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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 9, 1996
REGISTRATION STATEMENT NO. 333-12973
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
AMENDMENT NO. 2
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
PATRIOT AMERICAN HOSPITALITY, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
VIRGINIA 75-2599709
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
3030 LBJ FREEWAY
SUITE 1500
DALLAS, TEXAS 75234
(972) 888-8000
(ADDRESS, INCLUDING ZIP CODE AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
PAUL A. NUSSBAUM
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
3030 LBJ FREEWAY, SUITE 1500
DALLAS, TEXAS 75234
(972) 888-8000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
----------------
COPY TO:
GILBERT G. MENNA, P.C.
KATHRYN I. MURTAGH, ESQ.
GOODWIN, PROCTER & HOAR LLP
EXCHANGE PLACE
BOSTON, MA 02109
(617) 570-1000
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: From time to
time after this registration statement becomes effective.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box. [_] .
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [X] .
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_] .
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_] .
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE
REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
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++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL NOR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION
PROSPECTUS PRELIMINARY PROSPECTUS DATED DECEMBER 9, 1996
3,083,592 SHARES
PATRIOT AMERICAN HOSPITALITY, INC.
COMMON STOCK
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Patriot American Hospitality, Inc. (collectively with its subsidiaries, the
"Company") is a self-administered real estate investment trust ("REIT")
organized under the laws of Virginia, which owns hotels in several states
diversified by franchise or brand affiliation (the "Hotels"). The Company's
stock, no par value per share (the "Common Stock") is listed on the New York
Stock Exchange (the "NYSE") under the symbol "PAH".
This prospectus (the "Prospectus") relates to (i) the possible issuance from
time to time by the Company of up to 2,839,937 shares of Common Stock (the
"Redemption Shares"), if and to the extent that holders ("Unitholders") of up
to 2,839,937 units of limited partnership interest ("Units") in Patriot
American Hospitality Partnership, L.P., a Virginia limited partnership (the
"Operating Partnership") receive such shares in exchange for Units; and (ii)
the registration of 243,655 shares of Common Stock (the "Restricted Stock")
being registered for the account of certain persons named herein (collectively,
the "Registering Stockholders"). The Units were issued in connection with the
formation of the Company in October 1995 and in subsequent private placements
in connection with property acquisitions. The Restricted Stock was issued in
connection with the formation of the Company and pursuant to the Company's 1995
Stock Option and Incentive Plan (the "1995 Plan") and the Company's Non-
Employee Director's Incentive Plan (the "Directors Plan").
Pursuant to the agreement of limited partnership of the Operating Partnership
(the "Operating Partnership Agreement"), a Unitholder may tender its Units to
the Operating Partnership for cash; provided, however, that the Company may
acquire any Units so tendered for an equivalent number of shares of Common
Stock. The Company anticipates that it generally will elect to issue Common
Stock in exchange for Units tendered for redemption rather than paying cash. As
a result, the Company may from time to time issue up to 2,839,937 Redemption
Shares upon the acquisition of Units tendered to the Operating Partnership for
redemption. Accordingly, the Company is registering the Redemption Shares to
provide Unitholders with freely tradeable securities upon redemption.
Each of the Registering Stockholders, directly or through agents, dealers or
underwriters, may, from time to time, sell all or a portion of the Restricted
Stock on terms to be determined at the time of sale. To the extent required,
the specific terms of a particular offer will be set forth in an accompanying
Prospectus Supplement. Each Registering Stockholder reserves the right to
accept and, together with its agents, dealers or underwriters, to reject, in
whole or in part, any proposed purchase of Restricted Stock.
The Company will not receive any proceeds from the issuance of any Redemption
Shares. The Company will acquire additional Units in the Operating Partnership
in exchange for any Redemption Shares that the Company may issue to a
Unitholder pursuant to this Prospectus. The Company will not receive any
proceeds from the sale of shares of Restricted Stock offered hereby by the
Registering Stockholders. The Company has agreed to bear certain expenses of
registration of the Redemption Shares and the Restricted Stock under federal
and state securities laws.
To ensure that the Company maintains its qualification as a REIT, ownership
by any single person is limited to 9.8%, or 15% for certain stockholders, of
the value of any class of the outstanding capital stock of the Company.
SEE "RISK FACTORS" ON PAGE 4 FOR CERTAIN FACTORS RELEVANT TO AN INVESTMENT IN
THE COMMON STOCK.
-----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
-----------
THE DATE OF THIS PROSPECTUS IS , 1996.
<PAGE>
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the "SEC"
or "Commission") a Registration Statement on Form S-3 (the "Registration
Statement") under the Securities Act of 1933, as amended (the "Securities
Act"), with respect to the Redemption Shares and the Restricted Stock. This
Prospectus, which constitutes part of the Registration Statement, omits
certain of the information contained in the Registration Statement and the
exhibits thereto on file with the Commission pursuant to the Securities Act
and the rules and regulations of the Commission thereunder. Statements
contained in this Prospectus as to the contents of any contract or other
document referred to are not necessarily complete, and in each instance
reference is made to the copy of such contract or other document filed as an
exhibit to the Registration Statement, each such statement being qualified in
all respects by such reference. The Registration Statement, including exhibits
thereto, may be inspected and copies obtained from the Commission at Room
1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at
the following Regional Offices of the Commission: 7 World Trade Center, 13th
Floor, New York, New York 10048, and Citicorp Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661-2511. Copies of such material may be
obtained from the Public Reference Section of the Commission at Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates.
The Company files information electronically with the Commission, and the
Commission maintains a Web Site that contains reports, proxy and information
statements and other information regarding registrants (including the Company)
that file electronically with the Commission. The address of the Commissions's
Web Site is (http://www.sec.gov).
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports and proxy statements and other information with the
Commission. Such reports, proxy statements and other information can be
inspected and copied at the locations described above. Copies of such
materials can be obtained by mail from the Public Reference Section of the
Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549, at prescribed rates. In addition, the Common Stock is listed on
the New York Stock Exchange (the "NYSE"), and such materials can be inspected
and copied at the NYSE, 20 Broad Street, New York, New York 10005.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents are incorporated herein by reference:
1. The Company's Annual Report on Form 10-K for the year ended December
31, 1995, filed with the Commission pursuant to the Exchange Act;
2. The Company's Quarterly Reports on Form 10-Q for the quarters ended
March 31, 1996, June 30, 1996, and September 30, 1996 filed with the
Commission pursuant to the Exchange Act;
3. The Company's Current Reports on Form 8-K, as amended, dated December
1, 1995, April 2, 1996, October 31, 1996 and December 5, 1996, filed with
the Commission pursuant to the Exchange Act; and
4. The description of the Company's Common Stock contained in its
Registration Statement on Form 8-A, filed with the Commission pursuant to
the Exchange Act, including all amendments and reports updating such
description.
All other documents filed with the Commission by the Company pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date
of this Prospectus and prior to the termination of the offering of the
securities are to be incorporated herein by reference and such documents shall
be deemed to be a part hereof from the date of filing of such documents. Any
statement contained in this Prospectus or in a document incorporated or deemed
to be incorporated by reference herein shall be deemed to be modified or
superseded for
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<PAGE>
purposes of this Prospectus to the extent that a statement contained herein or
in any other subsequently filed document that also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.
Any person receiving a copy of this Prospectus may obtain, without charge,
upon written or oral request, a copy of any of the documents incorporated by
reference herein, except for the exhibits to such documents. Written requests
should be mailed to Rex E. Stewart, Secretary, Patriot American Hospitality,
Inc., 3030 LBJ Freeway, Suite 1500, Dallas, Texas 75234. Telephone requests
may be directed to (972) 888-8000.
3
<PAGE>
RISK FACTORS
An investment in the Common Stock involves various risks. Unitholders and
other prospective investors should carefully consider the following
information in conjunction with the other information contained in this
Prospectus before making an investment decision regarding the Redemption
Shares or the Restricted Stock.
TAX CONSEQUENCES TO UNITHOLDERS OF EXCHANGE OF UNITS
Tax Consequences of Exchange of Units. In the event that the Company
exercises its right to acquire Units tendered for redemption in exchange for
cash or Redemption Shares, the Company's acquisition of such Units will be
treated for tax purposes as a sale of the Units by the Unitholders. Such a
sale will be fully taxable to the Unitholder and the Unitholder will be
treated as realizing for tax purposes an amount equal to the sum of the cash
received or the value of the Redemption Shares received in the exchange plus
the amount of any Operating Partnership liabilities allocable to the exchanged
Units at the time of the redemption or exchange. It is possible that the
amount of gain recognized or even the tax liability resulting from such gain
could exceed the amount of cash and the value of other property (i.e.,
Redemption Shares) received upon such disposition. See "Description of Units
and Redemption of Units--Tax Consequences of Redemption." In addition, the
ability of the Unitholder to sell a substantial number of Redemption Shares in
order to raise cash to pay tax liabilities associated with the redemption of
Units may be limited as a result of fluctuations in the market price of the
Common Stock, and the price the Unitholder receives for such shares may not
equal the value of its Units at the time of redemption or exchange.
In the event that the Company does not exercise its right to acquire Units
tendered for redemption in exchange for cash or Redemption Shares, and such
Units are redeemed by the Operating Partnership for cash, the tax consequences
may differ. See "Description of Units and Redemption of Units."
Potential Change in Investment Upon Redemption of Units. If a Unitholder
exercises its right to require the redemption of all or a portion of its
Units, the Unitholder may receive cash or, at the option of the Company,
Redemption Shares in exchange for its Units. If the Unitholder receives cash
from either the Operating Partnership or the Company, the Unitholder will not
have any interest in the Company or the Operating Partnership (except to the
extent that it retains Units) and will not benefit from any subsequent
increases in the value of Common Stock and will not receive any future
distributions from the Company or the Operating Partnership (unless the
Unitholder retains or acquires in the future additional Common Stock or
Units). If the Unitholder receives Common Stock, the Unitholder will become a
stockholder of the Company rather than a holder of Units in the Operating
Partnership. See "Description of Units and Redemption of Units--Comparison of
Ownership of Units and Common Stock."
DEPENDENCE ON LESSEES AND PAYMENTS UNDER THE PARTICIPATING LEASES
The Company owns hotels in several states diversified by franchise or brand
affiliation (the "Hotels"). The Company leases each of the Hotels, except the
Crowne Plaza Ravinia and the Marriott WindWatch Hotel, which are owned through
special purpose entities to lessees that are independent from the Company (the
"Lessees") pursuant to separate participating leases (the "Participating
Leases".) The Lessees and the special purpose entities that own the Crowne
Plaza Ravinia and the Marriott WindWatch Hotel in turn have entered into
separate agreements (the "Management Agreements") with hotel management
entities (the "Operators") to operate the Hotels. Neither the Company nor its
management owns an interest in, or participates in the management of, the
Lessees or the Operators.
The Company's ability to make distributions to shareholders and to service
outstanding debt depends almost exclusively upon the ability of the Lessees to
make rent payments under the Participating Leases (which is dependent
primarily on the Lessees' ability to generate sufficient revenues from the
Hotels). Any failure or delay by the Lessees in making rent payments may
adversely affect the Company's ability to make anticipated distributions to
shareholders or make scheduled debt service payments. Such failure or delay
may be caused by
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reductions in revenue from the Hotels or in the net operating income of the
Lessees or otherwise. Although failure on the part of the Lessees to
materially comply with the terms of a Participating Lease would give the
Company the right to terminate such lease, take possession of the applicable
property and seek enforcement of the payment obligations under the lease the
Company would then be required to find another lessee to lease such property.
There can be no assurance that the Company would be able to find another
lessee or that, if another lessee were found, the Company would be able to
enter into a new lease on favorable terms.
LACK OF CONTROL OVER OPERATIONS OF THE HOTELS
The Company also is dependent on the ability of the Lessees and the
Operators to manage the Hotels. To maintain its status as a REIT, the Company
is not able to operate the Hotels or any subsequently acquired properties. As
a result, although the Company has the authority to review annual budgets for
the Hotels, and to approve certain items, the Company is unable to directly
implement strategic business decisions with respect to the marketing of its
properties, such as decisions with respect to the setting of room rates,
repositioning of a franchise, redevelopment of food and beverage operations
and certain similar decisions.
RISKS OF LEVERAGE; NO LIMITS ON INDEBTEDNESS
GENERAL
Neither the Company's Amended and Restated Bylaws (the "Bylaws") nor its
Amended and Restated Articles of Incorporation (the "Articles of
Incorporation") limit the amount of indebtedness the Company may incur. The
Company maintains a line of credit (the "Line of Credit") with PaineWebber
Real Estate Securities, Inc. ("PaineWebber"). Currently, the maximum committed
amount available under the Line of Credit is $228 million. Additionally, in
connection with the Company's acquisition of the Wyndham Greenspoint Hotel,
located in Houston, Texas, the Company incurred a single asset mortgage loan
of $22.0 million (the "Greenspoint Loan"). The Company has utilized the Line
of Credit to finance certain acquisitions of Hotels and may use the Line of
Credit to fund the acquisition of additional hotels. The Line of Credit is
currently secured by a first mortgage lien on certain of the Hotels and a
second mortgage lien on the Wyndham Greenspoint Hotel. The Line of Credit will
be secured by qualifying subsequently acquired hotels that are purchased with
borrowings under the Line of Credit. Other Hotels may be added as security for
the Line of Credit depending upon the outstanding balances thereunder. Subject
to the limitations described above, the Company may borrow additional amounts
from the same or other lenders in the future, or may issue corporate debt
securities in public or private offerings. Certain of such additional
borrowings may be secured by properties owned by the Company.
There can be no assurances that the Company will be able to meet its debt
service obligations and, to the extent that it cannot, the Company risks the
loss of some or all of its assets, including the Hotels, to foreclosure.
Adverse economic conditions could cause the terms on which borrowings become
available to be unfavorable. In such circumstances, if the Company is in need
of capital to repay indebtedness in accordance with its terms or otherwise, it
could be required to liquidate one or more investments in hotel properties at
times which may not permit realization of the maximum return on such
investments.
VARIABLE RATE DEBT
The Line of Credit and the Greenspoint Loan bear interest at a variable
rate. Economic conditions could result in higher interest rates, which could
increase debt service requirements on variable rate debt and could reduce the
amount of Cash Available for Distribution (defined as funds from operations,
adjusted for certain non-cash items, less reserves for capital expenditures).
Funds from operations means net income or loss computed in accordance with
generally accepted accounting principles, excluding gains or losses from debt
restructuring or sales of property, plus depreciation of real property, and
after adjustments for unconsolidated partnerships and joint ventures.
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RISK OF INVESTMENT IN SUBSIDIARIES
The capital stock of PAH Ravinia , Inc. ("PAH Ravinia"), the special purpose
corporation which owns the Crowne Plaza Ravinia, is divided into two classes:
voting common stock, 96% of which is owned indirectly by officers and
directors of PAH Ravinia and 4% of which is held indirectly by the Operating
Partnership, and nonvoting common stock, 100% of which is held by the
Operating Partnership. Management's voting common stock represents 0.96% of
the economic interest in PAH Ravinia. Although the Company's stock ownership
represents a 99.04% economic interest in PAH Ravinia, the Company is not able
to elect directors and its ability to influence the day-to-day decisions of
PAH Ravinia may therefore be limited. As a result, the voting stockholders of
PAH Ravinia may implement business policy decisions that would not have been
implemented by the Company and that are adverse to the interests of the
Company or that lead to adverse financial results.
PAH WindWatch LLC is a special purpose limited liability company (taxable as
a corporation for federal income tax purposes) that owns the Marriot WindWatch
Hotel, located in Hauppauge, New York. The 1% managing member interest of PAH
WindWatch LLC is held by PAH WindWatch Partners, 96% of which is held
indirectly by officers of the Company and 4% of which is held indirectly by
the Operating Partnership. The Operating Partnership holds a 99% nonmanaging
member interest in PAH WindWatch LLC. Although the Operating Partnership holds
a 99.04% economic interest in PAH WindWatch LLC, the Company does not manage
the entity and its ability to influence the day-to-day decisions of PAH
WindWatch LLC may therefore be limited. As a result, PAH WindWatch Partners,
as the managing member of PAH WindWatch LLC may implement business policy
decisions that would not have been implemented by the Company and that are
adverse to the interests of the Company or that lead to adverse financial
results.
RISKS INVOLVED IN JOINT OWNERSHIP OF PROPERTIES
The Company holds a 90% general partner interest in the limited partnerships
that own each of the Holiday Inn Capital Plaza (Tallahassee, Florida), the
Holiday Inn International Airport South (Miami, Florida), and the Holiday Inn
O'Hare (Des Plaines, Illinois). Consequently, although the Company has
retained sole decision-making authority regarding most matters affecting these
Hotels, the exercise of that authority may be limited to the extent that the
interests of the limited partner must be considered, and the limited partner
has veto rights regarding certain transactions.
Joint ownership of Hotels may, under certain circumstances, involve risks
not otherwise present, including the possibility that the Company's partners
might become bankrupt, that such partners might at any time have economic or
other business interests or goals that are inconsistent with the business
interests or goals of the Company, and that such partners may be in a position
to take action contrary to the instructions or the requests of the Company or
contrary to the Company's policies or objectives, including the Company's
policy with respect to maintaining its qualification as a REIT. Consequently,
actions by such partners might result in subjecting jointly owned Hotels to
additional risk. The Company will, however, seek to maintain sufficient
control of the entities holding jointly-owned Hotels to permit the Company's
business objectives to be achieved. There is no limitation under the Company's
organizational documents as to the amount of available funds that may be
invested in partnerships, joint ventures or co-investments. The Company has
entered into an arrangement with the Doubletree Hotels Corporation pursuant to
which the Company will invest $200 million in hotels which will be held in
separate limited partnerships, including the hotels listed immediately above,
of which the Company will be a 90% general partner or in other entities, such
as limited liability companies, in which it is contemplated that the Company
would serve as a 90% manager-member.
COMPETITION FOR MANAGEMENT TIME
The Company was formed to continue and expand the hotel acquisition,
ownership, redevelopment and repositioning business of the Patriot American
Group ("Patriot American"). Paul A. Nussbaum, the Chairman of the Board and
Chief Executive Officer of the Company, continues to act as chief executive
officer of Patriot American, and, therefore, will be subject to competing
demands on his time. Mr. Nussbaum intends to devote a majority of his business
time to the Company.
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CONFLICTS OF INTEREST
SALE OF HOTELS
Certain officers and directors of the Company or their affiliates may have
had unrealized gain in their interests in certain of the Hotels transferred to
the Company in connection with its formation. The sale of such Hotels by the
Company may cause adverse tax consequences to such officers, directors or
their affiliates. Therefore, the interests of the Company, such officers,
directors and their affiliates could be different in connection with the
disposition of such Hotels.
CONTINUING ACQUISITIONS AND HOTEL DEVELOPMENT
Affiliates of the Lessees may acquire, develop or manage hotels that compete
with the Company's Hotels. Accordingly, the Lessees' decisions relating to the
operation of the Hotels that are in competition with other hotels owned or
managed by them may not reflect the interests of the Company.
HOTEL INDUSTRY RISKS
OPERATING RISKS
The Hotels are subject to all operating risks common to the hotel industry.
These risks include, among other things, (i) competition for guests from other
hotels, a number of which may have greater marketing and financial resources
than the Company and the Lessees; (ii) increases in operating costs due to
inflation and other factors, which increases may not have been offset in
recent years, and may not be offset in the future by increased room rates;
(iii) dependence on business and commercial travelers and tourism, which
business may fluctuate and be seasonal; (iv) increases in energy costs and
other expenses of travel, which may deter travelers; and (v) adverse effects
of general and local economic conditions. These factors could adversely affect
the Lessees' ability to generate revenues and to make lease payments and
therefore the Company's ability to service its debt and to make expected
distributions to shareholders.
The Company is also subject to the risk that in connection with the
acquisition of hotels it may not be possible to transfer certain operating
licenses, such as food and beverage licenses, to the Lessees or Operators, or
to obtain new licenses in a timely manner in the event such licenses cannot be
transferred. The failure to have alcoholic beverages licenses or other
operating licenses could adversely affect the ability of the affected Lessees
to generate revenues and make lease payments to the Company.
OPERATING COSTS AND CAPITAL EXPENDITURES; HOTEL RENOVATION
Hotels in general, including the Hotels, have an ongoing need for
renovations and other capital improvements, particularly in older structures,
including periodic replacement or refurbishment of furniture, fixtures and
equipment ("F, F & E"). Under the terms of the Participating Leases, the
Company is obligated to establish a reserve to pay the cost of certain capital
expenditures at the Hotels and pay for periodic replacement or refurbishment
of F, F & E and expects to be similarly obligated with respect to future
acquisitions of hotels. However, if capital expenditures exceed the Company's
expectations, the additional cost could have an adverse effect on the
Company's ability to service its debt and on Cash Available for Distribution.
In addition, the Company has and may continue to acquire hotels where
significant renovation is either required or desirable. Renovation of hotels
involves certain risks, including the possibility of environmental problems,
construction cost overruns and delays, uncertainties as to market demand or
deterioration in market demand after commencement of renovation and the
emergence of unanticipated competition from other hotels.
COMPETITION FOR INVESTMENT OPPORTUNITIES
The Company may be competing for investment opportunities with entities that
have substantially greater financial resources than the Company. These
entities may generally be able to accept more risk than the Company can
prudently manage, including risks with respect to the creditworthiness of a
hotel operator or the
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geographic proximity of its investments. Competition may generally reduce the
number of suitable investment opportunities offered to the Company and
increase the bargaining power of property owners seeking to sell.
SEASONALITY
The hotel industry is seasonal in nature. Revenues at certain of the Hotels
are greater in the first and second quarters of a calendar year and at other
of the Hotels in the second and third quarters of a calendar year. Seasonal
variations in revenue at the Hotels may cause quarterly fluctuations in the
Company's lease revenue.
INVESTMENT IN SINGLE INDUSTRY
The Company's current strategy is to acquire interests only in hotels and
related properties. As a result, the Company will be subject to risks inherent
in investments in a single industry. The effects on Cash Available for
Distribution to the Company's shareholders resulting from a downturn in the
hotel industry will be more pronounced than if the Company had diversified its
investments.
REAL ESTATE INVESTMENT RISKS
GENERAL RISKS
The Company's investments are subject to varying degrees of risk generally
incident to the ownership of real property. The underlying value of the
Company's real estate investments and the Company's income and ability to make
distributions to its shareholders is dependent upon the ability of the Lessees
to operate the Hotels in a manner sufficient to maintain or increase revenues
and to generate sufficient income in excess of operating expenses to make rent
payments under the Participating Leases. Income from the Hotels may be
adversely affected by changes in national economic conditions, changes in
local market conditions due to changes in general or local economic conditions
and neighborhood characteristics, changes in interest rates and in the
availability, cost and terms of mortgage funds, the impact of present or
future environmental legislation and compliance with environmental laws, the
ongoing need for capital improvements, particularly in older structures,
changes in real estate tax rates and other operating expenses, adverse changes
in governmental rules and fiscal policies, civil unrest, acts of God,
including earthquakes and other natural disasters (which may result in
uninsured losses), acts of war, adverse changes in zoning laws, and other
factors which are beyond the control of the Company.
VALUE AND ILLIQUIDITY OF REAL ESTATE
Real estate investments are relatively illiquid. The ability of the Company
to vary its portfolio in response to changes in economic and other conditions
is limited. If the Company must sell an investment, there can be no assurance
that the Company will be able to dispose of it in the time period it desires
or that the sales price of any investment will recoup or exceed the amount of
the Company's investment.
PROPERTY TAXES
Each Hotel is subject to real property taxes. The real property taxes on
hotel properties in which the Company invests may increase or decrease as
property tax rates change and as the properties are assessed or reassessed by
taxing authorities. If property taxes increase, the Company's ability to make
expected distributions to its shareholders could be adversely affected.
CONSENTS OF GROUND LESSOR REQUIRED FOR SALE OF CERTAIN HOTELS
Certain of the Hotels are subject to ground leases with third party lessors.
In addition, the Company may acquire hotels in the future that are subject to
ground leases. Any proposed sale of a hotel that is subject to a ground lease
by the Operating Partnership or any proposed assignment of the Operating
Partnership's leasehold interest in the ground lease may require the consent
of third party lessors. As a result, the Company and the
8
<PAGE>
Operating Partnership may not be able to sell, assign, transfer or convey the
Operating Partnership's interest in any such hotel in the future absent the
consent of such third parties, even if such transaction may be in the best
interests of the shareholders of the Company.
ENVIRONMENTAL MATTERS
The Company's operating costs may be affected by the obligation to pay for
the cost of complying with existing environmental laws, ordinances and
regulations, as well as the cost of complying with future legislation. Under
various federal, state and local environmental laws, ordinances and
regulations, a current or previous owner or operator of real property may be
liable for the costs of removal or remediation of hazardous or toxic
substances on, under or in such property. Such laws often impose liability
whether or not the owner or operator knew of, or was responsible for, the
presence of such hazardous or toxic substances. In addition, the presence of
hazardous or toxic substances, or the failure to remediate such property
properly, may adversely affect the owner's ability to borrow by using such
real property as collateral. Persons who arrange for the transportation,
disposal or treatment of hazardous or toxic substances may also be liable for
the costs of removal or remediation of such substances at the disposal or
treatment facility, whether or not such facility is or ever was owned or
operated by such person. Certain environmental laws and common law principles
could be used to impose liability for releases of hazardous materials,
including asbestos-containing materials ("ACMs"), into the environment, and
third parties may seek recovery from owners or operators of real properties
for personal injury associated with exposure to released ACMs or other
hazardous materials. Environmental laws may also impose restrictions on the
manner in which a property may be used or transferred or in which businesses
may be operated, and these restrictions may require expenditures. In
connection with the ownership and operation of the Hotels, the Company, the
Operating Partnership or the Lessees may be potentially liable for any such
costs. The cost of defending against claims of liability or remediating
contaminated property and the cost of complying with environmental laws could
materially adversely affect the Company's results of operations and financial
condition. Phase I environmental site assessments ("ESAs") have been conducted
at all of the Hotels by qualified independent environmental engineers. The
purpose of Phase I ESAs is to identify potential sources of contamination for
which the Hotels may be responsible and to assess the status of environmental
regulatory compliance. The ESAs have not revealed any environmental liability
or compliance concerns that the Company believes would have a material adverse
effect on the Company's business, assets, results of operations or liquidity,
nor is the Company aware of any such liability or concerns. Nevertheless, it
is possible that these ESAs did not reveal all environmental liabilities or
compliance concerns or that material environmental liabilities or compliance
concerns exist of which the Company is currently unaware. The Company has not
been notified by any governmental authority, and has no other knowledge of,
any material noncompliance, liability or claim relating to hazardous or toxic
substances or other environmental substances in connection with any of its
hotels, except as incorporated herein by reference or as noted below.
Marriott WindWatch Hotel. The Marriott WindWatch Hotel is in close proximity
to a former municipal landfill, which has been designated as a National
Priorities List ("NPL") site by the United States Environmental Protection
Agency ("EPA"). The Hotel property is downgradient of the NPL site. An
environmental consultant retained by the Company has informed the Company that
the current data relating to the NPL site do not suggest any groundwater
contamination from the former landfill has migrated into the Hotel property.
The environmental consultant has also informed the Company that it is unlikely
that any groundwater contamination from the former landfill will in the future
migrate onto the Hotel property resulting in contaminant levels above
applicable action levels. Remediation activities by the municipality, under
the supervision of the EPA and the New York State Department of Environmental
Conservation ("DEC"), are ongoing but have not yet been completed. The DEC has
indicated that it does not intend to pursue as potentially responsible parties
nearby landowners whose property becomes contaminated as a result of off-site
migration from the former landfill.
UNINSURED AND UNDERINSURED LOSSES
Each Participating Lease specifies comprehensive insurance to be maintained
on each of the Hotels, including liability, fire and extended coverage.
Management believes such specified coverage is of the type and
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<PAGE>
amount customarily obtained for or by an owner of hotels. Leases for
subsequently acquired hotels will contain similar provisions. However, there
are certain types of losses, generally of a catastrophic nature, such as
earthquakes and floods, that may be uninsurable or not economically insurable.
The Company's Board of Directors and management will use their discretion in
determining amounts, coverage limits and deductibility provisions of
insurance, with a view to maintaining appropriate insurance coverage on the
Company's investments at a reasonable cost and on suitable terms. This may
result in insurance coverage that, in the event of a substantial loss, would
not be sufficient to pay the full current market value or current replacement
cost of the Company's lost investment. Inflation, changes in building codes
and ordinances, environmental considerations, and other factors also might
make it infeasible to use insurance proceeds to replace the property after
such property has been damaged or destroyed. Under such circumstances, the
insurance proceeds received by the Company might not be adequate to restore
its economic position with respect to such property.
ACQUISITION AND DEVELOPMENT RISKS
The Company intends to pursue acquisitions of additional hotels and, under
appropriate circumstances, may pursue development opportunities. Acquisitions
entail risks that investments will fail to perform in accordance with
expectations and that estimates of the cost of improvements necessary to
market and acquire properties will prove inaccurate, as well as general
investment risks associated with any new real estate investment. New project
development is subject to numerous risks, including risks of construction
delays or cost overruns that may increase project costs, new project
commencement risks such as receipt of zoning, occupancy and other required
governmental approvals and permits and the incurrence of development costs in
connection with projects that are not pursued to completion. The fact that the
Company must distribute 95% of its net taxable income in order to maintain its
qualification as a REIT may limit the Company's ability to rely upon lease
income from the Hotels or subsequently acquired properties to finance
acquisitions or new developments. As a result, if debt or equity financing
were not available on acceptable terms, further acquisitions or development
activities might be curtailed or Cash Available for Distribution might be
adversely affected.
TAX RISKS
FAILURE TO QUALIFY AS A REIT
The Company operates in a manner designed to permit it to qualify as a REIT
for federal income tax purposes. The continued qualification of the Company as
a REIT will depend on the Company's continuing ability to meet various
requirements concerning, among other things, the ownership of its outstanding
stock, the nature of its assets, the sources of its income, and the amount of
its distributions to its shareholders. If the Company were to fail to qualify
as a REIT in any taxable year, the Company would not be allowed a deduction
for distributions to shareholders in computing its taxable income and would be
subject to federal income tax (including any applicable minimum tax) on its
taxable income at regular corporate rates. Unless entitled to relief under
certain provisions of the Code), the Company also would be disqualified from
treatment as a REIT for the four taxable years following the year during which
qualification was lost. As a result, the Company's Cash Available for
Distribution would be reduced for each of the years involved. Although the
Company currently intends to continue to operate in a manner designed to
permit it to qualify as a REIT, it is possible that future economic, market,
legal, tax or other considerations may cause the Board of Directors to revoke
the REIT election.
ADVERSE EFFECTS OF REIT MINIMUM DISTRIBUTION REQUIREMENTS
In order to qualify as a REIT, the Company is generally required each year
to distribute to its shareholders at least 95% of its net taxable income
(excluding any net capital gain). In addition, the Company is subject to a 4%
nondeductible excise tax on the amount, if any, by which certain distributions
paid by it with respect to any calendar year are less than the sum of (i) 85%
of its ordinary income for that year, (ii) 95% of its capital gain net income
for that year and (iii) 100% of its undistributed income from prior years.
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<PAGE>
The Company intends to make distributions to its shareholders to comply with
the 95% distribution requirement and to avoid the nondeductible excise tax.
The Company's income consists primarily of its share of the income of the
Operating Partnership, and the Company's Cash Available for Distribution
consists primarily of its share of cash distributions from the Operating
Partnership. Differences in timing between taxable income and Cash Available
for Distribution and the seasonality of the hotel industry could require the
Company to borrow funds on a short-term basis to meet the 95% distribution
requirement and to avoid the nondeductible excise tax. For federal income tax
purposes, distributions paid to shareholders may consist of ordinary income,
capital gains, nontaxable return of capital, or a combination thereof. The
Company provides its shareholders with an annual statement as to its
designation of the taxability of distributions.
Distributions by the Company are determined by the Company's Board of
Directors and depend on a number of factors, including the amount of the
Company's Cash Available for Distribution, the Company's financial condition,
any decision by the Board of Directors to reinvest funds rather than to
distribute such funds, the Company's capital expenditures, the annual
distribution requirements under the REIT provisions of the Code and such other
factors as the Board of Directors deems relevant.
Failure of the Operating Partnership to be Classified as a Partnership for
Federal Income Tax Purposes; Impact on REIT Status
The Operating Partnership (and each of its subsidiary partnerships) has been
structured to be classified as a partnership for federal income tax purposes.
If the Operating Partnership (or a subsidiary partnership) were to fail to be
classified as a partnership for federal income tax purposes, the Operating
Partnership (or the subsidiary partnership) would be taxable as a corporation.
In such event, the Company likely would cease to qualify as a REIT for a
variety of reasons. Furthermore, the imposition of a corporate income tax on
the Operating Partnership would reduce substantially the amount of Cash
Available for Distribution.
RISKS OF OPERATING HOTELS UNDER FRANCHISE OR BRAND AFFILIATIONS
Certain of the Hotels are operated under franchise or brand affiliations. In
addition, hotels in which the Company invests subsequently may be operated
pursuant to franchise or brand affiliations. The continuation of the franchise
licenses relating to the franchised Hotels (the "Franchise Licenses") is
subject to specified operating standards and other terms and conditions. The
continued use of a brand is generally contingent upon the continuation of the
Management Agreement related to that Hotel with the branded Operator.
Franchisors typically inspect licensed properties periodically to confirm
adherence to operating standards. Action on the part of any of the Company,
the Operating Partnership, the Lessees or the Operators could result in a
breach of such standards or other terms and conditions of the Franchise
Licenses and could result in the loss or cancellation of a franchise license.
It is possible that a franchisor could condition the continuation of a
franchise license on the completion of capital improvements which the Board of
Directors determines are too expensive or otherwise unwarranted in light of
general economic conditions or the operating results or prospects of the
affected hotel. In that event, the Board of Directors may elect to allow the
franchise license to lapse. In any case, if a franchise or brand affiliation
is terminated, the Company and the Lessee may seek to obtain a suitable
replacement franchise or brand affiliation, or to operate the Hotel
independent of a franchise or brand affiliation. The loss of a franchise or
brand affiliation could have a material adverse effect upon the operations or
the underlying value of the hotel covered by the franchise or brand
affiliation because of the loss of associated name recognition, marketing
support and centralized reservation systems provided by the franchisor or
brand owner.
LIMITATION ON ACQUISITION AND CHANGE IN CONTROL
OWNERSHIP LIMITATION
In order for the Company to maintain its qualification as a REIT, not more
than 50% in value of its outstanding capital stock may be owned, directly or
indirectly, by five or fewer individuals (as defined in the Internal Revenue
Code of 1986, as amended (the "Code") to include certain entities).
Furthermore, if any
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<PAGE>
shareholder or group of shareholders of any Lessee owns, actually or
constructively, 10% or more in value of the capital stock of the Company, such
Lessee could become a related party tenant of the Company, which would result
in loss of REIT status for the Company. For the purpose of preserving the
Company's REIT qualification, the Company's Articles of Incorporation prohibit
direct or indirect ownership (taking into account applicable ownership
provisions of the Code) in excess of more than 9.8% of any class of the
Company's outstanding capital stock (the "Ownership Limitation"), subject to a
provision which permits mutual funds and certain other entities to own as much
as 15% of a class of the Company's capital stock in appropriate circumstances
(the "Look Through Ownership Limitation"). Generally, the capital stock owned
by affiliated owners is aggregated for purposes of the Ownership Limitation.
The Ownership Limitation could have the effect of discouraging a takeover or
other transaction in which holders of some, or a majority, of the Common Stock
might receive a premium for their Common Stock over the then prevailing market
price or which such holders might believe to be otherwise in their best
interests.
PREFERRED STOCK
The Articles of Incorporation authorize the Board of Directors to issue up
to 20,000,000 preferred shares and to establish the preferences and rights of
any shares issued. The issuance of preferred shares could have the effect of
delaying or preventing a change in control of the Company even if a change in
control were in the shareholders' interest. No preferred shares are currently
issued or outstanding.
VIRGINIA ANTI-TAKEOVER STATUTES
As a Virginia corporation, the Company is subject to various provisions of
the Virginia Stock Corporation Act ("the VSCA") that impose certain
restrictions and require certain procedures with respect to certain takeover
offers and business combinations, including, but not limited to, combinations
with interested holders and share purchases from certain holders. Such
provisions may deter takeover attempts or tender offers, including offers or
attempts that may result in the payment of a premium over the market price for
the Common Stock or that a shareholder might otherwise consider in its best
interest.
ABILITY OF BOARD TO CHANGE POLICIES
The major policies of the Company, including its policies with respect to
acquisitions, financing, growth, operations, debt capitalization and
distributions, are determined by its Board of Directors. The Board of
Directors may amend or revise these and other policies from time to time
without a vote of the shareholders of the Company.
ADVERSE EFFECT OF INCREASE IN MARKET INTEREST RATES ON PRICE OF COMMON STOCK
One of the factors that may influence the price of the Common Stock in
public trading markets will be the annual yield from distributions by the
Company on the Common Stock as compared to yields on certain financial
instruments. Thus, an increase in market interest rates will result in higher
yields on certain financial instruments, which could adversely affect the
market price of the Common Stock.
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<PAGE>
THE COMPANY
GENERAL
The Company is a self-administered REIT organized under the laws of
Virginia, which owns Hotels in several states diversified by franchise or
brand affiliation. The Common Stock is listed on the New York Stock Exchange
under the symbol "PAH".
The Company leases each of the Hotels, except the Crowne Plaza Ravinia and
the Marriott WindWatch Hotel, which are owned through special purpose
entities, to a Lessee. Lessees include CHC Lease Partners, an entity owned by
CHC International, Inc. and a principal of the Gencom Group ("Gencom"); Metro
Hotels Leasing Corporation, an affiliate of Metro Joint Venture, d/b/a Metro
Hotels, a Dallas-based hotel company; NorthCoast Hotels L.L.C., an entity
owned by a consortium of investors including principals of West Coast Hotels,
Inc. and Sunmakers Travel Group; DTR North Canton, Inc., a subsidiary of
Doubletree Hotels Corporation; Crow Hotel Lessee, Inc., an entity formed by
members of the Trammel Crow family; and Grand Heritage Leasing, LLC. The
Crowne Plaza Ravinia and the Marriott WindWatch Hotel acquisitions were
structured without a Lessee for reasons specific to the acquisitions. The
Company anticipates that future acquisitions will continue to be structured
with Lessees. The Lessees and the special purpose entities that own the Crowne
Plaza Ravinia and the Marriott WindWatch Hotel in turn have entered into
Management Agreements with the Operators to operate the Hotels. Neither the
Company nor its management owns an interest in, or participates in the
management of, the Lessees or the Operators.
The Company was formed in April 1995 to continue and expand the hotel
acquisition, ownership, redevelopment and repositioning business of Patriot
American. In October 1995, the Company completed its initial public offering.
The Company's executive offices are located at 3030 LBJ Freeway, Suite 1500,
Dallas, Texas 75234.
THE HOTELS
Set forth below are summary descriptions of the Hotels.
<TABLE>
<CAPTION>
NUMBER
OF GUEST YEAR BUILT/
LOCATION ROOMS RENOVATED(1)
-------- -------- ------------
<S> <C> <C> <C>
Full Service Hotels:
Bonaventure................ Ft. Lauderdale, FL 492 1981
Bourbon Orleans Hotel...... New Orleans, LA 211 1800s/1995
Crockett Hotel............. San Antonio, TX 206 1909/1983
Crowne Plaza Ravinia....... Atlanta, GA 495 1986/1993
Del Mar Hilton............. Del Mar (San Diego), CA 245 1989
Doubletree-Allen Center.... Houston, TX 341 1978/1994
Doubletree Denver/Boulder.. Westminster (Denver), CO 180 1985/1992
Embassy Suites Hunt Val-
ley....................... Hunt Valley, MD 223 1985/1995
Fairmount Hotel............ San Antonio, TX 37 1906/1994
Four Points by Sheraton
Fashion Square............ Saginaw, MI 156 1984
Hilton Inn Cleveland
South..................... Independence, OH 191 1980/1994
Holiday Inn Aristocrat..... Dallas, TX 172 1925/1994
Holiday Inn Capital Plaza.. Tallahassee, FL 244 1977
Holiday Inn Lenox.......... Atlanta, GA 297 1987/1995
Holiday Inn Miami Interna-
tional Airport South...... Miami, FL 264 1975
Holiday Inn O'Hare......... Chicago, IL 242 1969
Holiday Inn Northwest...... Houston, TX 193 1982/1994
Holiday Inn Northwest Pla-
za........................ Austin, TX 193 1984/1994
Holiday Inn Select North
Dallas.................... Farmers Branch (Dallas), TX 374 1979/1994
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
NUMBER
OF GUEST YEAR BUILT/
LOCATION ROOMS RENOVATED(1)
-------- -------- ------------
<S> <C> <C> <C>
Holiday Inn............... San Angelo, TX 148 1984/1994
Holiday Inn............... Sebring, FL 148 1983/1995
Hyatt Newporter Hotel..... Newport Beach, CA 410 1962
Hyatt Regency............. Lexington, KY 365 1977/1992
Marriott Hotel............ Troy, MI 350 1990
Marriott WindWatch Hotel.. Hauppauge, NY 362 1989
Mayfair Hotel............. St. Louis, MS 184 1925/1990
Pickwick Hotel............ San Francisco, CA 189 1928/1994
Radisson Hotel & Suites... Dallas, TX 198 1986/1994
Radisson New Orleans Ho-
tel...................... New Orleans, LA 759 1924/1995
Radisson Suites Town &
Country.................. Houston, TX 173 1986/1992
Tremont House Hotel(2).... Boston, MA 288 1925/1988
Tutwiler Hotel............ Birmingham, AL 147 1913/1986
Valley River Inn.......... Eugene, OR 257 1976
WestCoast Gateway Hotel... Seattle, WA 145 1990
WestCoast Long Beach Hotel
and Marina............... Long Beach, CA 192 1976/1987
WestCoast Roosevelt Hotel. Seattle, WA 151 1929/1987
WestCoast Wenatchee Center
Hotel.................... Wenatchee, WA 147 1986/1994
Wyndham Garden Hotel-Mid-
town..................... Atlanta, GA 191 1987/1994
Wyndham Greenspoint Hotel. Houston, TX 472 1985/1995
------
Subtotal................ 10,032
Limited Service Hotels:
Hampton Inn............... Canton, OH 108 1985
Hampton Inn............... Rochester, NY 113 1986
Hampton Inn Cleveland Air-
port..................... North Olmstead, OH 113 1986
Hampton Inn Jacksonville
Airport.................. Jacksonville, FL 113 1985
WestCoast Plaza Park
Suites(3)................ Seattle, WA 194 1990
------
Subtotal................ 641
Conference Center:
Peachtree Executive Con-
ference Center........... Peachtree City (Atlanta), GA 250 1984
------
Total................. 10,923
======
</TABLE>
- --------
(1) The Company defines a renovation as a significant upgrade of guest rooms
or common areas with capital expenditures averaging at least $1,000 per
guest room for limited service hotels and at least $1,500 per guest room
for full service hotels and conference centers. In some cases, renovations
occurred over more than one calendar year. Year renovated reflects the
calendar year in which the most recent of such renovations were completed.
Information on renovations for certain of the Hotels was provided by prior
owners.
(2) The Company intends to increase the room count at this Hotel to
approximately 321 rooms in connection with a renovation. At present only
283 of the 288 rooms are utilized as guest rooms.
(3) This Hotel currently contains unused restaurant space. The Company intends
to complete the build out of a restaurant in this space, thereby
converting the Hotel from a limited service to a full service property.
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<PAGE>
DESCRIPTION OF CAPITAL STOCK
Under its Articles of Incorporation, the Company has the authority to issue
200,000,000 shares of Common Stock and 20,000,000 shares of preferred stock,
no par value (the "Preferred Stock"). No shares of Preferred Stock are
currently outstanding.
COMMON STOCK
The holders of shares of Common Stock are entitled to one vote per share on
all matters voted on by shareholders, including elections of directors. Except
as otherwise required by law or provided in any resolution adopted by the
Board of Directors with respect to any series of Preferred Shares, the holders
of such shares exclusively possess all voting power. The Articles of
Incorporation do not provide for cumulative voting in the election of
directors. Subject to any preferential rights of any outstanding series of
Preferred Shares, the holders of shares of Common Stock are entitled to such
dividends as may be declared from time to time by the Board of Directors from
funds available therefor, and upon liquidation will be entitled to receive pro
rata all assets of the Company available for distribution to such holders.
PREFERRED STOCK
The Board of Directors is authorized to provide for the issuance of shares
of Preferred Stock in one or more series, to establish the number of shares in
each series and to fix the designation, powers, preferences and rights of each
such series and the qualifications, limitations or restrictions thereof.
Because the Board of Directors has the power to establish the preferences and
rights of each class or series of Preferred Shares, the Board of Directors may
afford the holders of any series or class of Preferred Stock preferences,
powers and rights, voting or otherwise, senior to the rights of holders of
shares of Common Stock. The issuance of Preferred Stock could have the effect
of delaying or preventing a change in control of the Company.
ARTICLES OF INCORPORATION AND BYLAW PROVISIONS
RESTRICTIONS ON TRANSFER
For the Company to qualify as a REIT under the Code, it must meet certain
requirements concerning the ownership of its outstanding shares of capital
stock. Specifically, not more than 50% in value of the Company's outstanding
shares of capital stock may be owned, directly or indirectly, by five or fewer
individuals (as defined in the Code to include certain entities) during the
last half of a taxable year, and the Company must be beneficially owned by 100
or more persons during at least 335 days of a taxable year of twelve months or
during a proportionate part of a shorter taxable year. In addition, the
Company must meet certain requirements regarding the nature of its gross
income in order to qualify as a REIT. One such requirement is that at least
75% of the Company's gross income for each year must consist of rents from
real property and income from certain other real property investments. If the
Company owns, actually or constructively, 10% or more of the ownership
interests in any Lessee, within the meaning of section 856(d)(2)(B) of the
Code, the rents received by the Company from the Lessees will not qualify as
rents from real property, which could result in loss of REIT status for the
Company.
Because the Board of Directors believes it is essential for the Company to
continue to qualify as a REIT, the Articles of Incorporation, subject to
certain exceptions described below, provide pursuant to the Ownership
Limitation that no person may own, or be deemed to own by virtue of the
attribution provisions of the Code, more than 9.8% of either (i) the
outstanding shares of any class of Common Stock or (ii) the outstanding shares
of Preferred Stock of any class or series of Preferred Stock (subject to the
Look-Through Ownership Limitation applicable to certain shareholders, as
further described below). Any transfer of Common Stock or Preferred Stock that
would (i) result in any person owning, directly or indirectly, Common Stock or
Preferred Stock in excess of the Ownership Limitation, (ii) result in Common
Stock and Preferred Stock being owned by fewer than 100 persons (determined
without reference to any rules of attribution), (iii) result in the Company
being "closely held" within the meaning of section 856(h) of the Code, or (iv)
cause the Company to own, actually or
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<PAGE>
constructively, 10% or more of the ownership interests in a tenant of the
Company's real property, within the meaning of section 856(d)(2)(B) of the
Code, will be null and void, and the intended transferee will acquire no
rights in such shares of Common Stock or Preferred Stock.
Certain types of entities, such as pension trusts qualifying under section
401(a) of the Code, mutual funds qualifying as regulated investment companies
under section 851 of the Code, and corporations, will be looked through for
purposes of the "closely held" test in section 856(h) of the Code. The
Articles of Incorporation allow such an entity under the Look-Through
Ownership Limitation to own up to 15% of the shares of any class or series of
the Company's capital stock, provided that such ownership does not cause any
beneficial owner of such entity to exceed the Ownership Limitation or
otherwise result in a violation of the tests described in clauses (ii), (iii)
and (iv) of the preceding paragraph.
Subject to certain exceptions described below, any purported transfer of
Common Stock or Preferred Stock that would (i) result in any person owning,
directly or indirectly, shares of Common Stock or Preferred Stock in excess of
the Ownership Limitation (or the Look-Through Ownership Limitation, if
applicable), (ii) result in the shares of Common Stock and Preferred Stock
being owned by fewer than 100 persons (determined without reference to any
rules of attribution), (iii) result in the Company being "closely held" within
the meaning of section 856(h) of the Code, or (iv) cause the Company to own,
actually or constructively, 10% or more of the ownership interests in a tenant
of the Company's, the Operating Partnership's or a Subsidiary Partnership's
real property, within the meaning of section 856(d)(2)(B) of the Code, will be
designated as "Shares-in-Trust" and will be transferred automatically to a
trust (a "Trust"), effective on the day before the purported transfer of such
shares of Common Stock or Preferred Stock. The record holder of the Common
Stock or Preferred Stock that are designated as Shares-in-Trust (the
"Prohibited Owner") will be required to submit such number of shares of Common
Stock or Preferred Stock to the Company for registration in the name of the
trustee of the Trust (the "Trustee"). The Trustee will be designated by the
Company, but will not be affiliated with the Company. The beneficiary of the
Trust (the "Beneficiary") will be one or more charitable organizations named
by the Company.
Shares-in-Trust will remain issued and outstanding shares of Common Stock or
Preferred Stock and will be entitled to the same rights and privileges as all
other shares of the same class or series. The Trustee will receive all
dividends and distributions on the Shares-in-Trust and will hold such
dividends or distributions in trust for the benefit of the Beneficiary. The
Trustee will vote all Shares-in-Trust. The Trustee will designate a permitted
transferee of the Shares-in-Trust, provided that the permitted transferee (i)
purchases such Shares-in-Trust for valuable consideration and (ii) acquires
such Shares-in- Trust without such acquisition resulting in another transfer
to another Trust.
The Prohibited Owner with respect to Shares-in-Trust will be required to
repay to the Trustee the amount of any dividends or distributions received by
the Prohibited Owner (i) that are attributable to any Shares-in-Trust and (ii)
the record date of which was on or after the date that such shares became
Shares-in-Trust. Any vote taken by a Prohibited Owner prior to the Company's
discovery that the Shares-in-Trust were held in trust will be rescinded as
void ab initio. The Prohibited Owner generally will receive from the Trustee
the lesser of (i) the price per share such Prohibited Owner paid for the
shares of Common Stock or Preferred Stock that were designated as Shares-in-
Trust (or, in the case of a gift or devise, the Market Price (as defined
below) per share on the date of such transfer) or (ii) the price per share
received by the Trustee from the sale of such Shares-in-Trust. Any amounts
received by the Trustee in excess of the amounts to be paid to the Prohibited
Owner will be distributed to the Beneficiary.
The Shares-in-Trust will be deemed to have been offered for sale to the
Company, or its designee, at a price per share equal to the lesser of (i) the
price per share in the transaction that created such Shares-in-Trust (or, in
the case of a gift or devise, the Market Price per share on the date of such
transfer) or (ii) the Market Price per share on the date that the Company, or
its designee, accepts such offer. The Company will have the right to accept
such offer for a period of ninety days after the later of (i) the date of the
purported transfer which resulted in such Shares-in-Trust or (ii) the date the
Company determines in good faith that a transfer resulting in such Shares-in-
Trust occurred.
16
<PAGE>
"Market Price" on any date shall mean the average of the Closing Price for
the five consecutive Trading Days ending on such date. The "Closing Price" on
any date shall mean the last sale price, regular way, or, in case no such sale
takes place on such day, the average of the closing bid and asked prices,
regular way, in either case as reported in the principal consolidated
transaction reporting system with respect to securities listed or admitted to
trading on the NYSE or, if the shares of Common Stock or Preferred Stock are
not listed or admitted to trading on the NYSE, as reported in the principal
consolidated transaction reporting system with respect to securities listed on
the principal national securities exchange on which the shares of Common Stock
or Preferred Stock are listed or admitted to trading or, if the shares of
Common Stock or Preferred Stock are not listed or admitted to trading on any
national securities exchange, the last quoted price, or if not so quoted, the
average of the high bid and low asked prices in the over-the-counter market,
as reported by the National Association of Securities Dealers, Inc. Automated
Quotation System or, if such system is no longer in use, the principal other
automated quotations system that may then be in use or, if the shares of
Common Stock or Preferred Stock are not quoted by any such organization, the
average of the closing bid and asked prices as furnished by a professional
market maker making a market in the shares of Common Stock or Preferred Stock
selected by the Board of Directors. "Trading Day" shall mean a day on which
the principal national securities exchange on which the shares of Common Stock
or Preferred Stock are listed or admitted to trading is open for the
transaction of business or, if the shares of Common Stock or Preferred Stock
are not listed or admitted to trading on any national securities exchange,
shall mean any day other than a Saturday, a Sunday or a day on which banking
institutions in the State of New York are authorized or obligated by law or
executive order to close.
Any person who acquires or attempts to acquire Common Stock or Preferred
Stock in violation of the foregoing restrictions, or any person who owned
shares of Common Stock or Preferred Stock that were transferred to a Trust,
will be required (i) to give immediately written notice to the Company of such
event and (ii) to provide to the Company such other information as the Company
may request in order to determine the effect, if any, of such transfer on the
Company's status as a REIT.
All persons who own, directly or indirectly, more than 5% (or such lower
percentages as required pursuant to regulations under the Code) of the
outstanding shares of Common Stock and Preferred Stock must, within 30 days
after January 1 of each year, provide to the Company a written statement or
affidavit stating (i) the name and address of such direct or indirect owner,
(ii) the number of shares of Common Stock and Preferred Stock owned directly
or indirectly, and (iii) a description of how such shares are held. In
addition, each direct or indirect shareholder shall provide to the Company
such additional information as the Company may request in order to determine
the effect, if any, of such ownership on the Company's status as a REIT and to
ensure compliance with the Ownership Limitation.
The Ownership Limitation generally does not apply to the acquisition of
shares of Common Stock or Preferred Stock by an underwriter that participates
in a public offering of such shares. In addition, the Board of Directors, upon
such conditions as the Board of Directors may direct, may exempt a person from
the Ownership Limitation under certain circumstances. The foregoing
restrictions will continue to apply until the Board of Directors determines
that it is no longer in the best interests of the Company to continue to
qualify as a REIT.
All certificates representing shares of Common Stock bear a legend referring
to the restrictions described above. All additional certificates representing
shares of Common Stock or Preferred Stock will bear substantially the same
legend.
The ownership limitations could have the effect of discouraging a takeover
or other transaction in which holders of some, or a majority, of shares of
Common Stock might receive a premium from their shares of Common Stock over
the then prevailing market price or which such holders might believe to be
otherwise in their best interest.
TRANSFER AGENT
The transfer agent and registrar for the Common Stock is American Stock
Transfer & Trust Company.
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DESCRIPTION OF UNITS AND REDEMPTION OF UNITS
GENERAL
Unitholders may, subject to certain limitations, require the Operating
Partnership to redeem all or a portion of their Units (the "Redemption Right")
after the first anniversary of the date of issuance of such Units. This
Redemption Right shall be exercised pursuant to a notice of redemption
delivered to the Operating Partnership, with a copy delivered to PAH GP, Inc.,
its general partner. Upon redemption, for each Unit redeemed, a Unitholder
will receive cash in an amount equal to the market value (as defined below) of
a share of Common Stock (subject to certain adjustments in the event of stock
dividends and stock splits); provided, however, that the Company may, in its
sole discretion, by notice to the Unitholder within five business days after
receipt of the notice of redemption, elect to acquire any Unit presented to
the Operating Partnership for redemption for cash or for one share of Common
Stock (subject to the same adjustments). The market value of the Common Stock
for purposes of redeeming Units will be equal to the average of the closing
trading price of the Common Stock for the ten trading days prior to the day on
which the redemption notice was received by the Operating Partnership.
The Company anticipates that it generally will elect to acquire any Units
presented to the Operating Partnership for redemption by the issuance of the
Redemption Shares. Such an acquisition by the Company will be treated as a
sale of the Units to the Company for Federal income tax purposes. See "--Tax
Consequences of Redemption." Upon a redemption for cash, a Unitholder's right
to receive distributions with respect to the Units redeemed will cease. Upon
the receipt of Redemption Shares, a Unitholder will have rights as a
stockholder of the Company, including the right to receive dividends from the
time of its acquisition of the Redemption Shares.
A Unitholder must notify the Company of its desire to require the Operating
Partnership to redeem Units. A Unitholder may not exercise the Redemption
Right for less than 1,000 Units or, if such Unitholder holds less than 1,000
Units, all of the Units held by such Unitholder. A Unitholder is not entitled
to exercise the Redemption Right if the delivery of Redemption Shares would be
prohibited under the provisions of the Operating Partnership Agreement to
protect the Company's qualification as a REIT.
TAX CONSEQUENCES OF REDEMPTION
The following discussion summarizes certain Federal income tax
considerations that may be relevant to a Unitholder should it exercise its
right to redeem its Units.
Tax Treatment of Exchange or Redemption of Units. If the Company elects to
purchase Units tendered for redemption, the Operating Partnership Agreement
provides that each of the Unitholder, the Operating Partnership and the
Company shall treat the transaction between the Unitholder and the Company as
a sale of Units by the Unitholder at the time of such redemption. Such sale
will be fully taxable to the Unitholder and the Unitholder will be treated as
realizing for tax purposes an amount equal to the sum of the cash value or the
value of the Common Stock received in the exchange plus the amount of any
Operating Partnership liabilities allocable to the redeemed Units at the time
of the redemption. The determination of the amount of gain or loss is
discussed more fully below. If the Company does not elect to purchase a
Unitholder's Units tendered for redemption and the Operating Partnership
redeems such Units for cash that the Company contributes to the Operating
Partnership to effect such redemption, the redemption likely would be treated
for tax purposes as a sale of such Units to the Company in a fully taxable
transaction, although the matter is not free from doubt. In that event, the
Unitholder would also be treated as realizing an amount equal to the sum of
the cash received in the exchange plus the amount of any Operating Partnership
liabilities allocable to the redeemed Units at the time of the redemption. The
determination of the amount and character of gain or loss in the event of such
a sale is discussed more fully below. See "--Tax Treatment of Disposition of
Units by a Limited Partner Generally."
If the Company does not elect to purchase Units tendered for redemption and
the Operating Partnership redeems a Unitholder's Units for cash that is not
contributed by the Company to effect the redemption, the tax consequences
would be the same as described in the previous paragraph, except that, if the
Operating Partnership
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redeems less than all of a Unitholder's Units, the Unitholder would not be
permitted to recognize any loss occurring on the transaction and would
recognize taxable gain only to the extent that the cash, plus the amount of
any Operating Partnership liabilities allocable to the redeemed Units,
exceeded the Unitholder's adjusted basis in all of its Units immediately
before the redemption.
If the Company contributes cash to the Operating Partnership to effect a
redemption, and in the unlikely event that the redemption transaction is
treated as the redemption of a Unitholder's Units by the Operating Partnership
rather than a sale of Units to the Company, the income tax consequences to the
Unitholder would be as described in the preceding paragraph.
Tax Treatment of Disposition of Units by a Limited Partner Generally. If a
Unit is disposed of in a manner that is treated as a sale of the Unit, or a
limited partner otherwise disposes of a Unit, the determination of gain or
loss from the sale or other disposition will be based on the difference
between the amount considered realized for tax purposes and the adjusted tax
basis in such Unit. See "--Basis of Units." Upon the sale of a Unit, the
"amount realized" will be measured by the sum of the cash and fair market
value of other property (i.e., Redemption Shares) received plus the amount of
any Operating Partnership liabilities allocable to the Units sold. To the
extent that the amount of cash or property received plus the allocable share
of any Operating Partnership liabilities exceeds the limited partner's
adjusted tax basis in the Units disposed of, such limited partner will
recognize gain. It is possible that the amount of gain recognized or even the
tax liability resulting from such gain could exceed the amount of cash and/or
the value of any other property (i.e., Redemption Shares) received upon such
disposition.
Except as described below, any gain recognized upon a sale or other
disposition of Units will be treated as gain attributable to the sale or
disposition of a capital asset. To the extent, however, that the amount
realized upon the sale of a Unit attributable to a limited partner's share of
"unrealized receivables" of the Operating Partnership (as defined in Section
751 of the Code) exceeds the basis attributed to those assets, such excess
will be treated as ordinary income. Unrealized receivables include, to the
extent not previously included in Operating Partnership income, any rights to
payment for services rendered or to be rendered. Unrealized receivables also
include amounts that would be subject to recapture as ordinary income if the
Operating Partnership had sold its assets at their fair market value at the
time of the transfer of a Unit.
Basis of Units. In general a Unitholder who acquired his Units by
contribution of property and/or money to the Operating Partnership had an
initial tax basis in his Units ("Initial Basis") equal to the sum of (i) the
amount of money contributed (or deemed contributed as described below) and
(ii) his adjusted tax basis in any other property contributed in exchange for
such Units, and less the amount of any money distributed (or deemed
distributed, as described below) in connection with the acquisition of the
Units. The Initial Basis of Units acquired by other means would have been
determined under the general rules of the Code, including the partnership
provisions, governing the determination of tax basis. Other rules, including
the "disguised sale" rules discussed below, also may affect Initial Basis, and
Unitholders are urged to consult their own tax advisors regarding their
Initial Basis. A Unitholder's Initial Basis in his Units is generally
increased by (i) such Unitholder's share of Operating Partnership taxable and
tax-exempt income and (ii) increases in such Unitholder's allocable share of
liabilities of the Operating Partnership (including any increase in his share
of liabilities occurring in connection with the acquisition of his Units).
Generally, such Unitholder's basis in his Units is decreased (but not below
zero) by (i) such Unitholder's share of Operating Partnership distributions,
(ii) decreases in such Unitholder's allocable share of liabilities of the
Operating Partnership (including any decrease in his share of liabilities of
the Operating Partnership occurring in connection with the acquisition of his
Units), (iii) such Unitholder's share of losses and deductible expenses of the
Operating Partnership and (iv) such Unitholder's share of nondeductible
expenditures of the Operating Partnership that are not chargeable to his
capital account.
Potential Application of the Disguised Sale Regulations to a Redemption of
Units. There is a risk that a redemption by the Operating Partnership of Units
issued in exchange for a contribution of property to the Operating Partnership
may cause the original transfer of property to the Operating Partnership in
exchange for
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Units to be treated as a "disguised sale" of property. Section 707 of the Code
and the Treasury Regulations thereunder (the "Disguised Sale Regulations")
generally provide that, unless one of the prescribed exceptions is applicable,
a partner's contribution of property to a partnership and a simultaneous or
subsequent transfer of money or other consideration (which may include the
assumption of or taking subject to a liability) from the partnership to the
partner will be presumed to be a sale, in whole or in part, of such property
by the partner to the partnership. Further, the Disguised Sale Regulations
provide generally that, in the absence of an applicable exception, if money or
other consideration is transferred by a partnership to a partner within two
years of the partner's contribution of property, the transactions are presumed
to be a sale of the contributed property unless the facts and circumstances
clearly establish that the transfers do not constitute a sale. The Disguised
Sale Regulations also provide that if two years have passed between the
transfer of money or other consideration and the contribution of property, the
transactions will be presumed not to be a sale unless the facts and
circumstances clearly establish that the transfers constitute a sale.
Accordingly, if a Unit is redeemed by the Operating Partnership from a
Unitholder who holds Units that were issued in exchange for a contribution of
property to the Operating Partnership, the Internal Revenue Service (the
"IRS") could contend that the Disguised Sale Regulations apply because the
Unitholder will thus receive cash subsequent to a previous contribution of
property to the Operating Partnership. In that event, the IRS could contend
that the contribution was taxable as a disguised sale under the Disguised Sale
Regulations. Any gain recognized thereby may be eligible for installment
reporting under Section 453 of the Code, subject to certain limitations. In
addition, in such event, the Disguised Sale Regulations might apply to cause a
portion of the proceeds received by a redeeming Unitholder to be characterized
as original issue discount on a deferred obligation which would be taxable as
interest income in accordance with the provisions of Section 1272 of the Code.
Each Unitholder is advised to consult its own tax advisors to determine
whether redemption of its Units could be subject to the Disguised Sale
Regulations.
COMPARISON OF OWNERSHIP OF UNITS AND COMMON STOCK
The nature of an investment in Common Stock of the Company is generally
economically equivalent to an investment in Units in the Operating
Partnership. There are, however, some differences between ownership of Units
and ownership of Common Stock, some of which may be material to investors. The
information below highlights a number of significant differences between the
Operating Partnership and the Company relating to, among other things, form of
organization, permitted investments, policies and restrictions, management
structure, compensation and fees, investor rights and Federal income taxation
and compares certain legal rights associated with the ownership of Units and
Common Stock, respectively. These comparisons are intended to assist
Unitholders in understanding how their investment will be changed if their
Units are acquired for Common Stock. This discussion is summary in nature and
does not constitute a complete discussion of these matters, and investors
should carefully review the balance of this Prospectus and the registration
statement of which this Prospectus is a part for additional important
information about the Company.
Form of Organization and Assets Owned. The Operating Partnership is
organized as a Virginia limited partnership. A substantial amount of the
Company's operations are conducted through the Operating Partnership.
The Company was organized under the laws of the Commonwealth of Virginia in
April 1995. Because of certain state tax considerations, the Company holds its
interest in the Operating Partnership through PAH GP and PAH LP. PAH GP is the
sole general partner of and owns a 1% partnership interest in the Operating
Partnership. PAH LP is one of the Operating Partnership's Limited Partners and
currently owns an approximately 84.4% limited partnership interest in the
Operating Partnership. Through its ownership of PAH GP and PAH LP, the Company
has an indirect investment in the Hotels and other assets owned by the
Operating Partnership.
Length of Investment. The Operating Partnership has a stated termination
date of December 31, 2050, although it may be terminated earlier under certain
circumstances. The Company has a perpetual term and intends to continue its
operations for an indefinite time period.
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Purpose and Permitted Investments. The purpose of the Operating Partnership
includes the conduct of any business that may be lawfully conducted by a
limited partnership formed under Virginia law, except that the Partnership
Agreement requires the business of the Operating Partnership to be conducted
in such a manner that will permit the Company to be classified as a REIT for
Federal income tax purposes. The Operating Partnership may, subject to the
foregoing limitation, invest or enter into partnerships, joint ventures or
similar arrangements and may own interests in any other entity.
Under its Articles of Incorporation, the Company may engage in any lawful
activity permitted under the VSCA.
Additional Equity. The Operating Partnership is authorized to issue Units
and other partnership interests to its partners or to other persons for such
consideration and on such terms and conditions as PAH GP, as general partner
(the "General Partner"), in its sole discretion, may deem appropriate.
The Board of Directors of the Company may authorize the issuance of shares
of capital stock of any class, whether now or hereafter authorized, or
securities or rights, convertible into shares of capital stock, for such
consideration as the Board of Directors may deem advisable, subject to such
restrictions or limitations as may be set forth in the Company's Bylaws. As
long as the Operating Partnership is in existence, the proceeds of all equity
capital raised by the Company will be contributed to the Operating Partnership
in exchange for Units or other interests in the Operating Partnership.
Borrowing Policies. The Operating Partnership has no restrictions on
borrowings, and the General Partner, has full power and authority to borrow
money on behalf of the Operating Partnership.
The Company is not restricted under its governing instruments from incurring
borrowings.
Other Investment Restrictions. Other than restrictions precluding
investments by the Operating Partnership that would adversely affect the
qualification of the Company as a REIT, there are no restrictions upon the
Operating Partnership's authority to enter into certain transactions,
including, among others, making investments, lending Operating Partnership
funds, or reinvesting the Operating Partnership's cash flow and net sale or
refinancing proceeds.
Neither the Company's Articles of Incorporation nor its Bylaws impose any
restrictions upon the types of investments that may be made by the Company.
Management Control. All management powers over the business and affairs of
the Operating Partnership are vested in the General Partner, and no Limited
Partner of the Operating Partnership has any right to participate in or
exercise control or management power over the business and affairs of the
Operating Partnership.
The Board of Directors has exclusive control over the Company's business and
affairs subject only to the restrictions in the Articles of Incorporation and
the Bylaws. Each member of the Company's Board of Directors is elected
annually. The policies adopted by the Board of Directors may be altered or
eliminated without advice of the stockholders of the Company. Accordingly,
except for their vote in the elections of directors, stockholders of the
Company have no control over the ordinary business policies of the Company.
Management Liability and Indemnification. The Operating Partnership
Agreement generally provides that the General Partner will incur no liability
to the Operating Partnership or any Limited Partner for losses sustained or
liabilities incurred as a result of errors in judgment or of any act or
omission if the General Partner acted in good faith. In addition, the General
Partner is not responsible for any misconduct or negligence on the part of its
agents provided the General Partner appointed such agents in good faith. The
Operating Partnership Agreement also provides for indemnification of the
General Partner, PAH LP, the Company, the Directors and officers of the
General Partner, PAH LP or the Company, and such other persons as the General
Partner may from time to time designate, against any and all losses, claims,
damages, liabilities, joint or several expenses, (including reasonable legal
fees and expenses), judgments, fines, settlements and other amounts arising
from any and all
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claims, demands, actions, suits or proceedings, civil, criminal,
administrative or investigative, that relate to the operations of the
Operating Partnership in which such person may be involved .
The Articles of Incorporation and the VSCA contain provisions which require
the Company to indemnify an officer or director against liability incurred in
any proceeding to which he is a party because he is an officer or director if
(i) he conducted himself in good faith, (ii) he believed (A) in the case of
conduct in his official capacity with the Company, that his conduct was in its
best interest, or (B) in all other cases, that his conduct was at least not
opposed to its best interests, and (iii) in the case of any criminal
proceeding, he had no reasonable cause to believe that his conduct was
unlawful.
The Articles of Incorporation of the Company also contain a provision which
eliminates the liability of a director or officer to the Company or it
shareholders for monetary damages for any breach of duty as a director or
officer. This provision does not eliminate such liability to the extent that
the director or officer engaged in willful misconduct or a known violation of
criminal law or of any federal or state securities law.
Unless a determination has been made that indemnification is not
permissible, the Articles of Incorporation also permit the Company to make
advances to and reimburse an officer or director for expenses prior to final
disposition of the proceeding, upon receipt of a written undertaking from the
director or officer to repay the amounts advanced or reimbursed if it is
ultimately determined that he is not entitled to indemnification. The Board of
Directors of the Company also has the authority to extend to any person who is
an employee or agent of the Company, or who is or was serving at the request
of the Company as a director, officer, employee or agent of another entity,
the same indemnification rights possessed by directors and officers, subject
to all of the accompanying conditions and obligations.
The VSCA permits a court, upon application of a director or officer, to
review the Company's determination as to a director's or officer's request for
advances, reimbursement or indemnification. The court may order the Company to
make advances and/or reimbursements for expenses or to provide
indemnification.
The Company has purchased and maintains insurance on behalf of all of its
directors and executive officers against liability asserted against or
incurred by them in their official capacities with the Company whether or not
the Company is required or has the power to indemnify them against the same
liability.
Anti-takeover Provisions. Except in limited circumstances, the General
Partner has exclusive management power over the business and affairs of the
Operating Partnership. Except in the case of bankruptcy or dissolution, the
General Partner may not be removed by the Limited Partners with or without
cause.
The Articles of Incorporation of the Company and Virginia law contain a
number of provisions that may have the effect of delaying or discouraging an
unsolicited proposal for the acquisition of the Company or the removal of
incumbent management. See "Risk Factors--Limitations on Acquisition and Change
in Control"
Voting Rights. Under the Operating Partnership Agreement, the Limited
Partners do not have voting rights relating to the operation and management of
the Operating Partnership except in connection with matters, as described more
fully below, involving certain amendments to the Operating Partnership
Agreement.
Stockholders of the Company have the right to vote, among other things, on a
merger or sale of substantially all of the assets of the Company, certain
amendments to the Articles of Incorporation and dissolution of the Company.
The Company is managed and controlled by a Board of Directors elected annually
by the stockholders of the Company. Each share of Common Stock has one vote,
and the Articles of Incorporation permit the Board of Directors to classify
and issue Preferred Stock in one or more series having voting power which may
differ from that of the Common Stock.
Amendment of the Operating Partnership Agreement or the Company's Articles
of Incorporation. Amendments to the Operating Partnership Agreement may be
proposed by the General Partner. Certain amendments that would, among other
things, adversely affect the rights of any Limited Partner in profits, losses
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or distributions, affect the Redemption Right in a manner adverse to the
Limited Partners, or impose on the Limited Partners any obligation to make
capital contributions, require the consent of Limited Partners (other than PAH
LP) holding more than 50% of the interests of Limited Partners (other than PAH
LP).
Amendments to the Company's Articles of Incorporation must be approved by
the vote of the holders of not less than two-thirds of all votes entitled to
be cast on the matter. Pursuant to the Company's Articles of Incorporation,
amendments affecting the Board of Directors, including their election and
removal, must be approved by the affirmative vote of all of the independent
Directors or the holders of not less than seventy-five percent of all votes
entitled to be cast on the matter.
Compensation, Fees and Distributions. The General Partner does not receive
any compensation for its services to the Operating Partnership. As a partner
in the Operating Partnership, however, the General Partner has the same right
to allocations and distributions as other partners of the Operating
Partnership. In addition, the Operating Partnership will reimburse the General
Partner for all expenses incurred relating to the ownership and operation of,
or for the benefit of, the Operating Partnership.
The Directors and officers of the General Partner receive compensation for
their services.
Liability of Investors. Under the Operating Partnership Agreement and
applicable Virginia law, the liability of the Limited Partners for the
Operating Partnership's debts and obligations is generally limited to the
amount of their investment in the Operating Partnership.
Under Virginia law, stockholders generally are not personally liable for the
debts or obligations of the Company. See "Description of Capital Stock."
Nature of Investment. The Units constitute equity interests entitling
holders thereof to their pro rata share of cash distributions made to the
Limited Partners of the Operating Partnership. The General Partner is entitled
to receive its pro rata share of distributions made by the Operating
Partnership with respect to its interest in the Operating Partnership.
Shares of Common Stock constitute equity interests in the Company. Each
stockholder will be entitled to his pro rata share of any dividends or
distributions paid with respect to Common Stock. The dividends payable to the
stockholders are not fixed in amount and are paid only if, when and as
declared by the Board of Directors. In order to qualify as a REIT, the Company
must distribute at least 95% of its taxable income (excluding capital gains),
and any taxable income (including capital gains) not distributed will be
subject to corporate income tax.
Liquidity. Subject to certain exceptions, the Unitholders may transfer all
or any portion of their Units with or without the consent of the Company.
However, the General Partner, in its sole and absolute discretion, may or may
not consent to the admission as a substituted limited partner of any
transferee of such Units. If the Company does not consent to the admission of
a transferee as a substituted limited partner, the transferee shall be
considered an assignee of an economic interest in the Operating Partnership
but will not be a holder of Units for any other purpose; accordingly, the
assignee will not be permitted to vote on any affairs or issues on which a
Limited Partner may vote.
The Common Stock is listed on the NYSE. The breadth and strength of this
market will depend, among other things, upon the number of shares outstanding,
the Company's financial results and prospects, the general interest in the
Company's real estate investments and the Company's dividend yield compared to
that of other debt and equity securities.
Federal Income Taxation. The Operating Partnership is taxed as a partnership
for federal income tax purposes. Accordingly, each Unitholder includes on his
individual income tax return as income, gain, deduction or loss his
distributive share of the Operating Partnership's items of income, gain,
deduction or loss, determined as if the Unitholder realized such items
directly from the source from which realized by the Operating Partnership
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or incurred such items in the same manner incurred by the Operating
Partnership. Distributions by the Operating Partnership to a Unitholder are
generally not taxable to the Unitholder unless they exceed the Unitholder's
basis in his Units. Special limitations, such as the passive activity loss
rules, may limit a Unitholder's ability to use his share of the Operating
Partnership's losses and deductions to offset income from other sources.
Income and gain from the Operating Partnership, however, are characterized as
passive activity income and may be offset by losses and deductions from other
passive activities in which a Unitholder holds an interest.
The Company is a corporation taxed as a REIT. Stockholders may not include
in their individual income tax returns any net operating losses or capital
losses of the Company. Instead, such losses would be carried over by the
Company for potential offset against its future income (subject to certain
limitations). Taxable distributions from the Company and gain from the
disposition of the Common Stock will not be treated as passive activity income
and, therefore, stockholders generally will not be able to apply any "passive
activity losses" (such as losses from certain types of limited partnerships in
which the stockholder is a limited partner) against such income. In addition,
taxable distributions from the Company generally will be treated as investment
income for purposes of the investment interest limitations.
As long as the Company qualifies as a REIT, distributions made to the
Company's taxable U.S. stockholders out of current or accumulated earnings and
profits (and not designated as capital gain dividends) will be taken into
account by such U.S. stockholders as ordinary income and will not be eligible
for the dividends received deduction generally available to corporations. As
used herein, the term "U.S. stockholder" means a holder of Common Stock that
for U.S. federal income tax purposes is (i) a citizen or resident of the
United States, (ii) a corporation, partnership, or other entity created or
organized in or under the laws of the United States or of any political
subdivision thereof, or (iii) an estate or trust the income of which is
subject to U.S. federal income taxation regardless of its source.
Distributions that are designated as capital gain dividends will be taxed as
long-term capital gains (to the extent they do not exceed the Company's actual
net capital gain for the taxable year) without regard to the period for which
the stockholder has held his Common Stock. However, corporate stockholders may
be required to treat up to 20% of certain capital gain dividends as ordinary
income. Distributions in excess of current and accumulated earnings and
profits will not be taxable to a stockholder to the extent that they do not
exceed the adjusted basis of the stockholder's Common Stock, but rather will
reduce the adjusted basis of such stock. To the extent that such distributions
in excess of current and accumulated earnings and profits exceed the adjusted
basis of a stockholder's Common Stock, such distributions will be included in
income as long-term capital gain (or short-term capital gain if the Common
Stock has been held for one year or less) assuming the Common Stock is a
capital asset in the hands of the stockholder. In addition, any distribution
declared by the Company in October, November, or December of any year and
payable to a stockholder of record on a specified date in any such month shall
be treated as both paid by the Company and received by the stockholder on
December 31 of such year, provided that the distribution is actually paid by
the Company during January of the following calendar year.
The rules governing U.S. federal income taxation of tax-exempt entities,
nonresident alien individuals, foreign corporations, foreign partnerships or
other foreign entities with regard to their investments in U.S. partnerships
and in REITs are complex, and no attempt is made here to summarize such rules.
TAX-EXEMPT AND FOREIGN UNITHOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS TO
DETERMINE THE EFFECT OF FEDERAL, STATE, LOCAL AND FOREIGN INCOME TAX LAWS WITH
REGARD TO AN INVESTMENT IN COMMON STOCK, INCLUDING ANY REPORTING REQUIREMENTS.
State and Local Taxation. In general, the differences between the state and
local tax treatments of Unitholders in the Operating Partnership and
stockholders in the Company will be similar to the differences between the
federal income tax treatments of Unitholders and stockholders. Variations in
state and local tax laws, are, however, impossible to summarize here. EACH
UNITHOLDER IS ADVISED TO CONSULT HIS OWN TAX ADVISOR REGARDING THE SPECIFIC
DIFFERENCES IN STATE AND LOCAL TAX TREATMENTS OF UNITHOLDERS AND STOCKHOLDERS.
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FEDERAL INCOME TAX CONSIDERATIONS
The Company has made an election to be taxed as a REIT under sections 856
through 860 of the Code. The Company believes that it is organized and
operates in such a manner as to qualify for taxation as a REIT under the Code,
and the Company intends to continue to operate in such a manner, but no
assurance can be given that the Company will operate in a manner so as to
qualify or remain qualified as a REIT.
The sections of the Code and the Treasury Regulations relating to
qualification and operation as a REIT (the "REIT Requirements") are highly
technical and complex. The following discussion is a brief and general summary
of some of the more significant consequences to the Company of compliance with
the REIT Requirements. The discussion is qualified in its entirety by the
applicable Code provisions, Treasury Regulations promulgated thereunder, and
administrative and judicial interpretations thereof, all of which are subject
to change prospectively or retrospectively. The statements in this discussion
and the opinion of Goodwin, Procter and Hoar LLP are based on current
provisions of the Code, Treasury Regulations, the legislative history of the
Code, existing administrative rulings and practices of the Service, and
judicial decisions. No assurance can be given that future legislative,
judicial, or administrative actions or decisions, which may be retroactive in
effect, will not affect the accuracy of any statements in this Prospectus with
respect to the transactions entered into or contemplated prior to the
effective date of such changes.
EACH UNITHOLDER IS ADVISED TO CONSULT HIS OWN TAX ADVISOR REGARDING THE
SPECIFIC TAX CONSEQUENCES TO HIM OR HER OF THE COMPANY'S ELECTION TO BE TAXED
AS A REIT, INCLUDING THE FEDERAL, STATE, LOCAL, FOREIGN, AND OTHER TAX
CONSEQUENCES OF SUCH INVESTMENT AND ELECTION, INCLUDING TAX CONSEQUENCES
RESULTING FROM A UNITHOLDER'S OWN TAX CHARACTERISTICS, AND OF POTENTIAL
CHANGES IN APPLICABLE TAX LAWS.
In the opinion of Goodwin, Procter & Hoar LLP, commencing with the taxable
year ended December 31, 1995, the Company has been organized and operated in
conformity with the requirements for qualification and taxation as a REIT
under the Code, and the Company's proposed method of operation will enable it
to continue to meet the requirements for qualification and taxation as a REIT
under the Code. Investors should be aware, however, that opinions of counsel
are not binding upon the Service or any court. It must be emphasized that
Goodwin, Procter & Hoar LLP's opinion is based on various assumptions and is
conditioned upon certain representations made by the Company as to factual
matters, including representations regarding the nature of the Company's
properties, the Participating Leases, and the future conduct of the Company's
business. Moreover, such qualification and taxation as a REIT depends upon the
Company's ability to meet on a continuing basis, through actual annual
operating results, requirements regarding its level of distributions, stock
ownership, and various other qualification tests. Goodwin, Procter & Hoar LLP
will not review the Company's compliance with those tests on a continuing
basis. Accordingly, no assurance can be given that the actual results of the
Company's operation for any particular taxable year will satisfy such
requirements.
EFFECTS OF REIT CLASSIFICATION ON THE COMPANY
As a REIT, the Company generally is not subject to federal corporate income
tax on its net income that is distributed currently to its stockholders. That
treatment substantially eliminates the "double taxation" of income (i.e.,
taxation at both the corporate and stockholder levels) that generally results
from investment in a corporation. However, the Company may be subject to
federal income tax under certain circumstances, including taxes at regular
corporate rates on any undistributed REIT taxable income, the "alternative
minimum tax" on its items of tax preference, and taxes imposed on income and
gain generated by certain extraordinary transactions.
EFFECTS OF COMPLIANCE WITH REIT REQUIREMENTS
In addition to meeting a number of technical requirements, including
requirements regarding diversification of ownership and record keeping, to
qualify as a REIT the Company must meet certain tests regarding the nature
25
<PAGE>
of its assets and its gross income. The Company is largely restricted under
these tests to holding "real estate assets" (as defined in the Code) and
relatively small amounts of investment securities. Accordingly, the Company's
ability to diversify its holdings outside of investments in real estate is
limited. The requirements of the statutory tests also impose restrictions on
the terms of the Company's investments. Because the Company's proportionate
shares of the assets and items of income of the Operating Partnership and the
Subsidiary Partnerships are treated as assets and gross income of the Company,
the same restrictions apply to the operations and investments of the Operating
Partnership and the Subsidiary Partnerships. The following is a summary of
some of the more significant of these restrictions, but should not be taken as
a comprehensive list of such restrictions. Further, changes in law, or in the
interpretation of the law, may change the nature and effect of the
restrictions discussed or add additional restrictions to the manner in which
the Company conducts its business.
To earn income that satisfies the REIT Requirements, the Company is
generally prohibited from operating the Hotels, whether on its own behalf or
through the Operating Partnership or the Subsidiary Partnerships (except for
short periods following a foreclosure under a Participating Lease).
Accordingly, all of the Hotels, other than the Crowne Plaza Ravinia and the
Marriott WindWatch Hotel (which are held by taxable, special purpose entities
in which the Company does not hold voting control), have been leased to the
Lessees. Among other requirements, a lease may not have the effect of giving
the Company a share of the net income of the Lessee, and the amount of
personal property leased with a Hotel must not exceed a defined, low level.
The Company may not provide services, other than customary services, to the
Lessees or their subtenants. The Participating Leases must also qualify as
"true" leases for federal income tax purposes (as opposed to service
contracts, joint ventures or other types of arrangements). There are, however,
no controlling Treasury Regulations, published rulings, or judicial decisions
that discuss whether leases similar to the Participating Leases constitute
"true" leases. Therefore, there can be no complete assusrance that the Service
will not assert successfully a contrary position.
Payments under a Participating Lease will not constitute qualifying income
for purposes of the REIT Requirements if the Company owns, directly or
indirectly, 10% or more of the ownership interests in the relevant Lessee.
Constructive ownership rules apply, such that, for instance, the Company is
deemed to own the assets of stockholders who own 10% or more in value of the
stock of the Company. The Limited Partners of the Operating Partnership, some
of whom hold ownership interests in Lessees, may acquire Common Stock (at the
Company's option) by exercising their redemption rights. The Partnership
Agreement prohibits redemptions to the extent that the delivery of Common
Stock upon the exercise of a redemption right would cause the Company to own,
actually or constructively, 10% or more of the ownership interests in a
Lessee. The Articles of Incorporation likewise prohibit a stockholder of the
Company from owning Common Stock that would cause the Company to own, actually
or constructively, 10% or more of the ownership interests in a Lessee. Thus,
the Company should never own, actually or constructively, 10% or more of a
Lessee. However, because the relevant constructive ownership rules are broad
and it is not possible to monitor continually direct and indirect transfers of
Common Stock, no absolute assurance can be given that such transfers, or other
events of which the Company has no knowledge, will not cause the Company to
own constructively 10% or more of one or more Lessees at some future date.
The Company may not hold, directly or indirectly, more than 10% of the
voting stock of any entity taxed as corporation for federal income tax
purposes, except for wholly owned direct subsidiaries in which the Company has
always held 100% of the voting stock (such as PAH GP and PAH LP). The Company
believes that each of the Operating Partnership and the Subsidiary
Partnerships is properly classified for federal income tax purposes as a
partnership and not as an association taxable as a corporation and thus not
subject to this restriction. The Company further believes that neither the
Operating Partnership nor the Subsidiary Partnerships are publicly traded
partnerships taxable as a corporation under the provisions of Section 7704 of
the Code. The Operating Partnership will be operated, however, so that more
than 90% of its income will be "qualifying income" under Section 7704(d) of
the Code, which will permit the Operating Partnership, even if otherwise
classified as a publicly traded partnership, to avoid taxation as a
corporation. Although the qualifying income required by Section 7704(d)
generally includes the same items of gross income that permit the Company to
satisfy the REIT Requirements, compliance with Section 7704(d) may further
restrict the Company's investments in certain debt instruments and its actual
or constructive ownership of interests in the Lessees.
26
<PAGE>
In addition to the considerations discussed above, the REIT Requirements
impose a number of other restrictions on the operations of the Company. Net
income from sales of property sold to customers in the ordinary course of
business (other than inventory acquired by reason of certain foreclosures) is
subject to a 100% tax. If the gross receipts from prohibited transactions,
when added to gain from the sale of (i) stock or securities held for less than
one year and (ii) real property held for less than four years (with certain
exceptions) exceed 30% of the Company's gross income in any taxable year, the
Company will fail to qualify as a REIT. Minimum distribution requirements
apply to the Company, as discussed elsewhere in this Prospectus. See "Risk
Factors--Tax Risks--Adverse Effects of REIT Minimum Distribution
Requirements."
Certain provisions of the Code provide that the Company may continue to
qualify as a REIT despite a failure by the Company to meet certain of the REIT
Requirements. The relief provisions are generally only available if the
Company's failure to meet such requirements is due to reasonable cause and not
due to willful neglect, and it is not possible to state whether in all
circumstances the Company would be entitled to the benefit of the relief
provisions. Even if the relief provisions apply, in some circumstances a 100%
tax would be imposed with respect to a portion of the Company's net income.
FAILURE TO QUALIFY
If the Company failed to qualify for taxation as a REIT in any taxable year,
and the relief provisions did not apply, the Company would be subject to tax
(including any applicable alternative minimum tax) on its taxable income at
regular corporate rates. Distributions to the stockholders would not be
deductible by the Company nor would they be required to be made. In such
event, to the extent of current or accumulated earnings and profits, all
distributions to stockholders would be taxable as ordinary income and, subject
to certain limitations, corporate distributees might be eligible for the
dividends received deduction. Unless entitled to relief under specific
statutory provisions, the Company also would be disqualified from taxation as
a REIT for the four taxable years following the year during which the Company
ceased to qualify as a REIT. It is not possible to state whether in all
circumstances the Company would be entitled to such statutory relief.
PAH RAVINIA AND PAH WINDWATCH
The Operating Partnership owns 100% of the non-voting stock of PAH Ravinia
and 100% of the non-voting member interests in PAH WindWatch, and owns,
indirectly, 4% of the voting equity interests in each entity, representing
99.04% of the economic interests in the companies. In addition, the Operating
Partnership owns mortgage notes on the hotels held by the companies. By virtue
of its ownership of Units in the Operating Partnership, the Company is
considered to own its pro rata share of such equity interests and mortgage
notes.
As discussed above, to qualify as a REIT, the Company may not own more than
10% of the voting securities of any issuer. Further, the Company may not own
equity and unsecured debt securities of any single issuer if the value of such
securities exceeds 5% of the total value of the Company's assets. The Company
believes that it satisfies these requirements with respect to PAH Ravinia and
PAH WindWatch. In particular, the Company believes that the mortgage notes on
the Hotels are properly treated as debt for tax purposes and are secured by
sufficient real property to qualify as "real estate assets" exempt from the 5%
limitation. If the Service were to successfully challenge these
determinations, however, the Company would fail to qualify as a REIT.
Both PAH Ravinia and PAH WindWatch will pay federal, state and local income
taxes on their taxable income at normal corporate rates. These taxes will
reduce amounts available for distribution by the Companies and will in turn
reduce amounts available for distribution to the Company's stockholders.
STATE AND LOCAL TAXES
The Company, the Operating Partnership and the Subsidiary Partnerships may
be subject to state and local taxes in various jurisdictions, including those
in which it or they transact business or reside. The state and local tax
treatment of the Company, the Operating Partnership and the Subsidiary
Partnerships may not conform to the federal income tax consequences discussed
above. Consequently, Unitholders should consult their own tax advisors
regarding the effect of state and local tax laws on the ownership of Common
Stock.
27
<PAGE>
REGISTERING STOCKHOLDERS
The following table sets forth certain information with respect to the
Registering Stockholders, including the number of shares of Common Stock
beneficially owned by each Registering Stockholder, the number of shares of
Common Stock registered hereby and the percentage of shares of Common Stock
held by each. There can be no assurance that all or any of the shares of
Restricted Stock offered hereby will be sold. If any are sold, each
Registering Stockholder will receive all of the net proceeds from the sale of
his or her respective shares of Restricted Stock offered hereby.
<TABLE>
<CAPTION>
NUMBER OF SHARES
OF COMMON STOCK NUMBER OF SHARES
BENEFICIALLY OWNED OF RESTRICTED STOCK
REGISTERING STOCKHOLDER BEFORE THE OFFERING(1) OFFERED HEREBY
- ----------------------- ---------------------- -------------------
<S> <C> <C>
Thomas W. Lattin(2).................. 71,250 71,250
Rex E. Stewart(3).................... 48,750 48,750
Leslie Ng(4)......................... 29,375 29,375
Michael D. Murphy(5)................. 20,000 20,000
John P. Bohlmann..................... 16,000 16,000
George T. Huntzicker(6).............. 12,000 12,000
Cindy Pervenanze..................... 6,000 6,000
James T. Evan........................ 3,000 3,000
Diane W. Golden...................... 2,400 2,400
David C. Lee......................... 2,400 2,400
Mary Kyle............................ 2,400 2,400
Deborah J. Gray...................... 1,600 1,600
Carmen L. Dennistoun................. 1,600 1,600
Leonard Boxer(7)..................... 4,480 4,480
John H. Daniels(7)................... 4,480 4,480
John C. Deterding(7)................. 4,480 4,480
Gregory R. Dillon(7)................. 4,480 4,480
Thomas S. Foley(7)................... 4,480 4,480
Arch K. Jacobson(7).................. 5,480 4,480
-------
TOTAL.............................. 243,655
=======
</TABLE>
- --------
(1) The Common Stock is being registered for the account of the Registering
Stockholders who received restricted shares of Common Stock in connection
with the formation of the Company and/or pursuant to the Company's 1995
Plan and the Company's Non-Employee Director's Incentive Plan. Each
Registering Stockholder's holdings represent less than 1% of all
outstanding shares of Common Stock of the Company.
(2) Mr. Lattin has served as President and Chief Operating Officer of the
Company since October 1995.
(3) Mr. Stewart has served as Executive Vice President and Chief Financial
Officer of the Company since October 1995.
(4) Mr. Ng has served as Senior Vice President-Acquisitions of the Company
since October 1995.
(5) Mr. Murphy has served as Senior Vice President-Acquisitions of the Company
since April 1996.
(6) Mr. Huntzicker has served as Vice President-Design and Construction of the
Company since April 1996.
(7) This individual has served a Director of the Company since October 1995.
28
<PAGE>
PLAN OF DISTRIBUTION
REDEMPTION SHARES
The Prospectus relates (i) to the possible issuance by the Company of the
Redemption Shares if, and to the extent that, holders of the Units tender such
Units for redemption and the Company elects to acquire such tendered Units for
shares of Common Stock; and (ii) to the resale of the Restricted Stock by the
registering Stockholder. The Company has registered the Redemption Shares for
sale pursuant to certain contractual obligations, but registration of such
shares does not necessarily mean that any of the Redemption Shares will be
issued by the Company. The Company will not receive any proceeds from the
issuance of Redemption Shares to Unitholders, although the Company will
acquire Units from such Unitholders in exchange for Redemption Shares.
The Company may from time to time issue up to 2,839,937 Redemption Shares
upon the acquisition of an equivalent number of Units tendered for exchange.
The Company will acquire one Unit in exchange for each Redemption Share that
the Company issues in connection with these acquisitions. Consequently, with
each exchange, the Company's interest in the Operating Partnership will
increase.
All expenses incident to the offering and sale of the Redemption Shares,
other than commissions, discounts and fees of underwriters, broker-dealers or
agents, shall be paid by the Company.
RESTRICTED STOCK
The Company will not receive any of the proceeds from the sale of the
Restricted Stock. The shares of Restricted Stock offered hereby may be sold
from time to time on the NYSE on terms to be determined at the time of such
sales. The Registering Stockholders may also make private sales directly or
through a broker or brokers. Alternatively, the Registering Stockholders may
from time to time offer shares of Common Stock to or through underwriters,
dealers or agents, who may receive consideration in the form of discounts and
commissions; such compensation, which may be in excess of ordinary brokerage
commissions, may be paid by the Registering Stockholders and/or the purchasers
of the shares of Restricted Stock offered hereby for whom such underwriters,
dealers or agents may act. The Registering Stockholders and any dealers or
agents that participate in the distribution of the shares of Restricted Stock
offered hereby may be deemed to be "underwriters" as defined in the Securities
Act, and any profit on the sale of such shares of Restricted Stock offered
hereby by them and any discounts, commissions or concessions received by any
such dealers or agents might be deemed to be underwriting discounts and
commissions under the Securities Act. The aggregate proceeds to the
Registering Stockholders from sales of the shares of Restricted Stock offered
by the Registering Stockholders hereby will be the purchase price of such
Restricted Stock less any broker's commissions.
To the extent required, the specific shares of Restricted Stock to be sold,
the names of the Registering Stockholders, the respective purchase prices and
public offering prices, the names of any such agent, dealer or underwriter,
and any applicable commissions or discounts with respect to a particular offer
will be set forth in an accompanying prospectus supplement.
The shares of Restricted Stock offered hereby may be sold from time to time
in one or more transactions at a fixed offering price, which may be changed,
or at varying prices determined at the time of sale or at negotiated prices.
In order to company with the securities laws of certain states, if
applicable, the shares of Restricted Stock offered hereby will be sold in such
jurisdictions only through registered or licensed brokers or dealers. In
addition, in certain states shares of Restricted Stock may not be sold unless
they have been registered or qualified for sale in the applicable state or an
exemption from the registration or qualification requirement is available and
is complied with.
29
<PAGE>
Under applicable rules and regulations under the Exchange Act, any person
engaged in the distribution of the Restricted Stock offered hereby may not
simultaneously engage in market making activities with respect to the
Restricted Stock for a period of two business days prior to the commencement
of such distribution. In addition, and without limiting the foregoing, the
Registering Stockholders will be subject to applicable provisions of the
Exchange Act and the rules and regulations thereunder, including, without
limitation, Rules 10b-2, 10b-6 and 10b-7, which may limit the timing of
purchases and sales by the Registering Stockholders.
The Company will pay substantially all the expenses incurred by the
Registering Stockholders and the Company incident to the sale of the
Restricted Stock, but excluding any underwriting discounts, commissions, and
transfers taxes.
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby will be passed
upon for the Company by Goodwin, Procter & Hoar llp, Boston, Massachusetts, a
limited liability partnership including professional corporations. In
addition, the description of federal income tax consequences contained in the
section of the Prospectus entitled "Federal Income Tax Considerations" is
based on the opinion of Goodwin, Procter & Hoar llp. Goodwin, Procter & Hoar
llp will rely on Hunton & Williams, Richmond, Virginia as to certain matters
of Virginia law.
EXPERTS
The (a) Consolidated Financial Statements of Patriot American Hospitality,
Inc. as of December 31, 1995 and for the period October 2, 1995 (inception of
operations) through December 31, 1995 and the related financial statement
schedules and (b) the Combined Financial Statements of the Initial Hotels as
of December 31, 1994 and for each of the years in the two-year period ended
December 31, 1994 and the period January 1, 1995 through October 1, 1995
appearing in the Company's 1995 Annual Report on Form 10-K have been audited
by Ernst & Young LLP, independent auditors, as set forth in their reports
thereon included therein and incorporated by reference herein. With respect to
the Combined Financial Statements of the Initial Hotels, such report is based
in part on the reports of Coopers & Lybrand, L.L.P., independent accountants,
as set forth in their respective reports for Certain of the Initial Hotels and
Troy Hotel Investors. The (a) Financial Statements of Buckhead Hospitality
Joint Venture as of December 31, 1995 and for the year then ended, (b) the
Combined Financial Statements of Gateway Hotel Limited Partnership and
Wenatchee Hotel Limited Partnership as of December 31, 1995 and for the year
then ended, and (c) the individual Statements of Direct Revenue and Direct
Operating Expenses for each of the Plaza Park Suites Hotel and Roosevelt Hotel
for the year ended December 31, 1995 appearing in the Company's Current Report
on Form 8-K, dated April 2, 1996, as amended, have been audited by Ernst &
Young LLP, independent auditors, as set forth in their reports thereon
included therein and incorporated by reference herein. The Financial
Statements of Metric-Holiday Ravinia Joint Venture as of December 31, 1994 and
for the year then ended appearing in the Company's Current Report on Form 8-K,
dated December 1, 1995, as amended, have been audited by Ernst & Young LLP,
independent auditors, as set forth in their report thereon included therein
and incorporated by reference herein. The (a) Statement of Direct Revenues and
Direct Operating Expenses of the Marriott WindWatch Hotel for the year ended
December 29, 1995, (b) the Financial Statements of Concord O'Hare Limited
Partnership as of December 29, 1995 and for the year then ended, and (c) the
Statement of Direct Revenues and Direct Operating Expenses of the Mayfair
Suites Hotel for the year ended December 31, 1995, appearing in the Company's
Current Report on Form 8-K, dated December 5, 1996, have been audited by Ernst
& Young LLP, independent auditors, as set forth in their reports thereon
included therein and incorporated by reference herein. Each of the above
referenced financial statements are incorporated herein by reference in
reliance upon such reports given upon the authority of such firm as experts in
accounting and auditing.
The financial statements of CHC Lease Partners as of December 31, 1995 and
the period from inception (October 2, 1995) through December 31, 1995
incorporated in this Prospectus by reference to the Annual Report on Form 10-K
of Patriot American Hospitality, Inc. for the year ended December 31, 1995,
have been so incorporated in reliance on the report of Price Waterhouse LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
30
<PAGE>
The Financial Statements of Troy Park Associates as of December 29, 1994 and
for the period January 1, 1994 through December 29, 1994 and the year ended
December 31, 1993 appearing in the Company's 1995 Annual Report on Form 10-K
have been audited by Coopers & Lybrand L.L.P., independent accountants, as set
forth in their report thereon included therein and incorporated by reference
herein. The Financial Statements of Newporter Beach Hotel Investments L.L.C.
as of December 31, 1995 and for the period from March 10, 1995 through
December 31, 1995 appearing in the Company's Current Report on Form 8-K, dated
April 2, 1996, as amended, have been audited by Coopers & Lybrand L.L.P.,
independent accountants, as set forth in their report thereon included therein
and incorporated by reference herein. The Statement of Direct Revenue and
Direct Operating Expenses of the Holiday Inn Miami Airport for the year ended
August 31, 1996 appearing in the Company's Current Report on Form 8-K, dated
December 5, 1996, have been audited by Coopers & Lybrand, L.L.P., independent
auditors, as set forth in their report thereon included therein and
incorporated by reference herein. Each of the above referenced financial
statements are incorporated herein by reference in reliance upon such reports
given on the authority of such firm as experts in accounting and auditing.
The financial statements of Historic Hotel Partners of Birmingham, Limited
Partnership as of and for the years ended December 31, 1994 and 1995 appearing
in the Company's Current Report on Form 8-K, dated December 5, 1996, have been
audited by Pannell Kerr Forster PC, independent auditors, as set forth in
their report thereon included therein and incorporated by reference herein.
The financial statements of Historic Hotel Partners of Birmingham, Limited
Partnership for the nine months ended September 29, 1996 appearing in the
Company's Current Report on Form 8-K, dated December 5, 1996, have been
reviewed by Pannell Kerr Forster PC, independent auditors, as set forth in
their report thereon included therein and incorporated by reference herein.
Each of the above referenced financial statements are incorporated herein by
reference in reliance upon such reports given on the authority of such firm as
experts in accounting and auditing.
31
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRE-
SENTATION IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY OTHER
PERSON. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFOR-
MATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER
TO BUY ANY SECURITIES OTHER THAN THE REGISTERED SECURITIES TO WHICH IT RE-
LATES.
----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information...................................................... 2
Incorporation of Certain Documents by Reference............................ 2
Risk Factors............................................................... 4
The Company................................................................ 13
Description of Capital Stock............................................... 15
Description of Units and Redemption of Units............................... 18
Federal Income Tax Considerations.......................................... 25
Registering Stockholders................................................... 28
Plan of Distribution....................................................... 29
Legal Matters.............................................................. 30
Experts.................................................................... 30
</TABLE>
----------------
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- -------------------------------------------------------------------------------
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3,083,592 SHARES
LOGO
PATRIOT AMERICAN
HOSPITALITY, INC.
COMMON STOCK
----------------
PROSPECTUS
----------------
----------------
, 1996
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the estimated fees and expenses payable by
the Company in connection with the issuance and distribution of the Common
Stock registered hereby (all amounts except the registration fee are
estimated):
<TABLE>
<S> <C>
Registration fee.................................................. $34,226
Printing and duplicating expenses................................. 5,000
Legal fees and expenses........................................... 10,000
Accountant's fees and expenses.................................... 15,000
Blue sky fees and expenses........................................ 2,500
Miscellaneous..................................................... 3,274
-------
Total........................................................... $70,000
=======
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Articles of Incorporation of the Company, generally, limit the liability
of the Company's directors and officers to the Company and the shareholders
for money damages to the fullest extent permitted from time to time by the
laws of the Commonwealth of Virginia. The Articles of Incorporation also
provide, generally, for the indemnification of directors and officers, among
others, against judgments, settlements, penalties, fines, and reasonable
expenses actually incurred by them in connection with any proceeding to which
they may be made a party by reason of their service in those or other
capacities except in connection with a proceeding by or in the right of the
Company in which the director was adjudged liable to the Company or in
connection with any other proceeding, whether or not involving action in his
official capacity, in which he was adjudged liable on the basis that personal
benefit was improperly received by him. Insofar as indemnification for
liabilities arising under the Securities Act may be permitted to directors and
officers of the Company pursuant to the foregoing provisions or otherwise, the
Company has been advised that, in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
Securities Act, and is, therefore, unenforceable.
The Company has purchased director and officer liability insurance for the
purpose of providing a source of funds to pay any indemnification described
above.
ITEM 16. EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
------- -------
<C> <S>
4.1* --Article IV of the Company's Amended and Restated Articles of
Incorporation (Incorporated by reference to Exhibit 3.2 to the
Company's Registration Statement on Form S-11, No. 33-94612).
4.2* --Articles II and VI of the Company's Amended and Restated Bylaws
(Incorporated by reference to Exhibit 3.4 to the Company's
Registration Statement on Form S-11, No. 33-94612).
5.1* --Opinion of Goodwin, Procter & Hoar llp.
8.1* --Opinion of Goodwin, Procter & Hoar llp as to Tax Matters.
23.1* --Consent of Goodwin, Procter & Hoar llp (included in Exhibits 5.1 and
8.1).
23.2 --Consent of Ernst & Young llp.
23.3 --Consent of Coopers & Lybrand L.L.P., Fort Lauderdale, Florida.
23.4 --Consent of Coopers & Lybrand L.L.P., Pittsburgh, Pennsylvania.
23.5 --Consent of Coopers & Lybrand L.L.P., Newport Beach, California.
23.6 --Consent of Coopers & Lybrand L.L.P., Dallas, Texas.
23.7 --Consent of Price Waterhouse llp.
23.8 --Consent of Pannell Kerr Foster PC.
24.1* --Powers of Attorney (included on Signature Pages to the Registration
Statement).
</TABLE>
- --------
*Previously filed.
II-1
<PAGE>
ITEM 17. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement;
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set
forth in the registration statement. Notwithstanding the
foregoing, any increase or decrease in volume of securities
offered (if the total dollar value of securities offered would not
exceed that which was registered) and any deviation from the low
or high and of the estimated maximum offering range may be
reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in
volume and price represent no more than 20 percent change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement;
and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) herein do not
apply if the information required to be included in a post-effective amendment
by those paragraphs is contained in periodic reports filed with or furnished
to the Commission by the registrant pursuant to Section 13 or Section 15(d) of
the Securities Exchange Act of 1934 that are incorporated by reference in the
registration statement;
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof; and
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in the
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(c) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer, or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
II-2
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF THE
REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS AMENDMENT NO. 2
TO THE REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED,
THEREUNTO DULY AUTHORIZED, IN THE CITY OF DALLAS, STATE OF TEXAS ON THIS 6TH
DAY OF DECEMBER, 1996.
Patriot American Hospitality, Inc.
/s/ Paul A. Nussbaum
By: _________________________________
Paul A. Nussbaum
Chairman of the Board and
Chief Executive Officer
POWER OF ATTORNEY
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
NO. 2 TO THE REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS
IN THE CAPACITIES INDICTED ON THE 6TH DAY OF DECEMBER, 1996.
SIGNATURE TITLE DATE
/s/ Paul A. Nussbaum Chairman of the
- ------------------------------------- Board and Chief December 6,
PAUL A. NUSSBAUM Executive Officer 1996
(Principal
Executive Officer)
/s/ Rex E. Stewart Executive Vice
- ------------------------------------- President and Chief December 6,
REX E. STEWART Financial Officer 1996
(Principal
Financial and
Accounting Officer)
Leonard Boxer* Director
- ------------------------------------- December 6,
LEONARD BOXER 1996
John H. Daniels* Director
- ------------------------------------- December 6,
JOHN H. DANIELS 1996
John C. Deterding* Director
- ------------------------------------- December 6,
JOHN C. DETERDING 1996
II-3
<PAGE>
SIGNATURE TITLE DATE
Director
- -------------------------------------
GREGORY R. DILLON
Thomas S. Foley* Director
- ------------------------------------- December 6,
THOMAS S. FOLEY 1996
Arch K. Jacobson* Director
- ------------------------------------- December 6,
ARCH K. JACOBSON 1996
/s/ Rex E. Stewart
*By: ________________________________
Rex E. Stewart
Attorney-in-Fact
II-4
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
------- -------
<C> <S>
4.1* --Article IV of the Company's Amended and Restated Articles of
Incorporation (Incorporated by reference to Exhibit 3.2 to the
Company's Registration Statement on Form S-11, No. 33-94612).
4.2* --Articles II and VI of the Company's Amended and Restated Bylaws
(Incorporated by reference to Exhibit 3.4 to the Company's
Registration Statement on Form S-11, No. 33-94612).
5.1* --Opinion of Goodwin, Procter & Hoar LLP.
8.1* --Opinion of Goodwin, Procter & Hoar LLP as to Tax Matters.
23.1* --Consent of Goodwin, Procter & Hoar LLP (included in Exhibits 5.1 and
8.1).
23.2 --Consent of Ernst & Young LLP.
23.3 --Consent of Coopers & Lybrand L.L.P., Fort Lauderdale, Florida.
23.4 --Consent of Coopers & Lybrand L.L.P., Pittsburgh, Pennsylvania.
23.5 --Consent of Coopers & Lybrand L.L.P., Newport Beach, California.
23.6 --Consent of Coopers & Lybrand L.L.P., Dallas, Texas
23.7 --Consent of Price Waterhouse LLP.
23.8 --Consent of Pannell Kerr Forster PC.
24.1* --Powers of Attorney (included on Signature Pages to the Registration
Statement).
</TABLE>
- --------
* Previously filed
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement on Form S-3 (File No. 333-12973) and related Prospectus
of Patriot American Hospitality, Inc. for the registration of 3,083,592 shares
of its common stock and to the incorporation by reference of our reports (a)
dated January 31, 1996 (except for Note 13, as to which the date is March 4,
1996) with respect to the Consolidated Financial Statements and financial
statement schedules of Patriot American Hospitality, Inc. included in its 1995
Annual Report on Form 10-K, (b) dated February 16, 1996, with respect to the
Combined Financial Statements of the Initial Hotels (which is based in part on
the reports of Coopers & Lybrand L.L.P., independent accountants, as set forth
in their reports on Certain of the Initial Hotels and Troy Hotel Investors)
included in Patriot American Hospitality, Inc.'s 1995 Annual Report on Form
10-K, (c) dated March 5, 1996, with respect to the Financial Statements of
Buckhead Hospitality Joint Venture included in the Current Report on Form 8-K
of Patriot American Hospitality, Inc., dated April 2, 1996, as amended, (d)
dated March 1, 1996 (except for Note 7, as to which the date is April 2, 1996)
with respect to the Combined Financial Statements of Gateway Hotel Limited
Partnership and Wenatchee Hotel Limited Partnership included in the Current
Report on Form 8-K of Patriot American Hospitality, Inc., dated April 2, 1996,
as amended, (e) dated February 28, 1996 (except for Note 5, as to which the
date is April 2, 1996) with respect to the Statement of Direct Revenue and
Direct Operating Expenses of Plaza Park Suites Hotel included in the Current
Report on Form 8-K of Patriot American Hospitality, Inc., dated April 2, 1996,
as amended, (f) dated February 26, 1996 (except for Note 5, as to which the
date is April 2, 1996) with respect to the Statement of Direct Revenues and
Direct Operating Expenses of Roosevelt Hotel included in the Current Report on
Form 8-K of Patriot American Hospitality, Inc., dated April 2, 1996, as
amended, (g) dated October 6, 1995 (except for Note 7, as to which the date is
December 1, 1995) with respect to the Financial Statements of Metric-Holiday
Ravinia Joint Venture included in the Current Report on Form 8-K of Patriot
American Hospitality, Inc., dated December 1, 1995, as amended, (h) dated
April 10, 1996 with respect to the Statement of Direct Revenue and Direct
Operating Expenses of the Marriott WindWatch Hotel for the year ended December
29, 1995 included in the Current Report on Form 8-K of Patriot American
Hospitality, Inc., dated December 5, 1996, (i) dated August 30, 1996 with
respect to the Financial Statements of Concord O'Hare Limited Partnership for
the year ended December 29, 1995 included in the Current Report on Form 8-K of
Patriot American Hospitality, Inc., dated December 5, 1996, and (j) dated
September 10, 1996 with respect to the Statement of Direct Revenue and Direct
Operating Expenses of the Mayfair Suites Hotel for the year ended December 31,
1995 included in the Current Report on Form 8-K of Patriot American
Hospitality, Inc., dated December 5, 1996, all filed with the Securities and
Exchange Commission.
Ernst & Young LLP
Dallas, Texas
December 6, 1996
<PAGE>
EXHIBIT 23.3
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this Registration Statement
on Form S-3 (File No. 333-12973) of our report dated January 15, 1996, on our
audits of the financial statements of Certain of the Initial Hotels, which
report is included on Form 10-K for the year ended December 31, 1995, of
Patriot American Hospitality, Inc. (File No. 0-26528).
Coopers & Lybrand L.L.P.
Fort Lauderdale, Florida
December 6, 1996
<PAGE>
EXHIBIT 23.4
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this registration statement
on Form S-3 (File No. 333-12973) of our report dated February 7, 1995, on our
audit of the financial statements of Troy Park Associates, which report is
included on Form 10-K for the year ended December 31, 1995, of Patriot
American Hospitality, Inc. (File No. 0-26528).
Coopers & Lybrand L.L.P.
Pittsburgh, Pennsylvania
December 6, 1996
<PAGE>
EXHIBIT 23.5
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this Registration Statement
on Form S-3 (File No. 333-12973) of our report dated March 8, 1996, on our
audit of the financial statements of Newporter Beach Hotel Investments L.L.C.
included on Form 8-K, dated April 2, 1996, as amended, of Patriot American
Hospitality, Inc. (File No. 0-26528).
Coopers & Lybrand L.L.P.
Newport Beach, California
December 6, 1996
<PAGE>
EXHIBIT 23.6
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this Registration Statement on
Form S-3 (File No. 333-12973) of Patriot American Hospitality, Inc. (the
"Company") and the related Prospectus of our report dated October 15, 1996
with respect to the Statement of Direct Revenue and Direct Operating Expenses
of the Holiday Inn Miami Airport for the year ended August 31, 1996 which is
included in the Company's Current Report on Form 8-K dated December 5, 1996
(File No. 0-26528).
COOPERS & LYBRAND L.L.P.
Dallas, Texas
December 6, 1996
<PAGE>
EXHIBIT 23.7
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Registration Statement on Form S-3 of our report
dated March 4, 1996 appearing on page F-20 of Patriot American Hospitality,
Inc.'s Annual Report on Form 10-K for the year ended December 31, 1995. We also
consent to the reference to us under the heading "Experts" in such Prospectus.
Price Waterhouse LLP
December 6, 1996
Miami, Florida
<PAGE>
EXHIBIT 23.8
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this Registration Statement
on Form S-3 (File No. 333-12973) of Patriot American Hospitality, Inc. (the
"Company") and the related Prospectus of our reports (a) dated March 1, 1996
with respect to the Financial Statements of Historic Hotel Partners of
Birmingham Limited Partnership for the year ended December 31, 1995 and (b)
dated October 23, 1996 with respect to the Financial Statements of Historic
Hotel Partners of Birmingham Limited Partnership for the nine months ended
September 29, 1996; both of which are included in the Company's Current Report
on Form 8-K dated December 5, 1996 (File No. 0-26528).
PANNELL KERR FORSTER PC
Alexandria, Virginia
December 6, 1996
