB Statement No. 123, "Accounting for Stock-Based
Compensation" ("SFAS 123") which, if fully adopted by the Company, would change
the methods the Company applies in recognizing the cost of the Plans. Adoption
of the cost recognition provisions of SFAS 123 is optional and the Company has
decided not to adopt the provisions of SFAS 123. However, pro forma disclosures
as if the Company adopted the cost recognition provisions of SFAS 123 are
required by SFAS 123 and are presented below.
F-17
<PAGE> 77
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
13. STOCK BASED COMPENSATION PLANS -- (CONTINUED)
Stock Options
FelCor is authorized to issue 2,950,000 shares of Common Stock under
the FelCor Plans pursuant to awards granted in the form of incentive stock
options, non-qualified stock options, and restricted stock. All options have
10-year contractual terms and vest over five equal annual installments (20% per
year), beginning in the year following the date of grant.
The options outstanding under the Bristol Plans generally vest either
in four equal annual installments (25% per year) beginning in the second year
following the original date of award, in five equal annual installments (20% per
year) beginning in the year following the original date of award, or on a single
date that is three to five years following the original date of the date of
award.
A summary of the status of FelCor's non-qualified stock options under
the Plans as of December 31, 1999, 1998, and 1997, and the changes during the
years are presented below:
<TABLE>
<CAPTION>
1999 1998 1997
---------------------- ---------------------- ----------------------
WEIGHTED WEIGHTED WEIGHTED
# SHARES OF AVERAGE # SHARES OF AVERAGE # SHARES OF AVERAGE
UNDERLYING EXERCISE UNDERLYING EXERCISE UNDERLYING EXERCISE
OPTIONS PRICES OPTIONS PRICES OPTIONS PRICES
---------- ------ ---------- ------ ---------- ------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of the year ... 2,540,466 $22.53 1,670,500 $29.96 1,047,500 $25.67
Granted (A) (B) ........................ 9,750 $22.13 2,445,813 $20.54 752,000 $35.70
Exercised .............................. (760) $10.33 (332,915) $11.67 (31,000) $19.11
Forfeited (B) .......................... (52,683) $32.41 (1,242,932) $31.51 (98,000) $31.56
---------- ---------- ----------
Outstanding at end of year ............. 2,496,773 $22.32 2,540,466 $22.53 1,670,500 $29.96
========== ========== ==========
Exercisable at end of year ............. 906,675 $24.58 796,499 $24.64 411,500 $24.42
</TABLE>
(A) 1998 grants include options covering 1,271,103 shares of Common
Stock issuable as a result of the assumption of the Bristol Plans.
(B) To enable FelCor to preserve its stock options as a meaningful
element of compensation in 1998, existing option holders under the
FelCor Plans employed by FelCor on a full-time basis were offered the
opportunity to exchange their existing options (having exercise prices
ranging from $26.44 to $38.56 per share) for a lesser number of new
options having an equal value under the Black-Scholes option pricing
model. Twenty-two employees accepted this offer in 1998, surrendering
for cancellation existing options covering an aggregate of 1,151,500
shares of Common Stock at a weighted average exercise price of $32.807
per share for new options covering an aggregate of 840,393 shares of
Common Stock at an exercise price of $22.125 per share. The new options
have the same expiration dates and vesting schedules as the options
surrendered for cancellation; however, none of the new options were
exercisable prior to January 1, 2000.
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------------------------------------ -------------------------------
NUMBER WGTD. AVG. NUMBER
RANGE OF OUTSTANDING REMAINING WGTD AVG. EXERCISABLE WGTD. AVG.
EXERCISE PRICES AT 12/31/99 LIFE EXERCISE PRICE AT 12/31/99 EXERCISE PRICE
- --------------- ----------- ----- -------------- ----------- --------------
<S> <C> <C> <C> <C> <C>
$10.33 to $29.50 2,206,819 7.21 $20.80 734,890 $22.21
$30.28 to $36.63 289,954 7.63 $33.92 171,785 $34.72
- ---------------- ---------- ---- ------ -------- ------
$10.33 to $36.63 2,496,773 7.26 $22.32 906,675 $24.58
</TABLE>
The fair value of each stock option granted is estimated on the date of
grant using the Black-Scholes option pricing model with the following weighted
average assumptions: dividend yield of 9.94%; risk free interest rates are
different for each grant and range from 4.65% to 6.2%; the expected lives of
options are 6 years; and volatility of 18.44% for 1999 grants, 32.90% for 1998
grants, and 22.67% for grants issued in 1997. The weighted average fair value of
options granted during 1999, 1998, and 1997 was $1.07, $3.35, and $4.31 per
share, respectively.
F-18
<PAGE> 78
FELCOR LODGING TRUST INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
13. STOCK BASED COMPENSATION PLANS -- (CONTINUED)
Restricted Stock
A summary of the status of the Company's restricted stock grants as of
December 31, 1999, 1998, and 1997 and the changes during the years are presented
below:
<TABLE>
<CAPTION>
1999 1998 1997
---------------------- --------------------- ----------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
FAIR MARKET FAIR MARKET FAIR MARKET
VALUE VALUE VALUE
# SHARES AT GRANT # SHARES AT GRANT # SHARES AT GRANT
-------- -------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of the year ....... 125,375 $ 28.97 115,500 $ 29.03 84,500 $ 26.04
--------- --------- ---------
Granted:
With 5-year pro rata vesting ............ 5,000 $ 21.25 35,000 $ 35.00
Vest 100% at grant date ................. 4,875 $ 35.63 6,000 $ 35.00
Vest 100% within 12 months of grant ..... 2,500 $ 36.94
--------- --------- ---------
Total granted .............................. 9,875 $ 28.35 43,500 $ 35.11
Forfeited .................................. (12,500) $ 30.00
--------- --------- ---------
Outstanding at end of year ................. 125,375 $ 28.97 125,375 $ 28.97 115,500 $ 29.03
========= ========= =========
Vested at end of year ...................... 83,575 $ 28.35 65,175 $ 28.26 40,400 $ 26.60
</TABLE>
Pro Forma Net Income and Net Income Per Common Share
Had the compensation cost for the Company's stock-based compensation
plans been determined in accordance with SFAS 123, the Company's net income and
net income per common share for 1999, 1998, and 1997 would approximate the pro
forma amounts below (in thousands, except per share data):
<TABLE>
<CAPTION>
DECEMBER 31, 1999 DECEMBER 31, 1998 DECEMBER 31, 1997
------------------------ ------------------------ ------------------------
AS REPORTED PRO FORMA AS REPORTED PRO FORMA AS REPORTED PRO FORMA
<S> <C> <C> <C> <C> <C> <C>
SFAS 123 charge................... $ 1,606 $ 1,799 $ 1,447
APB 25 charge..................... $ 652 $ 829 $ 1,017
Net income applicable to
common shareholders............ $ 106,345 $ 105,391 $ 93,416 $ 92,446 $ 51,853 $ 51,423
Diluted net income applicable
to common shareholders
per common share............... $ 1.57 $ 1.56 $ 1.86 $ 1.84 $ 1.64 $ 1.63
</TABLE>
The effects of applying SFAS 123 in this pro forma disclosure are not indicative
of future amounts.
14. LESSEES
All of the Company's percentage lease revenue is derived from the
Percentage Leases with the Lessees. Certain information, related to DJONT's
financial statements, is as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1999 1998
---------- ---------
<S> <C> <C>
Balance Sheet Information:
Cash and cash equivalents........................... $ 20,127 $ 28,538
Accounts receivable, net............................ $ 28,601 $ 27,561
Total assets........................................ $ 71,659 $ 63,972
Due to FelCor Lodging Trust Incorporated............ $ 22,064 $ 16,875
Accounts payable.................................... $ 12,742 $ 13,508
Shareholders' deficit............................... $ (13,142) $ (8,231)
</TABLE>
F-19
<PAGE> 79
FELCOR LODGING TRUST INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
14. LESSEES -- (CONTINUED)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------------------
1999 1998 1997
--------- --------- ---------
<S> <C> <C> <C>
Statement of Operations Information:
Room and suite revenue .............. $ 649,323 $ 618,122 $ 456,614
Percentage lease expenses ........... $ 307,532 $ 289,891 $ 216,990
Net income (loss) ................... $ (4,911) $ 844 $ (2,672)
</TABLE>
Certain entities owning interests in DJONT and managers for certain
hotels have agreed to make loans to DJONT of up to an aggregate of approximately
$17.3 million to the extent necessary to enable DJONT to pay rent and other
obligations due under the respective Percentage Leases relating to a total of 38
of the Hotels. No such loans were outstanding at December 31, 1999.
DJONT engages third-party managers to operate the Hotels leased by it
and generally pays such managers a base management fee based on a percentage of
room and suite revenue and an incentive management fee based on DJONT's income
before overhead expenses for each hotel. In certain instances, the hotel
managers have subordinated fees and are committed to make subordinated loans to
DJONT, if needed, to meet its rental and other obligations under the Percentage
Leases.
Bristol is a publicly traded company whose stock is listed on the New
York Stock Exchange under the symbol BH and that files financial statements in
accordance with the Securities Exchange Act of 1934, as amended.
Bristol serves as both the lessee and manager of the 100 Hotels leased
to it by the Company at December 31, 1999, and, as such, is compensated for both
roles through the profitability of the Hotels, after meeting their operating
expenses and rental obligations under the Percentage Leases.
Bristol has entered into an absolute and unconditional guarantee of the
obligations of the Bristol Lessees under the Percentage Leases, and is required
to maintain a minimum liquid net worth. A portion of this liquid net worth is
being satisfied through a letter of credit for the benefit of the Company. This
Letter of Credit is subject to periodic reductions upon satisfaction of certain
conditions and, at December 31, 1999, totaled $9.1 million. According to
Bristol's press release dated February 1, 2000, for the year ended December 31,
1999 and the period from July 28, 1998 through December 31, 1998, Bristol had
net income of $8.2 million and $2.6 million, respectively, and at December 31,
1999 and 1998, had stockholders' equity of $43.1 million and $35.4 million,
respectively.
At December 31, 1999, the Company owned interests in 188 Hotels
operating under various brand names. The Hotels generally operate pursuant to
franchise license agreements which require the payment of fees based on a
percentage of room and suite revenue. These fees are paid by the Lessees.
15. EMPLOYEE BENEFITS
The Company offers a 401(k) plan, health insurance benefits and a
deferred compensation plan to its employees. In 1999, the Company's matching
contribution to the 401(k) plan was $382,000 and the cost of health insurance
benefits were $217,000. The deferred compensation plan offered by the Company is
available only to directors and employees making in excess of $100,000 annually.
The Company makes no matching or other contributions to the deferred
compensation plan other than the payment of its operating and administrative
expenses.
F-20
<PAGE> 80
FELCOR LODGING TRUST INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
16. SEGMENT INFORMATION
The Company has determined that its reportable segments are those that are
consistent with the Company's method of internal reporting, which segments its
business by Lessee. The Company's Lessees at December 31, 1999, were DJONT and
Bristol. Prior to July 28, 1998 (the date of the Bristol Merger), the Company
had only one lessee, DJONT.
The following tables present information about the reportable segments for the
year ended December 31, 1999 and 1998 (in thousands):
<TABLE>
<CAPTION>
CORPORATE
SEGMENT NOT ALLOCABLE CONSOLIDATED
YEAR ENDED DECEMBER 31, 1999 DJONT BRISTOL TOTAL TO SEGMENTS TOTAL
- ----------------------------------------------- ----------- ---------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Statement of Operations Information:
Percentage lease revenue....................... $ 256,128 $ 234,765 $ 490,893 $ 490,893
Equity in income from unconsolidated
entities................................. $ 7,725 $ 759 $ 8,484 $ 8,484
Expenses:
Depreciation.............................. $ 80,969 $ 71,748 $ 152,717 $ 231 $ 152,948
Interest expense.......................... $ 125,435 $ 125,435
Income (loss) before nonrecurring items........ $ 147,868 $ 118,949 $ 266,817 $ (134,860) $ 131,957
Gain on sale of hotels......................... 236 236
Income (loss) before extraordinary change $ 147,868 $ 118,949 $ 266,817 $ (134,624) $ 132,193
Funds from operations:
Income (loss) before extraordinary charge...... $ 147,868 $ 118,949 $ 266,817 $ (134,624) $ 132,193
Series B preferred dividends................... (12,937) (12,937)
Depreciation................................... 80,969 71,748 152,717 231 152,948
Depreciation for unconsolidated entities....... 9,248 747 9,995 9,995
Minority interest in Operating Partnership..... 4,696 4,696
----------- ---------- ----------- ---------- -----------
Funds from operations.......................... $ 238,085 $ 191,444 $ 429,529 $ (142,634) $ 286,895
=========== ========== =========== ========== ===========
Weighted average common shares and
units outstanding (1)....................... 75,251
Other Information:
Total assets....................... $ 1,940,247 $2,243,916 $ 4,184,163 $ 68,555 $ 4,252,718
Capital expenditures............... $ 51,587 $ 170,733 $ 222,320 $ 222,320
</TABLE>
F-21
<PAGE> 81
FELCOR LODGING TRUST INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
16. SEGMENT INFORMATION -- (CONTINUED)
<TABLE>
<CAPTION>
CORPORATE
SEGMENT NOT ALLOCABLE CONSOLIDATED
YEAR ENDED DECEMBER 31, 1998 DJONT BRISTOL TOTAL TO SEGMENTS TOTAL
- ----------------------------------------------- ----------- ---------- --------- ------------- ------------
<S> <C> <C> <C> <C> <C>
Statement of Operations Information:
Percentage lease revenue...................... $ 237,555 $ 90,480 $ 328,035 $ 328,035
Equity in income from unconsolidated
entities................................ $ 6,744 $ 273 $ 7,017 $ 7,017
Expenses:
Depreciation............................ $ 71,055 $ 19,619 $ 90,674 $ 161 $ 90,835
Interest expense........................ $ 73,182 $ 73,182
Income before nonrecurring item............... $ 143,736 $ 54,233 $ 197,969 $ (80,532) $ 117,437
Gain on sale of hotels........................ $ 477 $ 477
Income (loss) before extraordinary charge..... $ 143,736 $ 54,233 $ 197,969 $ (80,055) $ 117,914
Funds from operations:
Income (loss) before extraordinary charge..... $ 143,736 $ 54,233 $ 197,969 $ (80,055) $ 117,914
Series B preferred dividends.................. (8,373) (8,373)
Depreciation.................................. 71,055 19,619 90,674 161 90,835
Depreciation for unconsolidated entities...... 10,254 233 10,487 10,487
Minority interest in Operating Partnership....
6,500 6,500
----------- ---------- ----------- ---------- -----------
Funds from operations......................... $ 225,045 $ 74,085 $ 299,130 $ (81,767) $ 217,363
=========== ========== =========== ========== ===========
Weighted average common shares and
units outstanding (1)...................... 58,013
Other Information:
Total assets...................... $ 2,022,975 $2,093,328 $ 4,116,303 $ 59,080 $ 4,175,383
Capital expenditures.............. $ 65,264 $ 65,839 $ 131,103 $ 131,103
</TABLE>
(1) Weighted average common shares and units outstanding are computed
including dilutive options and unvested stock grants, and assuming
conversion of Series A preferred stock to common stock.
F-22
<PAGE> 82
FELCOR LODGING TRUST INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
16. SEGMENT INFORMATION -- (CONTINUED)
The following table sets forth Percentage Lease revenue and investment
in hotel assets represented by the following geographical areas as of and for
the years ended December 31, (in thousands):
<TABLE>
<CAPTION>
PERCENTAGE LEASE REVENUE INVESTMENT IN HOTEL ASSETS
---------------------------- ----------------------------
1999 1998 1999 1998
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
California ......... $ 97,283 $ 63,733 $ 698,942 $ 642,965
Texas .............. 94,782 52,220 891,626 854,558
Florida ............ 61,516 45,719 542,298 519,280
Georgia ............ 39,247 23,691 355,519 349,429
Other States ....... 186,248 138,437 1,802,220 1,705,220
Canada ............. 11,817 5,123 75,294 62,202
---------- ---------- ---------- ----------
Total ... $ 490,893 $ 328,923 $4,365,899 $4,133,654
========== ========== ========== ==========
</TABLE>
17. RECENTLY ISSUED STATEMENTS OF FINANCIAL ACCOUNTING STANDARDS
In June 1998, the FASB issued Statement of Financial Accounting
Standards No. 133, "Accounting for Derivative Instruments and Hedging
Activities" ("FAS 133"). FAS 133 establishes accounting and reporting standards
for derivative instruments, including certain derivative instruments embedded in
other contracts (collectively referred to as derivatives) and for hedging
activities. It requires that an entity recognize all derivatives as either
assets or liabilities in the statement of financial position and measure those
instruments at fair value. In June 1999, the FASB issued Statement of Financial
Accounting Standards No. 137, "Accounting for Derivative Instruments and Hedging
Activities - Deferral of the Effective Date of FASB 133" which deferred the
effective date of FAS 133 for all fiscal quarters of fiscal years beginning
after June 15, 2000. The Company believes that, upon implementation, FAS 133
will not have a material impact on the financial statements of the Company.
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101 ("SAB 101") which provides guidance on revenue
recognition. SAB 101 is effective for fiscal years beginning after December 15,
1999. SAB 101 requires that a lessor not recognize contingent rental income
until annual specified thresholds have been achieved by the lessee. During 1999,
the Company's leases had quarterly, rather than annual, specified rental
thresholds and the Company recognized contingent rentals earned in each quarter
pursuant to the Percentage Lease terms. The Company has reviewed the terms of
its Percentage Leases and has determined that the provisions of SAB 101 will not
materially impact the Company's revenue recognition on an interim basis in 2000,
since a significant majority of the Percentage Leases contain quarterly
specified thresholds. SAB 101 will not impact the Company's revenue recognition
on an annual basis given the Company maintains only calendar year leases. SAB
101 will have no impact on the Company's interim or annual cash flow from the
Lessees, and therefore on its ability to pay dividends.
F-23
<PAGE> 83
FELCOR LODGING TRUST INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
18. QUARTERLY OPERATING RESULTS (UNAUDITED)
The Company's unaudited consolidated quarterly operating data for the
years ended December 31, 1999 and 1998, follows (in thousands, except per share
data). In the opinion of management, all adjustments (consisting of normal
recurring accruals) necessary for a fair presentation of quarterly results have
been reflected in the data. It is also management's opinion, however, that
quarterly operating data for hotel enterprises are not indicative of results to
be achieved in succeeding quarters or years. In order to obtain a more accurate
indication of performance, there should be a review of operating results,
changes in shareholders' equity and cash flows for a period of several years.
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
1999 QUARTER QUARTER QUARTER QUARTER
- ---- -------- -------- -------- --------
<S> <C> <C> <C> <C>
Total revenues ........................................ $126,917 $135,187 $124,082 $117,815
Income before nonrecurring items ...................... $ 36,747 $ 41,935 $ 30,021 $ 23,254
Net income applicable to common shareholders .......... $ 30,563 $ 34,638 $ 23,837 $ 17,307
Per diluted common share data:
Net income applicable to common shareholders ..... $ 0.45 $ 0.51 $ 0.35 $ 0.26
Weighted average common shares outstanding ............ 68,344 68,351 68,221 65,543
</TABLE>
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
1998 QUARTER QUARTER QUARTER QUARTER
- ---- -------- -------- -------- --------
<S> <C> <C> <C> <C>
Total revenues ........................................ $ 57,528 $ 67,402 $108,599 $106,088
Income before nonrecurring items ...................... $ 21,500 $ 24,881 $ 39,854 $ 31,202
Net income applicable to common shareholders .......... $ 17,995 $ 20,027 $ 31,151 $ 24,243
Per diluted common share data:
Net income applicable to common shareholders ..... $ 0.49 $ 0.54 $ 0.53 $ 0.36
Weighted average shares outstanding ................... 36,905 36,851 58,834 68,185
</TABLE>
19. SUBSEQUENT EVENTS
In connection with the efforts of Bass plc to acquire Bristol, as
announced on February 28, 2000, a Bass subsidiary (Bass America, Inc.)
contributed 4,713,185 outstanding FelCor common shares held by it to the
Operating Partnership in exchange for a like number of units of limited partner
interest. This exchange will not affect FelCor's FFO or earnings per share,
although it results in reducing FelCor's percentage ownership in the Operating
Partnership from approximately 95% to approximately 88%.
On January 4, 2000, FelCor announced that its Board of Directors had
approved a $200 million increase to the existing $100 million stock repurchase
program, authorizing the Company to purchase up to an aggregate of $300 million
of its outstanding common shares. Through March 15, 2000, the Company had
purchased an aggregate of 7.8 million common shares at an aggregate cost of
approximately $137.3 million.
F-24
<PAGE> 84
REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULE
To the Board of Directors
of FelCor Lodging Trust Incorporated
Our audits of the consolidated financial statements referred to in our report
dated February 1, 2000, except as to the information in Note 18, for which the
date is March 15, 2000, appearing on page F-2 of the Annual Report on Form 10-K
of FelCor Lodging Trust Incorporated (which report and consolidated financial
statements are included in this Annual Report on Form 10-K) also included an
audit of the financial statement schedule listed in Item 14(a)(2) of this Form
10-K. In our opinion, this financial statement schedule presents fairly, in all
material respects, the information set forth therein when read in conjunction
with the related consolidated financial statements.
PricewaterhouseCoopers LLP
Dallas, Texas
February 1, 2000
F-25
<PAGE> 85
FELCOR LODGING TRUST INCORPORATED
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
AS OF DECEMBER 31, 1999
(IN THOUSANDS)
<TABLE>
<CAPTION>
COST CAPITALIZED SUBSEQUENT
INITIAL COST TO ACQUISITION
-------------------------------- -----------------------------
BUILDINGS FURNITURE BUILDINGS FURNITURE
AND AND AND AND
DESCRIPTION OF PROPERTY ENCUMBRANCES LAND IMPROVEMENTS FIXTURES LAND IMPROVEMENTS FIXTURES
----------------------- ------------ ---- ------------ -------- ---- ------------ --------
<S> <C> <C> <C> <C> <C> <C> <C>
Birmingham, AL (1) $12,483 $2,843 $29,286 $ 160 $ 701 $3,801
Montgomery E. I-85, AL (2) 836 7,272 251 2,590 1,038
Texarkana I-30, AR (2) 5,245 162 550 1,249
Flagstaff, AZ (1) 900 6,825 268 1,637 1,220
Phoenix (Airport), AZ (1) 2,969 25,828 891 2,649 928
Phoenix (Camelback), AZ(1) 38,998 612 4,695 925 5,486
Phoenix (Crescent), AZ (3) 3,608 29,583 2,887 266 658
Scottsdale, AZ (4) 12,430 384 19 112
Tempe, AZ (1) 12,363 3,951 34,371 1,185 1,144 2,077
Anaheim, CA (1) 11,470 2,548 14,832 607 516 3,804
Dana Point, CA (5) 1,787 15,545 536 357 2,972
Irvine Orange Co., CA (6) 4,981 43,338 1,494 1,093 1,243
LAX Airport, CA (1) 2,660 17,997 798 728 5,816
LAX Century, CA (1) 2,207 18,764 1,104 191 702
Mandalay Beach, CA (1) 2,930 22,125 879 717 5,405
Milpitas, CA (1) 21,497 4,021 23,677 562 1,155 4,297
Milpitas San Jose N., CA(6) 4,153 36,130 1,246 6,311 1,237
Napa, CA (1) 11,295 3,287 14,205 494 941 3,304
Palm Desert, CA (1) 8,839 2,368 20,598 710 1,591 2,673
Pleasanton, CA (6) 3,169 27,569 951 145 225
San Diego on the Bay, CA(2) 68,633 2,123 10 110
Santa Barbara, CA (2) 6 1,692 14,723 508 69 187
SF Burlingame, CA (1) 39,929 818 110 4,022
SF Financial District, CA(2) 21,679 670 1,843 1,253
SF Fisherman's Wharf, CA(2) 62,202 1,924 749 373
SF Union Square, CA (6) 8,514 74,076 2,554 3,436 970
So. San Francisco, CA (1) 3,418 31,737 527 880 4,529
Beaver Creek, CO (7) 1,134 9,864 340 (16) 93 1,123
Denver, CO (5) 2,432 21,158 730 215 2,228
Hartford Downtown, CT (6) 2,327 20,243 698 5,902 3,124
Stamford, CT (8) 37,356 1,155 1,459 630
Wilmington, DE (5) 1,379 12,487 431 507 2,222
Boca Raton, FL (5) 5,433 2,796 468 166 1,193
Boca Raton, FL (1) 1,868 16,253 560 242 3,482
Cocoa Beach, FL (2) 2,304 20,046 691 4,898 4,885
Deerfield Beach, FL (1) 15,491 4,523 29,443 917 18 1,270 4,548
Ft. Lauderdale, FL (1) 16,544 5,329 47,850 903 45 1,530 5,223
Ft. Lauderdale, FL (3) 3,009 26,177 903 1,926 1,041
Jacksonville, FL (1) 1,130 9,608 456 5,083 2,116
Kissimmee Nikki Bird, FL(2) 31,652 979 5,186 2,709
Miami Airport, FL (6) 26,146 809 922 1,439
Miami (Airport), FL (1) 13,374 4,135 24,950 1,171 816 5,589
Orlando Int'l Airport, FL(8) 2,564 22,310 769 40 211
Orlando Int'l Drive, FL(2) 5,142 44,735 1,543 1,614 1,591
Orlando (North), FL (1) 1,673 14,218 684 5,154 2,108
Orlando (South), FL (1) 1,632 13,870 799 457 2,071
Tampa Busch Gardens, FL(5) 672 12,387 226 181 935
</TABLE>
<TABLE>
<CAPTION>
ACCUMULATED NET BOOK
GROSS AMOUNTS AT WHICH DEPRECIATION VALUE
CARRIED AT CLOSE OF PERIOD BUILDINGS BUILDINGS
------------------------------------------ AND AND
BUILDINGS FURNITURE IMPROVEMENTS IMPROVEMENTS;
AND AND FURNITURE & FURNITURE & DATE OF
DESCRIPTION OF PROPERTY AND IMPROVEMENTS FIXTURES TOTAL FIXTURES FIXTURES CONSTRUCTION
----------------------- --- ------------ -------- ----- -------- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Birmingham, AL (1) 2,843 $29,987 $3,961 $ 36,791 $5,178 $31,613 1987
Montgomery E. I-85, AL (2) 836 9,862 1,289 11,987 548 11,439 1964
Texarkana I-30, AR (2) 5,795 1,411 7,206 321 6,885 1970
Flagstaff, AZ (1) 900 8,462 1,488 10,850 2,168 8,682 1988
Phoenix (Airport), AZ (1) 2,969 28,477 1,819 33,265 1,326 31,939 1981
Phoenix (Camelback), AZ(1) 4,695 39,923 6,098 50,716 7,583 43,133 1985
Phoenix (Crescent), AZ (3) 3,608 29,849 3,545 37,002 3,523 33,479 1986
Scottsdale, AZ (4) 12,449 496 12,945 526 12,419 1970
Tempe, AZ (1) 3,951 35,515 3,262 42,728 2,020 40,708 1986
Anaheim, CA (1) 2,548 15,348 4,411 22,307 4,405 17,902 1987
Dana Point, CA (5) 1,787 15,902 3,508 21,197 2,414 18,783 1992
Irvine Orange Co., CA (6) 4,981 44,431 2,737 52,149 1,969 50,180 1986
LAX Airport, CA (1) 2,660 18,725 6,614 27,999 6,242 21,757 1985
LAX Century, CA (1) 2,207 18,955 1,806 22,968 2,202 20,766 1990
Mandalay Beach, CA (1) 2,930 22,842 6,284 32,056 5,514 26,542 1986
Milpitas, CA (1) 4,021 24,832 4,859 33,712 5,446 28,266 1987
Milpitas San Jose N., CA(6) 4,153 42,441 2,483 49,077 1,680 47,397 1987
Napa, CA (1) 3,287 15,146 3,798 22,231 3,440 18,791 1985
Palm Desert, CA (1) 2,368 22,189 3,383 27,940 1,553 26,387 1984
Pleasanton, CA (6) 3,169 27,714 1,176 32,059 1,203 30,856 1986
San Diego on the Bay, CA(2) 68,643 2,233 70,876 2,873 68,003 1965
Santa Barbara, CA (2) 1,692 14,792 695 17,179 658 16,521 1969
SF Burlingame, CA (1) 40,039 4,840 44,879 7,044 37,835 1986
SF Financial District, CA(2) 23,522 1,923 25,445 1,093 24,352 1970
SF Fisherman's Wharf, CA(2) 62,951 2,297 65,248 2,646 62,602 1970
SF Union Square, CA (6) 8,514 77,512 3,524 89,550 3,385 86,165 1970
So. San Francisco, CA (1) 3,418 32,617 5,056 41,091 6,344 34,747 1988
Beaver Creek, CO (7) 1,118 9,957 1,463 12,538 1,913 10,625 1989
Denver, CO (5) 2,432 21,373 2,958 26,763 1,489 25,274 1989
Hartford Downtown, CT (6) 2,327 26,145 3,822 32,294 1,498 30,796 1973
Stamford, CT (8) 38,815 1,785 40,600 1,670 38,930 1984
Wilmington, DE (5) 1,379 12,994 2,653 17,026 947 16,079 1972
Boca Raton, FL (5) 5,433 2,962 1,661 10,056 1,350 8,706 1989
Boca Raton, FL (1) 1,868 16,495 4,042 22,405 4,010 18,395 1989
Cocoa Beach, FL (2) 2,304 24,944 5,576 32,824 1,451 31,373 1960
Deerfield Beach, FL (1) 4,541 30,713 5,465 40,719 6,192 34,527 1987
Ft. Lauderdale, FL (1) 5,374 49,380 6,126 60,880 8,657 52,223 1986
Ft. Lauderdale, FL (3) 3,009 28,103 1,944 33,056 1,459 31,597 1986
Jacksonville, FL (1) 1,130 14,691 2,572 18,393 3,039 15,354 1986
Kissimmee Nikki Bird, FL(2) 36,838 3,688 40,526 1,741 38,785 1974
Miami Airport, FL (6) 27,068 2,248 29,316 1,360 27,956 1983
Miami (Airport), FL (1) 4,135 25,766 6,760 36,661 6,550 30,111 1987
Orlando Int'l Airport, FL(8) 2,564 22,350 980 25,894 977 24,917 1984
Orlando Int'l Drive, FL(2) 5,142 46,349 3,134 54,625 1,933 52,692 1972
Orlando (North), FL (1) 1,673 19,372 2,792 23,837 4,200 19,637 1985
Orlando (South), FL (1) 1,632 14,327 2,870 18,829 4,029 14,800 1985
Tampa Busch Gardens, FL(5) 672 12,568 1,161 14,401 1,852 12,549 1985
</TABLE>
<TABLE>
<CAPTION>
LIFE UPON
WHICH
DEPRECIATION
DATE IN STATEMENT
DESCRIPTION OF PROPERTY ACQUIRED IS COMPUTED
----------------------- -------- -----------
<S> <C> <C>
Birmingham, AL (1) 01-03-96 5 - 40 Yrs
Montgomery E. I-85, AL (2) 07-28-98 5 - 40 Yrs
Texarkana I-30, AR (2) 07-28-98 5 - 40 Yrs
Flagstaff, AZ (1) 02-16-95 5 - 40 Yrs
Phoenix (Airport), AZ (1) 05-04-98 5 - 40 Yrs
Phoenix (Camelback), AZ(1) 01-03-96 5 - 40 Yrs
Phoenix (Crescent), AZ (3) 06-30-97 5 - 40 Yrs
Scottsdale, AZ (4) 07-28-98 5 - 40 Yrs
Tempe, AZ (1) 05-04-98 5 - 40 Yrs
Anaheim, CA (1) 01-03-96 5 - 40 Yrs
Dana Point, CA (5) 02-21-97 5 - 40 Yrs
Irvine Orange Co., CA (6) 07-28-98 5 - 40 Yrs
LAX Airport, CA (1) 03-27-96 5 - 40 Yrs
LAX Century, CA (1) 02-18-97 5 - 40 Yrs
Mandalay Beach, CA (1) 05-08-96 5 - 40 Yrs
Milpitas, CA (1) 01-03-96 5 - 40 Yrs
Milpitas San Jose N., CA(6) 07-28-98 5 - 40 Yrs
Napa, CA (1) 05-08-96 5 - 40 Yrs
Palm Desert, CA (1) 05-04-98 5 - 40 Yrs
Pleasanton, CA (6) 07-28-98 5 - 40 Yrs
San Diego on the Bay, CA(2) 07-28-98 5 - 40 Yrs
Santa Barbara, CA (2) 07-28-98 5 - 40 Yrs
SF Burlingame, CA (1) 11-06-95 5 - 40 Yrs
SF Financial District, CA(2) 07-28-98 5 - 40 Yrs
SF Fisherman's Wharf, CA(2) 07-28-98 5 - 40 Yrs
SF Union Square, CA (6) 07-28-98 5 - 40 Yrs
So. San Francisco, CA (1) 01-03-96 5 - 40 Yrs
Beaver Creek, CO (7) 02-20-96 5 - 40 Yrs
Denver, CO (5) 03-15-98 5 - 40 Yrs
Hartford Downtown, CT (6) 07-28-98 5 - 40 Yrs
Stamford, CT (8) 07-28-98 5 - 40 Yrs
Wilmington, DE (5) 03-20-98 5 - 40 Yrs
Boca Raton, FL (5) 11-15-95 5 - 40 Yrs
Boca Raton, FL (1) 02-28-96 5 - 40 Yrs
Cocoa Beach, FL (2) 07-28-98 5 - 40 Yrs
Deerfield Beach, FL (1) 01-03-96 5 - 40 Yrs
Ft. Lauderdale, FL (1) 01-03-96 5 - 40 Yrs
Ft. Lauderdale, FL (3) 05-04-98 5 - 40 Yrs
Jacksonville, FL (1) 07-28-94 5 - 40 Yrs
Kissimmee Nikki Bird, FL(2) 07-28-98 5 - 40 Yrs
Miami Airport, FL (6) 07-28-98 5 - 40 Yrs
Miami (Airport), FL (1) 01-03-96 5 - 40 Yrs
Orlando Int'l Airport, FL(8) 07-28-98 5 - 40 Yrs
Orlando Int'l Drive, FL(2) 07-28-98 5 - 40 Yrs
Orlando (North), FL (1) 07-28-94 5 - 40 Yrs
Orlando (South), FL (1) 07-28-94 5 - 40 Yrs
Tampa Busch Gardens, FL(5) 11-15-95 5 - 40 Yrs
</TABLE>
F-26
<PAGE> 86
FELCOR LODGING TRUST INCORPORATED
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION -- (CONTINUED)
<TABLE>
<CAPTION>
COST CAPITALIZED SUBSEQUENT
INITIAL COST TO ACQUISITION
------------------------------- -----------------------------------
BUILDINGS FURNITURE BUILDINGS FURNITURE
AND AND AND AND
DESCRIPTION OF PROPERTY ENCUMBRANCES LAND IMPROVEMENTS FIXTURES LAND IMPROVEMENTS FIXTURES
- ----------------------- ------------ ---- ------------ -------- ---- ------------ --------
<S> <C> <C> <C> <C> <C> <C> <C>
Tampa Busch Gardens, FL (2) 9,534 295 8,879 4,172
Tampa Rocky Point, FL (5) 2,142 18,639 643 887 2,346
WDW Village, FL (5) 2,896 25,196 869 192 2,601
Atlanta, GA (4) 1,266 11,017 380 151 328
Atlanta Airport, GA (6) 40,943 1,266 119 317
Atlanta Airport, GA (1) 22,342 770 2,568 1,920 296
Atlanta Airport North, GA (2) 18 34,531 1,068 205 238
Atlanta Buckhead, GA (1) 7,303 38,996 2,437 572 1,951
Atlanta-Courtyd by Marriott, GA (9) 2,025 17,618 608 35 83
Atlanta Galleria, GA (3) 5,052 28,507 2,526 150 313
Atlanta Gateway, GA (3) 5,113 22,857 2,105 232 3,592
Atlanta Perimeter, GA (8) 11 20,556 636 153 348
Atlanta Powers Ferry, GA (6) 11 3,411 29,672 1,023 530 285
Atlanta South (Jonesboro), GA (2) 3 864 7,515 259 102 147
Brunswick, GA (1) 705 6,067 247 78 839
Columbus N. Airport, GA (2) 7,026 217 319 2,331
Marietta, GA (10) 952 8,285 286 377 469
Davenport, IA (2) 547 4,763 164 133 173
Davenport, IA (10) 434 3,776 130 32 93
Chicago Allerton, IL (6) 3,343 29,086 1,003 55,907 6,283
Chicago O'Hare, IL (3) 8,178 37,043 2,886 498 773
Deerfield, IL (1) 2,305 20,054 692 707 1,229
Moline, IL (10) 505 4,398 152 51 105
Moline Airport, IL (2) 538 822 7,149 247 57 198
Moline Airport, IL (11) 175 232 2,021 70 43 155
Colby, KS (11) 339 2,950 102 260 37
Great Bend, KS (2) 549 4,780 165 148 262
Hays, KS (2) 43 597 5,190 179 70 173
Hays, KS (10) 243 2,112 73 8 47
Salina, KS (2) 5,249 502 4,370 151 84 268
Salina, KS (11) 341 2,964 102 16 87
Lexington, KY (12) 1,955 13,604 587 363 1,774
Lexington, KY (3) 21,644 746 2,488 403 465
Baton Rouge, LA (1) 8,025 2,350 19,092 525 462 3,822
New Orleans French Quarter, LA (2) 35 5,264 45,793 1,579 164 438
New Orleans, LA (1) 2,570 22,300 895 4,423 3,087
Boston Gov't Center, MA (8) 45,452 1,406 97 234
Boston - Marlborough, MA (1) 947 8,143 325 761 12,922 4,821
Leominster Four Points, MA (3) 900 7,830 270 77 307
BWI, MD (5) 2,568 22,433 770 177 658
Troy, MI (5) 2,968 25,905 909 138 343
Bloomington Airport W, MN (1) 2,038 17,731 611 174 1,676
Minneapolis Airport, MN (1) 15,851 5,417 36,508 602 219 3,254
Minneapolis Downtown, MN (1) 818 16,820 505 234 3,346
St. Paul, MN (1) 1,156 17,315 849 140 3,256
Kansas City, MO (2) 973 8,461 292 (391) 2,948
St. Louis, MO (1) 3,179 27,659 954 229 2,728
St. Louis Westport, MO (2) 2,767 24,072 830 144 372
Jackson Briarwood, MS (10) 1 747 6,501 224 17 48
Jackson Downtown, MS (6) 5 2,226 19,370 668 97 311
Jackson North, MS (2) 6 1,643 14,296 493 229 276
<CAPTION>
GROSS AMOUNTS AT WHICH ACCUMULATED NET BOOK
CARRIED AT CLOSE OF PERIOD DEPRECIATION VALUE
------------------------------------------- BUILDINGS AND BUILDINGS AND
BUILDINGS FURNITURE IMPROVEMENTS; IMPROVEMENTS;
AND AND FURNITURE & FURNITURE & DATE OF
DESCRIPTION OF PROPERTY LAND IMPROVEMENTS FIXTURES TOTAL FIXTURES FIXTURES CONSTRUCTION
- ----------------------- ---- ------------ -------- ----- -------- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Tampa Busch Gardens, FL (2) 18,413 4,467 22,880 1,172 21,708 1966
Tampa Rocky Point, FL (5) 2,142 19,526 2,989 24,657 1,813 22,844 1986
WDW Village, FL (5) 2,896 25,388 3,470 31,754 2,487 29,267 1987
Atlanta, GA (4) 1,266 11,168 708 13,142 520 12,622 1963
Atlanta Airport, GA (6) 41,062 1,583 42,645 1,757 40,888 1975
Atlanta Airport, GA (1) 2,568 24,262 1,066 27,896 1,155 26,741 1989
Atlanta Airport North, GA (2) 34,736 1,306 36,042 1,435 34,607 1967
Atlanta Buckhead, GA (1) 7,303 39,568 4,388 51,259 5,118 46,141 1988
Atlanta-Courtyd by Marriott, GA (9) 2,025 17,653 691 20,369 764 19,605 1963
Atlanta Galleria, GA (3) 5,052 28,657 2,839 36,548 3,143 33,405 1990
Atlanta Gateway, GA (3) 5,113 23,089 5,697 33,899 3,295 30,604 1986
Atlanta Perimeter, GA (8) 20,709 984 21,693 902 20,791 1985
Atlanta Powers Ferry, GA (6) 3,411 30,202 1,308 34,921 1,303 33,618 1981
Atlanta South (Jonesboro), GA (2) 864 7,617 406 8,887 339 8,548 1973
Brunswick, GA (1) 705 6,145 1,086 7,936 1,347 6,589 1988
Columbus N. Airport, GA (2) 7,345 2,548 9,893 499 9,394 1969
Marietta, GA (10) 952 8,662 755 10,369 462 9,907 1986
Davenport, IA (2) 547 4,896 337 5,780 267 5,513 1966
Davenport, IA (10) 434 3,808 223 4,465 195 4,270 1985
Chicago Allerton, IL (6) 3,343 84,993 7,286 95,622 1,877 93,745 1923
Chicago O'Hare, IL (3) 8,178 37,541 3,659 49,378 3,989 45,389 1994
Deerfield, IL (1) 2,305 20,761 1,921 24,987 2,722 22,265 1987
Moline, IL (10) 505 4,449 257 5,211 224 4,987 1985
Moline Airport, IL (2) 822 7,206 445 8,473 360 8,113 1961
Moline Airport, IL (11) 232 2,064 225 2,521 118 2,403 1996
Colby, KS (11) 339 3,210 139 3,688 140 3,548 1998
Great Bend, KS (2) 549 4,928 427 5,904 260 5,644 1964
Hays, KS (2) 597 5,260 352 6,209 259 5,950 1966
Hays, KS (10) 243 2,120 120 2,483 108 2,375 1985
Salina, KS (2) 502 4,454 419 5,375 246 5,129 1986
Salina, KS (11) 341 2,980 189 3,510 164 3,346 1997
Lexington, KY (12) 1,955 13,967 2,361 18,283 2,587 15,696 1987
Lexington, KY (3) 2,488 22,047 1,211 25,746 1,128 24,618 1989
Baton Rouge, LA (1) 2,350 19,554 4,347 26,251 4,574 21,677 1985
New Orleans French Quarter, LA (2) 5,264 45,957 2,017 53,238 1,999 51,239 1969
New Orleans, LA (1) 2,570 26,723 3,982 33,275 5,672 27,603 1984
Boston Gov't Center, MA (8) 45,549 1,640 47,189 1,907 45,282 1968
Boston - Marlborough, MA (1) 1,708 21,065 5,146 27,919 4,323 23,596 1988
Leominster Four Points, MA (3) 900 7,907 577 9,384 332 9,052 1989
BWI, MD (5) 2,568 22,610 1,428 26,606 2,317 24,289 1987
Troy, MI (5) 2,968 26,043 1,252 30,263 2,504 27,759 1987
Bloomington Airport W, MN (1) 2,038 17,905 2,287 22,230 2,111 20,119 1980
Minneapolis Airport, MN (1) 5,417 36,727 3,856 46,000 6,365 39,635 1986
Minneapolis Downtown, MN (1) 818 17,054 3,851 21,723 4,375 17,348 1984
St. Paul, MN (1) 1,156 17,455 4,105 22,716 4,726 17,990 1983
Kansas City, MO (2) 973 8,070 3,240 12,283 912 11,371 1975
St. Louis, MO (1) 3,179 27,888 3,682 34,749 1,519 33,230 1985
St. Louis Westport, MO (2) 2,767 24,216 1,202 28,185 1,088 27,097 1979
Jackson Briarwood, MS (10) 747 6,518 272 7,537 289 7,248 1985
Jackson Downtown, MS (6) 2,226 19,467 979 22,672 924 21,748 1975
Jackson North, MS (2) 1,643 14,525 769 16,937 703 16,234 1957
<CAPTION>
LIFE UPON
WHICH
DEPRECIATION
DATE IN STATEMENT
DESCRIPTION OF PROPERTY ACQUIRED IS COMPUTED
- ----------------------- -------- -----------
<S> <C> <C>
Tampa Busch Gardens, FL (2) 07-28-98 5 - 40 Yrs
Tampa Rocky Point, FL (5) 07-28-97 5 - 40 Yrs
WDW Village, FL (5) 07-28-97 5 - 40 Yrs
Atlanta, GA (4) 07-28-98 5 - 40 Yrs
Atlanta Airport, GA (6) 07-28-98 5 - 40 Yrs
Atlanta Airport, GA (1) 05-04-98 5 - 40 Yrs
Atlanta Airport North, GA (2) 07-28-98 5 - 40 Yrs
Atlanta Buckhead, GA (1) 10-17-96 5 - 40 Yrs
Atlanta-Courtyd by Marriott, GA (9) 07-28-98 5 - 40 Yrs
Atlanta Galleria, GA (3) 06-30-97 5 - 40 Yrs
Atlanta Gateway, GA (3) 06-30-97 5 - 40 Yrs
Atlanta Perimeter, GA (8) 07-28-98 5 - 40 Yrs
Atlanta Powers Ferry, GA (6) 07-28-98 5 - 40 Yrs
Atlanta South (Jonesboro), GA (2) 07-28-98 5 - 40 Yrs
Brunswick, GA (1) 07-19-95 5 - 40 Yrs
Columbus N. Airport, GA (2) 07-28-98 5 - 40 Yrs
Marietta, GA (10) 07-28-98 5 - 40 Yrs
Davenport, IA (2) 07-28-98 5 - 40 Yrs
Davenport, IA (10) 07-28-98 5 - 40 Yrs
Chicago Allerton, IL (6) 07-28-98 5 - 40 Yrs
Chicago O'Hare, IL (3) 06-30-97 5 - 40 Yrs
Deerfield, IL (1) 06-20-96 5 - 40 Yrs
Moline, IL (10) 07-28-98 5 - 40 Yrs
Moline Airport, IL (2) 07-28-98 5 - 40 Yrs
Moline Airport, IL (11) 07-28-98 5 - 40 Yrs
Colby, KS (11) 07-28-98 5 - 40 Yrs
Great Bend, KS (2) 07-28-98 5 - 40 Yrs
Hays, KS (2) 07-28-98 5 - 40 Yrs
Hays, KS (10) 07-28-98 5 - 40 Yrs
Salina, KS (2) 07-28-98 5 - 40 Yrs
Salina, KS (11) 07-28-98 5 - 40 Yrs
Lexington, KY (12) 01-10-96 5 - 40 Yrs
Lexington, KY (3) 05-04-98 5 - 40 Yrs
Baton Rouge, LA (1) 01-03-96 5 - 40 Yrs
New Orleans French Quarter, LA (2) 07-28-98 5 - 40 Yrs
New Orleans, LA (1) 12-01-94 5 - 40 Yrs
Boston Gov't Center, MA (8) 07-28-98 5 - 40 Yrs
Boston - Marlborough, MA (1) 06-30-95 5 - 40 Yrs
Leominster Four Points, MA (3) 07-28-98 5 - 40 Yrs
BWI, MD (5) 03-20-97 5 - 40 Yrs
Troy, MI (5) 03-20-97 5 - 40 Yrs
Bloomington Airport W, MN (1) 02-01-97 5 - 40 Yrs
Minneapolis Airport, MN (1) 11-06-95 5 - 40 Yrs
Minneapolis Downtown, MN (1) 11-15-95 5 - 40 Yrs
St. Paul, MN (1) 11-15-95 5 - 40 Yrs
Kansas City, MO (2) 07-28-98 5 - 40 Yrs
St. Louis, MO (1) 05-04-98 5 - 40 Yrs
St. Louis Westport, MO (2) 07-28-98 5 - 40 Yrs
Jackson Briarwood, MS (10) 07-28-98 5 - 40 Yrs
Jackson Downtown, MS (6) 07-28-98 5 - 40 Yrs
Jackson North, MS (2) 07-28-98 5 - 40 Yrs
</TABLE>
F-27
<PAGE> 87
FELCOR LODGING TRUST INCORPORATED
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION -- (CONTINUED)
<TABLE>
<CAPTION>
COST CAPITALIZED SUBSEQUENT
INITIAL COST TO ACQUISITION
------------------------------- -----------------------------------
BUILDINGS FURNITURE BUILDINGS FURNITURE
AND AND AND AND
DESCRIPTION OF PROPERTY ENCUMBRANCES LAND IMPROVEMENTS FIXTURES LAND IMPROVEMENTS FIXTURES
- ----------------------- ------------ ---- ------------ -------- ---- ------------ --------
<S> <C> <C> <C> <C> <C> <C> <C>
Olive Branch Exec Conf Ctr, MS (7) 1,247 12,155 419 1,559 1,192
Raleigh/Durham, NC (5) 2,124 18,476 637 112 1,586
Omaha, NE (13) 923 8,029 277 680 130
Omaha Central I-80, NE (6) 6,604 1,795 15,614 538 117 264
Omaha Central I-80, NE (10) 518 4,504 155 815 140
Omaha Central, NE (5) 1,877 16,328 563 231 1,753
Omaha Northwest, NE (2) 979 8,519 294 3,559 3,476
Omaha Northwest, NE (11) 373 3,245 112 10 111
Omaha Southwest, NE (10) 464 4,036 139 299 327
Piscataway, NJ (1) 1,755 17,563 527 872 2,568
Secaucus, NJ (6) 2,356 20,497 707 2,242 3,223
Albuquerque Mountainview, NM (2) 1,322 11,505 397 86 497
Syracuse, NY (1) 1,483 13,756 1,330 303 307
Cleveland, OH (1) 1,755 15,329 527 1,683 2,008
Columbus, OH (5) 1,918 16,691 576 396 852
Dayton, OH (5) 1,140 11,223 342 149 124 938
Tulsa, OK (1) 525 7,344 3,117 253 1,796
Philadelphia Center City, PA (6) 5,793 50,395 1,738 2,345 1,138
Philadelphia Independence Mall, PA (2) 3,184 27,704 955 4,686 3,080
Pittsburgh, PA (8) 25,170 773 2,373 1,072
Society Hill, PA (3) 4,542 45,121 1,536 718 2,525
Charleston Mills House, SC (2) 3,270 28,446 981 286 791
Greenville Roper, SC (6) 1,551 13,492 465 588 765
Kingston Plantation, SC (1) 2,940 24,988 1,470 1,737 4,364
Knoxville West, TN (2) 11,586 358 1,452 1,006
Nashville, TN (5) 1,073 9,331 322 413 827
Nashville Airport, TN (1) 1,118 9,506 961 335 1,629
Nashville Airport Briley, TN (8) 27,889 863 2,180 814
Amarillo I-40, TX (2) 5,754 178 2,121 1,164
Austin, TX (5) 2,508 21,908 752 593 303
Austin Town Lake, TX (2) 21,551 667 747 1,182
Beaumont Midtown I-10, TX (2) 685 5,964 206 1,327 1,152
Corpus Christi, TX (1) 1,112 9,618 390 52 118 1,599
Dallas, TX (6) 15,885 30,513 944 5,624 205 554
Dallas, TX (14) 13,564 420 2,409 195 500
Dallas Bristol House, TX (7) 1,704 8,143 1,623 18 6
Dallas Campbell Ctr, TX (5) 3,208 27,907 962 1,794 577
Dallas Downtown, TX (10) 1,953 16,989 586 18 33
Dallas Love Field, TX (1) 13,904 1,934 16,674 757 377 1,475
Dallas Market Center, TX (6) 13 4,079 35,486 1,224 555 612
Dallas Market Center, TX (1) 12,414 2,560 23,751 2,182 450 315
Dallas Park Central, TX (1) 1,497 12,722 647 167 1,619
Dallas Park Central, TX (3) 1,720 28,550 4,130 186 88
Dallas Park Central, TX (15) 4,513 43,125 2,507 4,279 1,304
Dallas Regal Row, TX (4) 778 6,770 233 14 36
DFW Airport, TX (14) 28,296 56,713 1,754 10,040 523 1,306
DFW Airport (Suites), TX (14) 11 1,546 13,453 464 122 148
DFW South, TX (1) 35,156 1,212 4,041 2,170 1,681
Houston Galleria, TX (9) 1,855 16,143 557 184 271
Houston Galleria, TX (4) 465 4,047 140 26 64
<CAPTION>
GROSS AMOUNTS AT WHICH ACCUMULATED NET BOOK
CARRIED AT CLOSE OF PERIOD DEPRECIATION VALUE
------------------------------------------- BUILDINGS AND BUILDINGS AND
BUILDINGS FURNITURE IMPROVEMENTS; IMPROVEMENTS;
AND AND FURNITURE & FURNITURE & DATE OF
DESCRIPTION OF PROPERTY LAND IMPROVEMENTS FIXTURES TOTAL FIXTURES FIXTURES CONSTRUCTION
- ----------------------- ---- ------------ -------- ----- -------- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Olive Branch Exec Conf Ctr, MS (7) 1,247 13,714 1,611 16,572 773 15,799 1972
Raleigh/Durham, NC (5) 2,124 18,588 2,223 22,935 1,828 21,107 1987
Omaha, NE (13) 923 8,709 407 10,039 365 9,674 1989
Omaha Central I-80, NE (6) 795 15,731 802 18,328 711 17,617 1965
Omaha Central I-80, NE (10) 518 5,319 295 6,132 221 5,911 1991
Omaha Central, NE (5) 1,877 16,559 2,316 20,752 2,068 18,684 1973
Omaha Northwest, NE (2) 979 12,078 3,770 16,827 593 16,234 1974
Omaha Northwest, NE (11) 373 3,255 223 3,851 195 3,656 1996
Omaha Southwest, NE (10) 464 4,335 466 5,265 192 5,073 1986
Piscataway, NJ (1) 1,755 18,435 3,095 23,285 3,406 19,879 1988
Secaucus, NJ (6) 2,356 22,739 3,930 29,025 1,173 27,852 N/A
Albuquerque Mountainview, NM (2) 1,322 11,591 894 13,807 569 13,238 1968
Syracuse, NY (1) 1,483 14,059 1,637 17,179 1,580 15,599 1989
Cleveland, OH (1) 1,755 17,012 2,535 21,302 2,985 518,317 1990
Columbus, OH (5) 1,918 17,087 1,428 20,433 1,279 19,154 1985
Dayton, OH (5) 1,289 11,347 1,280 13,916 780 13,136 1987
Tulsa, OK (1) 525 7,597 4,913 13,035 6,223 6,812 1985
Philadelphia Center City, PA (6) 5,793 52,740 2,876 61,409 2,325 59,084 1970
Philadelphia Independence Mall, PA (2) 3,184 32,390 4,035 39,609 1,535 38,074 1972
Pittsburgh, PA (8) 27,543 1,845 29,388 1,152 28,236 1988
Society Hill, PA (3) 4,542 45,839 4,061 54,442 3,537 50,905 1986
Charleston Mills House, SC (2) 3,270 28,732 1,772 33,774 1,287 32,487 1982
Greenville Roper, SC (6) 1,551 14,080 1,230 16,861 705 16,156 1984
Kingston Plantation, SC (1) 2,940 26,725 5,834 35,499 4,363 31,136 1987
Knoxville West, TN (2) 13,038 1,364 14,402 698 13,704 1966
Nashville, TN (5) 1,073 9,744 1,149 11,966 1,004 10,962 1988
Nashville Airport, TN (1) 1,118 9,841 2,590 13,549 4,031 9,518 1985
Nashville Airport Briley, TN (8) 30,069 1,677 31,746 1,283 30,463 1981
Amarillo I-40, TX (2) 7,875 1,342 9,217 360 8,857 1970
Austin, TX (5) 2,508 22,501 1,055 26,064 2,074 23,990 1987
Austin Town Lake, TX (2) 22,298 1,849 24,147 1,125 23,022 1967
Beaumont Midtown I-10, TX (2) 685 7,291 1,358 9,334 355 8,979 1967
Corpus Christi, TX (1) 1,164 9,736 1,989 12,889 2,477 10,412 1984
Dallas, TX (6) 5,624 30,718 1,498 37,840 1,367 36,473 1988
Dallas, TX (14) 2,409 13,759 920 17,088 654 16,434 1981
Dallas Bristol House, TX (7) 1,623 1,722 8,149 11,494 2,230 9,264 1997
Dallas Campbell Ctr, TX (5) 3,208 29,701 1,539 34,448 1,340 33,108 1982
Dallas Downtown, TX (10) 1,953 17,007 619 19,579 729 18,850 1969
Dallas Love Field, TX (1) 1,934 17,051 2,232 21,217 3,602 17,615 1986
Dallas Market Center, TX (6) 4,079 36,041 1,836 41,956 1,587 40,369 1983
Dallas Market Center, TX (1) 2,560 24,201 2,497 29,258 2,666 26,592 1980
Dallas Park Central, TX (1) 1,497 12,889 2,266 16,652 3,852 12,800 1985
Dallas Park Central, TX (3) 1,720 28,736 4,218 34,674 4,499 30,175 1972
Dallas Park Central, TX (15) 4,513 47,404 3,811 55,728 1,546 54,182 1983
Dallas Regal Row, TX (4) 778 6,784 269 7,831 295 7,536 1969
DFW Airport, TX (14) 10,040 57,236 3,060 70,336 2,682 67,654 1987
DFW Airport (Suites), TX (14) 1,546 13,575 612 15,733 605 15,128 1989
DFW South, TX (1) 4,041 37,326 2,893 44,260 1,934 42,326 1985
Houston Galleria, TX (9) 1,855 16,327 828 19,010 726 18,284 1968
Houston Galleria, TX (4) 465 4,073 204 4,742 189 4,553 1968
<CAPTION>
LIFE UPON
WHICH
DEPRECIATION
DATE IN STATEMENT
DESCRIPTION OF PROPERTY ACQUIRED IS COMPUTED
- ----------------------- -------- -----------
<S> <C> <C>
Olive Branch Exec Conf Ctr, MS (7) 07-28-98 5 - 40 Yrs
Raleigh/Durham, NC (5) 07-28-97 5 - 40 Yrs
Omaha, NE (13) 07-28-98 5 - 40 Yrs
Omaha Central I-80, NE (6) 07-28-98 5 - 40 Yrs
Omaha Central I-80, NE (10) 07-28-98 5 - 40 Yrs
Omaha Central, NE (5) 02-01-97 5 - 40 Yrs
Omaha Northwest, NE (2) 07-28-98 5 - 40 Yrs
Omaha Northwest, NE (11) 07-28-98 5 - 40 Yrs
Omaha Southwest, NE (10) 07-28-98 5 - 40 Yrs
Piscataway, NJ (1) 01-10-96 5 - 40 Yrs
Secaucus, NJ (6) 07-28-98 5 - 40 Yrs
Albuquerque Mountainview, NM (2) 07-28-98 5 - 40 Yrs
Syracuse, NY (1) 06-30-97 5 - 40 Yrs
Cleveland, OH (1) 11-17-95 5 - 40 Yrs
Columbus, OH (5) 02-04-98 5 - 40 Yrs
Dayton, OH (5) 12-30-97 5 - 40 Yrs
Tulsa, OK (1) 07-28-94 5 - 40 Yrs
Philadelphia Center City, PA (6) 07-28-98 5 - 40 Yrs
Philadelphia Independence Mall, PA (2) 07-28-98 5 - 40 Yrs
Pittsburgh, PA (8) 07-28-98 5 - 40 Yrs
Society Hill, PA (3) 10-01-97 5 - 40 Yrs
Charleston Mills House, SC (2) 07-28-98 5 - 40 Yrs
Greenville Roper, SC (6) 07-28-98 5 - 40 Yrs
Kingston Plantation, SC (1) 12-05-96 5 - 40 Yrs
Knoxville West, TN (2) 07-28-98 5 - 40 Yrs
Nashville, TN (5) 06-05-97 5 - 40 Yrs
Nashville Airport, TN (1) 07-28-94 5 - 40 Yrs
Nashville Airport Briley, TN (8) 07-28-98 5 - 40 Yrs
Amarillo I-40, TX (2) 07-28-98 5 - 40 Yrs
Austin, TX (5) 03-20-97 5 - 40 Yrs
Austin Town Lake, TX (2) 07-28-98 5 - 40 Yrs
Beaumont Midtown I-10, TX (2) 07-28-98 5 - 40 Yrs
Corpus Christi, TX (1) 07-19-95 5 - 40 Yrs
Dallas, TX (6) 07-28-98 5 - 40 Yrs
Dallas, TX (14) 07-28-98 5 - 40 Yrs
Dallas Bristol House, TX (7) 07-28-98 5 - 40 Yrs
Dallas Campbell Ctr, TX (5) 05-29-98 5 - 40 Yrs
Dallas Downtown, TX (10) 07-28-98 5 - 40 Yrs
Dallas Love Field, TX (1) 03-29-95 5 - 40 Yrs
Dallas Market Center, TX (6) 07-28-98 5 - 40 Yrs
Dallas Market Center, TX (1) 06-30-97 5 - 40 Yrs
Dallas Park Central, TX (1) 07-28-94 5 - 40 Yrs
Dallas Park Central, TX (3) 11-01-98 5 - 40 Yrs
Dallas Park Central, TX (15) 06-30-97 5 - 40 Yrs
Dallas Regal Row, TX (4) 07-28-98 5 - 40 Yrs
DFW Airport, TX (14) 07-28-98 5 - 40 Yrs
DFW Airport (Suites), TX (14) 07-28-98 5 - 40 Yrs
DFW South, TX (1) 07-28-98 5 - 40 Yrs
Houston Galleria, TX (9) 07-28-98 5 - 40 Yrs
Houston Galleria, TX (4) 07-28-98 5 - 40 Yrs
</TABLE>
F-28
<PAGE> 88
FELCOR LODGING TRUST INCORPORATED
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION -- (CONTINUED)
<TABLE>
<CAPTION>
COST CAPITALIZED SUBSEQUENT
INITIAL COST TO ACQUISITION
------------------------------- ---------------------------------
BUILDINGS FURNITURE BUILDINGS FURNITURE
AND AND AND AND
DESCRIPTION OF PROPERTY ENCUMBRANCES LAND IMPROVEMENTS FIXTURES LAND IMPROVEMENTS FIXTURES
- ----------------------- ------------ ---- ------------ -------- ---- ------------ --------
<S> <C> <C> <C> <C> <C> <C> <C>
Houston Greenway, TX (8) 7 3,418 29,736 1,025 292 600
Houston I-10 West, TX (4) 586 5,099 176 74 267
Houston I-10 West, TX (8) 3,055 26,575 916 167 306
Houston I-10 West, TX (10) 478 4,155 143 147 178
Houston Int'l Airport, TX (2) 13 3,890 33,842 1,167 119 284
Houston Medical Center, TX (6) 6 2,493 21,687 748 471 461
Houston Medical Center, TX (2) 8 2,284 19,869 685 1,709 1,865
Midland Country Villa, TX (2) 404 3,517 121 30 176
N. Dallas Addison, TX (6) 18,368 4,938 42,965 1,482 245 595
Odessa Center, TX (2) 487 4,238 146 30 195
Odessa Parkway, TX (11) 370 3,218 111 29 109
Plano, TX (2) 885 7,696 265 70 229
Plano, TX (14) 1,813 15,775 544 380 783
San Antonio Airport, TX (8) 3,371 29,326 1,011 1,302 1,163
San Antonio Downtown, TX (2) 22,246 688 486 410
Waco I-35, TX (2) 574 4,994 172 102 200
Salt Lake City Airport, UT (2) 5,346 165 1,982 1,663
Burlington, VT (3) 313 27,283 941 533 707
Cambridge, CAN (2) 481 4,188 144 705 1,049
Kitchener Waterloo, CAN (2) 9,441 292 976 913
Peterbourough Waterfront, CAN (2) 735 6,391 220 281 836
Sarnia, CAN (2) 271 2,359 81 19 36
Toronto Airport, CAN (8) 21,168 655 2,107 2,346
Toronto Yorkdale, CAN (2) 1,578 13,725 473 1,778 1,697
--------- -------- ----------- ---------- -------- --------- ---------
Total $ 248,862 $312,365 $ 3,393,375 $ 138,833 $ 34,497 $ 222,894 $ 245,098
========= ======== =========== ========== ======== ========= =========
(a) Balance at December 31, 1997 $ 1,562,724
Additions during the period 2,537,222
-----------
Balance at December 31, 1998 $ 4,099,946
Additions during the period 247,116
-----------
Balance at December 31, 1999 $ 4,347,062
<CAPTION>
GROSS AMOUNTS AT WHICH ACCUMULATED NET BOOK
CARRIED AT CLOSE OF PERIOD DEPRECIATION VALUE
------------------------------------------- BUILDINGS AND BUILDINGS AND
BUILDINGS FURNITURE IMPROVEMENTS; IMPROVEMENTS;
AND AND FURNITURE & FURNITURE & DATE OF
DESCRIPTION OF PROPERTY LAND IMPROVEMENTS FIXTURES TOTAL FIXTURES FIXTURES CONSTRUCTION
- ----------------------- ---- ------------ -------- ----- -------- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Houston Greenway, TX (8) 3,418 30,028 1,625 35,071 1,347 33,724 1984
Houston I-10 West, TX (4) 586 5,173 443 6,202 244 5,958 1969
Houston I-10 West, TX (8) 3,055 26,742 1,222 31,019 1,194 29,825 1984
Houston I-10 West, TX (10) 478 4,302 321 5,101 227 4,874 1969
Houston Int'l Airport, TX (2) 3,890 33,961 1,451 39,302 1,494 37,808 1971
Houston Medical Center, TX (6) 2,493 22,158 1,209 25,860 1,023 24,837 1973
Houston Medical Center, TX (2) 2,284 21,578 2,550 26,412 1,181 25,231 1984
Midland Country Villa, TX (2) 404 3,547 297 4,248 207 4,041 1979
N. Dallas Addison, TX (6) 4,938 43,210 2,077 50,225 2,077 48,148 1985
Odessa Center, TX (2) 487 4,268 341 5,096 203 4,893 1982
Odessa Parkway, TX (11) 370 3,247 220 3,837 167 3,670 1977
Plano, TX (2) 885 7,766 494 9,145 386 8,759 1983
Plano, TX (14) 1,813 16,155 1,327 19,295 815 18,480 1983
San Antonio Airport, TX (8) 3,371 30,628 2,174 36,173 1,365 34,808 1981
San Antonio Downtown, TX (2) 22,732 1,098 23,830 1,039 22,791 1968
Waco I-35, TX (2) 574 5,096 372 6,042 268 5,774 1970
Salt Lake City Airport, UT (2) 7,328 1,828 9,156 328 8,828 1963
Burlington, VT (3) 3,136 27,816 1,648 32,600 1,891 30,709 1967
Cambridge, CAN (2) 481 4,893 1,193 6,567 261 6,306 1969
Kitchener Waterloo, CAN (2) 10,417 1,205 11,622 410 11,212 1965
Peterbourough Waterfront, CAN (2) 735 6,672 1,056 8,463 354 8,109 1965
Sarnia, CAN (2) 271 2,378 117 2,766 108 2,658 1970
Toronto Airport, CAN (8) 23,275 3,001 26,276 1,178 25,098 1970
Toronto Yorkdale, CAN (2) 1,578 15,503 2,170 19,251 617 18,634 1970
--------- ---------- -------- ---------- -------- ----------
Total $ 346,862 $3,616,269 $383,931 $4,347,062 $330,555 $4,016,507
========= ========== ======== ========== ======== ==========
(b) Depreciation expense during the period $ 50,682
----------
Balance at December 31, 1996 87,400
Depreciation expense during the period 90,672
----------
Balance at December 31, 1997 $ 178,072
Depreciation expense during the period 152,483
----------
Balance at December 31, 1998 $ 330,555
<CAPTION>
LIFE UPON
WHICH
DEPRECIATION
DATE IN STATEMENT
DESCRIPTION OF PROPERTY ACQUIRED IS COMPUTED
- ----------------------- -------- -----------
<S> <C> <C>
Houston Greenway, TX (8) 07-28-98 5 - 40 Yrs
Houston I-10 West, TX (4) 07-28-98 5 - 40 Yrs
Houston I-10 West, TX (8) 07-28-98 5 - 40 Yrs
Houston I-10 West, TX (10) 07-28-98 5 - 40 Yrs
Houston Int'l Airport, TX (2) 07-28-98 5 - 40 Yrs
Houston Medical Center, TX (6) 07-28-98 5 - 40 Yrs
Houston Medical Center, TX (2) 07-28-98 5 - 40 Yrs
Midland Country Villa, TX (2) 07-28-98 5 - 40 Yrs
N. Dallas Addison, TX (6) 07-28-98 5 - 40 Yrs
Odessa Center, TX (2) 07-28-98 5 - 40 Yrs
Odessa Parkway, TX (11) 07-28-98 5 - 40 Yrs
Plano, TX (2) 07-28-98 5 - 40 Yrs
Plano, TX (14) 07-28-98 5 - 40 Yrs
San Antonio Airport, TX (8) 07-28-98 5 - 40 Yrs
San Antonio Downtown, TX (2) 07-28-98 5 - 40 Yrs
Waco I-35, TX (2) 07-28-98 5 - 40 Yrs
Salt Lake City Airport, UT (2) 07-28-98 5 - 40 Yrs
Burlington, VT (3) 12-04-97 5 - 40 Yrs
Cambridge, CAN (2) 07-28-98 5 - 40 Yrs
Kitchener Waterloo, CAN (2) 07-28-98 5 - 40 Yrs
Peterbourough Waterfront, CAN (2) 07-28-98 5 - 40 Yrs
Sarnia, CAN (2) 07-28-98 5 - 40 Yrs
Toronto Airport, CAN (8) 07-28-98 5 - 40 Yrs
Toronto Yorkdale, CAN (2) 07-28-98 5 - 40 Yrs
Total
</TABLE>
1. Embassy Suites
2. Holiday Inn
3. Sheraton and Sheraton Suites
4. Fairfield Inn
5. Doubletree and Doubletree Guest Suites
6. Crowne Plaza and Crowne Plaza Suites
7. Independents
8. Holiday Inn Select
9. Courtyard by Marriott
10. Hampton Inn
11. Holiday Inn Express
12. Hilton Suites
13. Homewood Suites
14. Harvey Hotel
15. Westin
F-29
<PAGE> 89
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
of FelCor Lodging Trust Incorporated
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, shareholders' equity and cash flows
present fairly, in all material respects, the financial position of DJONT
Operations, L.L.C. at December 31, 1999 and 1998, and the consolidated results
of operations and cash flows for the years ended December 31, 1999, 1998 and
1997, respectively, in conformity with accounting principles generally accepted
in the United States. These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with auditing standards generally accepted in the
United States which require that we plan and perform the audit to obtain
reasonable assurance about her whet the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Dallas, Texas
March 20, 2000
F-30
<PAGE> 90
DJONT OPERATIONS, L.L.C.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1999 AND 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
ASSETS
1999 1998
---------- ----------
<S> <C> <C>
Cash and cash equivalents ...................................................... $ 20,127 $ 28,538
Accounts receivable, net ....................................................... 28,601 27,561
Inventories .................................................................... 4,260 4,381
Prepaid expenses ............................................................... 1,444 471
Other assets ................................................................... 5,791 3,021
Investment in real estate, net of accumulated depreciation of $530 in 1999 ..... 11,436
---------- ----------
Total assets ............................................................. $ 71,659 $ 63,972
========== ==========
LIABILITIES AND SHAREHOLDERS' DEFICIT
Accounts payable ......................................................... $ 12,742 $ 13,508
Due to FelCor Lodging Trust Incorporated ................................. 22,064 16,875
Accrued expenses and other liabilities ................................... 37,121 41,820
Minority interest ........................................................ 5,113
Debt ..................................................................... 7,761
---------- ----------
Total liabilities ........................................................ 84,801 72,203
---------- ----------
Commitments and contingencies (Notes 3 and 6)
Shareholders' deficit:
Capital .................................................................. 1 1
Accumulated deficit ...................................................... (13,143) (8,232)
---------- ----------
Total shareholders' deficit .............................................. (13,142) (8,231)
---------- ----------
Total liabilities and shareholders' deficit .............................. $ 71,659 $ 63,972
========== ==========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
F-31
<PAGE> 91
DJONT OPERATIONS, L.L.C.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998, AND 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
1999 1998 1997
--------- --------- ---------
<S> <C> <C> <C>
Revenues:
Room and suite revenue ............. $ 649,323 $ 618,122 $ 456,614
Food and beverage revenue .......... 87,212 77,834 34,813
Food and beverage rent ............. 5,212 4,792 4,393
Other revenue ...................... 55,903 48,781 38,690
--------- --------- ---------
Total revenues ............. 797,650 749,529 534,510
--------- --------- ---------
Expenses:
Property operating costs ........... 190,798 169,955 128,077
General and administrative ......... 61,025 56,995 39,147
Advertising and promotion .......... 56,450 51,105 37,333
Repair and maintenance ............. 38,555 36,374 26,236
Utilities .......................... 29,700 28,799 21,363
Management and incentive fees ...... 22,514 23,636 11,879
Franchise fees ..................... 19,253 18,102 13,407
Food and beverage expenses ......... 66,514 65,924 33,119
Percentage lease expenses .......... 307,532 289,891 216,990
Lessee overhead expenses ........... 991 1,990 2,332
Liability insurance ................ 2,518 1,258 3,202
Preopening and conversion costs .... 19 569 340
Interest expense ................... 682
Depreciation and amortization ...... 530
Minority interest .................. (90)
Other .............................. 5,570 4,087 3,757
--------- --------- ---------
Total expenses ............ 802,561 748,685 537,182
--------- --------- ---------
Net income (loss) ........................... $ (4,911) $ 844 $ (2,672)
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
F-32
<PAGE> 92
DJONT OPERATIONS, L.L.C.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' DEFICIT
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998, AND 1997
(IN THOUSANDS)
<TABLE>
<S> <C>
Balance at December 31, 1996................................ $ (6,403)
Net loss.................................................... (2,672)
-----------
Balance at December 31, 1997................................ (9,075)
Net income.................................................. 844
-----------
Balance at December 31, 1998................................ (8,231)
Net loss.................................................... (4,911)
-----------
Balance at December 31, 1999................................ $ (13,142)
===========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
F-33
<PAGE> 93
DJONT OPERATIONS, L.L.C.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998, AND 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) ................................................... $ (4,911) $ 844 $ (2,672)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization ....................................... 530
Minority interest in partnership income ............................. (90)
Changes in assets and liabilities:
Accounts receivable ............................................. (1,040) (7,287) (11,574)
Inventories ..................................................... 121 (915) (1,361)
Prepaid expenses ................................................ (973) 836 (1,052)
Other assets .................................................... (1,744) 950 (1,768)
Due to FelCor Lodging Trust Incorporated ........................ 5,189 (2,033) 13,382
Accounts payable, accrued expenses and other liabilities ........ (5,488) 10,459 25,521
-------- -------- --------
Net cash flow provided by (used in) operating activities .... (8,406) 2,854 20,476
-------- -------- --------
Cash flows from financing activities:
Repayment of borrowings ......................................... (5)
-------- -------- --------
Net cash flow used in financing activities .................. (5)
-------- -------- --------
Net change in cash and cash equivalents .................................. (8,411) 2,854 20,476
Cash and cash equivalents at beginning of years .......................... 28,538 25,684 5,208
-------- -------- --------
Cash and cash equivalents at end of years ................................ $ 20,127 $ 28,538 $ 25,684
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
F-34
<PAGE> 94
DJONT OPERATIONS, L.L.C.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION
Thomas J. Corcoran, the President, Chief Executive Officer and a
Director of FelCor Lodging Trust Incorporated ("FelCor") and Hervey A. Feldman,
Chairman Emeritus of FelCor, beneficially own a 50% voting common equity
interest in DJONT Operations LLC, a Delaware limited liability company. The
remaining 50% non-voting common equity interest is beneficially owned by the
children of Charles N. Mathewson, a Director and major initial investor of
FelCor.
Eighty-five of the hotels in which FelCor Lodging Limited Partnership
(the "Operating Partnership") had an ownership interest at December 31, 1999
(the "Hotels"), are leased to DJONT Operations LLC or a consolidated subsidiary
thereof ("DJONT") pursuant to percentage leases ("Percentage Leases"). Certain
entities owning interests in DJONT and the managers of certain hotels have
agreed to make loans to DJONT of up to an aggregate of approximately $17.3
million to the extent necessary to enable DJONT to pay rent and other
obligations due under the respective Percentage Leases relating to a total of 38
of the Hotels. No loans were outstanding under such agreements at December 31,
1999.
Messrs. Feldman and Corcoran have entered into an agreement with FelCor
pursuant to which they have agreed that through April 15, 2005, any
distributions received by them from DJONT (in excess of their tax liabilities
with respect to the income of DJONT) will be utilized to purchase common stock
from FelCor or units of limited partner interest in the Operating Partnership at
then current market prices. The agreement stipulates that Messrs. Feldman and
Corcoran are restricted from selling any stock or units so acquired for a period
of two years from the date of purchase. RGC Leasing, Inc., which owns the other
50% common equity interest in DJONT, may elect to purchase common stock of
FelCor or Operating Partnership units upon similar terms, at its option. The
independent directors of FelCor may suspend or terminate such agreement at any
time.
At December 31, 1999, 58 of the Hotels were operated as Embassy
Suites(R) hotels, 16 were operated as Doubletree(R) or Doubletree Guest
Suites(R) hotels, nine were operated as Sheraton(R) or Sheraton Suites(R)
hotels, one was operated as a Westin(R) hotel and one was operated as a Hilton
Suites(R) hotel. Seventy-two of the Hotels are managed by subsidiaries of Hilton
Hotels Corporation ("Hilton"). Hilton is the largest operator of all-suite,
full-service hotels in the United States. Of the remaining Hotels, 10 are
managed by subsidiaries of Starwood Hotels and Resorts Worldwide, Inc.
("Starwood") and three are managed by independent management companies.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates -- The preparation of the financial statements in
conformity with generally accepted accounting principals requires management to
make estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.
Cash and Cash Equivalents -- All highly liquid investments with a
maturity of three months or less when purchased are considered to be cash
equivalents.
Inventories -- Inventories are stated at the lower of cost or market.
F-35
<PAGE> 95
DJONT OPERATIONS, L.L.C.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
Investment in Real Estate -- Hotels are stated at cost and are
depreciated using the straight-line method over estimated useful lives of forty
years for buildings and improvements and five to seven years for furniture,
fixtures, and equipment.
The carrying value of the property is periodically reviewed to
determine if circumstances indicate an impairment in the carrying value of the
investment or that depreciation periods should be modified. If facts or
circumstances support the possibility of impairment, DJONT will prepare a
projection of the undiscounted future cash flows, without interest charges, of
the hotel and determine if the investment in the property is recoverable based
on the undiscounted future cash flows. If impairment is indicated, an adjustment
will be made to the carrying value of the real estate based on discounted future
cash flows. DJONT does not believe that there are any factors or circumstances
indicating impairment of any of its investment in real estate.
Revenue Recognition -- Revenue is recognized as earned. Ongoing credit
evaluations are performed and an allowance for potential credit losses is
provided against the portion of accounts receivable which is estimated to be
uncollectible. Such losses have been within management's expectations.
Income Taxes -- DJONT is a limited liability company which is taxed for
federal income taxes purposes as a partnership and, accordingly, all taxable
income or loss flows through to the shareholders.
3. COMMITMENTS AND RELATED PARTY TRANSACTIONS
DJONT has future lease commitments under the Percentage Leases which
expire in 2002 (5 hotels), 2004 (7 hotels), 2005 (12 hotels), 2006 (18 hotels),
2007 (23 hotels), 2008 (12 hotels), and thereafter (9 hotels). This includes one
hotel which had a lease agreement entered into on October 15, 1999, but is not
effective until January 1, 2000. Minimum future rental payments are computed
based on the base rent as defined under the noncancellable operating leases and
are as follows (in thousands):
<TABLE>
<CAPTION>
YEAR AMOUNT
---- ----------
<S> <C>
2000........................................................ $ 172,395
2001........................................................ 176,965
2002........................................................ 177,321
2003........................................................ 163,801
2004........................................................ 160,240
2005 and thereafter......................................... 512,794
----------
$1,363,516
==========
</TABLE>
The Percentage Lease expense is based on a percentage of room and suite
revenues, food and beverage revenues, and food and beverage rents of the Hotels.
Both the base rent and the threshold room and suite revenue in each lease
computation is subject to adjustments in the Consumer Price Index ("CPI"). The
adjustment is calculated at the beginning of each calendar year for the hotels
acquired prior to July of the previous year. The adjustment in any lease year
may not exceed 7%. The CPI adjustments made in January 2000, 1999 and 1998 are
1.05%, 0.55%, and 0.50%, respectively.
F-36
<PAGE> 96
DJONT OPERATIONS, L.L.C.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
3. COMMITMENTS AND RELATED PARTY TRANSACTIONS -- (CONTINUED)
Other than real estate and personal property taxes, casualty insurance,
capital improvements and maintenance of underground utilities and structural
elements, which are obligations of the Operating Partnership, the Percentage
Leases require DJONT to pay rent, liability insurance premiums, operating costs,
utilities and other charges incurred in the operation of the leased hotels.
DJONT is also obligated to indemnify and hold harmless the Operating
Partnership from and against all liabilities, costs and expenses incurred by or
asserted against the Operating Partnership in the normal course of operating the
Hotels.
DJONT is not permitted to sublet all or any substantial part of the
Hotels or assign its interest under any of the Percentage Leases without the
prior written consent of the Operating Partnership.
DJONT has agreed that during the term of the Percentage Leases it will
maintain a ratio of total debt to consolidated net worth (as defined in the
Percentage Leases) of less than or equal to 50%, exclusive of capital leases.
All of the debt recorded in DJONT's balance sheet at December 31, 1999, is held
in the 3% owned consolidated subsidiary and is not considered for this test. In
addition, the Lessee has agreed that it will not pay fees to any affiliate of
the Lessee.
DJONT typically pays a franchise fee ranging from 4% to 5% of suite
revenue, and marketing and reservation fees ranging from 1% to 3.5% of room and
suite revenue. In the cases where there is not a separate franchise agreement,
the right to use the brand name is included in the management agreement. Base
management fees typically range from 2% to 3% of applicable hotel revenues.
Incentive management fees are based upon the hotel's net income before overhead
and typically range from 50% to 100% subject to a maximum annual payment of
between 2% and 3% of total revenues. In many cases managers and franchisors have
agreed to subordinate all or a portion of their fees at a specific hotel or
group of hotels either for a set period of time, or until the hotel or group of
hotels provides a predetermined return to the Lessee, or both.
In the event FelCor enters into an agreement to sell or otherwise
transfer a leased hotel, FelCor has the right to terminate the Percentage Lease
with respect to such leased hotel upon 90 days' prior written notice upon either
(1) paying DJONT the fair market value of DJONT's leasehold interest in the
remaining term of the Percentage Lease to be terminated or (2) offering to lease
to DJONT a substitute hotel on terms that would create a leasehold interest in
such hotel with a fair market value equal to or exceeding the fair market value
of DJONT's remaining leasehold interest under the Percentage Lease to be
terminated. FelCor also is obligated to pay or reimburse DJONT for any
assignment fees, termination fees or other liabilities arising under any
franchise license agreement and restaurant sublease agreements.
DJONT shares the executive offices and certain employees with FelCor
and FelCor, Inc., and each company bears its share of the costs thereof,
including an allocated portion of the rent, compensation of certain personnel,
office supplies, telephones and depreciation of office furniture, fixtures and
equipment. Such allocation of shared expenses approved by a majority of FelCor's
independent directors. During 1999, 1998 and 1997, DJONT paid approximately
$660,000 (approximately 10%), $1.6 million (approximately 37%) and $2.1 million
(approximately 61%), respectively, of the allocable expenses under this
agreement.
F-37
<PAGE> 97
DJONT OPERATIONS, L.L.C.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
4. INVESTMENT IN REAL ESTATE
At December 31, 1999, DJONT owned thirty shares of the Class A Voting
Common Stock, $0.01 par value per share of Kingston Plantation Development
Corporation ("KPDC") which represents 3% of the equity and 100% of the voting
interest in that entity. This investment is recorded on a consolidated basis in
DJONT's financial statements.
Through a consolidated subsidiary, KPDC owns a hotel annex adjoining
the Embassy Suites in New Orleans, Louisiana. KPDC is to receive rental income
from a lease agreement for this hotel which expires in November, 2008 between a
wholly owned subsidiary of KPDC, as lessor, and FelCor Lodging Limited
Partnership, as lessee. The future monthly rental payments under this lease at
December 31, 1999 are as follows (in thousands):
<TABLE>
<CAPTION>
YEAR AMOUNT
- ---- ------
<S> <C>
2000............................................................... $ 593
2001............................................................... 593
2002............................................................... 593
2003............................................................... 593
2004 and thereafter................................................ 2,914
------
$5,286
======
</TABLE>
5. OTHER ASSETS
KPDC also owns a 50% interest in an entity developing a parcel of land.
This entity is accounted for under the equity method of accounting and KPDC's
equity investment of $1.0 million is reflected in other assets on DJONT's
balance sheet. This unconsolidated entity had no operating income or expense for
the year ended December 31, 1999. The unconsolidated entity's balance sheet
consists of land, construction in progress and $24.8 million of construction
loans at December 31, 1999.
6. DEBT
DJONT has reflected as a liability, a mortgage note, dated November 24,
1998, from a wholly-owned subsidiary of KPDC payable to FelCor Lodging Limited
Partnership. The note bears a fixed interest rate of 8% per annum with a 30 year
amortization and matures on December 31, 2004.
The indebtedness is collateralized by a Mortgage and Assignment of
Leases and Rents with respect to the New Orleans Embassy Suites Hotel Annex.
Future scheduled principal payments on the debt are as follows (in thousands):
<TABLE>
<S> <C>
2000.................. $ 65
2001.................. 71
2002.................. 77
2003.................. 83
2004.................. 7,465
------
$7,761
======
</TABLE>
F-38
<PAGE> 98
DJONT OPERATIONS, L.L.C.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
7. FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107 requires
disclosures about the fair value for all financial instruments, whether or not
recognized, for financial statement purposes. Disclosures about fair value of
financial instruments are based on pertinent information available to management
as of December 31, 1999. Considerable judgement is necessary to interpret market
data and develop estimated fair value. Accordingly, the estimates presented
herein are not necessarily indicative of the amounts that could be realized on
disposition of the financial instruments. The use of different market
assumptions and/or estimation methodologies may have a material effect on the
estimated fair value amounts.
Management estimates the fair value of accounts receivable, accounts
payable and accrued expenses approximate carrying value due to the relatively
short maturity of these instruments; and the borrowing under the mortgage note
approximates carrying value because it accrues interest at a fixed rate which
approximates market rates.
8. ACCUMULATED DEFICIT
DJONT recorded a net loss of $4.9 million for the year ended December
31, 1999. Because of the current year loss and losses in recent years, DJONT had
an accumulated deficit of $13.1 million at December 31, 1999. The losses in the
current year are attributed to weaker than anticipated revenues in 1999 and
lower operating margins. A significant portion of the prior year losses are
attributable to the operations of hotels during periods of substantial
renovation. Management believes and operating data indicates, that overall
performances of the hotels are adversely impacted during substantial renovation.
Management is working closely with the companies that manage DJONT's hotels to
improve operating margins.
Management anticipates modest revenue growth at the DJONT hotels during
2000 which may result in operating losses. Management anticipates DJONT will be
able to generate profits over the next five years to significantly reduce the
accumulated deficit as a result of planned rebranding of one of its hotels, the
elimination of certain expenses, and leases which are expected to be renewed
with more favorable terms at the time of their termination. At December 31, 1999
DJONT had paid all amounts then due under the Percentage Leases. Management
believes that the loan commitments from certain entities owning interests in
DJONT and the managers of certain hotels, of approximately $17.3 million and
improvements in operating margins will be sufficient to enable DJONT to continue
to make necessary payments when due. It is anticipated that a substantial
portion of any future profits of DJONT will be retained until a positive net
worth is restored. Management deems DJONT to be a viable going concern and, as
such, no adjustments are required to the accompanying financial statements.
9. SUPPLEMENTAL CASH FLOW DISCLOSURE
DJONT recorded certain real estate and assumed certain liabilities in
connection with its investment in KPDC in 1999. The assets and liabilities,
related to KPDC and recorded at December 31, 1999, are as follows (in
thousands):
<TABLE>
<S> <C>
Investment in real estate....................... $11,436
Other assets acquired........................... 1,458
-------
$12,894
=======
Liabilities assumed............................. $ 7,781
Minority interest contribution.................. 5,113
-------
$12,894
=======
</TABLE>
F-40
<PAGE> 99
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------- ----------------------
<S> <C>
2.1 - Agreement and Plan of Merger by and between the Registrant and Bristol
Hotel Company ("Bristol") dated as of March 23, 1998 (filed as Exhibit
2.1 to the Registrant's Form 8-K dated April 23, 1998, and incorporated
herein by reference).
3.1 - Articles of Amendment and Restatement dated June 22, 1995, amending and
restating the Charter of the Registrant, as amended or supplemented by
Articles of Merger dated June 23, 1995, Articles Supplementary dated
April 30, 1996, Articles of Amendment dated August 8, 1996, Articles of
Amendment dated June 16, 1997, Articles of Amendment dated October 30,
1997, Articles Supplementary dated May 6, 1998, Articles of Merger and
Articles of Amendment dated July 27, 1998, and Certificate of
Correction dated March 11, 1999 (filed as Exhibit 3.1 to the
Registrant's Annual Report on Form 10-K for the fiscal year ended
December 31, 1998 (the "1998 10-K") and incorporated herein by
reference).
3.1.1 - Certificate of Correction to the Articles of Merger between FelCor
Lodging Trust Incorporated and Bristol Hotel Company, dated August 31,
1999 (filed as Exhibit 3.1.1 to the Registrant's Form 10-Q dated
September 30, 1999 ("September 1999 10-Q") and incorporated herein by
reference).
3.2 - Bylaws of the Registrant, as amended (filed as Exhibit 3.2 to the
Registrant's Registration Statement on Form S-11 (File No. 333-98332)
and incorporated herein by reference).
4.1 - Form of Share Certificate for Common Stock (filed as Exhibit 4.1 to the
Registrant's Form 10- Q for the quarter ended June 30, 1996, and
incorporated herein by reference).
4.2 - Form of Share Certificate for $1.95 Series A Cumulative Convertible
Preferred Stock (filed as Exhibit 4.4 to the Registrant's Form 8-K
dated May 1, 1996, and incorporated herein by reference).
4.3 - Form of Share Certificate for 9% Series B Cumulative Redeemable
Preferred Stock (filed as Exhibit 4.5 to the Registrant's Form 8-K
dated May 29, 1998, and incorporated herein by reference).
4.4 - Deposit Agreement dated April 30, 1998, between the Registrant and
SunTrust Bank, Atlanta, as preferred share depositary (filed as Exhibit
4.6 to the Registrant's Form 8-K dated May 29, 1998, and incorporated
herein by reference).
4.5 - Form of Depositary Receipt evidencing the Depositary Shares (filed as
Exhibit 4.7 to the Registrant's Form 8-K dated May 29, 1998, and
incorporated herein by reference).
4.6 - Indenture dated as of April 22, 1996 by and between the Registrant and
Sun Trust Bank, Atlanta, Georgia, as Trustee (filed as Exhibit 4.2 to
the Registrant's Form 8-K dated May 1, 1996 and incorporated herein by
reference).
</TABLE>
E-1
<PAGE> 100
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------- ----------------------
<S> <C>
4.7 - Indenture dated as of October 1, 1997 by and among FelCor Lodging
Limited Partnership, formerly FelCor Suites Limited Partnership (the
"Partnership"), the Registrant, the Subsidiary Guarantors named therein
and SunTrust Bank, Atlanta, Georgia, as Trustee (filed as Exhibit 4.1
to the Registration Statement on Form S-4 (file No. 333-39595) and the
other co- registrants named therein and incorporated herein by
reference).
4.7.1 - First Amendment to Indenture dated as of February 5, 1998 by and among
Registrant, the Partnership, the Subsidiary Guarantors named therein
and SunTrust Bank, Atlanta, Georgia, as Trustee (filed as Exhibit 4.2
to the Registrant's Registration Statement on Form S-4 (File No.
333-39595) and incorporated herein by reference).
4.7.2 - Second Amendment to Indenture and First Supplemental Indenture dated as
of December 30, 1998, by and among Registrant, the Partnership, the
Subsidiary Guarantors named therein and SunTrust Bank, Atlanta,
Georgia, as Trustee (filed as Exhibit 4.7.2 to the 1998 10-K and
incorporated herein by reference).
4.7.3 - Third Amendment to Indenture dated as of March 30,1999 by and among the
Partnership, the Registrant, the Subsidiary Guarantors named therein
and SunTrust Bank, Atlanta (filed as Exhibit 4.7.3 to Registrant's Form
10-Q for the quarter ended March 31,1999 ("March 1999 10-Q") and
incorporated herein by reference).
10.1 - Amended and Restated Agreement of Limited Partnership of the
Partnership (filed as Exhibit 10.1 to the Registrant's Annual Report on
Form 10-K/A Amendment No. 1 for the fiscal year ended December 31, 1994
(the "1994 10-K/A") and incorporated herein by reference).
10.1.1 - First Amendment to Amended and Restated Agreement of Limited
Partnership of the Partnership dated as of November 17, 1995 by and
among the Registrant, Promus Hotels, Inc. and all of the persons or
entities who are or shall in the future become of the limited partners
of the Partnership (filed as Exhibit 10.1.1 to the Registrant's Annual
Report on Form 10-K, as amended, for the fiscal year ended December 31,
1995 (the "1995 10-K") and incorporated herein by reference).
10.1.2 - Second Amendment to Amended and Restated Agreement of Limited
Partnership of the Partnership dated as of January 9, 1996 between the
Registrant and all of the persons or entities who are or shall in the
future become limited partners of the Partnership (filed as Exhibit
10.1.2 to the 1995 10-K and incorporated herein by reference).
10.1.3 - Third Amendment to Amended and Restated Agreement of Limited
Partnership of the Partnership dated as of January 10, 1996 by and
among the Registrant, MarRay-LexGreen, Inc. and all of the persons and
entities who are or shall in the future become limited partners of the
Partnership (filed as Exhibit 10.1.3 to the 1995 10-K and incorporated
herein by reference).
10.1.4 - Fourth Amendment to the Amended and Restated Agreement of Limited
Partnership of the Partnership dated as of January 10, 1996 by and
among the Registrant, Piscataway-Centennial Associates Limited
Partnership and all of the persons or entities who are or shall in the
future become limited partners of the Partnership (filed as Exhibit
10.1.4 to the 1995 10-K and incorporated herein by reference).
</TABLE>
E-2
<PAGE> 101
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------- ----------------------
<S> <C>
10.1.5 - Fifth Amendment to Amended and Restated Agreement of Limited
Partnership of the Partnership dated as of May 2, 1996, between the
Registrant and all of the persons or entities who are or shall in the
future become limited partners of the Partnership, adopting Addendum
No. 2 to Amended and Restated Agreement of Limited Partnership of the
Partnership dated as of May 2, 1996 (filed as Exhibit 10.1.5 to the
Form 10-Q for the quarter ended June 30, 1996, and incorporated herein
by reference).
10.1.6 - Sixth Amendment to Amended and Restated Agreement of Limited
Partnership of the Partnership dated as of September 16, 1996, by and
among the Registrant, John B. Urbahns, II and all of the persons or
entities who are or shall in the future become limited partners of the
Partnership (filed as Exhibit 10.1.6 to the Registrant's Annual Report
on Form 10-K for the fiscal year ended December 31, 1996, and
incorporated herein by reference).
10.1.7 - Seventh Amendment to Amended and Restated Agreement of Limited
Partnership of the Partnership dated as of May 16, 1997, by and among
the Registrant, PMB Associates, Ltd. and all of the persons or
entities who are or shall in the future become limited partners of the
Partnership (filed as Exhibit 10.1.7 to the Registrant's Annual Report
on Form 10-K for the fiscal year ended December 31, 1997, and
incorporated herein by reference).
10.1.8 - Eighth Amendment to Amended and Restated Agreement of Limited
Partnership of the Partnership dated as of February 6, 1998, by and
among the Registrant, Columbus/Front Ltd. and all of the persons or
entities who are or shall in the future become limited partners of the
Partnership (filed as Exhibit 10.1.8 to the Registrant's Annual Report
on Form 10-K for the fiscal year ended December 31, 1997, and
incorporated herein by reference).
10.1.9 - Ninth Amendment to Amended and Restated Agreement of Limited
Partnership of the Partnership dated as of May 1, 1998, between the
Registrant and all of the persons or entities who are or shall in the
future become limited partners of the Partnership, adopting Addendum
No. 3 to Amended and Restated Agreement of Limited Partnership dated
as of May 1, 1998 (filed as Exhibit 10.1.9 to the Registrant's Form
8-K dated May 29, 1998, and incorporated herein by reference).
10.1.10 - Tenth Amendment to Amended and Restated Agreement of Limited
Partnership of the Partnership dated as of June 22, 1998, by and among
the Registrant, Schenley Hotel Associates, and all of the persons or
entities who are or shall in the future become limited partners of the
Partnership (filed as Exhibit 10.1.10 to the Registrant's Form 10-Q
for the quarter ended October 30, 1998, and incorporated herein by
reference).
10.1.11 - Eleventh Amendment to Amended and Restated Agreement of Limited
Partnership of the Partnership dated as of July 28, 1998, between the
Registrant and all of the persons or entities who are or shall in the
future become limited partners of the Partnership, changing the name
of the Partnership to "FelCor Lodging Limited Partnership" (filed as
Exhibit 10.1.11 to the Registrant's Form 10-Q for the quarter ended
October 30, 1998, and incorporated herein by reference).
10.1.12 - Twelfth Amendment to Amended and Restated Agreement of Limited
Partnership of the Partnership dated as of December 29, 1998, between
the Registrant and all of the persons or entities who are or shall in
the future become limited partners of the Partnership, amending
certain provisions of the Partnership Agreement (filed as Exhibit
10.1.12 to the Registrant's 1998 10-K and incorporated herein by
reference).
</TABLE>
E-3
<PAGE> 102
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------- ----------------------
<S> <C>
10.1.13 - Thirteenth Amendment to Amended and Restated Agreement of Limited
Partnership of the Partnership dated as of December 31, 1998, by and
between the Registrant, FelCor Nevada Holdings, L.L.C. and all of the
persons or entities who are or shall in the future become limited
partners of the Partnership (filed as Exhibit 10.1.13 to the
Registrant's 1998 10-K and incorporated herein by reference).
10.1.14 - Fourteenth Amendment to Amended and Restated Agreement of Limited
Partnership of the Partnership dated as of March 1, 1999, by and among
the Registrant, Huie Properties, Ltd., and all of the persons or
entities who are or shall in the future become limited partners of the
Partnership (filed as Exhibit 10.1.14 to the Registrant's 1998 10-K
and incorporated herein by reference).
10.1.15* - Fifteenth Amendment to Amended and Restated Agreement of Limited
Partnership of the Partnership dated as of October 15, 1999, by and
among the Registrant, SRS Properties Limited Partnership, and all of
the persons and entities who are or shall in the future become limited
partners of the Partnership.
10.1.16* - Sixteenth Amendment to Amended and Restated Agreement of Limited
Partnership of the Partnership dated as of February 27, 2000, by and
among the Registrant, Bass America, Inc., and all of the persons and
entities who are or shall in the future become limited partners of the
Partnership.
10.2 - Form of Lease Agreement between the Partnership as Lessor and DJONT
Operations, L.L.C. or its subsidiaries ("DJONT") as Lessee (filed as
Exhibit 10.2.1 to the 1995 10-K and incorporated herein by reference).
10.2.1 - Omnibus Lease Amendment Agreement dated as of June 30, 1998 among the
Registrant, the Partnership and DJONT to clarify the meaning of
Article III of the lease as represented by the actual course of
dealing between lessors and lessees under such leases (filed as
Exhibit 10.19 to the Registrant's Form 10-Q for the quarter ended June
30, 1998, and incorporated herein by reference).
10.3 - Form of Lease Agreement between the Partnership as Lessor and a
subsidiary of Bristol Hotels & Resorts ("BHR") as Lessee (the "Bristol
Lease Agreement") (filed as Exhibit 10.3 to the 1998 10-K. and
incorporated herein by reference).
10.3.1 - Amended and Restated Master Hotel Agreement dated as of July 27, 1998
among the Registrant, the Partnership, BHR and the lessors and lessees
named therein (filed as Exhibit 10.17 to the Registrant's Form 8-K
dated August 10, 1998, and incorporated herein by reference).
10.4 - Employment Agreement dated as of July 28, 1994 between the Registrant
and Thomas J. Corcoran, Jr. (filed as Exhibit 10.8 to the 1994 10-K/A
and incorporated herein by reference).
10.5 - Restricted Stock and Stock Option Plan of the Registrant (filed as
Exhibit 10.9 to the 1994 10- K/A and incorporated herein by
reference).
</TABLE>
E-4
<PAGE> 103
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------- ----------------------
<S> <C>
10.6 - Savings and Investment Plan of the Registrant (filed as Exhibit 10.10
to the 1994 10-K/A and incorporated herein by reference).
10.7 - 1995 Restricted Stock and Stock Option Plan of the Registrant (filed as
Exhibit 10.9.2 to the 1995 10-K and incorporated herein by reference).
10.8 - Non-Qualified Deferred Compensation Plan, as amended and restated July
1999 (filed as exhibit 10.9 to Registrant's Form 10-Q for the quarter
ended September 30,1999 ("September 1999 10-Q") and incorporated herein
by reference).
10.9 - 1998 Restricted Stock and Stock Option Plan (filed as Exhibit 4.2 to
the Registrant's Registration Statement on Form S-8 (File No.
333-66041) and incorporated herein by reference).
10.10 - Second Amended and Restated 1995 Equity Incentive Plan (filed as
Exhibit 99.1 to the Registrant's Post-Effective Amendment on Form S-3
to Form S-4 Registration Statement (File No. 333-50509) and
incorporated herein by reference).
10.11 - Amended and Restated Stock Option Plan for Non-Employee Directors
(filed as Exhibit 99.2 to the Registrant's Post-Effective Amendment on
Form S-3 to Form S-4 Registration Statement (File No. 333-50509) and
incorporated herein by reference).
10.12 - Form of Severance Agreement for executive officers and certain key
employees of the Registrant (filed as Exhibit 10.13 to the 1998 10-K
and incorporated herein by reference).
10.13 - Agreement dated as of April 15, 1995 among the Registrant, the
Partnership, FelCor, Inc., Thomas J. Corcoran, Jr. and Hervey A.
Feldman relating to purchase of securities (filed as Exhibit 10.15 to
the Registration Statement on Form S-11 (File No. 33-91870) and
incorporated herein by reference).
10.14 - Credit Agreement dated as of February 6, 1996 by and among the
Partnership, as borrower, FelCor/CSS Holdings, L.P. and the Registrant,
as guarantors, and Canadian Imperial Bank of Commerce, as agent (filed
as Exhibit 10.30 to the Registrant's Form 8-K dated May 1, 1996, and
incorporated herein by reference).
10.15 - Voting and Cooperation Agreement dated as of March 23, 1998 among
Registrant, Bristol, Bass America Inc., Holiday Corporation and
United/Harvey Holdings, L.P. (filed as Exhibit 99.7 to the Registrant's
Registration Statement on Form S-4 (File No. 333-50509) and
incorporated herein by reference).
10.16 - Spin-Off Agreement dated as of March 23, 1998 among Bristol, Bristol
Hotel Management Corporation and Bristol Hotel and Resorts, Inc., as
agreed to by Registrant (filed as Exhibit 99.8 to the Registrant's
Registration Statement on Form S-4 (File No. 333-50509) and
incorporated herein by reference).
10.17 - Stockholders' and Registration Rights Agreement dated as of July 27,
1998 by and among Registrant, Bass America, Inc., Holiday Corporation,
Bass plc, United/Harvey Investors I, L.P., United/Harvey Investors II,
L.P., United/Harvey Investors III, L.P., United/Harvey Investors IV,
L.P., and United/Harvey Investors V, L.P. (filed as Exhibit 10.18 to
the Registrant's Form 8-K dated August 10, 1998, and incorporated
herein by reference).
</TABLE>
E-5
<PAGE> 104
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------- ----------------------
<S> <C>
10.18 - Fourth Amended and Restated Revolving Credit Agreement dated as of July
1, 1998 among Registrant and the Partnership, as Borrower, the Lenders
party thereto, The Chase Manhattan Bank, as Administrative Agent,
Chase Securities, Inc. as Arranger, and Bankers Trust Company,
NationsBank, N.A. and Wells Fargo Bank, National Association as
Co-Arrangers and Documentation Agents (filed as Exhibit 10.14 to the
Registrant's Form 8-K dated August 10, 1998 and incorporated herein by
reference).
10.18.1 - Second Amendment to Credit Agreement dated as of August 20,1999, among
Registrant and the Partnership, as Borrower, the financial
institutions party thereto, and The Chase Manhattan Bank, as
administrative agent (filed as Exhibit 10.19.1 to the Registrant's
September 1999 10- Q and incorporated herein by reference).
10.18.2* - Third Amendment to Credit Agreement dated as of December 1,1999, among
Registrant and the Partnership, as Borrower, the financial
institutions party thereto, and The Chase Manhattan Bank, as
administrative agent.
10.19 - Loan Agreement dated as of October 10, 1997 among Bristol Lodging
Company, Bristol Lodging Holding Company, Nomura Asset Capital
Corporation as administrative agent and collateral agent for Lenders
and Bankers Trust Company as co-agent for Lenders (filed as Exhibit
10.10 to the Bristol Hotel Company Annual report on Form 10-K for the
year ended December 31, 1997 and incorporated herein by reference).
10.19.1* - First Amendment to Loan Agreement and Ancillary Loan Documents made as
of May 28, 1999, among FelCor Lodging Company, L.L.C., FelCor Lodging
Holding Company, L.L.C. and LaSalle National Bank, as Trustee for
Nomura Asset Securities Corporation Commercial Pass-Through
Certificates Series 1998-D6, as administrative agent and collateral
agent.
10.20 - Deed of Trust, Security Agreement, Assignment of Leases and Rents,
Fixture Filing and Financing Statement, Dated March 1, 1999, by FelCor
Hotel Company II, Ltd., as Grantor, to Howard E. Schreiber, Trustee,
in trust for the benefit of Banker Trust Company, as Beneficiary
(filed as Exhibit 10.21 to the Registrant's March 1999 10-Q and
incorporated herein by reference).
10.21 - Loan Agreement, dated April 1, 1999, among Registrant and the
Partnership as Borrower, and The Lenders Party Thereto and The Chase
Manhattan Bank as Administrative Agent and Collateral Agent (filed as
Exhibit 10.22.1 to the Registrant's March 1999 10-Q and incorporated
herein by reference).
10.21.1 - Guaranty, dated April 1, 1999, made by each of the named Guarantors
therein, who are signatories thereto (filed as Exhibit 10.22.2 to the
Registrant's March 1999 10-Q and incorporated herein by reference).
10.21.2 - Pledge and Security Agreement, dated April 1, 1999, made by each of
the named Pledgors therein, who are signatories thereto, in favor of
The Chase Manhattan Bank, as Collateral Agent (filed as Exhibit
10.22.3 to the Registrant's March 1999 10-Q and incorporated herein by
reference).
</TABLE>
E-6
<PAGE> 105
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------- ----------------------
<S> <C>
10.21.3 - Second Amendment to Loan Agreement dated as of August 20,1999, among
Registrant and the Partnership, as Borrower, the financial
institutions party thereto, and The Chase Manhattan Bank, as
Administrative Agent (filed as Exhibit 10.22.4 to the Registrant's
September 10-Q and incorporated herein by reference).
10.21.4* - Third Amendment to Loan Agreement dated as of December 1,1999, among
Registrant and the Partnership, as Borrower, the financial
institutions party thereto, and The Chase Manhattan Bank, as
Administrative Agent.
10.22 - Form of Mortgage, Security Agreement and Fixture Filing by and between
FelCor/CSS Holdings, L.P. as Mortgagor and The Prudential Insurance
Company of America, as Mortgagee (filed as Exhibit 10.23 to the
Registrant's March 1999 10-Q and incorporated herein by reference).
10.22.1 - Promissory Note dated April 1, 1999, in the original principal amount
of $100,000,000 made by FelCor/CSS Holdings, Ltd., payable to the
order of The Prudential Insurance Company of America. (filed as
Exhibit 10.23.1 to Registrant's Form 10-Q for the quarter ended June
30,1999 ("June 1999 10-Q") and incorporated herein by reference).
10.23 - Form of Deed of Trust, Security Agreement and Fixture Filing, each
dated as of May 12, 1999, from FelCor/MM Holdings, L.P., as Borrower,
in favor of Fidelity National Title Insurance Company, as Trustee, and
Massachusetts Mutual Life Insurance Company, as Beneficiary, each
covering a separate hotel and securing one of the separate Promissory
Notes described in Exhibit 10.23.1, also executed by FelCor/CSS
Holdings, L.P. with respect to the Embassy Suites-Anaheim and Embassy
Suites-Deerfield Beach, and by the Partnership with respect to the
Embassy Suites-Palm Desert (filed as Exhibit 10.24.2 to Registrant's
June 1999 10-Q and incorporated herein by reference).
10.23.1 - Form of six separate Promissory Notes each dated May 12, 1999, made by
FelCor/MM Holdings, L.P. payable to the order of Massachusetts Mutual
Life Insurance Company in the respective original principal amounts of
$12,500,000 (Embassy Suites-Dallas Market Center), $14,000,000
(Embassy Suites-Dallas Love Field), $12,450,000 (Embassy
Suites-Tempe), $11,550,000 (Embassy Suites-Anaheim), $8,900,000
(Embassy Suites-Palm Desert), $15,600,000 (Embassy Suites-Deerfield
Beach) (filed as Exhibit 10.24.1 to Registrant's June 1999 10-Q and
incorporated herein by reference).
21* - List of Subsidiaries of the Registrant.
23* - Consent of PricewaterhouseCoopers LLP.
27* - Financial Data Schedule.
</TABLE>
- -------------
* Filed herewith.
E-7
<PAGE> 1
EXHIBIT 10.1.15
FIFTEENTH AMENDMENT TO
AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF FELCOR LODGING LIMITED PARTNERSHIP
This Fifteenth Amendment to Amended and Restated Agreement of Limited
Partnership of FelCor Lodging Limited Partnership is made and entered into
effective as of October 15, 1999, by and among FelCor Lodging Trust
Incorporated, a Maryland corporation, as the General Partner ("General
Partner"), and SRS Properties Limited Partnership, a Virginia limited
partnership ("SRS"), as an Additional Limited Partner, and all of the persons
and entities who are or shall in the future become Limited Partners of this
limited partnership in accordance with the provisions of the Partnership
Agreement (as hereinafter defined).
R E C I T A L S:
A. The General Partner and the existing Limited Partners have previously
executed and delivered that certain Amended and Restated Agreement of Limited
Partnership of FelCor Suites Limited Partnership dated as of July 25, 1994, as
previously amended (the "Partnership Agreement"), pursuant to which they have
formed a Delaware limited partnership under the name, as amended, of "FelCor
Lodging Limited Partnership" (the "Partnership").
B. Pursuant to that certain Contribution Agreement dated as of May 24,
1999, by and between SRS and the Partnership, as amended to date (the
"Contribution Agreement"), SRS has agreed to contribute to the Partnership the
Sheraton Premiere at Tysons Corner hotel and certain related assets described in
the Contribution Agreement in exchange for, among other things, 3,571 units of
limited partner interest ("Units") of the Partnership.
C. The parties hereto desire to amend the Partnership Agreement to reflect
the foregoing issuance of Units and the admission of SRS as an Additional
Limited Partner to the Partnership in connection therewith.
A G R E E M E N T S:
NOW, THEREFORE, in consideration of the agreements and obligations of the
parties set forth herein and of other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereby
agree as follows:
1. Acceptance of Partnership Agreement. SRS does hereby accept and agree to
be bound by all of the terms and conditions of the Partnership Agreement,
including without limitation, the power of attorney set forth in Section 1.4
thereof. SRS and its Assignees hereby constitutes and appoints the General
Partner and the other parties named in Section 1.4, with full power of
substitution, as its true and lawful agent and attorney-in-fact, with full power
and authority in its name, place and stead, to take the actions set forth in
Section 1.4 of the Partnership Agreement, with the same effect as if SRS had
been one of the original partners to execute the Partnership Agreement.
-1-
<PAGE> 2
2. Admission of Additional Partner. In accordance with the provisions of
Section 11.4 of the Partnership Agreement, SRS is hereby admitted as an
Additional Limited Partner of the Partnership entitled to all rights and
benefits of Limited Partners therein as set forth in the Partnership Agreement
with respect to the Units acquired by SRS. Notwithstanding the foregoing
sentence, SRS agrees that the quarterly Partnership distribution payable with
respect to the Units for the third calendar quarter of 1999 shall not be paid to
SRS.
3. Exercise of Redemption Right. SRS shall first be able to exercise its
Redemption Right (as defined in Section 7.5(a) of the Partnership Agreement)
with respect to the Units after the first anniversary of the date hereof.
4. Amendment of Exhibit A. Exhibit A to the Partnership Agreement is hereby
amended to reflect the admission of SRS as an Additional Limited Partner in the
Partnership and the issuance of the Units to SRS.
5. Compliance with Terms of Contribution Agreement. The Partnership and SRS
mutually agree to comply fully with their respective covenants and obligations
contained in Section 8.7 of the Contribution Agreement.
6. Defined Terms: Effect Upon Partnership Agreement. All initially
capitalized terms used without definition herein shall have the meanings set
forth therefor in the Partnership Agreement. Except as expressly amended hereby,
the Partnership Agreement shall remain in full force and effect and each of the
parties hereto hereby reaffirms the terms and provisions thereof.
-2-
<PAGE> 3
IN WITNESS WHEREOF, this Fifteenth Amendment to Agreement of Limited
Partnership is executed and entered into as of the date first above written.
GENERAL PARTNER:
FELCOR LODGING TRUST INCORPORATED,
a Maryland corporation
By: /s/ WILLIAM P. STADLER
--------------------------------------------------
William P. Stadler, Senior Vice President
ADDITIONAL LIMITED PARTNER:
SRS PROPERTIES LIMITED PARTNERSHIP,
a Virginia limited partnership
By: DRJ Corp., a Virginia corporation, its general
partner
By: /s/ DAVID M. JENSEN
--------------------------------------------
Name: David M. Jensen
-------------------------------------------
Title: President
------------------------------------------
LIMITED PARTNERS (for all the Limited Partners
now and hereafter admitted as Limited Partners of the
Partnership, pursuant to the powers of attorney in
favor of the General Partner contained in Section 1.4
of the Partnership Agreement):
By: FELCOR LODGING TRUST INCORPORATED, acting as
General Partner and as duly authorized
attorney-in-fact
By: /s/ WILLIAM P. STADLER
---------------------------------------------
William P. Stadler,
Senior Vice President
<PAGE> 1
EXHIBIT 10.01.16
SIXTEENTH AMENDMENT TO
AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF FELCOR LODGING LIMITED PARTNERSHIP
This Sixteenth Amendment to Amended and Restated Agreement of Limited
Partnership of FelCor Lodging Limited Partnership is made and entered into
effective as of February 27, 2000, by and among FelCor Lodging Trust
Incorporated, a Maryland corporation, as the General Partner ("General
Partner"), and Bass America, Inc., a Delaware corporation ("BAI"), as an
Additional Limited Partner, and all of the persons and entities who are or shall
in the future become Limited Partners of this limited partnership in accordance
with the provisions of the Partnership Agreement (as hereinafter defined).
R E C I T A L S:
A. The General Partner and the existing Limited Partners have
previously executed and delivered that certain Amended and Restated Agreement of
Limited Partnership of FelCor Suites Limited Partnership dated as of July 25,
1994, as previously amended (the "Partnership Agreement"), pursuant to which
they have formed a Delaware limited partnership under the name, as amended, of
"FelCor Lodging Limited Partnership" (the "Partnership").
B. Pursuant to that certain Contribution Agreement dated as of the date
hereof, by and between BAI and the Partnership (the "Contribution Agreement"),
BAI has agreed to contribute to the Partnership 4,713,185 shares of common stock
of FelCor Lodging Trust Incorporated in exchange for, among other things,
4,713,185 units of limited partner interest ("Units") of the Partnership.
C. The parties hereto desire to amend the Partnership Agreement to
reflect the foregoing issuance of Units and the admission of BAI as an
Additional Limited Partner to the Partnership in connection therewith.
A G R E E M E N T S:
NOW, THEREFORE, in consideration of the agreements and obligations of
the parties set forth herein and of other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereby
agree as follows:
1. Acceptance of Partnership Agreement. BAI does hereby accept and
agree to be bound by all of the terms and conditions of the Partnership
Agreement, including without limitation, the power of attorney set forth in
Section 1.4 thereof. BAI and its Assignees hereby constitutes and appoints the
General Partner and the other parties named in Section 1.4, with full power of
substitution, as its true and lawful agent and attorney-in-fact, with full power
and authority in its name, place and stead, to take the actions set forth in
Section 1.4 of the
<PAGE> 2
Partnership Agreement, with the same effect as if BAI had been one of the
original partners to execute the Partnership Agreement.
2. Admission of Additional Partner. In accordance with the provisions
of Section 11.4 of the Partnership Agreement, BAI is hereby admitted as an
Additional Limited Partner of the Partnership entitled to all rights and
benefits of Limited Partners therein as set forth in the Partnership Agreement
with respect to the Units acquired by BAI.
3. Amendment of Exhibit A. Exhibit A to the Partnership Agreement is
hereby amended to reflect the admission of BAI as an Additional Limited Partner
in the Partnership and the issuance of the Units to BAI.
4. Priority of Terms of Contribution Agreement. The Partnership and BAI
mutually agree that to the extent any of the terms of the Contribution Agreement
conflict with the terms of the Partnership Agreement, the terms of the
Contribution Agreement shall control and the Partnership Agreement shall be
deemed amended, as between the Partnership and BAI, to the extent of any such
conflicting terms.
5. Defined Terms: Effect Upon Partnership Agreement. All initially
capitalized terms used without definition herein shall have the meanings set
forth therefor in the Partnership Agreement. Except as expressly amended hereby,
the Partnership Agreement shall remain in full force and effect and each of the
parties hereto hereby reaffirms the terms and provisions thereof.
- 2 -
<PAGE> 3
IN WITNESS WHEREOF, this Sixteenth Amendment to Agreement of Limited
Partnership is executed and entered into as of the date first above written.
GENERAL PARTNER:
FELCOR LODGING TRUST INCORPORATED,
a Maryland corporation
By: /s/ LAWRENCE D. ROBINSON
-------------------------------------------
Lawrence D. Robinson, Senior Vice President
ADDITIONAL LIMITED PARTNER:
BASS AMERICA, INC.,
a Delaware corporation
By: /s/ JULIAN A. FORTUNA
-------------------------------------------
Name: Julian A. Fortuna
-----------------------------------------
Title: Authorized Signatory
----------------------------------------
LIMITED PARTNERS (for all the Limited Partners now
and hereafter admitted as Limited Partners of the
Partnership, pursuant to the powers of attorney in
favor of the General Partner contained in Section
1.4 of the Partnership Agreement):
By: FELCOR LODGING TRUST INCORPORATED, acting as
General Partner and as duly authorized
attorney-in- fact
By: /s/ LAWRENCE D. ROBINSON
-------------------------------------------
Lawrence D. Robinson, Senior Vice President
<PAGE> 1
EXHIBIT 10.18.2
THIRD AMENDMENT
to
CREDIT AGREEMENT
THIS THIRD AMENDMENT TO CREDIT AGREEMENT ("Third Amendment"), dated as
of December 1, 1999 among FELCOR LODGING TRUST INCORPORATED, a Maryland
corporation (f/k/a FelCor Suite Hotels, Inc.) ("FelCor") and FELCOR LODGING
LIMITED PARTNERSHIP, a Delaware limited partnership (f/k/a FelCor Suites Limited
Partnership) ("FelCor LP" and collectively with FelCor, the "Borrower"), the
financial institutions listed on the signature pages hereof (each individually a
"Lender" and collectively the "Lenders"), and THE CHASE MANHATTAN BANK, as
administrative agent for the Lenders (in such capacity, the "Administrative
Agent").
W I T N E S S E T H:
WHEREAS, that certain Fourth Amended and Restated Credit Agreement,
dated as of July 1, 1998, among Borrower, the financial institutions party
thereto, and the Administrative Agent provides for the making of certain loans
to Borrower up to an aggregate principal amount of $1,100,000,000 (as amended,
the "Credit Agreement");
WHEREAS, pursuant to that certain Second Amendment to Credit Agreement
("Second Amendment"), dated as of August 20, 1999 among the parties thereto, the
parties modified, among other things, the provisions in the Credit Agreement
governing Restricted Payments to allow the Borrower to repurchase an amount of
its own Stock in excess of the limitations contained therein (the "Additional
Stock Repurchase Amount") in an amount of up to $50,000,000.00; and
WHEREAS, the parties hereto desire to further amend the Credit
Agreement to increase the Additional Stock Repurchase Amount to $275,000,000.00
and to make certain modifications to the financial covenants and other
provisions in connection therewith;
NOW, THEREFORE, in consideration of Ten Dollars ($10.00) and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree that the Credit Agreement is
amended as follows:
<PAGE> 2
1. Under the definition of "Applicable Margin" in Section 1.1 of the
Credit Agreement, the roman numeral "VIII" appearing in the first clause (ii) is
hereby deleted and the following is hereby substituted in place thereof:
"IX"
2. Under the definition of "Applicable Margin" in Section 1.1 of the
Credit Agreement, there is hereby added thereto after the row that begins with
the words "Level VIII" an additional row which shall read as follows (excluding
headings):
<TABLE>
<CAPTION>
Base Rate Eurodollar Rate Commitment
Loans Loans Fee
----- ----- ---
<S> <C> <C> <C>
"Level IX Status 0.375% 1.875% 0.35%"
</TABLE>
3. Under the definition of "Status" in Section 1.1 of the Credit
Agreement, the first paragraph is hereby deleted and the following is hereby
substituted in place thereof:
"'Status' means the existence of Level I Status, Level II
Status, Level III Status, Level IV Status, Level V Status,
Level VI Status, Level VII Status, Level VIII Status, or Level
IX Status, as the case may be."
4. Under the definition of "Status" in Section 1.1 of the Credit
Agreement, the words "less than or equal to 50%" are hereby deleted from the end
of the paragraph that begins with the words "Level VIII Status," and the
following is hereby substituted in place thereof:
"less than 50%"
5. Under the definition of "Status" in Section 1.1 of the Credit
Agreement, there is hereby added after the paragraph beginning with the words
"Level VIII Status" an additional paragraph which shall read as follows:
"'Level IX Status' exists on any date if, on such date (y)
none of Level I Status through Level IV Status exist and (z)
the Leverage Ratio is equal to or greater than 50% but less
than or equal to 55%."
6. Under Section 5.1 of the Credit Agreement, entitled Unsecured
Interest Expense Coverage, the ratio of "2.5:1.0" is hereby deleted and the
ratio of "2.25:1.0" is hereby substituted in place thereof.
7. Under Section 5.2 of the Credit Agreement, entitled Fixed Charge
Coverage Ratio, the ratio of "2.0:1.0" is hereby deleted and the ratio of
"1.75:1.0" is hereby substituted in place thereof.
2
<PAGE> 3
8. Under Section 5.4 of the Credit Agreement, entitled Limitations on
Total Indebtedness, the percentage of "50%" is hereby deleted and the percentage
of "55%" is hereby substituted in place thereof.
9. Under Section 7.4 of the Credit Agreement (as amended), in the
proviso to the last sentence of said section the words "in an amount of up to
$50,000,000.00" are hereby deleted and the following is hereby substituted in
place thereof:
"for an aggregate purchase price not to exceed $275,000,000.00
from and after August 20, 1999 through the end of the term of
the Loans (including any extension thereof)"
10. The Credit Agreement and the other Loan Documents are in full force
and effect without default thereunder by Borrower and all of the representations
and warranties contained in the Credit Agreement and the other Loan Documents
are hereby restated as if the same were made as of the date hereof (it being
understood and agreed that any representation or warranty which by its terms is
made on a specified date shall be required to be true and correct only as of
such specified date).
11. If there shall be any inconsistencies between the terms, covenants,
conditions and provisions set forth in the Credit Agreement, and the terms,
covenants, conditions and provisions set forth in this Third Amendment, then,
the terms, covenants, conditions and provisions of this Third Amendment shall
prevail. Whenever possible, the provisions of this Third Amendment shall be
deemed supplemental to and not in derogation of the terms of the Credit
Agreement and any documents relating thereto.
12. Any capitalized term used but not defined herein shall have the
meaning set forth in the Credit Agreement.
13. Each party hereto hereby confirms and ratifies all of the terms and
provisions of the Credit Agreement as amended by this Third Amendment. Except as
expressly amended hereby, all of the terms of the Credit Agreement shall remain
in full force and effect.
14. Each party hereto represents, warrants and covenants that such
party (and the undersigned representative of such party) has full power,
authority and legal right to execute this Third Amendment and to keep and
observe all of the terms of this Third Amendment and the Credit Agreement on
such party's part to be observed and performed.
15. If any term, covenant or condition of this Third Amendment shall be
held to be invalid, illegal or unenforceable in any respect, this Third
Amendment shall be construed without such provision.
16. This Third Amendment shall be binding upon the successors and
assigns of the Borrower and shall inure to the benefit of and be enforceable by
the Administrative Agent under the Credit Agreement and its successors and
assigns; provided that no Borrower may assign any of its rights or obligations
hereunder without the prior written
3
<PAGE> 4
consent of the Administrative Agent. THIS THIRD AMENDMENT SHALL BE CONSTRUED AND
ENFORCED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE STATE OF NEW YORK
(WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS).
17. This Third Amendment may be executed in any number of separate
counterparts, each of which shall, collectively and separately, constitute one
agreement.
[SIGNATURES BEGIN ON THE FOLLOWING PAGE]
4
<PAGE> 5
IN WITNESS WHEREOF, this instrument has been duly executed by the
undersigned as of the day and year first above written.
FELCOR LODGING TRUST INCORPORATED,
a Maryland corporation
By: /s/ LAWRENCE D. ROBINSON
---------------------------------
Name: Lawrence D. Robinson
Title: Senior Vice President
[SIGNATURES CONTINUE ON FOLLOWING PAGE]
<PAGE> 6
FELCOR LODGING LIMITED PARTNERSHIP, a
Delaware limited partnership
By: FELCOR LODGING TRUST INCORPORATED, a
Maryland corporation, its sole general partner
By: /s/ LAWRENCE D. ROBINSON
---------------------------------
Name: Lawrence D. Robinson
Title: Senior Vice President
[SIGNATURES CONTINUE ON FOLLOWING PAGE]
<PAGE> 7
Signature for Credit Agreement
THE CHASE MANHATTAN BANK,
as Administrative Agent
By: /s/ ALAN BREINDEL
---------------------------------
Name: Alan Breindel
Title: Managing Director
[SIGNATURES CONTINUE ON FOLLOWING PAGE]
<PAGE> 8
[REMAINDER OF SIGNATURE PAGES INTENTIONALLY OMITTED]
<PAGE> 1
EXHIBIT 10.19.1
After Recording, Please Return To:
Sutherland Asbill & Brennan LLP
999 Peachtree Street, N.E.
Suite 2300
Atlanta, Georgia 30309-3996
Attn: Nicole L. Friedman, Esq.
Borrower: FelCor Lodging Company, L.L.C.
Loan Number:
FIRST AMENDMENT TO LOAN AGREEMENT AND ANCILLARY LOAN DOCUMENTS
THIS FIRST AMENDMENT TO LOAN AGREEMENT AND ANCILLARY LOAN DOCUMENTS
(this "AGREEMENT") made as of May 28, 1999, is among FELCOR LODGING HOLDING
COMPANY, L.L.C., a Delaware limited liability company, as successor-by-merger to
Bristol Lodging Company, a Delaware corporation ("BORROWER"), having an address
at c/o FelCor Lodging Trust Incorporated, 545 E. John Carpenter Freeway, Suite
1300, Irving, Texas 75062, FelCor Lodging Holding Company, L.L.C., a Delaware
limited liability company, as successor-by-merger to BRISTOL LODGING HOLDING
COMPANY, a Delaware corporation, having an address at 545 E. John Carpenter
Freeway, Suite 1300, Irving, Texas 75062, ("GUARANTOR"), LaSALLE NATIONAL BANK,
AS TRUSTEE FOR NOMURA ASSET SECURITIES CORPORATION COMMERCIAL MORTGAGE
PASS-THROUGH CERTIFICATES SERIES 1998-D6, as assignee of Nomura Asset Capital
Corporation, having its mailing address c/o AMRESCO Services, L.P., 235
Peachtree Street, N.E., Suite 900, Atlanta, Georgia 30303, as administrative
agent and collateral agent (in such capacities, "LENDER").
RECITALS
A. Borrower entered into that certain Promissory Note dated
October 10, 1997 in the amount of $72,500,000 for the benefit of Nomura Asset
Capital Corporation ("Nomura") and that certain Promissory Note dated October
10, 1997 in the amount of $72,500,000 for the benefit of Bankers Trust Company
(collectively the "NOTE"). The Note is secured in part by that certain Deed of
Trust, Assignment of Leases and Rents and Security Agreement dated as of October
10, 1997 from Borrower to Stewart Title Company of Mississippi for the benefit
of Lender securing certain property located at Section 7, Township 5N, in Range
1E, Hinds County, Mississippi (the "DEED OF TRUST"). Borrower, Guarantor, Nomura
and Bankers Trust Company, entered into that certain Loan Agreement dated
October 10, 1997 (the "LOAN AGREEMENT"). The loan evidenced by the Note and
secured by the Deed of Trust is hereinafter referred to as the "LOAN". The Loan
Agreement, the Note, the Deed of Trust and all other documents evidencing or
securing the Loan are hereinafter collectively referred to as the "LOAN
DOCUMENTS".
B. Pursuant to Section 2.4.4 of the Loan Agreement, Borrower
wishes to, and Lender has agreed to permit Borrower to, substitute an Asset (the
"Substitution"). Pursuant thereto, Lender has agreed to release certain property
located in Section 7, Township
<PAGE> 2
Borrower: FelCor Lodging Company, L.L.C.
Loan Number:
5N, Range 1E, Hinds County, Mississippi (the "Released Property") from the lien
created by the Deed of Trust.
C. In connection with the substitution, Borrower has on even
date herewith executed and delivered to Lender that certain Deed of Trust,
Assignment of Leases and Rents and Security Agreement, from Borrower to Stewart
Title Company of Mississippi for the benefit of Lender, securing certain real
property located in Hinds County, Mississippi (which, along with all other
documentation delivered by Borrower in connection with the Substitution is
referred to collectively as, the "Substitution Loan Documents"). In addition to
the Substitution Loan Documents, Borrower and Lender desire to amend the Loan
Documents to evidence the Substitution and the release of the Released Property.
D. Capitalized terms not otherwise defined herein shall have
the meaning ascribed to them in the Loan Agreements.
AGREEMENTS:
NOW THEREFORE, in consideration of the foregoing recitals (which are
hereby incorporated herein by this reference) and the mutual covenants and
promises of the parties hereto and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties agree
as follows:
1. AMENDMENT TO LOAN AGREEMENT.
The Loan Agreement is amended as follows:
a. The following definitions in Section 1 of the Loan
Agreement, and as incorporated by reference in the Loan Documents, shall mean
the following:
i. "Asset" and "Property" as each term is defined in the Loan
Agreement shall hereinafter include the property shown on EXHIBIT A attached
hereto and incorporated herein by this reference (the "Property") and shall
exclude the Released Property;
2
<PAGE> 3
Borrower: FelCor Lodging Company, L.L.C.
Loan Number:
ii. "Security Documents" as that term is defined in the Loan
Agreement shall include the Substitution Loan Documents and shall exclude any
Loan Documents to the extent, and only to the extent, that such Loan Documents
relate to the Released Property.
b. All references in each of the Loan Documents to the Loan
Agreement shall mean the Loan Agreement as amended herein.
c. The words "Holiday Inn - Jackson Southwest" on Schedule IV
of the Loan Agreement shall be deleted and the following inserted in lieu
thereof: "Hampton Inn - Jackson".
d. The entry beginning with X-9 on Schedule V of the Loan
Agreement shall be deleted in its entirety and the following inserted in lieu
thereof:
<TABLE>
<S> <C> <C> <C>
X-9 Hampton Inn Hampton Inn License Agreement by and Hampton Inn
465 Briarwood Drive between Promus Hotels, Inc. and
Jackson, Mississippi Bristol Hotel Tenant Company dated July 24,
1998
</TABLE>
e. The entry beginning with X-9 on Schedule VI shall be
deleted in its entirety and the following inserted in lieu thereof:
<TABLE>
<S> <C> <C> <C> <C>
X-9 Hampton Inn Management Agreement by
465 Briarwood Drive and between Bristol Hotel none none none
Jackson, Mississippi Tenant Company and Bristol
Management, L.P. dated
July 27, 1998
</TABLE>
f. The entry beginning with X-9 on Schedule VII of the Loan
Agreement shall be deleted in its entirety and the following inserted in lieu
thereof:
3
<PAGE> 4
Borrower: FelCor Lodging Company, L.L.C.
Loan Number:
<TABLE>
<S> <C> <C> <C>
X-9 Hampton Inn owned in fee simple none
465 Briarwood Drive
Jackson, Mississippi
</TABLE>
g. The entry beginning with X-9 on Schedule XVI shall be
deleted in its entirety and the information shown on EXHIBIT B attached hereto
and incorporated herein by this reference shall be inserted in lieu thereof.
2. AMENDMENT TO ENVIRONMENTAL AND HAZARDOUS SUBSTANCE INDEMNIFICATION AGREEMENT:
The Environmental and Hazardous Substance Indemnification Agreement
from Borrower to Lender dated October 10, 1997 is amended as follows:
a. The following sentence shall be added after the word "mortgagee" in
the definition of Mortgages in Section 1.1:
"and that certain Deed of Trust, Assignment of Leases and
Rents and Security Agreement dated May __, 1999, executed by
FelCor Lodging Company, L.L.C., a Delaware limited liability
company, as successor-by-merger to Bristol Lodging Company, a
Delaware corporation, as mortgagor in favor of Lender as
mortgagee,"
3. AMENDMENT TO PLEDGE AND SECURITY AGREEMENT:
The Pledge and Security Agreement from Borrower to Lender dated October
10, 1997 is amended as follows:
All references in the Pledge and Security Agreement to the Loan
Agreement shall mean the Loan Agreement as amended herein.
4
<PAGE> 5
Borrower: FelCor Lodging Company, L.L.C.
Loan Number:
4. AMENDMENT TO DEPOSIT ACCOUNT AGREEMENT:
The Deposit Account Agreement from Borrower to Lender dated
October 10, 1997 is amended as follows:
The Deposit Account Agreement shall be modified by adding the legal
description attached hereto as EXHIBIT A and incorporated herein by this
reference to Exhibit A of the Deposit Account Agreement and by deleting the
portion of Exhibit A to the Deposit Account Agreement which describes the
Released Property.
5. DELIVERIES UNDER THE LOAN DOCUMENTS.
(a) Pursuant to Section 2.4.4 of the Loan Agreement, attached hereto as
EXHIBIT C is a copy of the Opinion of Borrower's Counsel, dated as of the
effective date of this Agreement, delivered by Jenkins & Gilchrist, a
Professional Corporation, in connection with the Substitution, regarding
non-consolidation.
(b) Pursuant to Section 2.4.4 of the Loan Agreement, attached hereto as
EXHIBIT D are copies of the written confirmation delivered by each of the Rating
Agencies, stating that the Substitution does not result in a qualification,
withdrawal or downgrading of the Loan or, in the alternative, that said Rating
Agency is satisfied that no further inquiry into the Substitution is necessary.
6. NO DEFAULTS. Borrower hereby represents and warrants that, to its knowledge,
as of the effective date of this Agreement, no monetary or other material
default has occurred and is continuing beyond any applicable grace or notice
period under any of the Loan Documents.
7. NO OFFSETS OR DEFENSES. Borrower hereby acknowledges, confirms and warrants
to Lender that to Borrower's knowledge as of the effective date of this
Agreement, Borrower neither has nor claims any offset, defense, claim, right of
set-off or counterclaim against Lender under, arising out of or in connection
with this Agreement, the Notes, or any of the other Loan Documents.
8. MODIFICATIONS. This Agreement may not be amended, modified or otherwise
changed in any manner except by a writing executed by all of the parties hereto.
5
<PAGE> 6
Borrower: FelCor Lodging Company, L.L.C.
Loan Number:
9. SUCCESSORS AND ASSIGNS. This Agreement applies to, inures to the benefit of,
and binds all parties hereof, their heirs, legatees, devisees, administrators,
executors, and permitted successors and assigns.
10. GOVERNING LAW. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of New York, without giving effect to the
conflict of laws provisions of said State.
11. ENTIRE AGREEMENT. This Agreement the Loan Documents, and the Substitution
Loan Document constitutes all of the agreements among the parties relating to
the matters set forth herein and supersedes all other prior or concurrent oral
or written letters, agreements and understandings with respect to the matters
set forth herein.
12. FULL FORCE AND EFFECT. The Loan Documents as amended hereby remain in full
force and effect.
13. COUNTERPARTS. This Agreement may be signed in any number of counterparts by
the parties hereto, all of which taken together shall constitute one and the
same instrument.
[signatures continued on the following page]
6
<PAGE> 7
Borrower: FelCor Lodging Company, L.L.C.
Loan Number:
IN WITNESS WHEREOF, the parties hereto have executed this Agreement,
under seal, as of the date first written above.
BORROWER:
FELCOR LODGING COMPANY, L.L.C., a
Delaware limited liability company
By: /s/ JOEL M. EASTMAN
----------------------------(SEAL)
Name: Joel M. Eastman
Title: Vice President
STATE OF TEXAS
COUNTY OF DALLAS
Personally appeared before me, the undersigned authority in and for the
said County and State, on this 28 day of May, 1999, within my jurisdiction, the
within named Joel M. Eastman, who acknowledged that he is Vice President of
FelCor Lodging Company, L.L.C. a Delaware limited liability company, and that
for and on behalf of the said limited liability company, and as its act and
deed, he executed the above and foregoing instrument, after first having been
duly authorized by said limited liability company so to do.
/s/ SCARLETT RAY
-------------------------------
NOTARY PUBLIC
My Commission Expires:
7-28-01
- ---------------------
[AFFIX NOTARIAL SEAL]
[NOTARY SEAL]
[signatures continued on the following page]
7
<PAGE> 8
Borrower: FelCor Lodging Company, L.L.C.
Loan Number:
GUARANTOR:
FELCOR LODGING HOLDING COMPANY,
L.L.C., a Delaware limited liability company
By: /s/ JOEL M. EASTMAN
----------------------------
Name: Joel M. Eastman
Title: Vice resident
[CORPORATE SEAL]
STATE OF TEXAS
COUNTY OF DALLAS
Personally appeared before me, the undersigned authority in and for the
said County and State, on this 28 day of May, 1999, within my jurisdiction, the
within named Joel M. Eastman, who acknowledged that he is Vice President of
Bristol Lodging Holding Company, L.L.C. a Delaware corporation, and that for and
on behalf of the said limited liability company, and as its act and deed, he
executed the above and foregoing instrument, after first having been duly
authorized by said limited liability company so to do.
/s/ SCARLETT RAY
--------------------------
NOTARY PUBLIC
My Commission Expires:
7-28-01
- -----------------------------
[AFFIX NOTARIAL SEAL]
[NOTARY SEAL]
[signatures continued on the following page]
8
<PAGE> 9
Borrower: FelCor Lodging Company, L.L.C.
Loan Number:
LENDER:
LaSALLE NATIONAL BANK, as Trustee for Nomura
Asset Securities Corporation Commercial
Mortgage Pass- Through Certificates Series 1998-D6
By: AMRESCO Services, L.P., its authorized
agent
By: AMRESCO Mortgage Capital, Inc.
its general partner
By:
-----------------------------------
Name:
---------------------------------
Title: Servicing Officer
STATE OF
---------
COUNTY OF
--------
Personally appeared before me, the undersigned authority in and for the
said County and State, on this ____ day of May, 1999, within my jurisdiction,
the within named __________, who acknowledged that he is ______________ of
LaSalle National Bank, as Trustee for Nomura Asset Securities Corporation
Commercial Mortgage Pass-Through Certificates Series 1998-D6, its authorized
agent, and that for and on behalf of the said limited liability company, and as
its act and deed, he executed the above and foregoing instrument, after first
having been duly authorized by said limited liability company so to do.
--------------------------------------
NOTARY PUBLIC
My Commission Expires:
- ----------------------------------
[AFFIX NOTARIAL SEAL]
9
<PAGE> 10
Borrower: FelCor Lodging Company, L.L.C.
Loan Number:
CONSENT OF GUARANTORS
FELCOR LODGING HOLDING COMPANY, L.L.C. and BRISTOL LODGING
BEVERAGE as Guarantors do hereby consent to the modification of the Loan, do
hereby agree that such documents constitute a part of the "Loan Documents" as
defined in the Loan Agreement, do hereby agree that the Property is a
Substituted Added Asset and as such is part of the Guaranteed Obligations as
such term is defined in the Guaranty and do hereby agree that the Guaranty and
all Guarantor's obligations thereunder remain in full force and effect.
IN WITNESS WHEREOF, Guarantors have executed this Consent under seal as
of the day and year first above written.
FELCOR LODGING HOLDING COMPANY,
L.L.C., a Delaware corporation
By: /s/ JOEL M. EASTMAN
--------------------------------------
Name: Joel M. Eastman
Title: Vice President
[CORPORATE SEAL]
BRISTOL LODGING BEVERAGE
COMPANY, a Texas corporation
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
[CORPORATE SEAL]
10
<PAGE> 11
EXHIBIT A
A certain parcel of land being situated in the South One-Half of the Northeast
Quarter of Section 12, Township 6 North, Range 1 East, Jackson, Hinds County,
Mississippi, containing 2.013 acres, more or less, and being more particularly
described as follows:
Commence at an iron rod commonly held to mark the North line of Section 12,
Township 6 North, Range 1 East, being on the line between the East one-half and
the West one-half of said Section 12, said iron rod being 134 feet North of the
Southeast corner of Lot 1, Homewood Subdivision, according to the map or plat
thereof, on file and of record in the office of the Chancery Clerk of Hinds
County of Jackson, Mississippi in Plat Book 4, page 83; from said iron rod, run
thence South 00 degrees 27 minutes West along the aforesaid line between the
East one-half and the West one-half of said Section 12 for a distance of 1,645.6
feet to an iron pin in concrete marking the Southeast corner of Lot 36, Block
"B", Homewood Subdivision, according to the map or plat thereof on file of
record in the office of the Chancery Clerk of Hinds County at Jackson,
Mississippi, in Plat Book 4, at page 76; continue thence South 00 degrees 27
minutes West for a distance of 665.0 feet to a 5/8-inch iron rod which is
described as the Point of Beginning of that certain lease executed by Theo P.
Costas, Jr., et al, to Ashy-Brown, Mississippi Centers recorded in Book 2052 at
Page 488, and an amendment to the description recorded in Book 2212 at page 608;
run thence South 89 degrees 46 minutes East and along the North line of the
property described in said instruments, for a distance of 283.67 feet to an iron
pin on the East line of that certain fifty foot (50) wide easement described in
said instruments; run thence North 00 degrees 27 minutes East along said East
line of a fifty foot (50') wide easement for a distance of 210.0 feet to the
Point of Beginning of the parcel of land herein described; continue thence North
00 degrees 27 minutes East along said East line of the aforesaid fifty foot
(50') wide easement for a distance of 409.165 feet to the intersection of said
East line of the aforesaid fifty foot (50') wide easement with the South
Right-of-Way line of Briarwood Drive (as now laid out and improved, July 1984);
run thence North 89 degrees 23 minutes 32 seconds East along said South
Right-of-Way line of Briarwood Drive for a distance of 172.405 feet to the
Northwest corner of that parcel of property conveyed to Texaco, Inc., and
recorded in Deed Book 1970 at Page 34; leaving said South Right-of-Way line of
Briarwood Drive, run along the West line of that property conveyed to Texaco,
Inc. the following courses and distances: South 00 degrees 02 minutes 13 seconds
East for a distance of 20.245 feet to a point; South 00 degrees 02 minutes 13
seconds East for a distance of 32.96 feet to a point; South 00 degrees 02
minutes 13 seconds East for a distance of 23.96 feet to a point; and South 00
degrees 02 minutes 13 seconds East for a distance of 157.47 feet to a 1/2-inch
rebar found; run thence along the South line of that property conveyed to
Texaco, Inc. the following courses and distances: North 89 degrees 36 minutes 17
seconds East for a distance of 184.18 feet to a point and South 73 degrees 00
minutes 56 seconds East for a distance of 35.43 feet to a point on the West
Right-of-Way line of Interstate Highway No. 55 (as now laid out and improved,
July 1984; run thence South 00 degrees 39 minutes West along said West
Right-of-Way of Interstate Highway No. 55 for a distance of 67.68 feet to a
1/2-inch rebar found the Northeast corner of that parcel of land conveyed to
Franchise Realty Corporation and recorded in Deed Book 2422 at Page 626; leaving
said West Right-of-Way line of Interstate Highway No. 55, run thence North 89
degrees 46 minutes West along the North line of Franchise Realty Interstate
Corporation tract for a distance of 218.27 feet to an iron pin; run thence South
00 39 degrees 00 West along the Franchise Realty Interstate Corporation parcel
for a distance of 100.00 feet to a 1/2-inch rebar found; run thence North 89
degrees 46 minutes West along the North line of Franchise Realty Interstate
Corporation for a distance of 172.47 feet to the Point of Beginning.
<PAGE> 12
EXHIBIT B
<TABLE>
<CAPTION>
1996 1996
ASSESS ASSESSED MARKET 1996 1996
PROPERTY TYPE JURISDICTION TO PAY RATIO VALUE VALUE TAX RATE TAXES
<S> <C> <C> <C> <C> <C> <C> <C>
JACKSON - HAMPTON INN NORTH PP HINDS COUNTY 15.00% 31,966 213,107 16.23300% 5,189
JACKSON - HAMPTON INN NORTH RE HINDS COUNTY 15.00% 389,397 2,595,980 16.23300% 63,211
JACKSON - HAMPTON INN NORTH RE HINDS COUNTY 15.00% 24,713 164,750 16.23300% 4,012
</TABLE>
<TABLE>
<CAPTION>
1997 1997
ASSESS ASSESSED MARKET 1997 1997
PROPERTY TYPE JURISDICTION TO PAY RATIO VALUE VALUE TAX RATE ACTUAL
<S> <C> <C> <C> <C> <C> <C> <C>
JACKSON - HAMPTON INN NORTH PP HINDS COUNTY 15.00% 45,804 305,360 16.23300% 7,435
JACKSON - HAMPTON INN NORTH RE HINDS COUNTY 15.00% 390,767 2,605,110 16.23300% 63,433
JACKSON - HAMPTON INN NORTH RE HINDS COUNTY 15.00% 24,719 164,790 16.23300% 4,013
</TABLE>
<TABLE>
<CAPTION>
1998 1998
ASSESS ASSESSED MARKET 1998 1998
PROPERTY TYPE JURISDICTION TO PAY RATIO VALUE VALUE TAX RATE ACTUAL
<S> <C> <C> <C> <C> <C> <C> <C>
JACKSON - HAMPTON INN NORTH PP HINDS COUNTY 15.00% 44,435 296,230 16.29300% 7,240
JACKSON - HAMPTON INN NORTH RE HINDS COUNTY 15.00% 383,973 2,559,820 16.29300% 62,561
JACKSON - HAMPTON INN NORTH RE HINDS COUNTY 15.00% 24,719 164,790 16.29300% 4,027
</TABLE>
<PAGE> 1
EXHIBIT 10.21.4
THIRD AMENDMENT
to
LOAN AGREEMENT
THIS THIRD AMENDMENT TO LOAN AGREEMENT ("Third Amendment"), dated as of
December 1, 1999 among FELCOR LODGING TRUST INCORPORATED, a Maryland corporation
("FelCor") and FELCOR LODGING LIMITED PARTNERSHIP, a Delaware limited
partnership ("FelCor LP" and collectively with FelCor, the "Borrower"), the
financial institutions listed on the signature pages hereof (each individually a
"Lender" and collectively the "Lenders"), and THE CHASE MANHATTAN BANK, as
administrative agent for the Lenders (in such capacity, the "Administrative
Agent").
W I T N E S S E T H :
WHEREAS, that certain Loan Agreement, dated as of April 1, 1999, among
Borrower, the financial institutions party thereto, and the Administrative Agent
provides for the making of a loan to Borrower in the aggregate principal amount
of $375,000,000 (as amended, the "Loan Agreement");
WHEREAS, pursuant to that certain Second Amendment to Loan Agreement
("Second Amendment"), dated as of August 20, 1999 among the parties thereto, the
parties modified, among other things, the provisions in the Loan Agreement
governing Restricted Payments to allow the Borrower to repurchase an amount of
its own Stock in excess of the limitations contained therein (the "Additional
Stock Repurchase Amount") in an amount of up to $50,000,000.00; and
WHEREAS, the parties hereto desire to further amend the Loan Agreement
to increase the Additional Stock Repurchase Amount to $275,000,000.00 and to
make certain modifications to the financial covenants in connection therewith.
NOW, THEREFORE, in consideration of Ten Dollars ($10.00) and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree that the Loan Agreement is amended
as follows:
1. Under Section 1.1 of the Loan Agreement, the definition of "Applicable
Margin" is hereby deleted in its entirety and the following is hereby
substituted in place thereof:
"`Applicable Margin' means, with respect to each
Loan, the applicable percentage per annum set forth below
based upon the Status in effect on the most recent Applicable
Margin Reset Date, it being understood that the Applicable
Margin for (i) Base Rate Loans shall be the
<PAGE> 2
percentage set forth under the column "Base Rate Loans", and
(ii) Eurodollar Rate Loans shall be the percentage set forth
under the column "Eurodollar Rate Loans":
<TABLE>
<CAPTION>
Base Rate Eurodollar Rate
Loans Loans
----- -----
<S> <C> <C>
Level I Status 1.00% 2.5%
Level II Status 1.25% 2.75%
</TABLE>
2. Under Section 1.1 of the Loan Agreement, there is hereby added thereto (in
alphabetical order) a new defined term which shall read as follows:
"Applicable Margin Reset Date' shall mean the 45th
day following the end of the most recent Fiscal Quarter."
3. Under Section 1.1 of the Loan Agreement, there is hereby added thereto (in
alphabetical order) a new defined term which shall read as follows:
"Status' means the existence of Level I Status or
Level II Status, as the case may be.
As used in this definition:
"Level I Status" exists on any date if, on
such date, each Borrower has a long-term senior
unsecured actual debt rating of better than BB by S&P
and better than Ba2 by Moody's;
"Level II Status" exists on any date if, on
such date, either Borrower has a long-term senior
unsecured actual debt rating of BB or lower by S&P or
Ba2 or lower by Moody's;
provided that (i) if S&P and/or Moody's shall cease
to issue ratings of debt securities of real estate
investment trusts generally, then the Administrative
Agent and the Borrower shall negotiate in good faith
to agree upon a substitute rating agency or agencies
(and to correlate the system of ratings of each
substitute rating agency with that of the rating
agency for which it is substituting) and (a) until
such substitute rating agency or agencies are agreed
upon, Status shall be determined on the basis of the
rating assigned by the other rating agency (or, if
both S&P and Moody's shall have so ceased to issue
such ratings, on the basis of the Status in effect
immediately prior thereto) and (b) after such
substitute rating agency or agencies are agreed upon,
Status shall be determined on
2
<PAGE> 3
the basis of the rating assigned by the other rating
agency and such substitute rating agency or the two
substitute rating agencies, as the case may be; and
(ii) if the long-term senior unsecured actual debt
ratings of either Borrower by S&P and Moody's are not
equivalent, the lower rating will apply for the
purposes of determining Status."
4. Under Section 2.8(a) of the Loan Agreement, subsection (i) is hereby
deleted in its entirety and the following is hereby substituted in place
thereof:
"(i) For Base Rate Loans, at a rate per annum equal
at all times to the Base Rate in effect from time to time plus
the Applicable Margin, payable monthly on the first day of
each month, on the Maturity Date and on the date any Base Rate
Loan is converted or paid in full."
5. Under Section 5.1 of the Loan Agreement, entitled Unsecured Interest
Expense Coverage, the ratio of "2.5:1.0" is hereby deleted and the ratio of
"2.25:1.0" is hereby substituted in place thereof.
6. Under Section 5.2 of the Loan Agreement, entitled Fixed Charge Coverage
Ratio, the ratio of "2.0:1.0" is hereby deleted and the ratio of "1.75:1.0"
is hereby substituted in place thereof.
7. Under Section 5.4 of the Loan Agreement, entitled Limitations on Total
Indebtedness, the percentage of "50%" is hereby deleted and the percentage
of "55%" is hereby substituted in place thereof.
8. Under Section 7.4 of the Loan Agreement (as amended), in the proviso to the
last sentence of said section the words "in an amount of up to
$50,000,000.00" are hereby deleted and the following is hereby substituted
in place thereof:
"for an aggregate purchase price not to exceed $275,000,000.00
from and after August 20, 1999 through the end of the term of
the Loans (including any extension thereof)"
9. The Loan Agreement and the other Loan Documents are in full force and
effect without default thereunder by Borrower and all of the
representations and warranties contained in the Loan Agreement and the
other Loan Documents are hereby restated as if the same were made as of the
date hereof (it being understood and agreed that any representation or
warranty which by its terms is made on a specified date shall be required
to be true and correct only as of such specified date).
10. If there shall be any inconsistencies between the terms, covenants,
conditions and provisions set forth in the Loan Agreement, and the terms,
covenants, conditions and provisions set forth in this Third Amendment,
then, the terms, covenants, conditions and provisions of this Third
Amendment shall prevail. Whenever possible, the provisions of this Third
Amendment shall be deemed supplemental to and not in derogation of the
terms of the Loan Agreement and any documents relating thereto.
3
<PAGE> 4
11. Any capitalized term used but not defined herein shall have the meaning set
forth in the Loan Agreement.
12. Each party hereto hereby confirms and ratifies all of the terms and
provisions of the Loan Agreement as amended by this Third Amendment. Except
as expressly amended hereby, all of the terms of the Loan Agreement shall
remain in full force and effect.
13. Each party hereto represents, warrants and covenants that such party (and
the undersigned representative of such party) has full power, authority and
legal right to execute this Third Amendment and to keep and observe all of
the terms of this Third Amendment and the Loan Agreement on such party's
part to be observed and performed.
14. If any term, covenant or condition of this Third Amendment shall be held to
be invalid, illegal or unenforceable in any respect, this Third Amendment
shall be construed without such provision.
15. This Third Amendment shall be binding upon the successors and assigns of
the Borrower and shall inure to the benefit of and be enforceable by the
Administrative Agent under the Loan Agreement and its successors and
assigns; provided that no Borrower may assign any of its rights or
obligations hereunder without the prior written consent of the
Administrative Agent. THIS THIRD AMENDMENT SHALL BE CONSTRUED AND ENFORCED
IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE STATE OF NEW YORK
(WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS).
16. This Third Amendment may be executed in any number of separate
counterparts, each of which shall, collectively and separately, constitute
one agreement.
[SIGNATURES BEGIN ON THE FOLLOWING PAGE]
4
<PAGE> 5
IN WITNESS WHEREOF, this instrument has been duly executed by the
undersigned as of the day and year first above written.
FELCOR LODGING TRUST INCORPORATED,
a Maryland corporation
By: /s/ LAWRENCE D. ROBINSON
----------------------------------
Name: Lawrence D. Robinson
Title: Senior Vice President
[SIGNATURES CONTINUE ON FOLLOWING PAGE]
<PAGE> 6
FELCOR LODGING LIMITED PARTNERSHIP, a
Delaware limited partnership
By: FELCOR LODGING TRUST INCORPORATED, a
Maryland corporation, its sole general partner
By: /s/ LAWRENCE D. ROBINSON
----------------------------------
Name: Lawrence D. Robinson
Title: Senior Vice President
[SIGNATURES CONTINUE ON FOLLOWING PAGE]
<PAGE> 7
SIGNATURE FOR LOAN AGREEMENT
THE CHASE MANHATTAN BANK,
as Administrative Agent
By: /s/ ALAN BREINDEL
------------------------
Name: Alan Breindel
Title: Managing Director
[SIGNATURES CONTINUE ON FOLLOWING PAGE]
<PAGE> 8
[REMAINDER OF SIGNATURE PAGES INTENTIONALLY OMITTED]
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES OF FELCOR LODGING TRUST INCORPORATED
(AS OF 12/31/99)
The following lists all of the subsidiaries of FelCor Lodging Trust Incorporated
by name, state of organization and type of entity:
<TABLE>
<CAPTION>
STATE OF
NAME OF SUBSIDIARY ORGANIZATION TYPE OF ENTITY
- ------------------ ------------ --------------
<S> <C> <C>
Special Remote I, Inc. Delaware Corporation
FelCor Nevada Holdings, L.L.C. Nevada Limited Liability Company
FelCor Lodging Limited Partnership Delaware Limited Partnership
FelCor/CSS Hotels, L.L.C. Delaware Limited Liability Company
FelCor/LAX Hotels, L.L.C. Delaware Limited Liability Company
FelCor/CSS Holdings, L.P. Delaware Limited Partnership
FelCor/St. Paul Holdings, L.P. Delaware Limited Partnership
FelCor/LAX Holdings, L.P. Delaware Limited Partnership
Los Angeles International Airport Hotel Texas Limited Partnership
Associates, L.P.
FelCor/Charlotte Hotel, L.L.C. Delaware Limited Liability Company
FelCor/Indianapolis Hotel, L.L.C. Delaware Limited Liability Company
E. S. Charlotte Limited Partnership Minnesota Limited Partnership
E.S. North, an Indiana Limited Partnership Indiana Limited Partnership
FelCor Eight Hotels, L.L.C. Delaware Limited Liability Company
Promus/FCH Development Company, L.L.C. Delaware Limited Liability Company
Promus/FCH Condominium Company, L.L.C. Delaware Limited Liability Company
</TABLE>
<PAGE> 2
<TABLE>
<CAPTION>
STATE OF
NAME OF SUBSIDIARY ORGANIZATION TYPE OF ENTITY
- ------------------ ------------ --------------
<S> <C> <C>
EPT Atlanta-Perimeter Center Limited Delaware Limited Partnership
Partnership
EPT Austin Limited Partnership Delaware Limited Partnership
EPT Covina Limited Partnership Delaware Limited Partnership
EPT Kansas City Limited Partnership Delaware Limited Partnership
EPT Meadowlands Limited Partnership Delaware Limited Partnership
EPT Overland Park Limited Partnership Delaware Limited Partnership
EPT Raleigh Limited Partnership Delaware Limited Partnership
EPT San Antonio Limited Partnership Delaware Limited Partnership
FCH/DT Hotels, L.L.C. Delaware Limited Liability Company
FCH/DT Holdings, L.P. Delaware Limited Partnership
FCH/DT BWI Holdings, L.P. Delaware Limited Partnership
Kingston Plantation Development Corp. Delaware Corporation
FCH/PSH, L.P. Pennsylvania Limited Partnership
Promus/FelCor Lombard Venture Illinois General Partnership
MHV Joint Venture Texas General Partnership
Promus/FelCor Parsippany Venture New Jersey General Partnership
Promus/FelCor San Antonio Venture Texas General Partnership
Promus/FelCor Hotels, L.L.C. Delaware Limited Liability Company
Promus/FelCor Manager, Inc. Delaware Corporation
</TABLE>
-2-
<PAGE> 3
<TABLE>
<CAPTION>
STATE OF
NAME OF SUBSIDIARY ORGANIZATION TYPE OF ENTITY
- ------------------ ------------ --------------
<S> <C> <C>
Brighton at Kingston Plantation, L.L.C. Delaware Limited Liability Company
FelCor Hotel Operating Company, L.L.C. Delaware Limited Liability Company
FelCor Hospitality Company, L.L.C. Delaware Limited Liability Company
FelCor Hospitality Holding Company, L.L.C. Delaware Limited Liability Company
FelCor St. Louis Company, L.L.C. Delaware Limited Liability Company
FelCor Hotel Asset Company, L.L.C. Delaware Limited Liability Company
FelCor HHCL Company, L.L.C. Delaware Limited Liability Company
FelCor Hotels GenPar, L.L.C. Delaware Limited Liability Company
FelCor Hotels Limpar, L.L.C. Delaware Limited Liability Company
FelCor Hotels Financing I, L.L.C. Delaware Limited Liability Company
FelCor Hotels Financing II, L.L.C. Delaware Limited Liability Company
FelCor Chat-Lem, L.L.C. Delaware Limited Liability Company
FelCor Lodging Company, L.L.C. Delaware Limited Liability Company
FelCor Lodging Holding Company, L.L.C. Delaware Limited Liability Company
FelCor Philadelphia Center, L.L.C. Delaware Limited Liability Company
FelCor Pennsylvania Company, L.L.C. Delaware Limited Liability Company
FelCor Airport Utilities, L.L.C. Delaware Limited Liability Company
FelCor Salt Lake, L.L.C. Delaware Limited Liability Company
FelCor Omaha Hotel Company, L.L.C. Delaware Limited Liability Company
FelCor Moline Hotel, L.L.C. Delaware Limited Liability Company
</TABLE>
-3-
<PAGE> 4
<TABLE>
<CAPTION>
STATE OF
NAME OF SUBSIDIARY ORGANIZATION TYPE OF ENTITY
- ------------------ ------------ --------------
<S> <C> <C>
FelCor Country Villa Hotel, L.L.C. Delaware Limited Liability Company
FelCor Marshall Motels, L.L.C. Delaware Limited Liability Company
FelCor Canada Holding GP, L.L.C. Delaware Limited Liability Company
FelCor Canada Co. Nova Scotia Unlimited Liability Company
FelCor Canada Holding, L.P. Delaware Limited Partnership
FelCor Hotel Company, Ltd. Texas Limited Partnership
FelCor Hotels Investments I, Ltd. Texas Limited Partnership
FelCor Hotels Investments II, Ltd. Texas Limited Partnership
HHHC GenPar, L.P. Delaware Limited Partnership
Center City Hotel Associates Pennsylvania Limited Partnership
HI Chat-Lem/Iowa - New Orleans Venture Louisiana General Partnership
FHAC Nevada Holdings, L.L.C. Nevada Limited Liablity Company
FHAC Texas Holdings, L.P. Texas Limited Partnership
FelCor/MM Hotels, L.L.C. Delaware Limited Liability Company
FelCor/MM Holdings, L.P. Delaware Limited Partnership
FelCor Hotels GenPar II, L.L.C. Delaware Limited Liability Company
FelCor Hotel Company II, Ltd. Texas Limited Partnership
FelCor/New Orleans Annex, L.L.C. Delaware Limited Liability Company
Park Central Joint Venture Texas General Partnership
Tysons Corner Hotel Company, L.L.C. Delaware Limited Liability Company
</TABLE>
-4-
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration
statements of FelCor Lodging Trust Incorporated on Form S-3 (File Nos.
333-04947, 333-25717, 333-46357, 333-50509, and 333-62599) and Form S-8 (File
Nos. 333-32579, and 333-66041) of FelCor Lodging Trust Incorporated of our
reports dated (i) February 1, 2000 (except as to the information in Note 18, for
which the date is March 15, 2000) on our audits of the consolidated financial
statements and financial statement schedule of FelCor Lodging Trust
Incorporated, and (ii) March 20, 2000 on our audit of the consolidated financial
statements of DJONT Operations, L.L.C., which reports are included in this
Annual Report on Form 10-K. We also consent to the reference to our firm under
the caption "Selected Financial Data."
PricewaterhouseCoopers LLP
Dallas, Texas
March 30, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FELCOR
LODGING TRUST INCORPORATED 10K DATED 12/31/99 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH 10K.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 36,123
<SECURITIES> 0
<RECEIVABLES> 26,154
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 62,277
<PP&E> 4,365,899
<DEPRECIATION> 330,555
<TOTAL-ASSETS> 4,255,751
<CURRENT-LIABILITIES> 105,137
<BONDS> 1,833,954
0
295,000
<COMMON> 693
<OTHER-SE> 1,879,218
<TOTAL-LIABILITY-AND-EQUITY> 4,255,751
<SALES> 0
<TOTAL-REVENUES> 504,001
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 125,435
<INCOME-PRETAX> 131,957
<INCOME-TAX> 0
<INCOME-CONTINUING> 131,957
<DISCONTINUED> 0
<EXTRAORDINARY> 1,113
<CHANGES> 0
<NET-INCOME> 131,080
<EPS-BASIC> 1.57
<EPS-DILUTED> 1.57
</TABLE>
