<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A No.1
CURRENT REPORT PURSUANT TO SECTION 13 OR
15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED)
JANUARY 16, 1997
COMMISSION FILE NUMBER: 0-26528
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 No.)
3030 LBJ FREEWAY, SUITE 1500 75234
DALLAS, TEXAS (Zip Code)
(Address of principal executive office)
(972) 888-8000
(Registrant's telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changes since last
report)
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<PAGE>
PATRIOT AMERICAN HOSPITALITY, INC.
INDEX TO FINANCIAL INFORMATION
<TABLE>
<CAPTION>
PAGE
FINANCIAL STATEMENTS OF PROPERTIES ACQUIRED:
PRO FORMA FINANCIAL INFORMATION:
PATRIOT AMERICAN HOSPITALITY:
<S> <C>
Pro Forma Condensed Consolidated Statement of Operations for
the nine months ended September 30, 1995 (unaudited)................................ F-4
Pro Forma Condensed Consolidated Statement of Operations for
the year ended December 31, 1995 (unaudited)......................................... F-6
Pro Forma Condensed Consolidated Statement of Operations for
the nine months ended September 30, 1996 (unaudited)................................ F-8
Pro Forma Condensed Consolidated Balance Sheet as of
September 30, 1996 (unaudited)...................................................... F-10
COMBINED LESSEES:
Pro Forma Condensed Combined Statement of Operations for
the nine months ended September 30, 1995 (unaudited)................................ F-13
Pro Forma Condensed Combined Statement of Operations for
the year ended December 31, 1995 (unaudited)........................................ F-15
Pro Forma Condensed Combined Statement of Operations for
the nine months ended September 30, 1996 (unaudited)................................ F-17
</TABLE>
F-1
<PAGE>
PATRIOT AMERICAN HOSPITALITY, INC.
PRO FORMA FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
Patriot American Hospitality, Inc. (collectively with its subsidiaries, the
"Company") completed an initial public offering (the "Initial Offering") of
14,605,000 shares of its common stock on October 2, 1995 (including 1,905,000
shares of common stock issued upon exercise of the underwriters' over-allotment
option) and commenced operations. Upon completion of the Initial Offering, the
Company, through its wholly-owned subsidiary, PAH LP, Inc., contributed
substantially all of the net proceeds of the Initial Offering to Patriot
American Hospitality Partnership, L.P. (the "Operating Partnership") in exchange
for an approximately 85.3% limited partnership interest in the Operating
Partnership. The Company, through its wholly-owned subsidiary, PAH GP, Inc., is
the sole general partner and the holder of a 1.0% general partnership interest
in the Operating Partnership.
The Operating Partnership used approximately $263,600 of the net proceeds
of the Initial Offering to acquire ownership interests in 20 hotels (the
"Initial Hotels") from various entities (the "Selling Entities") and to repay
existing mortgage and other indebtedness of the Initial Hotels. In consideration
for the sale of the Initial Hotels, certain owners in the Selling Entities,
including affiliates of the Company, elected to receive limited partnership
units in the Operating Partnership ("OP Units"). The 2,324,312 OP Units received
by such owners represented an approximate 13.7% equity interest in the Operating
Partnership as the Company commenced operations. The balance of the proceeds
from the Initial Offering, together with proceeds from the Company's line of
credit, were used to finance acquisitions of two additional hotel investments,
provide for renovations to existing hotels and for general working capital
during 1995.
During the first quarter of 1996, the Company acquired three additional
hotel properties, utilizing cash drawn on its line of credit and issuing 167,012
OP Units in connection with the purchases. During the second quarter of 1996,
the Company acquired eight additional hotel properties, utilizing cash drawn on
its line of credit and issuing 331,577 OP Units in connection with the
purchases. In addition, in May 1996, the Company sold an aggregate of
approximately $40,000 of equity securities to an institutional investor that
purchased the securities on behalf of two owners (the "Private Placement"). The
proceeds of the Private Placement were used primarily to reduce amounts
outstanding under the line of credit.
During the third quarter of 1996, the Company completed a public offering
(the "Follow-on Offering") of 6,146,700 shares of its common stock (including
646,700 shares of common stock issued upon exercise of the underwriter's over-
allotment option). The offering price of all shares sold in the Follow-on
Offering was $28.25 per share, resulting in net proceeds (less the underwriters'
discount and offering expenses) of approximately $160,222, of which
approximately $151,963 was used to reduce amounts outstanding under the line of
credit. The Company acquired nine additional hotel properties, financed
primarily with funds drawn on its line of credit and issuing 17,036 OP Units in
connection with the purchase of certain hotel properties. At September 30,
1996, the Operating Partnership owned interests in 42 hotels and the Company
owned an approximate 86.2% interest in the Operating Partnership.
Subsequent to September 30, 1996, the Company has acquired ownership
interests in six additional hotel properties (the "Recent Acquisitions"),
financed primarily with funds drawn on its line of credit and issuing 85,078 OP
Units in connection with the purchase of one of the hotel properties. Subsequent
to the acquisition of the Recent Acquisitions the Company owns an approximate
85.9% interest in the Operating Partnership.
During the fourth quarter of 1996, Patriot redeemed an aggregate of 407,207
OP Units for approximately $16,583 (based upon the market value of Patriot's
common stock on the effective date of the respective redemptions) which was
financed primarily with funds drawn on the line of credit. The pro forma
financial statements presented herein do not include adjustments to reflect the
impact of such redemptions.
On January 16, 1997 and January 17, 1997, the Company acquired from Resorts
Limited Partnership, Carefree Resorts Corporation and The Morgan Stanley Real
Estate Fund, L.P. four resort properties (the "Carefree Resorts") for a total
purchase price of approximately $264 million. The Boulders located near
Scottsdale, Arizona, consists of 160 guest "casitas" and includes access to 33
private homes which participate in a rental pool. The Peaks Resort and Spa
located in Telluride, Colorado, consists of 177 guests rooms plus 7 penthouse
condomimiums. Ventana Canyon, located in Tucson, Arizona, consists of 49 suites
and Carmel Valley Ranch located near Carmel, California, consists of 100 one-
bedroom guest suites. The acquisition of the Carefree Resorts was primarily
financed with funds drawn on the Company's line of credit and the issuance of
1,295,077 OP Units.
The Company currently owns interests in 52 hotels and resorts and has an
approximate 83.0% interest in the Patriot Partnership. However for pro forma
financial statement presentation purposes, because the adjustments for the
redemption of OP Units in the fourth quarter of 1996 have not been included, the
Company's current ownership interest in the Patriot Partnership has been assumed
to be approximately 81.7%.
The Company leases each of its hotels, except the Crowne Plaza Ravinia
Hotel and the Marriott WindWatch Hotel, which are separately owned through
special purpose corporations, to lessees who are responsible for operating the
hotels (the "Lessees"). All of the Lessees except PAH RSI, L.L.C. ("PAH RSI
Lessee") are independent of the Company. PAH
F-2
<PAGE>
RSI Lessee is owned and controlled by certain executive officers of the Company
(and was formed in anticipation of the Company's planned merger with and into
California Jockey Club, a real estate investment trust which is paired with an
operating corporation, Bay Meadows Operating Company). The Company leases 25 of
its hotel investments to CHC Lease Partners for staggered terms of ten to twelve
years pursuant to separate participating leases providing for the payment of the
greater of base or participating rent, plus certain additional charges, as
applicable (the "Participating Leases"). Nine of the hotels are leased to
NorthCoast Hotels, L.L.C. ("NorthCoast") under similiar Participating Lease
agreements. DTR North Canton, Inc. (the "Doubletree Lessee") leases six hotels
and Crow Hotel Lessee, Inc. (the "Wyndham Lessee") leases two hotels under
similiar Participating Lease agreements. PAH RSI Lessee leases five hotels,
Metro Hotels Leasing Corporation ("Metro Lease Partners") leases one hotel, and
Grand Heritage Leasing, L.L.C. ( the "Grand Heritage Lessee") leases two hotels
under similiar Participating Lease agreements. The Lessees, in turn, have
entered into separate agreements with hotel management entities (the
"Operators") to manage the hotels. The Crowne Plaza Ravinia Hotel and the
Marriott WindWatch Hotel acquisitions were structured without lessees and are
managed directly by Holiday Inns, Inc. and Marriott International, Inc.,
respectively.
The following unaudited Pro Forma Condensed Consolidated Statements of
Operations for the nine months ended September 30, 1995, for the year ended
December 31, 1995 and for the nine months ended September 30, 1996 of the
Company are presented as if (i) the Initial Offering and the aquisition of the
20 Initial Hotels, (ii) the Private Placement and the Follow-on Offering, (iii)
the subsequent acquisition of 28 additional hotel properties including the two
hotels owned through unconsolidated subsidaries, and (iv) the acquisition of
Carefree Resorts had occurred as of January 1, 1995 and carried forward through
each period presented. Such pro forma information is based in part upon the
Consolidated Statements of Operations of the Company filed with the Company's
Quarterly Report on Form 10-Q for the quarterly period ended September 30, 1996
and with the Company's Annual Report on Form 10-K for the period ended December
31, 1995 and the Pro Forma Condensed Combined Statements of Operations of the
Lessees included in this Current Report. In management's opinion, all
adjustments necessary to reflect the effects of these transactions have been
made.
The following unaudited Pro Forma Condensed Consolidated Statements of
Operations are not necessarily indicative of what actual results of operations
of the Company would have been assuming such transactions had been completed as
of the beginning of the periods presented, nor do they purport to represent the
results of operations for future periods. Further, the unaudited Pro Forma
Condensed Consolidated Statements of Operations for the interim periods
presented are not necessarily indicative of the results of operations for the
full year.
F-3
<PAGE>
PATRIOT AMERICAN HOSPITALITY, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
Hotels
Owned as of RECENT
September ACQUISITIONS CAREFREE PRO FORMA
30,1996 (A) (B) RESORTS (C) TOTAL
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Revenue:
Participating lease revenue........ $65,375 (D) $ 7,698 (D) $10,310 (D) $83,383
Interest and other income.......... 53 (E) -- 1,049 (E) 1,102
------- ------- ------- -------
Total revenue.................... 65,428 7,698 11,359 84,485
------- ------- ------- -------
Expenses:
Real estate and personal property
taxes and casualty insurance..... 6,861 (F) 934 (F) 1,439 (F) 9,234
Ground lease expense............... 1,002 (G) -- -- 1,002
General and administrative......... 3,270 (H) 38 (H) 75 (H) 3,383
Interest expense................... 7,129 (I) 5,288 (I) 11,793 (I) 24,210
Depreciation and amortization...... 15,998 (J) 2,834 (J) 5,587 (J) 24,419
------- ------- ------- -------
Total expenses................... 34,260 9,094 18,894 62,248
------- ------- ------- -------
Income (loss) before equity in
earnings of unconsolidated
subsidiaries and minority
interests.......................... 31,168 (1,396) (7,535) 22,237
Equity in earnings of unconsolidated
subsidiaries........................ 3,351 (K) -- -- 3,351
------- ------- ------- -------
Income (loss) before minority
interests...... 34,519 (1,396) (7,535) 25,588
Minority interest in Operating
Partnership....................... (4,737) (L) 131 (L) 5 (L) (4,601)
Minority interest in other
partnerships...................... (196) (M) (252) (M) -- (448)
------- ------- ------- -------
Net income (loss) applicable to common
shareholders........................ $29,586 $(1,517) $(7,530) $20,539
======= ======= ======= =======
Net income per common share........... $ 0.94
=======
Weighted average number of common shares
and common share equivalents
outstanding......................... 21,807
=======
- ---------------------------------------------
</TABLE>
(A) Represents the Company's pro forma results of operations for the nine
months ended September 30, 1995 of the 42 hotel properties owned by the
Company as of September 30, 1996. Because the Company commenced operations
on October 2, 1995, there are no historical results of operations for this
period.
(B) Represents the Company's pro forma results of operations related to the
Tutwiler Hotel, the Doubletree Hotel at Allen Center, the Pickwick Hotel,
the Doubletree Hotel in Tulsa, the Radisson Overland Park Hotel and the
Radisson Northbrook Hotel as if the Company had acquired the hotels at the
beginning of the period.
(C) Represents the Company's pro forma results of operations related to the
Carefree Resorts as if the Company had acquired the hotels at the beginning
of the period. Sales and cost of sales related to the residential real
estate which was owned, developed and sold by Carefree Resorts are excluded
because the Company anticipates selling the residential real estate to an
affiliate at fair market value. Therefore, no gain or loss on the sale of
residential real estate is expected.
(D) Represents lease payments from the Lessees to the Operating Partnership
calculated on a pro forma basis by applying the provisions of the
Participating Leases to the historical revenue of the hotels for the period
presented.
(E) For hotels owned as of September 30, 1996, the adjustment represents
interest income earned on the Company's mortgage notes receivable from
unconsolidated subsidiaries assuming the mortgage notes were outstanding at
the beginning of the period. For the Carefree Resorts, the adjustment
represents interest income earned on the Company's notes receivable
issued in connection with the sale of certain assets to PAH RSI Lessee and
PAH Boulders, Inc. assuming the notes were outstanding at the beginning of
the period presented.
(F) Represents real estate and personal property taxes, and casualty insurance
to be paid by the Operating Partnership.
(G) Represents ground lease payments to be made with respect to certain of the
hotels.
(H) Represents salaries, insurance, travel, audit, legal and other expenses
associated with operating as a public company and the continued growth of
the Company. Also includes annual amortization of unearned stock
compensation computed on a straight-line basis over the three to four year
vesting period.
F-4
<PAGE>
(I) Represents interest expense incurred on the net borrowings under the line
of credit which were used to purchase hotel properties and
amortization of deferred loan costs. Deferred loan costs are amortized
over the term of the related loan. The adjustment related to the hotels
owned as of September 30, 1996 includes amortization of $386, the
adjustment related to the Recent Acqusitions includes amortization of $56
and the adjustment related to the Carefree Resorts acquisition includes
amortization of $283.
(J) Represents depreciation on the hotels owned as of September 30, 1996 of
$15,934 and amortization of $64. The adjustments related to the Recent
Acquisitions and the Carefree Resorts acquisition represent depreciation of
the related hotel properties. Depreciation is computed using the straight-
line method and is based upon the estimated useful lives of 35 years for
buildings and improvements and 5-7 years for furniture and equipment.
These estimated useful lives are based on management's knowledge of the
properties and the hotel industry in general. Amortization of franchise
fees is computed using straight-line method over the terms of the related
franchise agreement.
(K) Represents equity in income of the unconsolidated subsidiaries which own
the Crowne Plaza Ravinia Hotel and the Marriott WindWatch Hotel.
(L) Represents the minority interest assuming the Initial Offering and the
acquisition of the 20 Initial Hotels, the Private Placement, the Follow-on
Offering, the acquisition of interests in 28 additional hotel properties
and the acquisition of Carefree Resorts had occurred at the beginning of
the period presented. As of September 30, 1996, the minority interest
percentage was approximately 13.8%. Subsequent to the Recent Acquisitions
the minority interest percentage is approximately 14.1%. Subsequent to the
Carefree Resorts acquisition, the minority interest percentage is
approximately 18.3%.
(M) Represents the minority interest and adjustments to minority interest
related to the partnerships with DTR PAH Holding, Inc. assuming such
entities had been formed and the five hotels owned by such partnerships had
been acquired at the beginning of the period presented.
F-5
<PAGE>
PATRIOT AMERICAN HOSPITALITY, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
Pro Forma Adjustments
Company Recent
Historical Adjustments Acquisitions Carefree Pro Forma
(A) (B) (C) Resorts (D) Total
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Revenue:
Participating lease revenue..... $ 10,582 $ 76,359 (E) $ 10,280 (E) $ 15,531 (E) $ 112,752
Interest and other income....... 513 67 (F) -- 1,399 (F) 1,979
-------- --------- -------- ---------- ----------
Total revenue................ 11,095 76,426 10,280 16,930 114,731
-------- --------- -------- ---------- ----------
Expenses:
Real estate and personal
property taxes and
casualty insurance............ 901 8,319 (G) 1,245 (G) 1,918 (G) 12,383
Ground lease expense............ -- 1,368 (H) -- -- 1,368
General and administrative...... 607 3,828 (I) 50 (I) 100 (I) 4,585
Interest expense................ 89 9,369 (J) 7,014 (J) 15,653 (J) 32,125
Depreciation and amortization... 2,590 18,742 (K) 3,780 (K) 7,449 (K) 32,561
-------- -------- ------- -------- ---------
Total expenses............... 4,187 41,626 12,089 25,120 83,022
-------- -------- ------- -------- ---------
Income (loss) before equity
in earnings of unconsolidated
subsidiaries and minority
interest........................ 6,908 34,800 (1,809) (8,190) 31,709
Equity in earnings of
unconsolidated subsidiaries... 156 4,520 (L) -- -- 4,676
-------- -------- ------- -------- ---------
Income (loss) before minority
interests and extraordinary
item............................ 7,064 39,320 (1,809) (8,190) 36,385
Minority interest in Operating
Partnership................... (968) (5,400) (M) 164 (M) (351) (M) (6,555)
Minority interest in other
partnerships.................. -- (232) (N) (334) (N) -- (566)
Extraordinary item, net of
minority interest............. (737) 737 (O) -- -- --
-------- -------- ------- -------- ---------
Net income applicable to
common shareholders............. $ 5,359 $ 34,425 $ (1,979) $ (8,541) $ 29,264
======= ======== ======== ======== ========
Net income per common share....... $ 0.37 $ 1.34
======= ========
Weighted average number of
common shares and common
share equivalents outstanding... 14,675 21,807
======== =======
- ----------------------------------------
</TABLE>
(A) Represents the Company's historical results of operations from the date of
the Initial Offering, October 2, 1995, through December 31, 1995.
(B) Represents adjustments to the Company's results of operations assuming the
Initial Offering and acquisition of the 20 Initial Hotels, the Private
Placement, the Follow-on Offering and the acquisition of 22 additional
hotels had occurred at the beginning of the period presented.
(C) Represents adjustments to the Company's results of operations assuming the
acquisition of the Tutwiler Hotel, the Doubletree Hotel at Allen Center, the
Pickwick Hotel, the Doubletree Hotel in Tulsa, the Radisson Overland Park
Hotel and the Radisson Northbrook Hotel had occurred at the beginning of the
period presented.
(D) Represents adjustments to the Company's results of operations assuming the
acquisition of the Carefree Resort properties had occurred at the beginning
of the period presented. Sales and cost of sales related to the residential
real estate which was owned, developed and sold by Carefree Resorts are
excluded because the Company anticipates selling the residential real estate
to an affiliate at fair market value. Therefore, no gain or loss on the sale
of the residential real estate is expected.
F-6
<PAGE>
(E) Represents lease payments from the Lessees to the Operating Partnership
calculated on a pro forma basis by applying the provisions of the
Participating Leases to the historical revenue of the hotels for the period
presented.
(F) For hotels owned as of September 30, 1996, the adjustment represents
interest income earned on the Company's mortgage notes receivables from
unconsolidated subsidiaries assuming the mortgage notes were outstanding.
For the Carefree Resorts, the adjustment represents interest income earned
on the Company's notes receivable issued in connection with the sale of
certain assets to PAH RSI Lessee and PAH Boulders, Inc. assuming the notes
were outstanding at the beginning of the period presented.
(G) Represents real estate and personal property taxes, and casualty insurance
to be paid by the Operating Partnership.
(H) Represents ground lease payments to be made with respect to certain of the
hotels.
(I) Represents salaries, insurance, travel, audit, legal and other expenses
associated with operating as a public company and the continued growth of
the Company. Also includes annual amortization of unearned stock
compensation computed on a straight-line basis over the three to four year
vesting periods.
(J) Represents adjustments to interest expense incurred on the net borrowings
under the line of credit which were used to purchase hotel properties and
amortization of deferred loan costs. Deferred loan costs are amortized over
the term of the related loan. The adjustment related to the hotels owned as
of September 30, 1996 includes amortization of $515, the adjustment related
to the Recent Acqusitions includes amortization of $75 and the adjustment
related to the Carefree Resorts acquisition includes amortization of $377.
(K) Represents depreciation on the hotels owned as of September 30, 1996 of
$18,675 and amortization of $67. The adjustments related to the Recent
Acquisitions and the Carefree Resorts acquisition represent depreciation.
Depreciation is computed using the straight-line method and is based upon
the estimated useful lives of 35 years for buildings and improvements and 5-
7 years for furniture and equipment. These estimated useful lives are based
on management's knowledge of the properties and the hotel industry in
general. Amortization of franchise fees is computed using the straight-line
method over the terms of the related franchise agreement.
(L) Represents equity in income of the unconsolidated subsidiaries which own the
Crowne Plaza Ravinia Hotel and the Marriott WindWatch Hotel.
(M) Represents the adjustments to minority interest assuming the Initial
Offering and acquisition of the 20 Initial Hotels, the Private Placement,
the Follow-on Offering, the acquisition of interests in 28 additional
hotel properties and the acquisition of Carefree Resorts had occurred at the
beginning of the period presented. Prior to the acquisition of the Recent
Acquisitions and the Carefree Resorts, the minority interest percentage was
approximately 13.8%. Subsequent to the acquisition of the Recent
Acquisitions, the minority interest percentage is approximately 14.1%.
Subsequent to the acquisition of the Carefree Resorts, the minority interest
percentage is approximately 18.3%.
(N) Represents the minority interest related to the partnerships with DTR PAH
Holding, Inc., assuming such entities had been formed and the five hotels
owned by such partnerships had been acquired at the beginning of the period
presented.
(O) In connection with the Initial Offering and acquisition of the 20 Initial
Hotels, the Company incurred prepayment penalties and charged-off deferred
financing costs associated with mortgage notes which were repaid. These
extraordinary items have been eliminated for purposes of the pro forma
presentation.
F-7
<PAGE>
PATRIOT AMERICAN HOSPITALITY, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
Pro Forma Adjustments
Company Recent
Historical Adjustments Acquisitions Carefree Pro Forma
(A) (B) (C) Resorts (D) Total
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Revenue:
Participating lease revenue.... $52,735 $16,910 (E) $9,310 (E) $12,822 (E) $91,777
Interest and other income...... 412 21 (F) -- 1,049 (F) 1,482
------- ------- ------ ------- -------
Total revenue................ 53,147 16,931 9,310 13,871 93,259
------- ------- ------ ------- -------
Expenses:
Real estate and personal
property taxes and
casualty insurance............ 4,452 2,650 (G) 1,017 (G) 1,439 (G) 9,558
Ground lease expense............ 711 312 (H) -- -- 1,023
General and administrative...... 3,273 690 (I) 38 (I) 75 (I) 4,076
Interest expense................ 4,481 2,215 (J) 4,953 (J) 11,144 (J) 22,793
Depreciation and amortization... 11,628 5,070 (K) 2,836 (K) 5,587 (K) 25,121
------- ------- ------ ------- -------
Total expenses 24,545 10,937 8,844 18,245 62,571
------- ------- ------ ------- -------
Income (loss) before equity in
earnings of unconsolidated
subsidiaries and minority
interest........................ 28,602 5,994 466 (4,374) 30,688
Equity in earnings of
unconsolidated subsidiaries... 4,377 1,371 (L) -- -- 5,748
------- ------- ------ ------- -------
Income (loss) before minority
interests....................... 32,979 7,365 466 (4,374) 36,436
Minority interest in Operating
Partnership................... (5,142) (406) (M) (129) (M) (892) (M) (6,569)
Minority interest in other
partnerships.................. (2) (140) (N) (396) (N) -- (538)
------- ------- ------ ------- -------
Net income (loss) applicable to
common shareholders............. $27,835 $ 6,819 $ (59) $(5,266) $29,329
======= ======= ====== ======== =======
Net income per common share....... $ 1.67 $ 1.34
======= =======
Weighted average number of
common shares and common
share equivalents outstanding... 16,677 21,900
======= =======
- ----------------------------------------
</TABLE>
(A) Represents the Company's historical results of operations for the nine
months ended September 30, 1996.
(B) Represents adjustments to the Company's results of operations assuming the
Private Placement, the Follow-on Offering and the acquisition of interests
in 20 additional hotels (the hotels acquired by the Company during the
first nine months of 1996) had occurred at the beginning of the period
presented.
(C) Represents adjustments to the Company's results of operations assuming the
acquisitions of the Tutwiler Hotel, the Doubletree Hotel at Allen Center,
the Pickwick Hotel, the Doubletree Hotel in Tulsa, the Radisson Overland
Park Hotel and the Radisson Northbrook Hotel had occurred at the beginning
of the period presented.
(D) Represents adjustments to the Company's results of operations assuming the
acquisition of the Carefree Resort properties had occurred at the beginning
of the period presented. Sales and cost of sales related to the residential
real estate which was owned, developed and sold by Carefree Resorts are
excluded because the Company anticipates selling the residential real
estate to an affiliate at fair market value. Therefore, no gain or loss on
the sale of the residential real estate is expected.
(E) Represents lease payments from the Lessees to the Operating Partnership
calculated on a pro forma basis by applying the provisions of the
Participating Leases to the historical revenue of the hotels for the period
presented assuming January 1, 1995 was the start of the lease term.
(F) For hotels owned as of September 30, 1996 the adjustment represents
interest income earned on the Company's mortgage notes receivables from
unconsolidated subsidiaries assuming the mortgage notes were outstanding at
the beginning of the period presented. For the Carefree Resorts, the
adjustment represents interest income earned on the Company's notes
receivable issued in connection with the sale of certain assets to PAH RSI
Lessee and PAH Boulders, Inc. assuming the notes were outstanding at the
beginning of the period presented.
(G) Represents real estate and personal property taxes, and casualty insurance
to be paid by the Operating Partnership.
(H) Represents ground lease payments to be made with respect to certain of the
hotels.
F-8
<PAGE>
(I) Represents salaries, insurance, travel, audit, legal and other expenses
associated with operating as a public company and the continued growth of
the Company. Also includes annual amortization of unearned stock
compensation computed on a straight-line basis over the three to four year
vesting periods.
(J) Represents adjustments to interest expense incurred on the net borrowings
under the line of credit which were used to purchase hotel properties and
amortization of deferred loan costs. Deferred loan costs are amortized over
the term of the related loan. The adjustment related to the hotels owned as
of September 30, 1996 includes amortization of $386, the adjustment related
to the Recent Acqusitions includes amortization of $56 and the adjustment
related to the Carefree Resorts acquisition includes amortization of $283.
(K) Represents depreciation on the hotels. Depreciation is computed using the
straight-line method and is based upon the estimated useful lives of 35
years for buildings and improvements and 5-7 years for furniture and
equipment. These estimated useful lives are based on management's
knowledge of the properties and the hotel industry in general.
(L) Represents equity in income of the unconsolidated subsidiaries which own
the Crowne Plaza Ravinia Hotel and the Marriott WindWatch Hotel.
(M) Represents the adjustments to minority interest assuming the Private
Placement, the Follow-on Offering, the acquisition of 28 additional
hotel properties and the acquisition of Carefree Resorts had occurred at
the beginning of the period presented. Prior to the acquisition of the
Recent Acquisitions, the minority interest percentage was approximately
13.8%. Subsequent to the acquisition of the Recent Acquisitions, the
minority interest percentage is approximately 14.1%. Subsequent to the
acquisition of the Carefree Resort properties, the minority interest
percentage is approximately 18.3% .
(N) Represents the minority interest related to the partnerships with DTR PAH
Holding, Inc., assuming such entities had been formed and the five hotels
owned by such partnerships had been acquired at the beginning of the period
presented.
F-9
<PAGE>
PATRIOT AMERICAN HOSPITALITY, INC.
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 1996
(UNAUDITED)
(IN THOUSANDS)
The following unaudited Pro Forma Condensed Consolidated Balance Sheet is
presented as if (i) the acquisition of the Recent Acquisitions, and (ii) the
acquisition of the Carefree Resorts had occurred on September 30, 1996. Such pro
forma information is based in part upon the Company's Consolidated Balance Sheet
as of September 30,1996 and should be read in conjunction with the financial
statements filed with the Company's Quarterly Report on Form 10-Q for the
quarterly period ended September 30, 1996. In management's opinion, all
adjustments necessary to reflect the effect of these transactions have been
made.
The following unaudited Pro Forma Condensed Consolidated Balance Sheet is
not necessarily indicative of what the actual financial position would have been
assuming such transactions had been completed as of September 30, 1996, nor does
it purport to represent the future financial position of the Company.
<TABLE>
<CAPTION>
Company Recent Carefree Pro Forma
Historical Acquisitions (A) Resorts (B) Total
ASSETS
<S> <C> <C> <C> <C> <C> <C>
Net investment in hotel properties..... $557,890 $ 99,766 $ -- $ 657,656
Net investment in resort properties
and land held for sale............... -- -- 248,444 248,444
Mortgage notes and other receivables
from unconsolidated subsidiaries..... 72,004 -- -- 72,004
Notes receivable....................... -- -- 12,348 (C) 12,348
Investment in unconsolidated
subsidiaries......................... 11,607 -- -- 11,607
Cash and cash equivalents.............. 7,004 (225) -- 6,779
Accounts receivable.................... 8,831 618 1,597 11,046
Deferred expenses, net................. 3,282 365 (D) 1,182 (D) 4,829
Prepaid expenses and other assets...... 3,031 207 -- 3,238
-------- -------- -------- ----------
Total assets...................... $663,649 $100,731 $263,571 $1,027,951
======== ======== ======== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Borrowings under line of credit and
mortgage notes....................... $113,592 $ 88,352 (E) $198,996 (E) $ 400,940
Dividends and distributions payable.... 12,158 -- -- 12,158
Accounts payable and accrued expenses.. 8,500 444 5,913 14,857
Due to unconsolidated subsidiaries..... 6,263 -- -- 6,263
Minority interest in Operating
Partnership.......................... 73,268 3,489 (F) 58,662 (F) 135,419
Minority interest in other partnerships 3,214 8,446 (G) -- 11,660
Shareholders' equity:
Preferred stock...................... -- -- -- --
Common stock......................... -- -- -- --
Paid-in capital...................... 451,305 -- -- 451,305
Unearned stock compensation, net..... (5,867) -- -- (5,867)
Retained earnings.................... 1,216 -- -- 1,216
-------- -------- -------- ----------
Total shareholders' equity........ 446,654 -- -- 446,654
-------- -------- -------- ----------
Total liabilities and shareholders'
equity.......................... $663,649 $100,731 $263,571 $1,027,951
======== ======== ======== ==========
- --------------------------------------------
</TABLE>
(A) Represents adjustments to the Company's financial position assuming the
acquisition of the Tutwiler Hotel, the Doubletree Hotel at Allen Center,
the Pickwick Hotel, the Doubletree Hotel in Tulsa, the Radisson Overland
Park Hotel and the Radisson Northbrook Hotel occurred on September 30,
1996. The acquisition of these six hotel properties was financed
primarily with funds drawn on the Company's line of credit in the aggregate
amount of $88,240 and issuing 85,078 limited partnership units in the
Operating Partnership ("OP Units") valued at $3,489.
F-10
<PAGE>
(B) Represents adjustments to the Company's financial position assuming the
acquisition of the Carefree Resorts had occurred on September 30, 1996. The
acquisition was primarily financed with funds drawn of the Company's line
of credit of $170,507, the issuance of 1,295,077 OP units valued at
approximately $58,662 and the assumption of approximately $28,489 of debt
and certain liabilities.
(C) Represents promissory notes issued to the Operating Partnership by PAH RSI,
L.L.C. and PAH Boulders, Inc. in consideration for the sale of certain
assets including inventories, trade names and the right to receive certain
royalty fees.
(D) Represents deferred loan costs incurred in connection with the new debt
financing obtained related to the Bourbon Orleans Hotel and the
modification of the line of credit agreement to increase the maximum amount
available under the line of credit to $475,000.
(E) The adjustment related to the Recent Acquisitions represents approximately
$88,240 of funds drawn on the line of credit related to the acquisition of
the properties. The adjustment also includes the repayment of approximately
$13,388 on the line of credit and a bank loan of approximately $13,500
related to the refinancing of debt on the Bourbon Orleans Hotel. The
adjustment related to the Carefree Resorts acquisition represents
approximately $170,507 of funds drawn on the line of credit and the
assumption of approximately $28,489 of debt.
(F) The adjustment related to the Recent Acquisitions represents the issuance
of 85,078 OP Units valued at $3,489 in connection with the acquisition of
the Tutwiler Hotel. The adjustment related to the Carefree Resorts
acquisition represents the issuance of 1,295,077 OP Units valued at
$58,662.
(G) Represents the capital contribution of DTR PAH Holding, Inc. for its 15%
limited partnership interest in two partnerships formed with the Operating
Partnership related to the acquisition of the Doubletree Hotel at Allen
Center and the Doubletree Hotel in Tulsa.
F-11
<PAGE>
COMBINED LESSEES
PRO FORMA CONDEDSED COMBINED STATEMENTS OF OPERATIONS
The combined Lessees' (CHC Lease Partners, NorthCoast, Doubletree Lessee,
Wyndham Lessee, PAH RSI Lessee, Metro Lease Partners and Grand Heritage Lessee
combined) unaudited Pro Forma Condensed Combined Statements of Operations for
the nine months ended September 30, 1995, for the year ended December 31, 1995
and for the nine months ended September 30, 1996 are presented as if (i) the
Initial Offering and the acquisition of the 20 Initial Hotels, (ii) the Private
Placement and Follow-on Offering, (iii) the subsequent acquisition of 28
additional hotel properties, and (iv) the acquisition of Carefree Resorts had
occurred on January 1, 1995, and the hotels (except the Crowne Plaza Ravinia
Hotel and the Marriott WindWatch Hotel) had been leased to the Lessees pursuant
to the Participating Leases. The pro forma information is based in part upon the
Statements of Operations of CHC Lease Partners, the Statements of Operations of
NorthCoast and the Combined Statements of Operations of the Initial Hotels filed
with the Company's Quarterly Report on Form 10-Q for the quarterly period ended
September 30, 1996 and is also based in part on the Statement of Operations of
CHC Lease Partners and the Initial Hotels filed with the Company's Annual Report
on Form 10-K for the period ended December 31, 1995. In management's opinion,
all adjustments necessary to reflect the effects of these transactions have been
made.
The Crowne Plaza Ravinia Hotel and the Marriott WindWatch Hotel are not
leased to a Lessee but are managed directly by Holiday Inns, Inc. and Marriott
International, Inc., respectively. Therefore, the results of operations of the
Crowne Plaza Ravinia Hotel and the Marriott WindWatch Hotel are not included in
these Pro Froma Condensed Combined Statements of Operations.
These unaudited Pro Forma Condensed Combined Statements of Operations are
not necessarily indicative of what the actual results of operations of the
Combined Lessees would have been assuming such transactions had been completed
as of the beginning of the periods presented, nor do they purport to represent
the results of operations for future periods. Further, the unaudited Pro Forma
Condensed Combined Statements of Operations for the interim periods presented
are not necessarily indicative of the results of operations for the full year.
F-12
<PAGE>
COMBINED LESSEES
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
Pro Forma Adjustments
Combined Recent
Hotels Historical Adjustments Acquisitions Carefree Pro Forma
(A) (B) (C) Resorts (D) Total
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Revenue:
Room......................... $141,253 $ -- $18,976 $18,648 $178,877
Food and beverage............ 53,894 -- 6,709 10,583 71,186
Conference center............ 1,858 -- -- -- 1,858
Golf/Club revenue............ -- -- -- 13,869 13,869
Club membership.............. -- -- -- 2,510 2,510
Shopping center.............. -- -- -- 1,162 1,162
Spa revenue.................. -- -- -- 1,514 1,514
Telephone and other.......... 14,208 -- 1,757 5,647 21,612
-------- ------- ------- ------- --------
Total revenue................ 211,213 -- 27,442 53,933 292,588
-------- ------- ------- ------- --------
Expenses:
Departmental costs and
expenses..................... 83,606 (638) (E) 11,931 25,492 120,391
General and administrative... 20,485 (1,852) (F) 2,840 3,913 25,386
Ground lease expense......... 2,979 (1,322) (G) -- -- 1,657
Repair and maintenance....... 10,784 -- 1,483 5,111 17,378
Utilities.................... 9,447 -- 1,955 2,385 13,787
Marketing.................... 18,592 100 (H) 2,819 3,392 24,903
Interest expense............. 22,118 (22,118) (I) -- 1,049 (J) 1,049
Real estate and personal
property taxes and casualty
insurance.................. 8,079 (8,079) (K) -- -- --
Insurance.................... 1,602 136 411 2,149
Depreciation and amortization 12,904 (12,904) (L) -- -- --
Participating lease payments. -- 65,375 (M) 7,698 (M) 10,310 (M) 83,383
-------- -------- ------- ------- --------
Total expenses.............. 188,994 20,164 28,862 52,063 290,083
-------- -------- ------- ------- --------
Income (loss) before lessee
income (expense)................ 22,219 (20,164) (1,420) 1,870 2,505
Dividend and interest income...... 10 (10) (N) -- -- --
Management fees................... (7,633) 4,580 (O) (713) (O) (2,009) (O) (5,775)
Lessee general and administrative. -- (1,154) (P) (29) (P) (150) (P) (1,333)
-------- -------- ------- ------- --------
Net income (loss)................. $ 14,596 $(16,748) $(2,162) $ (289) $ (4,603)
======== ======== ======= ======= ========
- --------------------------------------
</TABLE>
(A) Represents the combined historical results of operations of the 40 hotel
properties leased to the Lessees as of September 30, 1996.
(B) Represents adjustments to the Lessees' results of operations assuming the 40
hotels leased to the Lessees as of September 30, 1996 had been leased at the
beginning of the period presented.
(C) Represents adjustments to the Lessees' results of operations assuming the
Tutwiler Hotel, the Doubletree Hotel at Allen Center, the Pickwick Hotel,
the Doubletree Hotel in Tulsa, the Radisson Overland Park Hotel and the
Radisson Northbrook Hotel had been leased to one of the Lessees at the
beginning of the period presented.
(D) Represents adjustments to the Lessees' results of operations assuming the
Carefree Resort properties had been leased to one of the Lessees at the
beginning of the period presented.
(E) Reflects the elimination of equipment lease expense related to leases that
were paid off in connection with the acquisition of certain of the hotels.
F-13
<PAGE>
(F) Reflects the elimination of expenses which are not expected to be incurred
by the Lessees, including certain audit and accounting, legal and
professional fees.
(G) Represents adjustments to the ground lease payments to eliminate ground
lease expenses to be paid by the Operating Partnership and to reflect
adjustments related to renegotiation of certain ground lease agreements.
(H) Represents adjustments to reflect revisions to marketing agreements for
certain hotels.
(I) Represents elimination of interest expense and amortization of deferred loan
costs due to the repayment of mortgages and other notes payable at
acquisition.
(J) Represents interest expense on promissory notes issued in connection with
the acquisition of certain assets by PAH RSI Lessee assuming the notes were
outstanding at the beginning of the period presented.
(K) Decrease represents real estate and personal property taxes, and casualty
insurance to be paid by the Operating Partnership and reclassification of
general liability insurance costs to be paid by the Lessees.
(L) Decrease represents elimination of amortization expense related to the
amortization of deferred costs and elimination of depreciation expense.
(M) Represents Participating Lease payments calculated on a pro forma basis by
applying the provisions of the Participating Leases to the historical
revenue of the hotels.
(N) Decrease reflects the elimination of interest income earned on invested cash
balances.
(O) Represents adjustments for management fees paid to the Operators under the
terms of their respective management agreements with the Lessees. Management
fees paid to certain Operators are subordinate to the Lessees' obligations
to the Company under the Participating Lease agreements.
(P) Represents pro forma overhead expenses, which include an estimate of the
Lessees' salaries and benefits, professional fees, insurance costs and
administrative expenses.
F-14
<PAGE>
COMBINED LESSEES
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
Pro Forma Adjustments
Combined
Hotels Recent
Historical Adjustments Acquisitions Carefree Pro Forma
(A) (B) (C) Resorts (D) Total
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue:
Room............................... $21,508 $166,554 $24,950 $24,783 $237,795
Food and beverage.................. 8,649 67,979 9,583 15,067 101,278
Conference center.................. 576 1,858 -- -- 2,434
Golf/Club revenue.................. -- -- -- 19,213 19,213
Club membership.................... -- -- -- 5,701 5,701
Shopping center.................... -- -- -- 1,497 1,497
Spa revenue........................ -- -- -- 1,927 1,927
Telephone and other................ 1,732 17,189 2,375 7,643 28,939
------- -------- ------- ------- --------
Total revenue.................... 32,465 253,580 36,908 75,831 398,784
------- -------- ------- ------- --------
Expenses:
Departmental costs and
expenses......................... 12,173 101,605 16,191 37,434 167,403
General and administrative......... 2,714 22,400 3,842 5,399 34,355
Ground lease expense............... -- 2,467 -- -- 2,467
Repair and maintenance............. 1,476 13,297 2,028 7,258 24,059
Utilities.......................... 1,319 11,247 2,598 2,774 17,938
Marketing.......................... 2,928 22,458 3,725 4,875 33,986
Interest expense................... -- -- -- 1,399 (E) 1,399
Insurance.......................... 191 1,898 183 549 2,821
Participating lease payments....... 10,582 76,359 (F) 10,279 (F) 15,531 (F) 112,751
------- -------- ------- ------- --------
Total expenses.................. 31,383 251,731 38,846 75,219 397,179
------- -------- ------- ------- --------
Income (loss) before lessee
income (expense)................... 1,082 1,849 (1,938) 612 1,605
Dividend and interest income ......... 198 (G) -- -- -- 198
Management fees....................... (536) (4,395) (H) (775) (H) (2,887) (H) (8,593)
Lessee general and administrative..... (235) (1,313) (I) (41) (I) (207) (I) (1,796)
------- -------- ------- ------- --------
Net income (loss)..................... $ 509 $ (3,859) $(2,754) $(2,482) $ (8,586)
======= ======== ======= ======= ========
- ---------------------------------------
</TABLE>
(A) Represents the combined historical results of operations of CHC Lease
Partners from October 2, 1995 (inception) and Metro Lease Partners results
of operations from November 15, 1995 (inception) through December 31, 1995.
(B) Represents adjustments to the Lessees' results of operations assuming the
40 hotels leased to the Lessees as of September 30, 1996 had been leased at
the beginning of the period presented.
(C) Represents adjustments to the Lessees' results of operations assuming the
Tutwiler Hotel, the Doubletree Hotel at Allen Center, the Pickwick Hotel,
the Doubletree Hotel in Tulsa, the Radisson Overland Park Hotel and the
Radisson Northbrook Hotel had been leased to one of the Lessees at the
beginning of the period presented.
(D) Represents adjustments to the Lessees' results of operations assuming the
Carefree Resort properties had been leased to one of the Lessees at the
beginning of the period presented.
(E) Represents interest expense on promissory notes issued in connection with
the acquisition of certain assets by PAH RSI Lessee assuming the notes were
outstanding at the beginning of the period presented.
(F) Represents Participating Lease payments calculated on a pro forma basis by
applying the provisions of the Participating Leases to the historical
revenue of the hotels.
F-15
<PAGE>
(G) Includes dividend income on approximately 250,000 OP Units in the
Operating Partnership which form a portion of the required capitalization
of CHC Lease Partners. Pro forma amounts exclude additional dividend
income earned on OP Units held by certain Lessees, and pro forma interest
income earned on invested cash balances.
(H) Represents adjustments for management fees paid to the Operators under the
terms of their respective management agreements with the Lessees.
Management fees paid to certain Operators are subordinate to the Lessees'
obligations to the Company under the Participating Lease agreements.
(I) Represents pro forma overhead expenses, which include an estimate of the
Lessees' salaries and benefits, professional fees, insurance costs and
administrative expenses.
F-16
<PAGE>
COMBINED LESSEES
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
Pro Forma Adjustments
Combined
Hotels Recent
Historical Adjustments Acquisitions Carefree Pro Forma
(A) (B) (C) Resorts (D) Total
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue:
Room.................. $109,099 $41,961 $22,366 $22,057 $195,483
Food and beverage..... 35,349 19,688 7,479 12,869 75,385
Conference center..... 1,652 -- -- -- 1,652
Golf/Club revenue..... -- -- -- 16,169 16,169
Club membership....... -- -- -- 2,743 2,743
Shopping center....... -- -- -- 1,309 1,309
Spa revenue........... -- -- -- 1,688 1,688
Telephone and other... 9,808 5,088 2,024 7,263 24,183
-------- ------- ------- ------- --------
Total revenue.... 155,908 66,737 31,869 64,098 318,612
-------- ------- ------- ------- --------
Expenses:
Departmental costs and
expenses......... 57,012 29,224 12,841 30,306 129,383
General and
administrative....... 13,092 7,729 2,950 4,396 28,167
Ground lease expense.. 571 1,239 -- -- 1,810
Repair and maintenance 7,140 3,809 1,515 5,592 18,056
Utilities............. 6,677 3,294 2,086 2,674 14,731
Marketing............. 13,405 5,614 2,969 3,909 25,897
Interest expense...... -- -- -- 1,049 (E) 1,049
Insurance............. 644 793 139 411 1,987
Participating lease
payments............. 52,735 16,910 (F) 9,310 (F) 12,822 (F) 91,777
-------- ------- ------- ------- --------
Total expenses... 151,276 68,612 31,810 61,159 312,857
-------- ------- ------- ------- --------
Income (loss) before lessee
income (expense)...... 4,632 (1,875) 59 2,939 5,755
Dividend and interest
income.................... 1,209 (G) -- -- -- 1,209
Management fees............ (3,366) (1,206) (H) (821) (H) (2,229) (H) (7,622)
Lessee general and
administrative........ (1,093) (219) (I) (29) (I) (150) (I) (1,491)
-------- ------- ------- ------- --------
Net income (loss).......... $ 1,382 $(3,300) $ (791) $ 560 $ (2,149)
======== ======= ======= ======= ========
- ------------------------------------
</TABLE>
(A) Represents the combined historical results of operations of CHC Lease
Partners and Metro Lease Partners for the nine months ended September 30,
1996, and NorthCoast, Doubletree Lessee, Wyndham Lessee and Grand Heritage
Lessee for the period from their respective inception of operations through
September 30, 1996.
(B) Represents adjustments to the Lessees' results of operations assuming the
40 hotels leased to the Lessees as of September 30, 1996 had been leased at
the beginning of the period presented.
(C) Represents adjustments to the Lessees' results of operations assuming the
Tutwiler Hotel, the Doubletree Hotel at Allen Center, the Pickwick Hotel,
the Doubletree Hotel in Tulsa, the Radisson Overland Park Hotel and the
Radisson Northbrook Hotel had been leased to one of the Lessees at the
beginning of the period presented.
(D) Represents adjustments to the Lessees' results of operations assuming the
Carefree Resort properties had been leased to one of the Lessees at the
beginning of the period presented.
(E) Represents interest expense on promissory notes issued in connection with
the acquisition of certain assets by PAH RSI Lessee assuming the notes were
outstanding at the beginning of the period presented.
F-17
<PAGE>
(F) Represents Participating Lease payments calculated on a pro forma basis by
applying the provisions of the Participating Leases to the historical
revenue of the hotels assuming January 1, 1995 was the beginning of the
lease term.
(G) Includes dividend income on approximately 250,000 OP Units and 31,074 OP
Units in the Operating Partnership which form a portion of the required
capitalization of CHC Lease Partners and NorthCoast, respectively. Pro
forma amounts exclude additional dividend income earned on the OP Units
held by certain Lessees, and pro forma interest income earned on invested
cash balances.
(H) Represents adjustments to management fees paid to the Operators under the
terms of their respective management agreements with the Lessees.
Management fees paid to certain Operators are subordinate to the Lessees'
obligations to the Company under the Participating Lease agreements.
(I) Represents pro forma overhead expenses, which include an estimate of the
Lessees' salaries and benefits, professional fees, insurance costs and
administrative expenses.
F-18
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the registrant has duly caused the report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: February 21, 1997
PATRIOT AMERICAN HOSPITALITY, INC.
By: /s/ Rex E. Stewart
____________________________________________________
Rex E. Stewart
Executive Vice President and Chief Financial Officer
(Principal Accounting and Financial Officer)
F-19
